e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2006
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File Number 1-4300
APACHE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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41-0747868 |
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number) |
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Suite 100, One Post Oak Central
2000 Post Oak Boulevard, Houston, TX
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77056-4400 |
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(Address of Principal Executive Offices)
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(Zip Code) |
Registrants Telephone Number, Including Area Code: (713) 296-6000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
YES o NO þ
Number of
shares of Registrants common stock, outstanding as of
September 30,
2006................................................. 329,413,445
TABLE OF CONTENTS
PART
I FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
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For the Quarter |
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For the Nine Months |
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Ended September 30, |
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Ended September 30, |
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2006 |
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2005 |
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2006 |
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2005 |
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(In thousands, except per common share data) |
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REVENUES AND OTHER: |
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Oil and gas production revenues |
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$ |
2,072,815 |
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$ |
2,051,744 |
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$ |
6,108,240 |
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$ |
5,452,928 |
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Gain on China divestiture |
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173,545 |
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173,545 |
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Other |
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15,121 |
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9,308 |
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40,316 |
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29,643 |
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2,261,481 |
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2,061,052 |
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6,322,101 |
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5,482,571 |
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OPERATING EXPENSES: |
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Depreciation, depletion and amortization |
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487,542 |
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357,159 |
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1,301,557 |
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1,055,583 |
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Asset retirement obligation accretion |
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22,762 |
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13,527 |
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64,268 |
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40,016 |
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Lease operating costs |
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361,784 |
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279,995 |
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965,800 |
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768,596 |
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Gathering and transportation costs |
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24,815 |
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23,571 |
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76,728 |
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73,529 |
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Severance and other taxes |
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117,704 |
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150,394 |
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432,520 |
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309,173 |
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General and administrative |
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53,781 |
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50,047 |
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151,644 |
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152,460 |
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Financing costs: |
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Interest expense |
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61,074 |
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43,517 |
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154,073 |
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133,590 |
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Amortization of deferred loan costs |
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501 |
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521 |
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1,530 |
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3,226 |
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Capitalized interest |
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(16,108 |
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(14,990 |
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(46,183 |
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(42,653 |
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Interest income |
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(3,481 |
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(2,201 |
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(13,112 |
) |
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(4,003 |
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1,110,374 |
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901,540 |
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3,088,825 |
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2,489,517 |
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INCOME BEFORE INCOME TAXES |
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1,151,107 |
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1,159,512 |
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3,233,276 |
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2,993,054 |
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Provision for income taxes |
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504,043 |
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472,517 |
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1,201,666 |
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1,157,546 |
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NET INCOME |
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647,064 |
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686,995 |
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2,031,610 |
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1,835,508 |
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Preferred stock dividends |
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1,420 |
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1,420 |
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4,260 |
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4,260 |
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INCOME ATTRIBUTABLE TO COMMON STOCK |
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$ |
645,644 |
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$ |
685,575 |
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$ |
2,027,350 |
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$ |
1,831,248 |
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NET INCOME PER COMMON SHARE: |
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Basic |
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$ |
1.96 |
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$ |
2.08 |
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$ |
6.14 |
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$ |
5.57 |
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Diluted |
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$ |
1.94 |
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$ |
2.05 |
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$ |
6.08 |
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$ |
5.49 |
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The accompanying notes to consolidated financial statements
are an integral part of this statement.
1
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
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For the Nine Months Ended |
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September 30, |
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2006 |
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2005 |
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(In thousands) |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
2,031,610 |
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$ |
1,835,508 |
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Adjustments to reconcile net income to net cash
provided by operating activities: |
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Depreciation, depletion and amortization |
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1,301,557 |
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1,055,583 |
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Asset retirement obligation accretion |
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64,268 |
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40,016 |
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Provision for deferred income taxes |
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534,999 |
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412,652 |
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Other |
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(145,986 |
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48,518 |
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Changes in operating assets and liabilities: |
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(Increase) decrease in receivables |
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44,356 |
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(317,394 |
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(Increase) decrease in drilling advances and other |
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78,576 |
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(96,259 |
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(Increase) decrease in inventories |
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(13,468 |
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10,822 |
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(Increase) decrease in deferred charges and other |
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(131,075 |
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(30,226 |
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Increase (decrease) in accounts payable |
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(130,884 |
) |
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121,003 |
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Increase (decrease) in accrued expenses |
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(286,591 |
) |
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137,501 |
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Increase (decrease) in advances from gas purchasers |
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(17,970 |
) |
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(15,935 |
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Increase (decrease) in deferred credits and noncurrent liabilities |
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69,620 |
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(41,693 |
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Net cash provided by operating activities |
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3,399,012 |
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3,160,096 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to property and equipment |
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(2,697,012 |
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(2,736,266 |
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Acquisition of BP plc properties |
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(821,282 |
) |
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Acquisition of Pioneers Argentine operations |
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(704,809 |
) |
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Acquisition of Amerada Hess properties |
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(229,095 |
) |
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Acquisition of Pan American Fueguina S.R.L. properties |
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(396,056 |
) |
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Additions to gas gathering, transmission and processing facilities |
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(203,211 |
) |
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Proceeds from China divestiture |
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264,081 |
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Proceeds from sale of Egyptian properties |
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409,197 |
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Other, net |
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(308,166 |
) |
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5,236 |
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Net cash used in investing activities |
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(4,686,353 |
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(2,731,030 |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Debt borrowings |
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1,531,436 |
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112,398 |
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Payments on debt |
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(75,260 |
) |
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(508,729 |
) |
Dividends paid |
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(103,264 |
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(83,046 |
) |
Common stock activity |
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23,453 |
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18,646 |
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Treasury stock activity, net |
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(169,671 |
) |
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5,802 |
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Cost of debt and equity transactions |
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(1,370 |
) |
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(838 |
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Other |
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14,079 |
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12,292 |
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Net cash provided by (used in) financing activities |
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1,219,403 |
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(443,475 |
) |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
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(67,938 |
) |
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(14,409 |
) |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
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228,860 |
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|
111,093 |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD |
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$ |
160,922 |
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$ |
96,684 |
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The accompanying notes to consolidated financial statements
are an integral part of this statement.
2
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
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September 30, |
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December 31, |
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2006 |
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2005 |
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(In thousands) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
160,922 |
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$ |
228,860 |
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Receivables, net of allowance |
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1,565,606 |
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1,444,545 |
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Inventories |
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284,998 |
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209,670 |
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Drilling advances |
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63,276 |
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146,047 |
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Derivative instruments |
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81,459 |
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16 |
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Prepaid taxes |
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158,980 |
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58,797 |
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Prepaid assets and other |
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64,990 |
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74,142 |
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2,380,231 |
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2,162,077 |
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PROPERTY AND EQUIPMENT: |
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Oil and gas, on the basis of full cost accounting: |
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Proved properties |
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27,949,979 |
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23,836,789 |
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Unproved properties and properties under
development, not being amortized |
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1,286,332 |
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|
795,706 |
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Gas gathering, transmission and processing facilities |
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1,669,272 |
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1,359,477 |
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Other |
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|
348,685 |
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|
312,970 |
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|
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|
|
|
|
|
|
|
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|
31,254,268 |
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|
26,304,942 |
|
Less: Accumulated depreciation, depletion and amortization |
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(10,616,579 |
) |
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(9,513,602 |
) |
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|
|
|
|
|
|
|
|
|
20,637,689 |
|
|
|
16,791,340 |
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|
|
|
|
|
|
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OTHER ASSETS: |
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|
|
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Goodwill, net |
|
|
189,252 |
|
|
|
189,252 |
|
Deferred charges and other |
|
|
218,753 |
|
|
|
129,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
23,425,925 |
|
|
$ |
19,271,796 |
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements
are an integral part of this statement.
3
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
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|
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CURRENT LIABILITIES: |
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|
|
|
Accounts payable |
|
$ |
627,412 |
|
|
$ |
714,598 |
|
Accrued operating expense |
|
|
85,245 |
|
|
|
66,609 |
|
Accrued exploration and development |
|
|
517,298 |
|
|
|
460,203 |
|
Accrued compensation and benefits |
|
|
122,298 |
|
|
|
125,022 |
|
Accrued interest |
|
|
42,994 |
|
|
|
32,564 |
|
Accrued income taxes |
|
|
39,789 |
|
|
|
120,153 |
|
Current debt |
|
|
1,458,917 |
|
|
|
274 |
|
Asset retirement obligation |
|
|
342,190 |
|
|
|
93,557 |
|
Derivative instruments |
|
|
112,629 |
|
|
|
256,115 |
|
Other |
|
|
141,047 |
|
|
|
317,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,489,819 |
|
|
|
2,186,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT |
|
|
2,189,487 |
|
|
|
2,191,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Income taxes |
|
|
3,372,918 |
|
|
|
2,580,629 |
|
Advances from gas purchasers |
|
|
50,798 |
|
|
|
68,768 |
|
Asset retirement obligation |
|
|
1,459,341 |
|
|
|
1,362,358 |
|
Derivative instruments |
|
|
|
|
|
|
152,430 |
|
Other |
|
|
228,518 |
|
|
|
187,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,111,575 |
|
|
|
4,352,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Preferred stock, no par value, 5,000,000 shares authorized
Series B, 5.68% Cumulative Preferred Stock,
100,000 shares issued and outstanding |
|
|
98,387 |
|
|
|
98,387 |
|
Common stock, $0.625 par, 430,000,000 shares authorized,
338,573,305 and 336,997,053 shares issued, respectively |
|
|
211,608 |
|
|
|
210,623 |
|
Paid-in capital |
|
|
4,243,699 |
|
|
|
4,170,714 |
|
Retained earnings |
|
|
8,428,774 |
|
|
|
6,516,863 |
|
Treasury stock, at cost, 9,159,860 and 6,875,823 shares,
respectively |
|
|
(259,971 |
) |
|
|
(89,764 |
) |
Accumulated other comprehensive loss |
|
|
(87,453 |
) |
|
|
(365,608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,635,044 |
|
|
|
10,541,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
23,425,925 |
|
|
$ |
19,271,796 |
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements
are an integral part of this statement.
4
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
Series B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Comprehensive |
|
|
|
Preferred |
|
|
Common |
|
|
Paid-In |
|
|
Retained |
|
|
Treasury |
|
|
Comprehensive |
|
|
Shareholders |
|
(In thousands, except per share) |
|
Income |
|
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Stock |
|
|
Income (Loss) |
|
|
Equity |
|
BALANCE AT DECEMBER 31, 2004 |
|
|
|
|
|
|
$ |
98,387 |
|
|
$ |
209,320 |
|
|
$ |
4,106,182 |
|
|
$ |
4,017,339 |
|
|
$ |
(97,325 |
) |
|
$ |
(129,482 |
) |
|
$ |
8,204,421 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,835,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,835,508 |
|
|
|
|
|
|
|
|
|
|
|
1,835,508 |
|
Commodity hedges, net of income tax
benefit of $185,766 |
|
|
(309,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(309,444 |
) |
|
|
(309,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
1,526,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,260 |
) |
|
|
|
|
|
|
|
|
|
|
(4,260 |
) |
Common ($.26 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85,506 |
) |
|
|
|
|
|
|
|
|
|
|
(85,506 |
) |
Common shares issued |
|
|
|
|
|
|
|
|
|
|
|
796 |
|
|
|
56,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,591 |
|
Treasury shares issued, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,064 |
|
|
|
|
|
|
|
7,354 |
|
|
|
|
|
|
|
14,418 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT SEPTEMBER 30, 2005 |
|
|
|
|
|
|
$ |
98,387 |
|
|
$ |
210,116 |
|
|
$ |
4,170,164 |
|
|
$ |
5,763,081 |
|
|
$ |
(89,971 |
) |
|
$ |
(438,926 |
) |
|
$ |
9,712,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2005 |
|
|
|
|
|
|
$ |
98,387 |
|
|
$ |
210,623 |
|
|
$ |
4,170,714 |
|
|
$ |
6,516,863 |
|
|
$ |
(89,764 |
) |
|
$ |
(365,608 |
) |
|
$ |
10,541,215 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,031,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,031,610 |
|
|
|
|
|
|
|
|
|
|
|
2,031,610 |
|
Commodity hedges, net of income tax
expense of $152,871 |
|
|
278,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,155 |
|
|
|
278,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
2,309,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,260 |
) |
|
|
|
|
|
|
|
|
|
|
(4,260 |
) |
Common ($.30 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(115,440 |
) |
|
|
|
|
|
|
|
|
|
|
(115,440 |
) |
Common shares issued |
|
|
|
|
|
|
|
|
|
|
|
985 |
|
|
|
67,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,314 |
|
Treasury shares activity, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,566 |
|
|
|
|
|
|
|
(170,199 |
) |
|
|
|
|
|
|
(164,633 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 |
|
|
|
1 |
|
|
|
(8 |
) |
|
|
|
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT SEPTEMBER 30, 2006 |
|
|
|
|
|
|
$ |
98,387 |
|
|
$ |
211,608 |
|
|
$ |
4,243,699 |
|
|
$ |
8,428,774 |
|
|
$ |
(259,971 |
) |
|
$ |
(87,453 |
) |
|
$ |
12,635,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements
are an integral part of this statement.
5
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These financial statements have been prepared by Apache Corporation (Apache or the Company)
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC), and reflect all adjustments which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods, on a basis consistent with the annual audited
financial statements. All such adjustments are of a normal recurring nature. Certain information,
accounting policies, and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States have been omitted
pursuant to such rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial statements should be
read in conjunction with the financial statements and the summary of significant accounting
policies and notes included in the Companys most recent annual report on Form 10-K.
Reclassifications
Certain prior period amounts have been reclassified to conform with current year
presentations.
1. ACQUISITIONS AND DIVESTITURES
2006 Acquisitions and Divestitures
Amerada Hess
On January 5, 2006, the Company purchased Amerada Hesss interest in eight fields located in
the Permian Basin of West Texas and New Mexico. The original purchase price was reduced from $404
million to $269 million because other interest owners exercised their preferential rights to
purchase a number of the properties. The settlement price at closing of $239 million was also
adjusted for revenues and expenditures occurring between the closing date and the effective date of
the acquisition. These fields had estimated proved reserves of 27 million barrels (MMbbls) of
liquid hydrocarbons and 27 billion cubic feet (Bcf) of natural gas as of year-end 2005.
On January 6, 2006, the Company completed the sale of its 55 percent interest in the deepwater
section of Egypts West Mediterranean Concession to Amerada Hess for $413 million. Apache did not
have any proved reserves booked for these properties. Apache first announced this transaction on
October 13, 2005.
Pioneer Natural Resources (Pioneer)
On
April 25, 2006, the Company acquired Pioneers operations
in Argentina for $675 million. The total cash consideration allocated
below includes working capital balances purchased by the Company, asset retirement liabilities
assumed and transaction costs. The properties are located in the Neuquén, San Jorge and Austral
basins of Argentina and had estimated net proved reserves of approximately 22 MMbbls of liquid
hydrocarbons and 297 Bcf of natural gas as of December 31, 2005. The properties include eight gas
processing plants (five operated and three non-operated) and 112 miles of operated pipelines in the
Neuquén Basin. Also included are 2,200 square miles of 3-D seismic data. Apache financed the
purchase with cash on hand and commercial paper.
The purchase price was allocated to the assets acquired and liabilities assumed based upon the
estimated fair values as of the date of acquisition, as follows (in thousands):
|
|
|
|
|
Proved property |
|
$ |
501,938 |
|
Unproved property |
|
|
189,500 |
|
Gas Plants |
|
|
51,200 |
|
Working capital acquired, net |
|
|
11,256 |
|
Asset retirement obligation |
|
|
(13,635 |
) |
Deferred income tax liability |
|
|
(37,630 |
) |
|
|
|
|
|
|
|
|
|
Cash consideration |
|
$ |
702,629 |
|
|
|
|
|
6
BP plc (BP)
In June 2006, the Company acquired BPs remaining producing properties on the Outer
Continental Shelf of the Gulf of Mexico. The original purchase price
was reduced from $1.3 billion for 18 producing fields to $845 million because other interest owners exercised their preferential rights to purchase five
of the 18 fields. The purchase price consisted of $747 million
of proved property, $42 million of unproved property and
$56 million of facilities. The settlement price on the date of closing of $821 million
was adjusted primarily for revenues and expenditures occurring between the closing date and the
effective date of the acquisition. The effective date of the purchase was April 1, 2006. The
acquired properties include 13 producing fields (nine of which are operated) with estimated proved reserves
of 19.5 MMbbls of liquid hydrocarbons and 148 Bcf of natural gas. Apache financed the purchase
with cash on hand and commercial paper.
ROC Oil Company Limited (ROC)
On August 8, 2006, the Company completed the sale of its 24.5 percent interest in the Zhao
Dong block offshore, the Peoples Republic of China, to Australia-based ROC Oil Company Limited for
$260 million, marking Apaches exit from China. The effective date of the transaction was July 1,
2006. The Company booked a gain of $174 million in the third quarter.
Pan American Fuequina S.R.L. (Pan American)
During
the third quarter of 2006, Apache acquired additional interests in
(and now operates)
seven concessions in the Tierra del Fuego Province from Pan
American for total consideration of $429 million. The total cash consideration allocated below
includes working capital balances purchased, asset retirement obligations assumed and an obligation
to deliver specific gas volumes in the future. Apache financed the purchase with cash on hand and
commercial paper.
The purchase price was allocated to the assets acquired and liabilities assumed based upon the
estimated fair values as of the date of acquisition, as follows (in thousands):
|
|
|
|
|
Proved property |
|
$ |
302,638 |
|
Unproved property |
|
|
132,000 |
|
Working capital acquired, net |
|
|
8,929 |
|
Asset retirement obligation |
|
|
(1,511 |
) |
Assumed obligation |
|
|
(46,000 |
) |
|
|
|
|
|
|
|
|
|
Cash consideration |
|
$ |
396,056 |
|
|
|
|
|
2005 Acquisitions and Divestitures
There were no material acquisitions or divestitures during the nine-month period ended
September 30, 2005.
2. HEDGING AND DERIVATIVE INSTRUMENTS
Apache uses a variety of strategies to manage its exposure to fluctuations in crude oil and
natural gas commodity prices. The Companys hedging approach allows management to enter into
hedges in connection with capital investments, including selected acquisitions. The success of an
acquisition is significantly influenced by the Companys ability to achieve targeted production at
forecasted prices over the long term, and commodity hedges effectively reduce price
risk on a portion of the acquired production. During the third quarter of 2006, the Companys
Board of Directors authorized management to enter into additional derivative contracts on a portion
of production generated from the 2006 drilling program. Hedge positions entered into for the
drilling program were designed to protect the underlying investment economics of the program.
Apache has entered into, and designated as cash flow hedges, various fixed-price swaps, option
collars, and put contracts. These positions have a maximum duration through 2008, and involve six
counterparties all rated A+ or
7
better by established credit rating agencies. If applicable, the Company nets its realized
gains against realized losses when settling its derivative contracts with counterparties.
As of September 30, 2006, the total outstanding positions of Apaches natural gas and crude
oil cash flow hedges were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
Total Volumes |
|
Weighted Average |
|
Fair Value Asset/ |
Period |
|
Instrument Type |
|
(MMBtu/Bbl/GJ) |
|
Floor/Ceiling |
|
(Liability) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
2006 |
|
Gas Collars |
|
|
8,280,000 |
|
|
$ |
5.50 / 6.66 |
|
|
$ |
1,398 |
|
|
|
Gas Fixed |
|
|
951,000 |
|
|
|
5.82 |
|
|
|
144 |
|
|
|
Gas Put Option |
|
|
7,360,000 |
|
|
|
6.81 |
|
|
|
11,187 |
|
|
|
Oil Collars |
|
|
1,085,600 |
|
|
|
32.07 / 40.66 |
|
|
|
(25,488 |
) |
|
|
Oil Fixed-Price Swap |
|
|
778,000 |
|
|
|
68.34 |
|
|
|
3,068 |
|
|
|
Oil Put Option |
|
|
386,400 |
|
|
|
28.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
Gas Collars |
|
|
77,495,000 |
|
|
$ |
6.94 / 8.99 |
|
|
$ |
12,972 |
|
|
|
Gas Collars (Canada) |
|
|
3,650,000 |
|
|
|
6.52 / 8.52 |
|
|
|
2,685 |
|
|
|
Gas Fixed-Price Swap |
|
|
1,761,000 |
|
|
|
5.57 |
|
|
|
(3,298 |
) |
|
|
Oil Collars |
|
|
6,473,500 |
|
|
|
59.78 / 70.62 |
|
|
|
(26,554 |
) |
|
|
Oil Fixed-Price Swap |
|
|
4,458,000 |
|
|
|
70.29 |
|
|
|
9,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
Gas Collars |
|
|
49,410,000 |
|
|
$ |
7.46 / 10.17 |
|
|
$ |
28,376 |
|
|
|
Gas Collars (Canada) |
|
|
3,660,000 |
|
|
|
6.52 / 8.49 |
|
|
|
1,690 |
|
|
|
Oil Collars |
|
|
4,575,000 |
|
|
|
69.00 / 80.39 |
|
|
|
17,118 |
|
|
|
Oil Fixed-Price Swap |
|
|
4,392,000 |
|
|
|
69.21 |
|
|
|
1,625 |
|
U.S. natural gas and crude oil prices in the above table are settled against the NYMEX
index, except for 23,725,000 and 23,790,000 MMBtu of gas collars in 2007 and 2008, respectively,
which are settled against the Panhandle Eastern Pipe Line index, and have been valued using
actively quoted prices and quotes obtained from reputable third-party financial institutions. The
above prices represent a weighted average of several contracts entered into on a per million British
thermal units (MMBtu) or per barrel (Bbl) basis for gas and oil derivatives, respectively.
The Canadian natural gas prices shown in the above table are converted to US dollars utilizing
September 30, 2006 exchange rates. They are settled against the AECO Index, and valued using
actively quoted prices and quotes obtained from reputable third-party financial institutions. The
above prices represent a weighted average of several contracts entered into on a per gigajoule (GJ)
basis.
In March 2006, the Company purchased $10.50 call options spanning the August through November
2006 period on 100,000 MMBtu per day for $6.3 million. The options were purchased to mitigate price
exposure on prior hedged volumes in the event of significant potential natural gas price spikes
during the 2006 U.S. Gulf Coast hurricane season. The options are marked to market each period and any
gains or losses are reflected in Revenue and Other: Other on the Statement of Consolidated
Operations. As of September 30, 2006, the remaining two months of the call option had a minimal
fair market value.
A reconciliation of the components of accumulated other comprehensive income (loss) in the
Statement of Consolidated Shareholders Equity related to Apaches commodity derivative activity is
presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
After tax |
|
|
|
(In thousands) |
|
Unrealized gain (loss) on derivatives on December 31, 2005 |
|
$ |
(398,229 |
) |
|
$ |
(256,858 |
) |
Net losses realized into earnings |
|
|
118,327 |
|
|
|
76,321 |
|
Net change in derivative fair value |
|
|
312,699 |
|
|
|
201,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on derivatives on September 30, 2006 |
|
$ |
32,797 |
|
|
$ |
21,297 |
|
|
|
|
|
|
|
|
8
Based on market prices as of September 30, 2006, the Company recorded an unrealized gain in
other comprehensive income (loss) of $33 million ($21 million after tax), primarily representing
commodity derivative hedges. Gains and losses on the Companys commodity
hedges in accumulated
other comprehensive income will be realized in future earnings contemporaneously with the related
sales of natural gas and crude oil production applicable to specific hedges. Based on market prices as of September 30, 2006, the Company would expect
to realize a loss of $33 million in the next 12 months on these hedges assuming no changes in
commodity prices, and a $66 million gain beyond the twelve-month period. Actual gains and losses will be realized based on the settlement date.
These contracts,
designated as hedges, qualified and continue to qualify for hedge accounting in accordance with
Statement of Financial Accounting Standards (SFAS) No. 133, as amended.
3. DEBT
During the first nine months of 2006, the Companys debt-to-capitalization ratio increased to
22 percent from 17 percent on December 31, 2005, as a result of an increase in commercial paper
outstanding following $2.4 billion of acquisitions. The Companys outstanding debt includes notes
and debentures maturing in the years 2007 through 2096.
The Company has available a $1.95 billion commercial paper program which enables Apache to
borrow funds for up to 270 days at competitive interest rates. As of September 30, 2006, Apache
had $1.41 billion of commercial paper outstanding. Apaches weighted-average interest rate for
commercial paper was 5.06 percent and 2.92 percent for the first nine months of 2006 and 2005,
respectively. If the Company is unable to issue commercial paper following a significant credit
downgrade or dislocation in the market, the Companys U.S. credit facilities are available as a
100-percent backstop. The Company was in compliance with the terms of the credit facilities as of
September 30, 2006.
In May 2006, the Company amended its existing five-year revolving U.S. credit facility which
was scheduled to mature on May 28, 2009. The amendment: (a) extended the maturity to May 28, 2011,
(b) increased the size of the facility from $750 million to $1.5 billion, and (c) reduced the
facility fees from .08% to .06% and reduced the margin over LIBOR on loans from .27% to .19%. The
lenders also extended the maturity dates of the $150 million Canadian facility, the $150 million
Australian facility and $385 million of the $450 million U.S. credit facility, for an additional
year to May 12, 2011 from May 12, 2010. The Company also increased commercial paper availability
to $1.95 billion from $1.20 billion.
In August 2006, the Company extended the maturity of another $25 million in commitments under
the $450 million U.S. credit facility for an additional year. As a result, $410 million will
mature on May 12, 2011, and $40 million will mature on May 12, 2010.
4. STOCK-BASED COMPENSATION
On May 3, 2006, the Companys stockholders approved a new stock option plan and 1.7 million
options were subsequently awarded to substantially all employees. The estimated fair value per
option determined on the date of grant was $24.57. The terms and underlying valuation assumptions
of the grant are consistent with prior-year awards and are expensed on a straight-line basis over
the four-year vesting term.
5. CAPITAL STOCK
On April 19, 2006, the Company announced that its Board of Directors authorized the purchase
of up to 15 million shares of the Companys common stock representing a market value of
approximately $1 billion on the date of the announcement. The Company may buy shares from time to
time on the open market, in privately negotiated transactions, or a combination of both. The
timing and amounts of any purchases will be at the discretion of Apaches management. The Company
initiated the purchase program on May 1, 2006, after the Companys first-quarter 2006 earnings
information was disseminated in the market. Through September 30, 2006, the Company purchased
2,500,000 shares at an average price of $69.74 per share.
During the third quarters of 2006 and 2005, Apache paid $33 million and $26 million, respectively,
in dividends on its common stock. For the nine months ended September 30, 2006 and 2005, the
Company paid $99 million and $79
9
million, respectively. The increase in the amounts paid for the 2006 third quarter and nine-month
periods relative to their respective 2005 period reflects a slight increase in common shares
outstanding and a 25 percent increase in the Companys quarterly common stock dividend rate,
effective with the November 2005 payment. On September 13, 2006, the Company announced that its
Board of Directors voted to increase the quarterly cash dividend on its common stock to 15 cents
per share from 10 cents per share, effective with the November 2006 payment. In addition, for the
three-month and nine-month periods ended September 30, 2006 and 2005, Apache paid a total of $1.4
million and $4.3 million, respectively, in dividends on its Series B Preferred Stock issued in
August 1998.
10
6. NET INCOME PER COMMON SHARE
A reconciliation of the components of basic and diluted net income per common share is
presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
|
Income |
|
|
Shares |
|
|
Per Share |
|
|
Income |
|
|
Shares |
|
|
Per Share |
|
|
|
(In thousands, except per share amounts) |
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to common stock |
|
$ |
645,644 |
|
|
|
329,643 |
|
|
$ |
1.96 |
|
|
$ |
685,575 |
|
|
|
329,219 |
|
|
$ |
2.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other |
|
|
|
|
|
|
3,212 |
|
|
|
|
|
|
|
|
|
|
|
4,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to common stock,
including assumed conversions |
|
$ |
645,644 |
|
|
|
332,855 |
|
|
$ |
1.94 |
|
|
$ |
685,575 |
|
|
|
334,164 |
|
|
$ |
2.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
|
Income |
|
|
Shares |
|
|
Per Share |
|
|
Income |
|
|
Shares |
|
|
Per Share |
|
|
|
(In thousands, except per share amounts) |
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to common stock |
|
$ |
2,027,350 |
|
|
|
329,971 |
|
|
$ |
6.14 |
|
|
$ |
1,831,248 |
|
|
|
328,615 |
|
|
$ |
5.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other |
|
|
|
|
|
|
3,431 |
|
|
|
|
|
|
|
|
|
|
|
4,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to common stock,
including assumed conversions |
|
$ |
2,027,350 |
|
|
|
333,402 |
|
|
$ |
6.08 |
|
|
$ |
1,831,248 |
|
|
|
333,602 |
|
|
$ |
5.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended |
|
|
September 30, |
|
|
2006 |
|
2005 |
|
|
(In thousands) |
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest (net of amounts capitalized) |
|
$ |
91,539 |
|
|
$ |
69,173 |
|
Income taxes (net of refunds) |
|
|
784,258 |
|
|
|
816,221 |
|
For the nine-month period ended September 30, 2006, approximately 86 percent of the Companys
income tax cash payments relate to the 2006 income period. For the nine-month period ended
September 30, 2005, approximately 91 percent was related to the 2005 income period.
8. PENSION AND POST-RETIREMENT BENEFITS
Apache has a non-contributory defined benefit pension plan that provides retirement benefits
for certain United Kingdom (U.K.) North Sea employees meeting established age and service
requirements. The pension plan is closed to new employees. Apache also has a post-retirement
benefit plan which provides benefits for substantially all of its U.S. employees. The
post-retirement benefit plan provides medical benefits up until age 65 and is contributory.
11
Net Periodic Cost
The following table presents the net periodic benefit cost for the three-month and nine-month
periods ended September 30, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
|
Quarter Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
1,822 |
|
|
$ |
1,540 |
|
|
$ |
5,305 |
|
|
$ |
4,778 |
|
|
$ |
338 |
|
|
$ |
350 |
|
|
$ |
1,138 |
|
|
$ |
1,049 |
|
Interest cost |
|
|
1,323 |
|
|
|
1,093 |
|
|
|
3,851 |
|
|
|
3,392 |
|
|
|
174 |
|
|
|
204 |
|
|
|
674 |
|
|
|
610 |
|
Expected return on plan assets (gain)/loss |
|
|
(1,457 |
) |
|
|
(1,181 |
) |
|
|
(4,243 |
) |
|
|
(3,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of transition obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
11 |
|
|
|
33 |
|
|
|
33 |
|
Amortization of actuarial (gain)/loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
82 |
|
|
|
217 |
|
|
|
248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
1,688 |
|
|
$ |
1,452 |
|
|
$ |
4,913 |
|
|
$ |
4,506 |
|
|
$ |
562 |
|
|
$ |
647 |
|
|
$ |
2,062 |
|
|
$ |
1,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer Contributions
As previously disclosed in our year-end 2005 financial statements for the year ended December
31, 2005, we expect to contribute $5 million to the pension plan and $321,000 to the
post-retirement benefit plan in 2006. As of September 30, 2006, approximately $3.5 million of
contributions have been made to the plans.
12
9. BUSINESS SEGMENT INFORMATION
Apache has six reportable segments: the United States, Canada, Egypt, Australia, the U.K. and
Argentina. The Company divested its interest in China effective July 1, 2006. The Company
evaluates segment performance based on profits and losses from oil and gas operations before income
and expense items incidental to oil and gas operations and income taxes. Apaches reportable
segments are managed separately because of their geographic locations. Historical results for
China are encapsulated under the Other International category. Financial information by reportable
segment is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
States |
|
|
Canada |
|
|
Egypt |
|
|
Australia |
|
|
North Sea |
|
|
Argentina |
|
|
International |
|
|
Total |
|
|
|
(In thousands) |
|
For the Quarter Ended
September 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production
Revenues |
|
$ |
810,597 |
|
|
$ |
341,436 |
|
|
$ |
424,592 |
|
|
$ |
115,063 |
|
|
$ |
306,620 |
|
|
$ |
58,715 |
|
|
$ |
15,792 |
|
|
$ |
2,072,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (1) |
|
$ |
372,908 |
|
|
$ |
147,817 |
|
|
$ |
327,314 |
|
|
$ |
52,970 |
|
|
$ |
133,489 |
|
|
$ |
12,469 |
|
|
$ |
11,241 |
|
|
$ |
1,058,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on China divestiture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,545 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,121 |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,781 |
) |
Financing costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,986 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,151,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
September 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production
Revenues |
|
$ |
2,240,339 |
|
|
$ |
1,075,002 |
|
|
$ |
1,261,234 |
|
|
$ |
319,242 |
|
|
$ |
1,036,662 |
|
|
$ |
103,251 |
|
|
$ |
72,510 |
|
|
$ |
6,108,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (1) |
|
$ |
1,106,487 |
|
|
$ |
531,739 |
|
|
$ |
974,141 |
|
|
$ |
152,037 |
|
|
$ |
438,146 |
|
|
$ |
20,504 |
|
|
$ |
44,313 |
|
|
$ |
3,267,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on China divestiture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,545 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,316 |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(151,644 |
) |
Financing costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(96,308 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,233,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
11,167,383 |
|
|
$ |
5,551,767 |
|
|
$ |
2,401,477 |
|
|
$ |
1,250,440 |
|
|
$ |
1,715,446 |
|
|
$ |
1,338,912 |
|
|
$ |
500 |
|
|
$ |
23,425,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
September 30, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production
Revenues |
|
$ |
761,167 |
|
|
$ |
375,310 |
|
|
$ |
378,194 |
|
|
$ |
122,423 |
|
|
$ |
378,977 |
|
|
$ |
5,163 |
|
|
$ |
30,510 |
|
|
$ |
2,051,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (1) |
|
$ |
439,330 |
|
|
$ |
230,741 |
|
|
$ |
293,410 |
|
|
$ |
62,216 |
|
|
$ |
182,520 |
|
|
$ |
1,712 |
|
|
$ |
17,169 |
|
|
$ |
1,227,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,308 |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50,047 |
) |
Financing costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,847 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,159,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
September 30, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production
Revenues |
|
$ |
2,154,921 |
|
|
$ |
962,188 |
|
|
$ |
984,452 |
|
|
$ |
300,008 |
|
|
$ |
932,901 |
|
|
$ |
11,822 |
|
|
$ |
106,636 |
|
|
$ |
5,452,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (1) |
|
$ |
1,222,036 |
|
|
$ |
562,314 |
|
|
$ |
738,838 |
|
|
$ |
152,786 |
|
|
$ |
470,090 |
|
|
$ |
4,172 |
|
|
$ |
55,795 |
|
|
$ |
3,206,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,643 |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(152,460 |
) |
Financing costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(90,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,993,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
7,852,092 |
|
|
$ |
4,567,754 |
|
|
$ |
2,425,911 |
|
|
$ |
1,212,946 |
|
|
$ |
1,628,267 |
|
|
$ |
52,311 |
|
|
$ |
113,816 |
|
|
$ |
17,853,097 |
|
|
|
|
1) |
|
Operating Income consists of oil and gas production revenues less depreciation, depletion and
amortization, asset retirement obligation accretion, lease operating costs, gathering and
transportation costs, and severance and other taxes. |
13
10. ASSET RETIREMENT OBLIGATIONS
The following table describes changes to the Companys asset retirement obligation (ARO)
liability for the quarter ended September 30, 2006 (in thousands):
|
|
|
|
|
Asset retirement obligation as of December 31, 2005 |
|
$ |
1,455,915 |
|
Liabilities incurred |
|
|
252,131 |
|
Liabilities settled |
|
|
(202,767 |
) |
Revisions |
|
|
231,984 |
|
Accretion expense |
|
|
64,268 |
|
|
|
|
|
|
|
|
|
|
Asset retirement obligation as of September 30, 2006 |
|
$ |
1,801,531 |
|
|
|
|
|
Liabilities incurred of $252 million relate to abandonment obligations assumed in connection
with various acquisitions closed during the period and obligations related to current drilling
activity. Liabilities settled during the period primarily relate to properties plugged and
abandoned or sold during the period.
During the third quarter, the Company increased its estimate $232 million for abandonment
requirements related to offshore platforms destroyed during hurricanes Katrina and Rita. The
revision was made because more complete information surrounding the damage, timing and cost
estimates continues to be obtained from third parties and from actual costs incurred.
11. LITIGATION
Texaco China B.V.
In July 2006, one of the judges on the three judge panel hearing Apaches appeal of Texaco
China B.V.s $71 million international arbitration award against Apache China Corporation LDC was
recused from the matter. Because of the recusal, the appeal had to be
reargued on October 4, 2006, and we are waiting for a final
decision on Apaches appeal. The history of this matter is discussed in Note 10 of the financial
statements in Apaches annual report on Form 10-K for our 2005 fiscal year.
Predator
In September 2006 the trial court rendered a judgment (the Judgment) in favor of Murphy Oil
Corporation (Murphy) and Apaches claim against Predator and dismissed Predators C$365 million
counterclaim against Murphy and Apache. The parties entered into a
settlement agreement not to appeal the judgement, thereby making the
judgement final. As
a result, Apache recognized approximately $11 million of revenue in the third quarter of 2006. The
history of this matter is discussed in Note 10 of the financial statements in Apaches annual
report on Form 10-K for our 2005 fiscal year.
Grynberg
In 1997, Jack J. Grynberg began filing lawsuits against other natural gas producers,
gatherers, and pipelines claiming that the defendants have under paid royalty to the federal
government and Indian tribes by mis-measurement of the volume and heating content of natural gas
and are responsible for acts of others who mis-measured natural gas. In 2004, Grynberg filed suit
against Apache making the same claims he had made previously against others in the industry. With
the addition of Apache, there are more than 300 defendants to these actions. The Grynberg lawsuits
have been consolidated through a federal Multi-District Litigation (MDL) action located in Wyoming
federal court for discovery and pre-trial purposes. The defendants in the MDL, jointly and/or
separately, filed motions to dismiss based upon certain statutory requirements Grynberg is required
to prove to proceed with these qui tam lawsuits. On October 20, 2006, the multi-district Judge
ruled in favor of Apache and other defendants on these motions to dismiss, dismissing Grynbergs
lawsuit against Apache and others. The appeal period has not yet passed, and Apache does not know
if Grynberg will appeal the ruling. Although Grynberg purports to be acting on behalf of the
government, the federal government has declined to join in the cases. While an adverse judgment
against Apache is possible, Apache does not believe the plaintiffs claims have merit and plans to
vigorously pursue its defenses against these claims. Exposure related to this lawsuit is not
currently determinable.
14
Egypt Tax Authority
On June 11, 2006, the ETA cancelled the last tax claim in its entirety, with no liability to
Apache. All three ETA tax claims, have now been finally resolved in Apaches favor with no
liability. The history of this matter is discussed in Note 10 of the financial statements in
Apaches annual report on Form 10-K for our 2005 fiscal year.
Argentine Environmental Claims
In connection with the Pioneer acquisition, the Company acquired a subsidiary of Pioneer in
Argentina (PNRA) that is involved in various administrative proceedings with environmental
authorities in the Neuquén Province relating to permits for and discharges from operations in that
province. PNRA is cooperating with the proceedings, although it from time to time challenges
whether certain assessed fines, which could exceed $100,000, are appropriate. PNRA was named in a
suit initiated against oil companies operating in the Neuquén basin entitled Asociación de
Superficiarios de la Patagonia v. YPF S.A., et. al., originally filed on August 21, 2003, in the
Argentine National Supreme Court of Justice. The plaintiffs, a private group of landowners, have
also named the national government and several provinces as third parties. The lawsuit alleges
injury to the environment generally by the oil and gas industry. The plaintiffs principally seek
from all defendants, jointly, (i) the remediation of the contaminated sites, of the superficial and
underground waters, and of the soil that was degraded as a result of deforestation, (ii) if the
remediation is not possible, payment of an indemnification for the material and moral damages in an
unspecified amounts claimed from defendants operating in the Neuquén basin, of which PNRA is a
small portion, (iii) adoption of all of the necessary measures to prevent future environmental
damages, and (iv) the creation of a private restoration fund to provide coverage for remediation of
potential future environmental damages. Much of the alleged damage relates to operations by the
Argentine state oil company, which conducted oil and gas operations throughout Argentina prior to
its privatization, which began in 1990. While the plaintiffs will seek to make all oil and gas
companies operating in the Neuquén basin jointly liable for each others actions, PNRA will defend
on an individual basis and attempt to require the plaintiffs to delineate damages by company. PNRA
intends to defend itself vigorously in the case. It is not certain exactly how or what the court
will do in this matter as it is the first of its kind. While it is possible PNRA may incur
liabilities related to the environmental claims, no reasonable prediction can be made as PNRAs
exposure related to this lawsuit is not currently determinable.
General
The Company is involved in other litigation and is subject to governmental and regulatory
controls arising in the ordinary course of business. The Company has an accrued liability of
approximately $3 million for other legal contingencies that are probable of occurring and can be
reasonably estimated. It is managements opinion that the loss for any such other litigation
matters and claims that are reasonably possible to occur will not have a material adverse affect on
the Companys financial position or results of operations.
12. INCOME TAXES
During the third quarter of 2006, the U.K. formally enacted a previously announced 10 percent
income tax increase retroactive to the beginning of 2006. As a result, the Company recorded a $92
million non-recurring charge for additional deferred taxes and for applying the rate to the first
six months of 2006 taxable earnings. The impact on third-quarter 2006 income taxes was an increase
of $13 million.
Also, during the second quarter of 2006, Canada enacted a combination of federal and
provincial tax rate reductions that resulted in a non-recurring benefit of approximately $132
million for a reduction in deferred taxes. The lower rates reduced income tax expense $14 million
for the nine-month period ending September 30, 2006.
13. NEW PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN No. 48). The Interpretation clarifies the
accounting for income taxes by prescribing a minimum recognition threshold that a tax position is
required to meet before being recognized in the
15
financial statements. FIN No. 48 also provides guidance on measurement, classification, interim
accounting and disclosure. FIN No. 48 is effective for fiscal years beginning after December 15,
2006 and the Company is continuing to assess potential impacts this Interpretation might have on
Apaches Consolidated Financial Statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 Fair
Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. This statement is
effective for financial statements issued for fiscal years beginning after November 15, 2007. The
Company is continuing to assess the potential impacts this statement might have on Apaches
Consolidated Financial Statements and related footnotes.
Also in September 2006, the FASB issued Statement of Financial Accounting Standard No. 158
Employees Accounting for Defined Benefit Plans and Other Postretirement Plans (SFAS 158). The
statement requires employers to recognize any overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in Apaches Consolidated Financial Statements.
Unrealized components of net periodic benefit costs are reflected in other comprehensive income,
net of tax. SFAS 158 requires recognition of the funded status and related disclosures as of the
end of the fiscal year ending after December 15, 2006. The Company does not believe that its
Consolidated Financial Statements will be materially impacted by implementing this statement.
14. SUPPLEMENTAL GUARANTOR INFORMATION
Apache Finance Pty Ltd. (Apache Finance Australia) and Apache Finance Canada Corporation
(Apache Finance Canada) are subsidiaries of Apache that have issuances of publicly traded
securities and require the following condensed consolidating financial statements be provided as an
alternative to filing separate financial statements.
Each of the companies presented in the condensed consolidating financial statements have been
fully consolidated in Apaches consolidated financial statements. As such, the condensed
consolidating financial statements should be read in conjunction with the financial statements of
Apache Corporation and Subsidiaries and notes.
16
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassifications |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
REVENUES AND OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues |
|
$ |
785,346 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,340,264 |
|
|
$ |
(52,795 |
) |
|
$ |
2,072,815 |
|
Equity in net income (loss) of affiliates |
|
|
497,820 |
|
|
|
10,623 |
|
|
|
13,581 |
|
|
|
53,962 |
|
|
|
(12,329 |
) |
|
|
(563,657 |
) |
|
|
|
|
Gain on China divestiture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,545 |
|
|
|
|
|
|
|
173,545 |
|
Other |
|
|
7,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,749 |
|
|
|
|
|
|
|
15,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,290,538 |
|
|
|
10,623 |
|
|
|
13,581 |
|
|
|
53,962 |
|
|
|
1,509,229 |
|
|
|
(616,452 |
) |
|
|
2,261,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
210,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277,517 |
|
|
|
|
|
|
|
487,542 |
|
Asset retirement obligation accretion |
|
|
16,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,028 |
|
|
|
|
|
|
|
22,762 |
|
Lease operating costs |
|
|
169,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,303 |
|
|
|
(52,795 |
) |
|
|
361,784 |
|
Gathering and transportation costs |
|
|
7,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,449 |
|
|
|
|
|
|
|
24,815 |
|
Severance and other taxes |
|
|
29,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,578 |
|
|
|
|
|
|
|
117,704 |
|
General and administrative |
|
|
40,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,907 |
|
|
|
|
|
|
|
53,781 |
|
Financing costs, net |
|
|
37,038 |
|
|
|
|
|
|
|
4,442 |
|
|
|
14,111 |
|
|
|
(13,605 |
) |
|
|
|
|
|
|
41,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
510,439 |
|
|
|
|
|
|
|
4,442 |
|
|
|
14,111 |
|
|
|
634,177 |
|
|
|
(52,795 |
) |
|
|
1,110,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
780,099 |
|
|
|
10,623 |
|
|
|
9,139 |
|
|
|
39,851 |
|
|
|
875,052 |
|
|
|
(563,657 |
) |
|
|
1,151,107 |
|
Provision (benefit) for income taxes |
|
|
133,035 |
|
|
|
|
|
|
|
(1,484 |
) |
|
|
(4,740 |
) |
|
|
377,232 |
|
|
|
|
|
|
|
504,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
647,064 |
|
|
|
10,623 |
|
|
|
10,623 |
|
|
|
44,591 |
|
|
|
497,820 |
|
|
|
(563,657 |
) |
|
|
647,064 |
|
Preferred stock dividends |
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME ATTRIBUTABLE TO COMMON STOCK |
|
$ |
645,644 |
|
|
$ |
10,623 |
|
|
$ |
10,623 |
|
|
$ |
44,591 |
|
|
$ |
497,820 |
|
|
$ |
(563,657 |
) |
|
$ |
645,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassifications |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
REVENUES AND OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues |
|
$ |
757,281 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,397,113 |
|
|
$ |
(102,650 |
) |
|
$ |
2,051,744 |
|
Equity in net income (loss) of affiliates |
|
|
410,091 |
|
|
|
10,979 |
|
|
|
13,952 |
|
|
|
62,111 |
|
|
|
(12,345 |
) |
|
|
(484,788 |
) |
|
|
|
|
Other |
|
|
4,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,895 |
|
|
|
|
|
|
|
9,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,171,785 |
|
|
|
10,979 |
|
|
|
13,952 |
|
|
|
62,111 |
|
|
|
1,389,663 |
|
|
|
(587,438 |
) |
|
|
2,061,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
139,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,440 |
|
|
|
|
|
|
|
357,159 |
|
Asset retirement obligation accretion |
|
|
7,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,560 |
|
|
|
|
|
|
|
13,527 |
|
Lease operating costs |
|
|
136,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246,115 |
|
|
|
(102,650 |
) |
|
|
279,995 |
|
Gathering and transportation costs |
|
|
7,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,481 |
|
|
|
|
|
|
|
23,571 |
|
Severance and other taxes |
|
|
28,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,898 |
|
|
|
|
|
|
|
150,394 |
|
General and administrative |
|
|
42,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,389 |
|
|
|
|
|
|
|
50,047 |
|
Financing costs, net |
|
|
17,912 |
|
|
|
|
|
|
|
4,512 |
|
|
|
14,110 |
|
|
|
(9,687 |
) |
|
|
|
|
|
|
26,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
380,372 |
|
|
|
|
|
|
|
4,512 |
|
|
|
14,110 |
|
|
|
605,196 |
|
|
|
(102,650 |
) |
|
|
901,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
791,413 |
|
|
|
10,979 |
|
|
|
9,440 |
|
|
|
48,001 |
|
|
|
784,467 |
|
|
|
(484,788 |
) |
|
|
1,159,512 |
|
Provision (benefit) for income taxes |
|
|
104,418 |
|
|
|
|
|
|
|
(1,539 |
) |
|
|
(4,738 |
) |
|
|
374,376 |
|
|
|
|
|
|
|
472,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
686,995 |
|
|
|
10,979 |
|
|
|
10,979 |
|
|
|
52,739 |
|
|
|
410,091 |
|
|
|
(484,788 |
) |
|
|
686,995 |
|
Preferred stock dividends |
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME ATTRIBUTABLE TO COMMON STOCK |
|
$ |
685,575 |
|
|
$ |
10,979 |
|
|
$ |
10,979 |
|
|
$ |
52,739 |
|
|
$ |
410,091 |
|
|
$ |
(484,788 |
) |
|
$ |
685,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassifications |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
REVENUES AND OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues |
|
$ |
2,156,664 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,128,917 |
|
|
$ |
(177,341 |
) |
|
$ |
6,108,240 |
|
Equity in net income (loss) of affiliates |
|
|
1,436,496 |
|
|
|
25,170 |
|
|
|
32,165 |
|
|
|
210,807 |
|
|
|
(35,108 |
) |
|
|
(1,669,530 |
) |
|
|
|
|
Gain on China divestiture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,545 |
|
|
|
|
|
|
|
173,545 |
|
Other |
|
|
75,319 |
|
|
|
|
|
|
|
(38 |
) |
|
|
|
|
|
|
(34,965 |
) |
|
|
|
|
|
|
40,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,668,479 |
|
|
|
25,170 |
|
|
|
32,127 |
|
|
|
210,807 |
|
|
|
4,232,389 |
|
|
|
(1,846,871 |
) |
|
|
6,322,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
540,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
761,050 |
|
|
|
|
|
|
|
1,301,557 |
|
Asset retirement obligation accretion |
|
|
46,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,451 |
|
|
|
|
|
|
|
64,268 |
|
Lease operating costs |
|
|
424,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
718,441 |
|
|
|
(177,341 |
) |
|
|
965,800 |
|
Gathering and transportation costs |
|
|
22,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,751 |
|
|
|
|
|
|
|
76,728 |
|
Severance and other taxes |
|
|
84,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
347,871 |
|
|
|
|
|
|
|
432,520 |
|
General and administrative |
|
|
119,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,837 |
|
|
|
|
|
|
|
151,644 |
|
Financing costs, net |
|
|
79,851 |
|
|
|
|
|
|
|
13,490 |
|
|
|
42,333 |
|
|
|
(39,366 |
) |
|
|
|
|
|
|
96,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,319,308 |
|
|
|
|
|
|
|
13,490 |
|
|
|
42,333 |
|
|
|
1,891,035 |
|
|
|
(177,341 |
) |
|
|
3,088,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
2,349,171 |
|
|
|
25,170 |
|
|
|
18,637 |
|
|
|
168,474 |
|
|
|
2,341,354 |
|
|
|
(1,669,530 |
) |
|
|
3,233,276 |
|
Provision (benefit) for income taxes |
|
|
317,561 |
|
|
|
|
|
|
|
(6,533 |
) |
|
|
(14,220 |
) |
|
|
904,858 |
|
|
|
|
|
|
|
1,201,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
2,031,610 |
|
|
|
25,170 |
|
|
|
25,170 |
|
|
|
182,694 |
|
|
|
1,436,496 |
|
|
|
(1,669,530 |
) |
|
|
2,031,610 |
|
Preferred stock dividends |
|
|
4,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME ATTRIBUTABLE TO COMMON STOCK |
|
$ |
2,027,350 |
|
|
$ |
25,170 |
|
|
$ |
25,170 |
|
|
$ |
182,694 |
|
|
$ |
1,436,496 |
|
|
$ |
(1,669,530 |
) |
|
$ |
2,027,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassifications |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
REVENUES AND OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues |
|
$ |
2,128,566 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,582,523 |
|
|
$ |
(258,161 |
) |
|
$ |
5,452,928 |
|
Equity in net income (loss) of affiliates |
|
|
1,120,922 |
|
|
|
23,103 |
|
|
|
32,056 |
|
|
|
171,971 |
|
|
|
(37,061 |
) |
|
|
(1,310,991 |
) |
|
|
|
|
Other |
|
|
40,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,216 |
) |
|
|
|
|
|
|
29,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,290,347 |
|
|
|
23,103 |
|
|
|
32,056 |
|
|
|
171,971 |
|
|
|
3,534,246 |
|
|
|
(1,569,152 |
) |
|
|
5,482,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
447,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
607,813 |
|
|
|
|
|
|
|
1,055,583 |
|
Asset retirement obligation accretion |
|
|
23,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,342 |
|
|
|
|
|
|
|
40,016 |
|
Lease operating costs |
|
|
360,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
666,131 |
|
|
|
(258,161 |
) |
|
|
768,596 |
|
Gathering and transportation costs |
|
|
22,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,873 |
|
|
|
|
|
|
|
73,529 |
|
Severance and other taxes |
|
|
72,112 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
237,060 |
|
|
|
|
|
|
|
309,173 |
|
General and administrative |
|
|
127,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,510 |
|
|
|
|
|
|
|
152,460 |
|
Financing costs, net |
|
|
58,140 |
|
|
|
|
|
|
|
13,537 |
|
|
|
42,330 |
|
|
|
(23,847 |
) |
|
|
|
|
|
|
90,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,112,928 |
|
|
|
|
|
|
|
13,537 |
|
|
|
42,331 |
|
|
|
1,578,882 |
|
|
|
(258,161 |
) |
|
|
2,489,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
2,177,419 |
|
|
|
23,103 |
|
|
|
18,519 |
|
|
|
129,640 |
|
|
|
1,955,364 |
|
|
|
(1,310,991 |
) |
|
|
2,993,054 |
|
Provision (benefit) for income taxes |
|
|
341,911 |
|
|
|
|
|
|
|
(4,584 |
) |
|
|
(14,223 |
) |
|
|
834,442 |
|
|
|
|
|
|
|
1,157,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
1,835,508 |
|
|
|
23,103 |
|
|
|
23,103 |
|
|
|
143,863 |
|
|
|
1,120,922 |
|
|
|
(1,310,991 |
) |
|
|
1,835,508 |
|
Preferred stock dividends |
|
|
4,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME ATTRIBUTABLE TO COMMON STOCK |
|
$ |
1,831,248 |
|
|
$ |
23,103 |
|
|
$ |
23,103 |
|
|
$ |
143,863 |
|
|
$ |
1,120,922 |
|
|
$ |
(1,310,991 |
) |
|
$ |
1,831,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassifications |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES |
|
$ |
1,321,464 |
|
|
$ |
|
|
|
$ |
(15,095 |
) |
|
$ |
(21,550 |
) |
|
$ |
2,114,193 |
|
|
$ |
|
|
|
$ |
3,399,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
(1,425,216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,271,796 |
) |
|
|
|
|
|
|
(2,697,012 |
) |
Acquisition of BP p.l.c. properties |
|
|
(821,282 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(821,282 |
) |
Acquisition of Pioneers Argentine operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(704,809 |
) |
|
|
|
|
|
|
(704,809 |
) |
Acquisition of Amerada Hess properties |
|
|
(229,095 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(229,095 |
) |
Acquisition of Pan American Fueguina S.R.L.
properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(396,056 |
) |
|
|
|
|
|
|
(396,056 |
) |
Additions to gas gathering, transmission and
processing facilities |
|
|
(55,410 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(147,801 |
) |
|
|
|
|
|
|
(203,211 |
) |
Proceeds from China divestiture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264,081 |
|
|
|
|
|
|
|
264,081 |
|
Proceeds from sale of Egyptian properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
409,197 |
|
|
|
|
|
|
|
409,197 |
|
Investment in subsidiaries, net |
|
|
42,727 |
|
|
|
(12,525 |
) |
|
|
|
|
|
|
|
|
|
|
(36,477 |
) |
|
|
6,275 |
|
|
|
|
|
Other, net |
|
|
(17,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(290,936 |
) |
|
|
|
|
|
|
(308,166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES |
|
|
(2,505,506 |
) |
|
|
(12,525 |
) |
|
|
|
|
|
|
|
|
|
|
(2,174,597 |
) |
|
|
6,275 |
|
|
|
(4,686,353 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt borrowings |
|
|
1,495,981 |
|
|
|
|
|
|
|
2,569 |
|
|
|
1,828 |
|
|
|
(26,582 |
) |
|
|
57,640 |
|
|
|
1,531,436 |
|
Payments on debt |
|
|
(73,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,960 |
) |
|
|
|
|
|
|
(75,260 |
) |
Dividends paid |
|
|
(103,264 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(103,264 |
) |
Common stock activity |
|
|
23,453 |
|
|
|
12,525 |
|
|
|
12,525 |
|
|
|
19,721 |
|
|
|
19,144 |
|
|
|
(63,915 |
) |
|
|
23,453 |
|
Treasury stock activity, net |
|
|
(169,671 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(169,671 |
) |
Cost of debt and equity transactions |
|
|
(1,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,370 |
) |
Other |
|
|
14,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
1,185,908 |
|
|
|
12,525 |
|
|
|
15,094 |
|
|
|
21,549 |
|
|
|
(9,398 |
) |
|
|
(6,275 |
) |
|
|
1,219,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS |
|
|
1,866 |
|
|
|
|
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(69,802 |
) |
|
|
|
|
|
|
(67,938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR |
|
|
3,785 |
|
|
|
|
|
|
|
2 |
|
|
|
1 |
|
|
|
225,072 |
|
|
|
|
|
|
|
228,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
END OF PERIOD |
|
$ |
5,651 |
|
|
$ |
|
|
|
$ |
1 |
|
|
$ |
|
|
|
$ |
155,270 |
|
|
$ |
|
|
|
$ |
160,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassifications |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES |
|
$ |
1,220,137 |
|
|
$ |
|
|
|
$ |
(13,725 |
) |
|
$ |
(19,785 |
) |
|
$ |
1,973,469 |
|
|
$ |
|
|
|
$ |
3,160,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
(767,872 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,968,394 |
) |
|
|
|
|
|
|
(2,736,266 |
) |
Investment in subsidiaries, net |
|
|
(50,210 |
) |
|
|
(12,525 |
) |
|
|
|
|
|
|
|
|
|
|
(33,312 |
) |
|
|
96,047 |
|
|
|
|
|
Other, net |
|
|
58,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,901 |
) |
|
|
|
|
|
|
5,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES |
|
|
(759,945 |
) |
|
|
(12,525 |
) |
|
|
|
|
|
|
|
|
|
|
(2,054,607 |
) |
|
|
96,047 |
|
|
|
(2,731,030 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings |
|
|
112,189 |
|
|
|
|
|
|
|
1,200 |
|
|
|
502 |
|
|
|
36,124 |
|
|
|
(37,617 |
) |
|
|
112,398 |
|
Payments on long-term debt |
|
|
(507,900 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(829 |
) |
|
|
|
|
|
|
(508,729 |
) |
Dividends paid |
|
|
(83,046 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83,046 |
) |
Common stock activity |
|
|
18,646 |
|
|
|
12,525 |
|
|
|
12,525 |
|
|
|
19,281 |
|
|
|
14,099 |
|
|
|
(58,430 |
) |
|
|
18,646 |
|
Treasury stock activity, net |
|
|
5,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,802 |
|
Cost of debt and equity transactions |
|
|
(838 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(838 |
) |
Other |
|
|
12,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
(442,855 |
) |
|
|
12,525 |
|
|
|
13,725 |
|
|
|
19,783 |
|
|
|
49,394 |
|
|
|
(96,047 |
) |
|
|
(443,475 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS |
|
|
17,337 |
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(31,744 |
) |
|
|
|
|
|
|
(14,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR |
|
|
597 |
|
|
|
|
|
|
|
2 |
|
|
|
3 |
|
|
|
110,491 |
|
|
|
|
|
|
|
111,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
END OF PERIOD |
|
$ |
17,934 |
|
|
$ |
|
|
|
$ |
2 |
|
|
$ |
1 |
|
|
$ |
78,747 |
|
|
$ |
|
|
|
$ |
96,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassification |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
5,651 |
|
|
$ |
|
|
|
$ |
1 |
|
|
$ |
|
|
|
$ |
155,270 |
|
|
$ |
|
|
|
$ |
160,922 |
|
Receivables, net of allowance |
|
|
784,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780,626 |
|
|
|
|
|
|
|
1,565,606 |
|
Inventories |
|
|
28,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256,500 |
|
|
|
|
|
|
|
284,998 |
|
Drilling advances and other |
|
|
277,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,928 |
|
|
|
|
|
|
|
368,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,096,906 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
1,283,324 |
|
|
|
|
|
|
|
2,380,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
9,786,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,851,415 |
|
|
|
|
|
|
|
20,637,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable, net |
|
|
996,415 |
|
|
|
|
|
|
|
(6,330 |
) |
|
|
(255,995 |
) |
|
|
(734,090 |
) |
|
|
|
|
|
|
|
|
Goodwill, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,252 |
|
|
|
|
|
|
|
189,252 |
|
Equity in affiliates |
|
|
7,382,839 |
|
|
|
326,321 |
|
|
|
563,721 |
|
|
|
1,839,285 |
|
|
|
(1,201,898 |
) |
|
|
(8,910,268 |
) |
|
|
|
|
Deferred charges and other |
|
|
113,441 |
|
|
|
|
|
|
|
|
|
|
|
4,064 |
|
|
|
101,248 |
|
|
|
|
|
|
|
218,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,375,875 |
|
|
$ |
326,321 |
|
|
$ |
557,392 |
|
|
$ |
1,587,354 |
|
|
$ |
10,489,251 |
|
|
$ |
(8,910,268 |
) |
|
$ |
23,425,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
372,106 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
255,306 |
|
|
$ |
|
|
|
$ |
627,412 |
Other accrued expenses |
|
|
983,132 |
|
|
|
|
|
|
|
(1,765 |
) |
|
|
61,144 |
|
|
|
360,979 |
|
|
|
|
|
|
|
1,403,490 |
|
Current debt |
|
|
1,422,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,517 |
|
|
|
|
|
|
|
1,458,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,777,638 |
|
|
|
|
|
|
|
(1,765 |
) |
|
|
61,144 |
|
|
|
652,802 |
|
|
|
|
|
|
|
3,489,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT |
|
|
1,271,740 |
|
|
|
|
|
|
|
269,586 |
|
|
|
646,909 |
|
|
|
1,252 |
|
|
|
|
|
|
|
2,189,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
1,500,928 |
|
|
|
|
|
|
|
(36,750 |
) |
|
|
4,514 |
|
|
|
1,904,226 |
|
|
|
|
|
|
|
3,372,918 |
|
Advances from gas purchasers |
|
|
50,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,798 |
|
Asset retirement obligation |
|
|
1,030,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
428,399 |
|
|
|
|
|
|
|
1,459,341 |
|
Other |
|
|
108,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,733 |
|
|
|
|
|
|
|
228,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,691,453 |
|
|
|
|
|
|
|
(36,750 |
) |
|
|
4,514 |
|
|
|
2,452,358 |
|
|
|
|
|
|
|
5,111,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
12,635,044 |
|
|
|
326,321 |
|
|
|
326,321 |
|
|
|
874,787 |
|
|
|
7,382,839 |
|
|
|
(8,910,268 |
) |
|
|
12,635,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,375,875 |
|
|
$ |
326,321 |
|
|
$ |
557,392 |
|
|
$ |
1,587,354 |
|
|
$ |
10,489,251 |
|
|
$ |
(8,910,268 |
) |
|
$ |
23,425,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
Apache |
|
|
Apache |
|
|
Finance |
|
|
Finance |
|
|
of Apache |
|
|
Reclassifications |
|
|
|
|
|
|
Corporation |
|
|
North America |
|
|
Australia |
|
|
Canada |
|
|
Corporation |
|
|
& Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
17,934 |
|
|
$ |
|
|
|
$ |
2 |
|
|
$ |
1 |
|
|
$ |
78,747 |
|
|
$ |
|
|
|
$ |
96,684 |
|
Receivables, net of allowance |
|
|
376,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
882,080 |
|
|
|
|
|
|
|
1,258,387 |
|
Inventories |
|
|
28,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,305 |
|
|
|
|
|
|
|
198,436 |
|
Drilling advances and other |
|
|
132,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,157 |
|
|
|
|
|
|
|
233,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
555,313 |
|
|
|
|
|
|
|
2 |
|
|
|
1 |
|
|
|
1,231,289 |
|
|
|
|
|
|
|
1,786,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
7,062,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,682,486 |
|
|
|
|
|
|
|
15,745,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable, net |
|
|
1,143,410 |
|
|
|
|
|
|
|
(2,242 |
) |
|
|
(254,180 |
) |
|
|
(886,988 |
) |
|
|
|
|
|
|
|
|
Goodwill, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,252 |
|
|
|
|
|
|
|
189,252 |
|
Equity in affiliates |
|
|
5,308,510 |
|
|
|
295,877 |
|
|
|
540,839 |
|
|
|
1,506,387 |
|
|
|
(1,199,457 |
) |
|
|
(6,452,156 |
) |
|
|
|
|
Deferred charges and other |
|
|
44,934 |
|
|
|
|
|
|
|
|
|
|
|
4,380 |
|
|
|
82,441 |
|
|
|
|
|
|
|
131,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,115,166 |
|
|
$ |
295,877 |
|
|
$ |
538,599 |
|
|
$ |
1,256,588 |
|
|
$ |
8,099,023 |
|
|
$ |
(6,452,156 |
) |
|
$ |
17,853,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
382,632 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
344,014 |
|
|
$ |
|
|
|
$ |
726,646 |
|
Other accrued expenses |
|
|
701,765 |
|
|
|
|
|
|
|
(731 |
) |
|
|
53,086 |
|
|
|
662,224 |
|
|
|
|
|
|
|
1,416,344 |
|
Current debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
274 |
|
|
|
|
|
|
|
274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,084,397 |
|
|
|
|
|
|
|
(731 |
) |
|
|
53,086 |
|
|
|
1,006,512 |
|
|
|
|
|
|
|
2,143,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT |
|
|
1,271,334 |
|
|
|
|
|
|
|
269,355 |
|
|
|
646,844 |
|
|
|
4,252 |
|
|
|
|
|
|
|
2,191,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
1,004,087 |
|
|
|
|
|
|
|
(25,902 |
) |
|
|
4,766 |
|
|
|
1,364,632 |
|
|
|
|
|
|
|
2,347,583 |
|
Advances from gas purchasers |
|
|
74,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,941 |
|
Asset retirement obligation |
|
|
594,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
390,269 |
|
|
|
|
|
|
|
984,353 |
|
Oil and gas derivative instruments |
|
|
213,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213,574 |
|
Other |
|
|
159,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,848 |
|
|
|
|
|
|
|
184,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,046,584 |
|
|
|
|
|
|
|
(25,902 |
) |
|
|
4,766 |
|
|
|
1,779,749 |
|
|
|
|
|
|
|
3,805,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
9,712,851 |
|
|
|
295,877 |
|
|
|
295,877 |
|
|
|
551,892 |
|
|
|
5,308,510 |
|
|
|
(6,452,156 |
) |
|
|
9,712,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,115,166 |
|
|
$ |
295,877 |
|
|
$ |
538,599 |
|
|
$ |
1,256,588 |
|
|
$ |
8,099,023 |
|
|
$ |
(6,452,156 |
) |
|
$ |
17,853,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
These financial statements should be read in conjunction with the financial statements and the
summary of significant accounting policies and notes included in the Companys most recent annual
report on Form 10-K.
Overview
Apache Corporation (Apache or the Company) reported third-quarter 2006 earnings of $646
million, compared to $686 million for the third quarter of 2005. The 2006-period earnings included
a $174 million gain recognized in conjunction with divestment of operations in China and a $92
million one-time income tax charge for retroactive application of a new 10 percent oil and gas
company supplemental tax enacted by the U.K. during the third quarter of 2006. Third-quarter 2006
results, relative to the comparable prior-year quarter, saw higher unit costs and a higher
effective income tax rate with only marginal improvement in crude oil and natural gas revenues.
Natural gas production averaged 1,707 million cubic feet per day (MMcf/d) with production up in all
principal gas producing areas, highlighted by 133 MMcf/d rise in U.S. production and an additional
148 MMcf/d in Argentina. Crude oil production, which averaged 216,468 barrels per day (b/d), was
17,224 b/d below the comparable year-ago period, with over half of the decline related to an
unexpected shutdown of the BP p.l.c. (BP) operated North Sea Forties pipeline and another 3,788 b/d
related to the sale of Apaches China assets. Crude oil prices were up across the board, averaging
$63.66 per barrel. Natural gas prices, which averaged $4.83 per thousand cubic feet (Mcf), were
down in all major gas producing areas except Australia, which was flat on a comparative basis.
For the nine months ending September 30, 2006, the Company reported earnings of $2.0 billion,
11 percent more than the $1.8 billion reported for the 2005 period. The Companys 2006 period
earnings included a $132 million income tax benefit related to retroactive application of a
reduction in federal and provincial tax rates enacted by Canada in the second quarter of 2006, as
well as the gain on the China divestiture and the U.K. tax charge discussed above. Cash provided
by operating activities totaled $3.4 billion for the same period, $239 million ahead of 2005.
Natural gas production averaged 1,545 MMcf/d, 271 MMcf/d more than 2005. Crude oil production
averaged 221,538 b/d, 17,245 b/d below the comparable 2005 nine-month period. Crude oil price
realizations averaged $61.85 for the first nine months of 2006, 21 percent more than the relevant
2005 period. Natural gas prices averaged $5.32 per Mcf, $.54 less than 2005.
During the third quarter of 2006, Apache became operator in Argentinas Tierra del Fuego
Province following the Companys acquisition of additional interests from Pan American Fueguina
S.R.L. (Pan American) for total consideration of $429 million. The Company also sold its interests
in China in the third quarter to Australia-based ROC Oil Company Limited for $260 million, marking
Apaches exit from China. These transactions, along with other 2006 acquisition and divestiture
activity, are discussed in more detail below.
Other 2006 third-quarter and nine-month financial and operating results include:
|
|
|
Oil and gas production revenues totaled $2.1 billion for the third quarter of 2006, up
slightly from the 2005 quarter. For the nine-month period oil and gas revenues totaled
$6.1 billion, $655 million more than 2005. |
|
|
|
|
Quarterly production rose to a record 513,006 barrels of oil equivalent per day (boe/d),
13 percent above the comparable year-ago period. |
|
|
|
|
Third-quarter 2006 daily natural gas production was up 442 MMcf/d from last year, with
U.S. and Argentina daily production up 133 MMcf and 148 MMcf, respectively. Our U.S. Gulf
Coast region production was up 95 MMcf/d on successful drilling activity, hurricane
restorations and the June 2006 BP acquisition. Central Region production rose 38 MMcf/d on
successful drilling activity and the properties acquired from Amerada Hess in January 2006.
Argentinas production increase reflects production acquired from Pioneer in April 2006
and Pan American late in the third quarter of 2006. |
|
|
|
|
Australias third-quarter 2006 natural gas production increased 66 MMcf/d to 204 MMcf/d
compared to the prior-year equivalent quarter. The increase was related to production from
the John Brookes field, which commenced production during the second half of 2005. |
25
|
|
|
Natural gas production from Egypts Khalda Concession Qasr field, which commenced during
the third quarter of 2005, added 55 MMcf/d of natural gas to third-quarter 2006 production
when compared to the 2005 third-quarter. Apaches net production in Egypt averaged 208
MMcf/d for the 2006 quarter. |
|
|
|
|
Canadas production was up 49 MMcf/d from the prior-year quarter to 422 MMcf/d on
production from new wells drilled under the ExxonMobil Grant Land agreement, wells drilled
in the Nevis, Brownfield and Consort areas and royalty relief associated with gas cost
allowance wells. The region also benefited from a one-time adjustment following settlement
of its lawsuit against The Predator Corporation Ltd which involved the Ladyfern area of
northeast British Columbia (refer to Note 11). |
|
|
|
|
Third-quarter 2006 North Sea production was down 18,338 b/d primarily because of the
unexpected shutdown of the Forties pipeline by BP and a Delta platform turnaround. |
|
|
|
|
Australias third-quarter oil production was down 26 percent to 12,249 b/d on natural
decline. |
|
|
|
|
Production from the Pioneer and Pan American acquisitions pushed Argentinas
third-quarter 2006 oil production to 8,960 b/d, up 7,621 b/d from the prior year quarter. |
|
|
|
|
U.S. Central region crude oil production averaged 30,595 b/d, a 4,594 barrel improvement
over the prior-year comparative quarter. Production from the Amerada Hess properties
acquired in January 2006 and productive drilling results drove the gains. U.S. Gulf Coast
region third-quarter production was down 1,504 b/d on a comparative basis with drilling
activity and acquisitions more than offset by downtime and natural decline. |
Capital Expenditures:
Capital expenditures for the quarter, exclusive of acquisitions and capitalized interest,
totaled $948 million, nine percent lower than the third quarter of 2005. Expenditures for
exploration and development activity accounted for approximately 94 percent, or $889 million of the
capital spending, $36 million less than the third quarter of 2005. The balance of capital spending
was primarily for gathering, marketing and processing facilities and totaled $59 million, $53
million less than last year. For the nine-month period ending September 30, 2006, capital
expenditures total $2.8 billion, $203 million of which was for gathering, marketing and processing
facilities.
|
|
|
In the U.S., the Company spent $419 million on exploration and development activity,
including production platforms and facilities. The Company
drilled a total of 89 wells, 69 in the Central region and 20 in the Gulf Coast region. |
|
|
|
|
Canadas exploration and development capital totaled $162 million, including
recompletion activity and production facilities. The region drilled 55 wells during the
quarter. They also spent $37 million on gas gathering, transmission and processing
facilities. |
|
|
|
|
Egypt drilled and completed 46 wells during the third quarter of 2006. Egypts capital
expenditures for exploration and development totaled $120 million, including drilling,
recompletion activity and geological and geophysical expenditures. Gas gathering,
transmission and processing facility expenditures totaled $18 million during the period. |
|
|
|
|
The North Sea spent $97 million on exploration and development, including $56 million on
platform and production facility modifications and recompletions. Two wells were drilled
during the quarter. |
|
|
|
|
Australias $46 million of capital for exploration and development included five wells,
as well as geological and geophysical activity. |
|
|
|
|
In Argentina, the Company spent $43 million on exploration and development activity in
the third quarter. The region drilled 25 wells and had an active recompletion program. |
26
Acquisitions and Divestitures:
|
|
On January 5, 2006, the Company purchased Amerada Hesss interest
in eight fields located in the Permian Basin of West Texas and New
Mexico. The original purchase price was reduced from $404 million
to $269 million because other interest owners exercised their
preferential rights on a number of the properties. The
settlement price on the date of closing of $239 million was
adjusted primarily for revenues and expenditures occurring between
the closing date and the effective date of the acquisition.
Apache estimates that these fields had proved reserves of 27
million barrels (MMbbls) of liquid hydrocarbons and 27 billion
cubic feet (Bcf) of natural gas as of year-end 2005. |
|
|
On January 6, 2006, the Company completed the sale of its 55
percent interest in the deepwater section of Egypts West
Mediterranean Concession to Amerada Hess for $413 million. Apache
did not have any oil and gas reserves recorded for these
properties. Apache first announced this transaction on October
13, 2005. |
|
|
On April 25, 2006, the Company acquired Pioneers operations in
Argentina for $675 million. The total cash consideration includes
working capital balances purchased by the Company, asset
retirement liabilities assumed and transaction costs. The
properties are located in the Neuquén, San Jorge and Austral
basins of Argentina and had estimated net proved reserves of
approximately 22 MMbbls of liquid hydrocarbons and 297 Bcf of
natural gas as of December 31, 2005. The properties include eight
gas processing plants (five operated and three non-operated) and
112 miles of operated pipelines in the Neuquén Basin. Also
included are 2,200 square miles of 3-D seismic data. Apache
financed the purchase with cash on hand and commercial paper. |
|
|
In June 2006, the Company acquired BPs remaining producing
properties on the Outer Continental Shelf of the Gulf of Mexico.
The original purchase price was reduced from $1.3 billion to $845
million because other interest owners exercised their preferential
rights to purchase five of the original 18 producing fields. The
settlement price on the date of closing of $821 million was
adjusted primarily for revenues and expenditures occurring between
the closing date and the effective date of the acquisition. The
effective date of the purchase was April 1, 2006. The properties
include 13 producing fields (nine of which are operated) with
estimated proved reserves of 19.5 MMbbls of liquid hydrocarbons
and 148 Bcf of natural gas. Apache financed the purchase with
cash on hand and commercial paper. |
|
|
On August 8, 2006, the Company sold its 24.5 percent interest in
the Zhao Dong block offshore the Peoples Republic of China to
Australia-based ROC Oil Company Limited for $260 million, marking
Apaches exit from China. The transaction was effective July 1,
2006. The Company booked a $174 million gain on the transaction. |
|
|
During the third quarter of 2006, Apache acquired additional
interests in (and now operates) seven concessions in the Tierra del
Fuego Province from Pan
American for total consideration of $429 million. The total cash
consideration allocated below includes working capital balances
purchased, asset retirement obligations assumed and an obligation
to deliver specific gas volumes in the future. Apache financed
the purchase with cash on hand and commercial paper. |
Impact of 2005 Hurricanes:
The hurricanes that struck the Gulf of Mexico in 2005 continue to impact the Companys U.S.
Gulf Coast operations, both onshore and offshore Louisiana and Texas. As of September 30, 2006,
the Company estimates that it will be able to restore an additional 18 million net cubic feet of
natural gas per day and 7,000 net barrels of crude oil per day from currently shut-in production.
Restoration activities will continue into 2007.
The
Company estimates that costs for abandonment (including removal of
wreckage), repairs and
redevelopment will total $1.1 billion. The Company has collected $150 million for business
interruption losses and expects to collect between $325 and $350 million for repairs, abandonment
and redevelopment. The Company is also pursuing additional recoveries
for removal of wreckage costs.
27
Common Stock Purchases:
On April 19, 2006, the Company announced that its Board of Directors authorized the purchase
of up to 15 million shares of the Companys common stock representing a market value of
approximately $1 billion on the date of the announcement. The Company may buy shares from time to
time on the open market, in privately negotiated transactions, or a combination of both. The
timing and amounts of any purchases will be at the discretion of Apaches management. The Company
initiated the program on May 1, 2006, after the Companys first-quarter 2006 earnings information
was disseminated in the market. Through September 30, 2006, the Company purchased 2,500,000 shares
at an average of $69.74 per share.
28
Results of Operations
Revenues
The table below presents oil and gas production revenues, production and average prices
received from sales of natural gas, oil and natural gas liquids.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
2006 |
|
|
2005 |
|
|
(Decrease) |
|
|
2006 |
|
|
2005 |
|
|
(Decrease) |
|
Revenues (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
$ |
1,267,880 |
|
|
$ |
1,261,192 |
|
|
|
0.53 |
% |
|
$ |
3,740,472 |
|
|
$ |
3,328,102 |
|
|
|
12.39 |
% |
Natural gas |
|
|
758,726 |
|
|
|
761,399 |
|
|
|
(0.35 |
%) |
|
|
2,245,550 |
|
|
|
2,035,941 |
|
|
|
10.30 |
% |
Natural gas liquids |
|
|
46,209 |
|
|
|
29,153 |
|
|
|
58.51 |
% |
|
|
122,218 |
|
|
|
88,885 |
|
|
|
37.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,072,815 |
|
|
$ |
2,051,744 |
|
|
|
1.03 |
% |
|
$ |
6,108,240 |
|
|
$ |
5,452,928 |
|
|
|
12.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Volume Barrels per day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
67,996 |
|
|
|
64,906 |
|
|
|
4.76 |
% |
|
|
64,277 |
|
|
|
71,860 |
|
|
|
(10.55 |
%) |
Canada |
|
|
20,509 |
|
|
|
21,974 |
|
|
|
(6.67 |
%) |
|
|
21,123 |
|
|
|
22,226 |
|
|
|
(4.96 |
%) |
Egypt |
|
|
54,634 |
|
|
|
54,728 |
|
|
|
(0.17 |
%) |
|
|
55,756 |
|
|
|
54,110 |
|
|
|
3.04 |
% |
Australia |
|
|
12,249 |
|
|
|
16,499 |
|
|
|
(25.76 |
%) |
|
|
12,146 |
|
|
|
15,323 |
|
|
|
(20.73 |
%) |
North Sea |
|
|
49,375 |
|
|
|
67,713 |
|
|
|
(27.08 |
%) |
|
|
58,370 |
|
|
|
64,966 |
|
|
|
(10.15 |
%) |
Argentina |
|
|
8,960 |
|
|
|
1,339 |
|
|
NM |
|
|
5,632 |
|
|
|
1,074 |
|
|
NM |
China |
|
|
2,745 |
|
|
|
6,533 |
|
|
|
(57.98 |
%) |
|
|
4,234 |
|
|
|
9,224 |
|
|
|
(54.10 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
216,468 |
|
|
|
233,692 |
|
|
|
(7.37 |
%) |
|
|
221,538 |
|
|
|
238,783 |
|
|
|
(7.22 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Oil price Per barrel: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
58.39 |
|
|
$ |
53.85 |
|
|
|
8.43 |
% |
|
$ |
55.38 |
|
|
$ |
47.72 |
|
|
|
16.05 |
% |
Canada |
|
|
66.09 |
|
|
|
60.66 |
|
|
|
8.95 |
% |
|
|
62.30 |
|
|
|
52.12 |
|
|
|
19.53 |
% |
Egypt |
|
|
66.88 |
|
|
|
60.38 |
|
|
|
10.77 |
% |
|
|
65.66 |
|
|
|
53.29 |
|
|
|
23.21 |
% |
Australia |
|
|
73.80 |
|
|
|
66.52 |
|
|
|
10.94 |
% |
|
|
71.67 |
|
|
|
58.06 |
|
|
|
23.44 |
% |
North Sea |
|
|
67.04 |
|
|
|
60.46 |
|
|
|
10.88 |
% |
|
|
64.68 |
|
|
|
52.33 |
|
|
|
23.60 |
% |
Argentina |
|
|
46.41 |
|
|
|
39.18 |
|
|
|
18.45 |
% |
|
|
45.03 |
|
|
|
36.96 |
|
|
|
21.83 |
% |
China |
|
|
62.53 |
|
|
|
50.76 |
|
|
|
23.19 |
% |
|
|
62.73 |
|
|
|
42.35 |
|
|
|
48.12 |
% |
Total |
|
|
63.66 |
|
|
|
58.66 |
|
|
|
8.52 |
% |
|
|
61.85 |
|
|
|
51.05 |
|
|
|
21.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Volume Mcf per day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
719,324 |
|
|
|
586,111 |
|
|
|
22.73 |
% |
|
|
653,379 |
|
|
|
625,716 |
|
|
|
4.42 |
% |
Canada |
|
|
422,397 |
|
|
|
373,079 |
|
|
|
13.22 |
% |
|
|
408,758 |
|
|
|
366,892 |
|
|
|
11.41 |
% |
Egypt |
|
|
207,686 |
|
|
|
162,386 |
|
|
|
27.90 |
% |
|
|
213,097 |
|
|
|
154,839 |
|
|
|
37.62 |
% |
Australia |
|
|
204,465 |
|
|
|
138,267 |
|
|
|
47.88 |
% |
|
|
181,143 |
|
|
|
120,759 |
|
|
|
50.00 |
% |
North Sea |
|
|
1,738 |
|
|
|
2,384 |
|
|
|
(27.10 |
%) |
|
|
2,055 |
|
|
|
2,287 |
|
|
|
(10.14 |
%) |
Argentina |
|
|
151,122 |
|
|
|
2,715 |
|
|
NM |
|
|
86,275 |
|
|
|
3,142 |
|
|
NM |
China |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,706,732 |
|
|
|
1,264,942 |
|
|
|
34.93 |
% |
|
|
1,544,707 |
|
|
|
1,273,635 |
|
|
|
21.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Natural Gas price Per Mcf: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
6.27 |
|
|
$ |
7.73 |
|
|
|
(18.89 |
%) |
|
$ |
6.62 |
|
|
$ |
6.71 |
|
|
|
(1.34 |
%) |
Canada |
|
|
5.38 |
|
|
|
7.17 |
|
|
|
(24.97 |
%) |
|
|
6.22 |
|
|
|
6.28 |
|
|
|
(0.96 |
%) |
Egypt |
|
|
4.63 |
|
|
|
4.97 |
|
|
|
(6.84 |
%) |
|
|
4.50 |
|
|
|
4.67 |
|
|
|
(3.64 |
%) |
Australia |
|
|
1.70 |
|
|
|
1.69 |
|
|
|
0.59 |
% |
|
|
1.65 |
|
|
|
1.73 |
|
|
|
(4.62 |
%) |
North Sea |
|
|
13.20 |
|
|
|
10.57 |
|
|
|
24.88 |
% |
|
|
10.79 |
|
|
|
7.63 |
|
|
|
41.42 |
% |
Argentina |
|
|
0.89 |
|
|
|
1.35 |
|
|
|
(34.07 |
%) |
|
|
0.91 |
|
|
|
1.14 |
|
|
|
(20.18 |
%) |
China |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4.83 |
|
|
|
6.54 |
|
|
|
(26.15 |
%) |
|
|
5.32 |
|
|
|
5.86 |
|
|
|
(9.22 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Liquids (NGL)
Volume Barrels per day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
7,896 |
|
|
|
7,097 |
|
|
|
11.26 |
% |
|
|
8,088 |
|
|
|
8,529 |
|
|
|
(5.17 |
%) |
Canada |
|
|
2,104 |
|
|
|
2,232 |
|
|
|
(5.73 |
%) |
|
|
2,169 |
|
|
|
2,187 |
|
|
|
(0.82 |
%) |
Argentina |
|
|
2,083 |
|
|
|
|
|
|
NM |
|
|
1,154 |
|
|
|
|
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
12,083 |
|
|
|
9,329 |
|
|
|
29.52 |
% |
|
|
11,411 |
|
|
|
10,716 |
|
|
|
6.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average NGL Price Per barrel: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
42.19 |
|
|
$ |
34.54 |
|
|
|
22.15 |
% |
|
$ |
39.73 |
|
|
$ |
31.10 |
|
|
|
27.75 |
% |
Canada |
|
|
38.66 |
|
|
|
32.13 |
|
|
|
20.32 |
% |
|
|
36.83 |
|
|
|
27.59 |
|
|
|
33.49 |
% |
Argentina |
|
|
42.15 |
|
|
|
|
|
|
|
|
|
|
|
40.31 |
|
|
|
|
|
|
|
|
|
Total |
|
|
41.57 |
|
|
|
33.97 |
|
|
|
22.37 |
% |
|
|
39.23 |
|
|
|
30.38 |
|
|
|
29.13 |
% |
29
Crude Oil Revenues
Third-quarter 2006 consolidated crude oil revenues increased $7 million from the comparable
2005 quarter with a $5.00 per barrel increase in average realized oil price offsetting a seven
percent decrease in average daily production. All segments reported increases in realized crude
oil price, with the U.S. and Argentina also benefiting from production growth relative to the 2005
third-quarter. For the 2006 nine-month period, crude oil revenues increased $412 million from the
comparable 2005 period reflecting a $10.80 per barrel increase in oil price, which offsets a seven
percent decrease in daily production.
U.S. third-quarter 2006 crude oil revenues increased $44 million compared to the same quarter
of 2005. This increase was the result of an eight percent increase in realized price and a five
percent increase in crude oil production. The Central region was the primary contributor to
increased production through the Amerada Hess, Bronco, Five State and JDT acquisitions in addition
to an active drilling program. The Gulf Coast region reported increased production related to the
BP acquisition that was offset by natural decline, facility downtime and the impact of hurricane
damage. Nine-month period revenues increased $36 million period over period on a 16 percent
increase in crude oil price realizations, which was offset by an 11 percent decrease in
production.
Argentina contributed an additional $33 million in revenues for the third quarter of 2006
compared to the same quarter in 2005, which is related to a 7,621 b/d increase in production. The
increase in crude oil production resulted from the acquisitions of Pioneers Argentine operations
in April 2006 and from Pan American which closed September 18, 2006. Argentinas nine-month period
revenues were up $58 million from 2005, reflecting the impact of the Pioneer and Pan American
acquisitions.
Egypt contributed additional revenues of $32 million in the third quarter of 2006 compared to
the same quarter in 2005. This increase in revenue was attributable to an 11 percent increase in
crude oil price while production remained relatively flat. Egypts nine-month revenues improved
$212 million over the 2005 period on a three percent increase in production complimented by a 23
percent increase in price.
Canadas third-quarter 2006 revenues increased $2 million over third-quarter 2005 on a nine
percent increase in price, which was offset by a seven percent decrease in oil production. First
nine months oil revenues were up $43 million relative to 2005, on a 20 percent improvement in
price. Daily production for the first nine months of 2006 was five percent below 2005 levels.
Australias third-quarter 2006 crude oil revenues decreased $18 million compared to
third-quarter 2005. This decrease reflects 26 percent lower crude oil production, which is
partially offset by an 11 percent increase in price. The production decreases generated lower
revenues of $29 million that were offset by higher price realizations of $11 million. The
production decline was driven by inefficiencies of gas lift compression experienced at the Legendre
field, increased water cut at Legendre North 5H and natural decline of Harriet and Mohave oil
fields and lower condensate liquids associated with lower production from the Linda and Rose gas
fields. These declines were offset by production gains from the Zephyrus and Bambra fields,
increased condensate production from the John Brookes field, successful Stag well work and
optimization program. Revenues for the first nine months of 2006 were $5 million lower than the
relevant 2005 period, reflecting a 21 percent decrease in production, which was offset by a 23
percent increase in price.
The North Seas third-quarter 2006 crude oil revenues were $72 million lower than the
comparable quarter of 2005, which is related to a 27 percent decrease in oil production partially
offset by an 11 percent increase in price. The production decline was associated with a BP Forties
pipeline system seven day shutdown in addition to an accelerated
planned Forties Delta Platform turnaround.
These production declines were partially offset by new wells. Nine-month period revenues improved
$102 million from the comparable 2005 period on a 24 percent increase in price which offset the
impact of a 10 percent decrease in production.
Chinas
third-quarter 2006 revenues decreased $14 million compared to
third-quarter 2005 with
the disposition of all of our Zhao Dong block assets to ROC, which closed on August 8, 2006.
Approximately 11 percent and nine percent of our worldwide crude oil production was subject to
financial derivative hedging for the third quarter and first nine months of 2006, compared to six
percent for the comparable periods in 2005. Currently, all of our crude oil derivative positions
have been designated against U.S. production.
These financial derivative instruments reduced our third-quarter 2006 and 2005 worldwide
realized price $1.76 and $.99 per barrel, respectively. For the nine-month periods ending
September 30, 2006 and 2005 these hedges
30
reduced our average realized prices $1.60 and $.61 per barrel, respectively. (See Note 2,
Hedging and Derivative Instruments, of this Form 10-Q for a summary of the current derivative
positions and terms.)
Natural Gas Revenues
Third-quarter 2006 consolidated natural gas revenues decreased $3 million from the comparable
prior-year quarter with a 35 percent increase in natural gas production adding $196 million to
period revenues, offset by $199 million from a 26 percent decrease in realized natural gas price.
Production in all of our major gas producing regions increased, with the U.S. reflecting a 23
percent rise in production and Argentina adding 148 MMcf/d. Natural gas prices were down in all
major producing regions except Australia which was relatively flat period to period. For the
nine-month period, consolidated natural gas revenues increased $210 million from the comparable
2005 period, reflecting a 21 percent increase in production and a nine percent decrease in price
realizations.
Egypt added $14 million to third-quarter 2006 consolidated natural gas revenues compared to
the same quarter of 2005. Egypts production increased 28 percent while price realizations were
seven percent lower than the 2005 quarter. Egypts production growth was primarily attributed to
the Khalda concession Qasr field. On a nine-month comparison, Egypt added $64 million to 2006
revenues on a 38 percent rise in production. A four percent decline in comparative prices period
to period had minimal impact on revenues.
Argentinas 2006 third-quarter revenues were $12 million higher compared to the same quarter
of 2005 because of the Pioneer and Pan American acquisitions. Gas revenues for the first nine months of 2006 were up $20 million when compared to 2005. Lower relative price realizations in
both the three-month and nine-month 2006 periods had minimal impact on 2006 third-quarter and
nine-month comparative natural gas revenues.
Australias third-quarter 2006 natural gas revenues were $10 million higher than the
respective prior-year period resulting from a 48 percent rise in production, mainly focused in the
John Brookes field. Australia contributed an additional $24 million to 2006 first nine months gas
revenues when compared to 2005. The added revenues related to a 50 percent rise in production,
mainly from the John Brookes field. The nine-month 2006 Australian natural gas price averaged five percent
less than the first nine months of 2005.
U.S. third-quarter 2006 natural gas revenues were $2 million lower than the same quarter of
2005. Third-quarter production increased 23 percent adding $77 million to revenues, offset by a 19
percent decrease in natural gas prices lowering revenues by $79 million. Production in our Gulf
Coast region was up 27 percent primarily because of the BP acquisition and new drills while the
Central region also reported a 17 percent increase in production from a successful drilling and
recompletion program and acquisitions. U.S. natural gas revenues for the 2006 nine-month period
were $35 million higher than the relevant 2005 period, with a four percent increase in production
offsetting a one percent decrease in price realizations.
Canadas third-quarter 2006 natural gas revenues decreased $37 million over the comparable
quarter of 2005 from a 25 percent decrease in realized price, partially offset by a 13 percent
increase in gas production. The production increase resulted from drilling and development
activity on the acreage farmed in from ExxonMobil, increased Gas Cost Allowance royalty relief and a
lawsuit settlement at Ladyfern. Canada contributed $65 million higher gas revenues for the
nine-month period compared to 2005 on an 11 percent increase in production.
Although a majority of our worldwide gas sales contracts are indexed to prevailing market
prices, approximately seven percent and nine percent of our third-quarter 2006 and 2005 U.S.
natural gas production, respectively, was subject to long-term, fixed-price physical contracts.
Approximately eight percent of our U.S. natural gas production for the first nine months of 2006
was subject to long-term, fixed price physical contracts down from nine percent in the prior year.
These fixed-price contracts reduced third-quarter 2006 and 2005 worldwide realized prices $.07 and
$.16 per Mcf, respectively and 2006 and 2005 nine-month worldwide realized prices $.11 and $.13 per
Mcf, respectively. Additionally, nearly all of our Australian natural gas production is subject to
long-term, fixed-price supply contracts that are periodically adjusted for changes in Australias
consumer price index. Since these contracts are denominated in Australian dollars, the resulting
revenues are impacted by changes in the value of the Australian dollar relative to the U.S. dollar.
In Argentina, our natural gas is sold into three separate markets; 1) the residential market,
where prices are regulated by the Argentine government; 2) the commercial market for small
industrial companies and electrical generation, where prices, although higher than for the
residential market, are also controlled by the Argentine government; and 3) the negotiated market
for large industrial users, where prices fluctuate throughout the year based on supply and demand.
Delivery requirements into the residential and commercial markets are determined proportionately
among all industry participants. Regulated pricing on a portion of our gas market in Argentina
lessens price volatility.
31
In addition to fixed price physical contracts, approximately 10 percent and eight percent of
our worldwide natural gas production was subject to financial derivative hedges for the
third-quarter and nine-month periods of 2006, compared to seven percent and 10 percent for the
comparable periods in 2005. At the close of this quarter, all of our natural gas derivative
positions had been designated against available production. These derivative financial instruments
reduced our third-quarter 2006 and 2005 consolidated realized prices $.02 and $.12 per Mcf,
respectively. Our average realized prices for the first nine-month periods of 2006 and 2005 were
reduced $.07 and $.06 per Mcf, respectively. (See Note 2, Hedging and Derivative Instruments, of
this Form 10-Q for a summary of our current derivative positions and terms.)
Costs
The table below presents a comparison of Apaches expenses on an absolute dollar basis and an
equivalent unit of production (boe) basis. This discussion may reference either expenses on a boe
basis or expenses on an absolute dollar basis, or both, depending on their relevance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
(In millions) |
|
|
(Per boe) |
|
|
(In millions) |
|
|
(Per boe) |
|
Depreciation, depletion and amortization
(DD&A): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas property and equipment |
|
$ |
456 |
|
|
$ |
333 |
|
|
$ |
9.68 |
|
|
$ |
7.97 |
|
|
$ |
1,215 |
|
|
$ |
991 |
|
|
$ |
9.08 |
|
|
$ |
7.86 |
|
Other assets |
|
|
31 |
|
|
|
24 |
|
|
|
.65 |
|
|
|
.58 |
|
|
|
86 |
|
|
|
65 |
|
|
|
.64 |
|
|
|
.51 |
|
Asset retirement obligation accretion |
|
|
23 |
|
|
|
14 |
|
|
|
.48 |
|
|
|
.32 |
|
|
|
64 |
|
|
|
40 |
|
|
|
.48 |
|
|
|
.32 |
|
Lease operating costs |
|
|
362 |
|
|
|
280 |
|
|
|
7.67 |
|
|
|
6.71 |
|
|
|
966 |
|
|
|
769 |
|
|
|
7.21 |
|
|
|
6.10 |
|
Gathering and transportation costs |
|
|
25 |
|
|
|
24 |
|
|
|
.53 |
|
|
|
.56 |
|
|
|
77 |
|
|
|
74 |
|
|
|
.58 |
|
|
|
.58 |
|
Severance and other taxes |
|
|
117 |
|
|
|
150 |
|
|
|
2.49 |
|
|
|
3.60 |
|
|
|
433 |
|
|
|
309 |
|
|
|
3.23 |
|
|
|
2.45 |
|
General and administrative expense |
|
|
54 |
|
|
|
50 |
|
|
|
1.14 |
|
|
|
1.20 |
|
|
|
152 |
|
|
|
152 |
|
|
|
1.13 |
|
|
|
1.21 |
|
Financing costs, net |
|
|
42 |
|
|
|
27 |
|
|
|
.89 |
|
|
|
.65 |
|
|
|
96 |
|
|
|
90 |
|
|
|
.72 |
|
|
|
.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,110 |
|
|
$ |
902 |
|
|
$ |
23.53 |
|
|
$ |
21.59 |
|
|
$ |
3,089 |
|
|
$ |
2,490 |
|
|
$ |
23.07 |
|
|
$ |
19.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, Depletion and Amortization (DD&A)
Third-quarter 2006 full-cost DD&A expense of $456 million was $123 million higher than the
comparative quarter of 2005. The Companys 2006 third-quarter full-cost DD&A rate increased $1.71
to $9.68 per boe, from the same quarter last year, reflecting rising acquisition costs, higher
abandonment cost estimates, rising industry-wide drilling and finding costs, especially in the U.S.
and Canada, and incremental future development costs associated with recent acquisitions and newly
identified development projects. The increase in costs, including increased estimates of future
development costs, is related to increased demand for drilling and associated services, a consequence of both
higher oil and gas prices and additional demand resulting from the ongoing need to repair damage
caused by hurricanes Katrina and Rita in the third quarter of 2005. The increase in third-quarter
2006 DD&A, relative to the 2005 quarter, was mitigated by a decline in Egypt resulting from the
January 2006 sale of Egypts deepwater acreage.
DD&A expense for the first nine months of 2006 totaled $1.2 billion, $224 million more than
2005. The full-cost DD&A rate averaged $9.08 per boe, $1.22 higher than 2005. The same factors
driving the increase in the 2006 third-quarter rate drove the increase in the nine-month period
rate.
Lease Operating Costs (LOE)
LOE increased $82 million from the third quarter of last year to $362 million in the 2006
third quarter. On a per unit basis, 2006 third-quarter LOE was up $.96 from the 2005 quarter to
$7.67 per boe. LOE for the nine months ended September 30, 2006 totaled $966 million, $197 million
more than 2005. Unit costs for the nine-month period were $7.21 per boe compared to $6.10 in 2005.
Rising production mitigated the impact of industry-wide increases in service costs by spreading
the higher costs across more units of production.
The increases in the per unit rates for both periods were attributable to higher service costs
associated with rising commodity prices, driving increases in repair and maintenance costs, ad
valorem costs, contract labor, and the impact of a weaker U.S. dollar on Canadian LOE.
Historically, electricity, fuel and ad valorem costs have been directly impacted by rising
commodity prices. Other service costs have historically risen as a result of increased activity,
and hence demand, in high commodity price environments.
On a regional basis, the U.S. added $.35 to the 2006 third-quarter consolidated rate, most of
which was related to workover activity and offshore repair and maintenance projects, the North Sea
$.70, Canada $.35 and China $.02.
32
Lower production, higher repair and maintenance costs and higher fuel and service costs drove
the increase in the North Sea. Canadas impact was driven by the impact of a weaker U.S. dollar on
Canadian LOE, higher relative repair and maintenance costs and higher chemicals, power, fuel and
labor costs, while Chinas increase was a result of a decline in production volumes as partner
advances were fully recovered in the second half of 2005, thereby reducing the Companys net
entitlement. Argentina lowered the third-quarter consolidated rate $.30 per boe on the production
added from the April 2006 Pioneer acquisition, while Australia and Egypt lowered the rate $.15 and
$.01 per boe, respectively. Australias impact was related to the production from the John
Brookes field which more than offset the impact of higher maintenance and insurance costs.
Egypts impact was attributed to production increases from the Qasr field in the Khalda Concession
which more than offset the processing fees associated with the Qasr gas, higher fuel costs and
contract labor.
For the nine-months ended September 30, 2006, the U.S. added $.60, Canada $.39, the North Sea
$.32, and China $.06 to the consolidated boe rate. Argentina, Australia and Egypt lowered the
consolidated rate $.13, $.09 and $.03 per boe, respectively.
For a more detailed discussion of production, refer to Results of Operations Revenues of
this Managements Discussion and Analysis of Financial Condition and Results of Operations.
Gathering and Transportation Costs
Gathering and transportation costs were flat quarter over quarter and increased four percent
for the first nine months of 2006 compared to the same period in 2005. The following table
presents gathering and transportation costs paid directly by Apache to third-party carriers for
each of the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
U.S |
|
$ |
8 |
|
|
$ |
7 |
|
|
$ |
23 |
|
|
$ |
23 |
|
Canada |
|
|
8 |
|
|
|
8 |
|
|
|
26 |
|
|
|
24 |
|
North Sea |
|
|
6 |
|
|
|
8 |
|
|
|
19 |
|
|
|
21 |
|
Egypt |
|
|
3 |
|
|
|
1 |
|
|
|
8 |
|
|
|
5 |
|
Argentina |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
China |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gathering and Transportation |
|
$ |
25 |
|
|
$ |
24 |
|
|
$ |
77 |
|
|
$ |
74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For both periods presented, these costs related to the transportation of crude oil and
natural gas in our North American operations, transportation of crude oil in the North Sea and
transportation of crude oil from Egypt.
Severance and Other Taxes
Third-quarter 2006 severance and other taxes totaled $118 million, $32 million less than the
prior-year quarter. For the nine-month period, severance and other taxes totaled $433 million
compared to $309 million in the year-earlier period. A detail of these taxes follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
(In millions) |
|
Severance taxes |
|
$ |
34 |
|
|
$ |
43 |
|
|
$ |
96 |
|
|
$ |
103 |
|
U.K. PRT |
|
|
74 |
|
|
|
99 |
|
|
|
305 |
|
|
|
188 |
|
Canadian taxes |
|
|
5 |
|
|
|
6 |
|
|
|
14 |
|
|
|
15 |
|
Other |
|
|
5 |
|
|
|
2 |
|
|
|
18 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Severance and Other Taxes |
|
$ |
118 |
|
|
$ |
150 |
|
|
$ |
433 |
|
|
$ |
309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K. Petroleum Revenue Tax (PRT) is assessed on net profits from subject fields in the
North Sea. The decrease in third-quarter 2006 PRT, compared to the 2005 quarter, was attributable
to a 19 percent decrease in revenues and an 11 percent decrease in deductible costs. The increase
in PRT for the nine-month period was related to an 11 percent increase in revenues and a 20 percent
decrease in deductible costs.
33
Severance taxes are incurred in the U.S. and Australia. U.S. severance taxes were flat period
over period. Australias third-quarter 2006 severance taxes were down $11 million when compared to
the third quarter of 2005. The lower comparative taxes were associated with a decline in taxes
which were assessed on fewer production volumes at the Legendre and Harriet fields. For the
nine-month period ending September 30, 2006, U.S. severance taxes rose $12 million on higher
price-driven revenues, while Australias severance taxes declined $19 million as discussed under
quarterly comparisons.
Other taxes for the 2006 nine-month period were $15 million more than 2005 primarily because
of additional state franchise taxes in the U.S. related to expanding operations, increases in other
miscellaneous taxes and $5 million of newly enacted special profits charges levied on petroleum
revenues by the Chinese government. During the third-quarter of 2006 Apache sold its interest in
China.
General and Administrative Expense
Third-quarter 2006 general and administrative expense (G&A) totaled $54 million, $4 million
more than the third quarter of 2005. The higher costs were related to growth in our international
areas, including the Argentina acquisitions, and higher insurance costs. The higher costs were
partly offset by lower stock-based compensation. Apaches cash-based SARs program is expensed
based on changes in the Companys stock price and resulted in greater expense in the 2005 period
when compared to 2006. G&A expense for the 2006 nine-month period totaled $152 million, flat
compared to the same period of 2005 with the additional costs associated with acquisitions and
increasing insurance costs offset by lower stock-based compensation costs, as explained above.
Provision for Income Taxes
Third-quarter 2006 provision for income tax expense totaled $504 million, $32 million more
than the 2005 third quarter. The third-quarter 2006 effective rate of
43.8 percent was impacted by a new 10 percent oil and gas
company supplemental tax enacted by the U.K. during the third quarter
of 2006, including a $92 million income tax charge associated
with retroactive application of the rate increase. Also, the impact of
a reduction in federal and provincial tax rates enacted by Canada during the second quarter of 2006
impacted the third-quarters effective rate when compared to the 2005 third-quarter rate of 40.8
percent.
Nine-month 2006 income tax expense of $1.2 billion was $44 million more than the 2005
comparable period. The effective rate for the 2006 period was 37.2 percent comparable to the 38.7
percent effective rate in the 2005 nine-month period. The impact of the 2006 Canadian income rate
reductions more than offset the impact of the new U.K. supplemental tax and foreign exchange
movement.
The effective income tax rates for both the 2006 third-quarter and nine-month period were
impacted by the gain recognized in conjunction with the divestment of operations in China. The
Company intends to permanently reinvest earnings of its foreign subsidiaries and as such, has not
recorded U.S. income tax expense on any undistributed foreign earnings, including the gain from the
China sale.
Capital Resources and Liquidity
Financial Indicators
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2006 |
|
2005 |
Millions of dollars except as indicated |
|
|
|
|
|
|
|
|
Cash |
|
$ |
161 |
|
|
$ |
229 |
|
Current ratio |
|
|
.68 |
|
|
|
.99 |
|
Total debt |
|
$ |
3,648 |
|
|
$ |
2,192 |
|
Shareholders equity |
|
$ |
12,635 |
|
|
$ |
10,541 |
|
Percent of total debt to capitalization |
|
|
22 |
% |
|
|
17 |
% |
Floating-rate debt/total debt |
|
|
40 |
% |
|
|
|
|
Overview
Apaches primary uses of cash are exploration, development and acquisition of oil and gas
properties, costs and expenses necessary to maintain continued operations, repayment of principal
and interest on outstanding debt and payment of dividends.
34
The Company funds its exploration and development activities primarily through net cash
provided by operating activities (cash flow) and budgets capital expenditures based on projected
cash flow. Cash flow, both in the short-term and long-term, is impacted by highly volatile oil and
natural gas prices, production levels and industry trends impacting operating expenses and drilling
costs. Future cash flows are also dependent on our ability to continue to acquire or find
high-margin reserves at competitive prices. For these reasons, we only forecast, for internal use
by management, an annual cash flow. Longer term cash flow and capital spending projections are not
used by management to operate our business. The annual cash flow forecasts are revised monthly in
response to changing market conditions and production projections. Apache routinely adjusts
capital expenditure budgets throughout the year in response to the adjusted cash flow forecasts and
market trends in drilling and acquisitions costs.
The Company has historically utilized internally generated cash flow, committed and
uncommitted credit facilities, and access to both debt and equity capital markets for all other
liquidity and capital resources needs. Apaches ability to access the debt capital market is
supported by its investment grade credit ratings. Apaches senior unsecured debt is currently
rated investment grade by Moodys, Standard and Poors and Fitch with ratings of A3, A- and A,
respectively. Because of the liquidity and capital resources alternatives available to Apache,
including internally generated cash flows, Apaches management believes that its short-term and
long-term liquidity is adequate to fund operations, including its capital spending program,
repayment of debt maturities and any amounts that may ultimately be paid in connection with
contingencies.
Given the Companys current capital resource and liquidity position, an announcement was made
in April 2006 that the Board of Directors authorized the purchase of up to 15 million shares of the
Companys common stock, valued at approximately $1 billion when first announced. Shares may be
purchased either in the open market or through privately negotiated transactions. The Company
anticipates that any purchases will be made with excess cash flows and short-term borrowing, but
the Company is not obligated to acquire any specific number of shares. The Company initiated the
program on May 1, 2006, after the Companys first-quarter 2006 earnings information was
disseminated in the market. Through September 30, 2006, the Company repurchased 2,500,000 of the
shares at an average price of $69.74 per share.
The Companys ratio of current assets to current liabilities was .68 on September 30, 2006,
compared to .99 on December 31, 2005. The decrease in the ratio was the result of an increase in
current liabilities of $1.3 billion partially offset by a $218 million increase in current assets.
The increase in current liabilities from the end of 2005 was principally driven by the issuance of
commercial paper to fund acquisitions although variations in other current liability categories
impacted the ultimate change. The increase in current assets for the same period primarily related
to receivables, inventories and prepaid assets, with variations in other current asset categories
impacting the overall change.
Net Cash Provided by Operating Activities
Apaches net cash provided by operating activities for the first nine months of 2006 totaled
$3.4 billion, up from $3.2 billion for the same period in 2005. The increase in 2006 cash flow was
attributed to higher net income, which was driven by increased
production revenues in the period as
discussed in Results of Operations under Item 2, Managements Discussion and Analysis of
Financial Condition and Results of Operations in this Form 10-Q.
Historically, fluctuations in commodity prices have been the primary reason for the Companys
short-term changes in cash flow from operating activities. Sales volume changes have also impacted
cash flow in the short-term, but have not been as volatile as commodity prices. Apaches long-term
cash flow from operating activities is dependent on commodity prices, reserve replacement, and the
level of costs and expenses required for continued operations. Normal fluctuations in operating
asset and liability balances also impacted net cash from operating activities.
Debt
During the first nine months of 2006, the Companys debt-to-capitalization ratio increased to
22 percent from 17 percent on December 31, 2005, as a result of an increase in commercial paper
outstanding following $2.4 billion of acquisitions. The Companys outstanding debt includes notes
and debentures maturing in the years 2007 through 2096.
35
The Company has available a $1.95 billion commercial paper program which enables Apache to
borrow funds for up to 270 days at competitive interest rates. As of September 30, 2006, Apache
had $1.41 billion of commercial paper outstanding. The weighted-average interest rate for
commercial paper was 5.06 percent and 2.92 percent for the first nine months of 2006 and 2005,
respectively. If the Company is unable to issue commercial paper following a significant credit
downgrade or dislocation in the market, the Companys U.S. credit facilities are available as a
100-percent backstop. The Company was in compliance with the terms of the credit facilities as of
September 30, 2006.
In May 2006, the Company amended its existing five-year revolving U.S. credit facility which
was scheduled to mature on May 28, 2009. The amendment: (a) extended the maturity to May 28, 2011,
(b) increased the size of the facility from $750 million to $1.5 billion, and (c) reduced the
facility fees from .08% to .06% and reduced the margin over LIBOR on loans from .27% to .19%. The
lenders also extended the maturity dates of the $150 million Canadian facility, the $150 million
Australian facility and $385 million of the $450 million U.S. credit facility, for an additional
year to May 12, 2011 from May 12, 2010. The Company also increased commercial paper availability
to $1.95 billion from $1.20 billion.
In August 2006, the Company extended the maturity of another $25 million in commitments under
the $450 million U.S. credit facility for an additional year. As a result, $410 million will
mature on May 12, 2011, and $40 million will mature on May 12, 2010.
As of September 30, 2006, available borrowing capacity under our total credit facilities was
$839 million and the Company had $161 million of cash and cash equivalents on hand.
Oil and Gas Capital Expenditures
The Company funded its exploration and production capital expenditures, including gathering,
transportation and marketing facilities and capitalized interest of $2.9 billion in both nine-month
periods of 2006 and 2005 primarily with internally generated cash flow of $3.4 billion and $3.2
billion, respectively.
The following table presents a summary of the Companys capital expenditures for each of our
reportable segments for the nine month periods ended September 30, 2006 and 2005.
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Exploration and development: |
|
|
|
|
|
|
|
|
United States |
|
$ |
1,108,793 |
|
|
$ |
803,297 |
|
Canada |
|
|
721,989 |
|
|
|
854,032 |
|
Egypt |
|
|
330,599 |
|
|
|
262,315 |
|
Australia |
|
|
115,540 |
|
|
|
174,809 |
|
North Sea |
|
|
255,219 |
|
|
|
399,836 |
|
Argentina |
|
|
63,621 |
|
|
|
18,414 |
|
Other International |
|
|
12,288 |
|
|
|
18,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,608,049 |
|
|
$ |
2,531,494 |
|
|
|
|
|
|
|
|
Capitalized Interest |
|
$ |
46,183 |
|
|
$ |
42,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas gathering, transmission and processing facilities |
|
$ |
203,210 |
|
|
$ |
319,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions: |
|
|
|
|
|
|
|
|
Oil and gas properties |
|
$ |
2,358,774 |
|
|
$ |
35,826 |
|
|
|
|
|
|
|
|
Cash Dividend Payments
The Company has paid cash dividends on its common stock for 41 consecutive years through 2005.
Future dividend payments will depend on the Companys level of earnings, financial requirements
and other relevant factors. Common dividends paid during the three-month and nine-month periods
ending September 30, 2006, rose to $33 million and $99 million, respectively, reflecting a slight
increase in common shares outstanding and a 25 percent higher common stock dividend rate. The
Company increased its quarterly cash dividend 50 percent, to 15 cents per share from 10 cents per
share, effective with the November 2006 dividend payment. During the three-month and
36
nine-month periods ending September 30, 2006, Apache paid $1.4 million and $4.3 million,
respectively, in dividends on its Series B Preferred Stock issued in August 1998.
Contractual Obligations
We are subject to various financial obligations and commitments in the normal course of
operations. These contractual obligations represent known future cash payments that we are
required to make and relate primarily to commercial paper outstanding, long-term debt, operating
leases, pipeline transportation commitments and international commitments. The Company expects to
fund these contractual obligations with cash generated from operating activities.
Apache is also subject to various contingent obligations that become payable only if certain
events or rulings were to occur. The inherent uncertainty surrounding the timing of and monetary
impact associated with these events or rulings prevents any meaningful accurate measurement, which
is necessary to assess the impact on future liquidity. Such obligations include environmental
contingencies and potential settlements resulting from litigation. Apaches management feels that
it has adequately reserved for its contingent obligations. The Company has reserved approximately
$15 million for environmental remediation. The Company has also reserved approximately $7 million
for various legal liabilities, in addition to $71 million, (plus accrued interest of $8.8 million)
for the Texaco China B.V. litigation.
The Companys future liquidity could be impacted in the event of a significant downgrade of
its credit ratings by Moodys, Standard and Poors, and Fitch; however, we do not believe that such
a sharp downgrade is reasonably likely. The Companys credit facilities do not require the Company
to maintain a minimum credit rating. In addition, generally under our commodity hedge agreements,
Apache may be required to post margin or terminate outstanding positions if the Companys credit
ratings decline significantly. The negative covenants associated with our debt are outlined in
greater detail in Item 7, Managements Discussion and Analysis of Financial Condition and Results
of Operations, Capital Resources and Liquidity, Debt in the Companys 2005 Form 10-K.
Off-Balance Sheet Arrangements
Apache does not currently utilize any off-balance sheet arrangements with unconsolidated
entities to enhance liquidity and capital resource positions.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Risk
The major market risk exposure is in the pricing applicable to our oil and gas production.
Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot
prices applicable to our United States and Canadian natural gas production. Prices received for
oil and gas production have been and remain volatile and unpredictable. Average monthly oil price
realizations, including the impact of fixed-price contracts and hedges, ranged from a low of $56.24
per barrel to a high of $68.59 per barrel during the first nine months of 2006. Average monthly
gas price realizations, including the impact of fixed-price contracts and hedges, ranged from a
monthly low of $4.61 per Mcf to a monthly high of $8.05 per Mcf during the same period. Based on
the Companys worldwide oil production levels, a $1.00 per barrel change in the weighted-average
realized price of oil would increase or decrease nine-month 2006 revenues by $61 million. Based on
the Companys worldwide gas production levels, a $.10 per Mcf change in the weighted-average
realized price of gas would increase or decrease nine-month 2006 revenues by $40 million.
Apache has historically only hedged long-term oil and gas prices related to a portion of its
expected production associated with acquisitions. As such, the Companys use of hedging activity
remains at a correspondingly low level. However, Apache hedged a portion of its expected
production associated with the Companys 2006 drilling program. In the first nine months of 2006,
financial derivative hedges represented approximately eight percent of the total worldwide natural
gas production and nine percent of the total worldwide crude oil production. Hedges in place are
related to U.S. and Canadian production and represent approximately 10 percent of worldwide
production for natural gas and crude oil for the remainder of 2006.
On September 30, 2006, the Company had open natural gas derivative positions with a fair value
of $55 million. A 10 percent increase in natural gas prices
would decrease the fair value by $54
million. A 10 percent decrease in prices would increase the fair value by $55 million. The Company
also had open oil derivative positions with a fair
37
value of $(21) million on September 30, 2006. A 10 percent increase in crude oil prices would
decrease the fair value by $117 million. A 10 percent decrease
in prices would increase the fair
value by $120 million. See Note 2, Hedging and Derivative Instruments of this Form 10-Q, for
notional volumes associated with the Companys derivative contracts.
Governmental Risk
On October 10, 2006, the Ministry of Economy of Argentina issued Resolution No. 776/2006, the
effect of which is to lift the existing exemption and impose an export duty on hydrocarbons
exported from Tierra del Fuego. The Customs Administration subsequently issued regulations deeming
the assessment retroactive from the first date the duty applied in 2002. The Company is currently
assessing the impact of this resolution on its future production in Tierra del Fuego. The Company
is fully indemnified from sellers for periods prior to our ownership, which commenced in 2006.
Interest Rate Risk
The Company interest rate risk exposure increased during the third quarter of 2006 with the
addition of $171.9 million in floating-rate debt. As of September 30, 2006, the Companys fixed
interest debt represented 60 percent of total debt. As a result, Apaches annual interest costs in
2006 will fluctuate based on short-term interest rates on approximately 40 percent of our total
debt outstanding as of September 30, 2006. The impact on cash flow of a 10 percent change in the
floating interest rate would be approximately $2.0 million per quarter on September 30, 2006, debt
balances.
Foreign Currency Risk
The Companys cash flow stream relating to certain international operations is based on the
U.S. dollar equivalent of cash flows measured in foreign currencies. In Australia, oil production
is sold under U.S. dollar contracts and natural gas production is sold under fixed-price Australian
dollar contracts. Over half the costs incurred for Australian operations are paid in Australian
dollars. In Canada, the majority of oil and natural gas production is sold under Canadian dollar
contracts. The majority of the costs incurred are paid in Canadian dollars. The North Sea oil
production is sold under U.S. dollar contracts and the majority of costs incurred are paid in
British pounds. In contrast, all oil and natural gas production in Egypt is sold for U.S. dollars
and the majority of the costs incurred are denominated in U.S. dollars. In Argentina, most
payments and receipts are received and paid in Argentine pesos. However, most contracts are priced
on U.S. dollar equivalents. Revenue and disbursement transactions denominated in Australian
dollars, Canadian dollars, British pounds and Argentine pesos are converted to U.S. dollar
equivalents based on the exchange rate as of the transaction date.
A 10 percent change in the Australian and Canadian dollars, the British pound and the
Argentine pesos as of September 30, 2006, would result in a foreign currency net gain or loss of
approximately $120 million. This is primarily driven from foreign currency effects on the
Companys deferred tax liability positions in its international operations.
The information set forth under Commodity Risk, Interest Rate Risk and Foreign Currency
Risk in Item 7A of our annual report on Form 10-K for the year ended December 31, 2005, is
incorporated herein by reference. Information about market risks for the quarter ended September
30, 2006, does not differ materially from the disclosure in our 2005 Form 10-K, except as noted
above.
Forward-Looking Statements and Risk
Certain statements in this report, including statements of the future plans, objectives, and
expected performance of the Company, are forward-looking statements that are dependent upon certain
events, risks and uncertainties that may be outside the Companys 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
38
availability, complex geology and other factors can affect these risks. Although Apache may
make use of futures contracts, swaps, options and fixed-price physical contracts to mitigate risk,
fluctuations in oil and natural gas prices or a prolonged continuation of low prices, may adversely
affect the Companys financial position, results of operations and cash flows.
ITEM 4 CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
G. Steven Farris, the Companys President, Chief Executive Officer and Chief Operating
Officer, and Roger B. Plank, the Companys Executive Vice President and Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2006, the
end of the period covered by this report. Based on that evaluation and as of the date of that
evaluation, these officers concluded that the Companys disclosure controls were effective,
providing effective means to ensure that information we are required to disclose under applicable
laws and regulations is recorded, processed, summarized and reported in a timely manner. We also
made no significant changes in internal controls over financial reporting during the quarter ending
September 30, 2006, that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.
We periodically review the design and effectiveness of our disclosure controls, including
compliance with various laws and regulations that apply to our operations both inside and outside
the United States. We make modifications to improve the design and effectiveness of our disclosure
controls, and may take other corrective action, if our reviews identify deficiencies or weaknesses
in our controls.
Managements Report on Internal Control over Financial Reporting
The management report called for by Item 308(a) of Regulation S-K is incorporated herein by
reference to Report of Management on Internal Control Over Financial Reporting, included on Page
F-1 in Item 15 of the Companys 2005 Form 10-K.
The independent auditors attestation report called for by Item 308(b) of Regulation S-K is
incorporated by reference to Report of Independent Registered Public Accounting Firm on Internal
Control Over Financial Reporting, included on Page F-3 in Item 15 of the Companys 2005 Form 10-K.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting during the period
covered by this quarterly Report on Form 10-Q that materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.
39
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 10 to the Consolidated Financial Statements contained
in the Companys annual report on Form 10-K for the year ended December 31, 2005 (filed
with the SEC on March 14, 2006) and the updating of those matters in this quarterly
report in Item 1 Financial Statements, is incorporated herein by reference.
ITEM 1A. RISK FACTORS
During the quarter ending September 30, 2006, there were no material changes from the
risk factors as previously disclosed in the Companys Form 10-K for the year end
December 31, 2005.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents information on shares of common stock repurchased by the
Company during the quarter ended September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer Purchases of Equity Securities |
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
|
Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
Part of Publicly |
|
|
that May Yet Be |
|
|
|
Total Number of |
|
|
Average Price Paid |
|
|
Announced Plans or |
|
|
Purchased Under the |
|
Period |
|
Shares Purchased |
|
|
per Share |
|
|
Programs* |
|
|
Plans or Programs* |
|
July 1 to July 31, 2006 |
|
|
|
|
|
$ |
|
|
|
|
2,250,000 |
|
|
|
12,750,000 |
|
August 1 to August 31, 2006 |
|
|
|
|
|
|
|
|
|
|
2,250,000 |
|
|
|
12,750,000 |
|
September 1 to
September 30, 2006 |
|
|
250,000 |
|
|
|
63.81 |
|
|
|
2,500,000 |
|
|
|
12,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
250,000 |
|
|
$ |
63.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
On April 19, 2006, the Company announced that its Board of Directors
authorized the repurchase of up to 15 million shares of the Companys common stock.
The Company may buy shares from time to time on the open market, in privately
negotiated transactions, or a combination of both. The timing and amounts of any
repurchases will be at the discretion of Apaches management and will depend on a
variety of factors, including the current market price of the Companys common stock
and overall market conditions. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
40
|
|
|
|
|
|
|
ITEM 6. |
|
EXHIBITS |
|
|
12.1
|
|
|
|
Statement of computation of ratio of earnings to fixed charges and
combined fixed charges and preferred stock dividends. |
|
|
31.1
|
|
|
|
Certification of Chief Executive Officer. |
|
|
31.2
|
|
|
|
Certification of Chief Financial Officer. |
|
|
32.1
|
|
|
|
Certification of Chief Executive Officer and Chief Financial Officer. |
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
|
|
|
APACHE CORPORATION |
|
|
|
Dated: November 8, 2006
|
|
/s/ ROGER B. PLANK
Roger B. Plank
|
|
|
|
|
Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
|
Dated:
November 8, 2006
|
|
/s/ REBECCA A. HOYT
Rebecca A. Hoyt
|
|
|
|
|
Vice President and Controller |
|
|
|
|
(Chief Accounting Officer) |
|
|
42
Exhibit Index
|
|
|
|
|
12.1
|
|
-
|
|
Statement of computation of ratio of earnings to fixed charges and
combined fixed charges and preferred stock dividends. |
31.1
|
|
-
|
|
Certification of Chief Executive Officer. |
31.2
|
|
-
|
|
Certification of Chief Financial Officer. |
32.1
|
|
-
|
|
Certification of Chief Executive Officer and Chief Financial Officer. |