SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13546
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APACHE OFFSHORE INVESTMENT PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 41-1464066
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
Suite 100, One Post Oak Central
2000 Post Oak Boulevard, Houston, TX 77056-4400
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(Address of Principal Executive Offices (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 296-6000
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
--- ---
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE OFFSHORE INVESTMENT PARTNERSHIP
BALANCE SHEET
(Unaudited)
September 30, December 31,
1995 1994
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 104 $ 104
Accrued revenues receivable 2,003,464 2,029,284
Receivable from Apache Corporation 239,197 --
Drilling advances 233,458 --
Prepaid financing costs and other -- 14,583
------------ ------------
2,476,223 2,043,971
------------ ------------
OIL AND GAS PROPERTIES, on the basis
of full cost accounting:
Proved properties 161,807,915 158,926,380
Less: accumulated depreciation,
depletion and amortization (149,770,846) (146,679,259)
------------ ------------
12,037,069 12,247,121
------------ ------------
$ 14,513,292 $ 14,291,092
============ ============
LIABILITIES AND PARTNERS CAPITAL
CURRENT LIABILITIES:
Accrued expenses payable $ 872,268 $ 363,209
Payable to Apache Corporation -- 318,221
Distribution payable 921,348 --
------------- ------------
1,793,616 681,430
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LONG-TERM DEBT 8,670,000 9,435,000
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PARTNERS CAPITAL:
Managing Partner 853,315 1,026,159
Investing Partners (1,228.5 and 1,238.3
Units outstanding, respectively) 3,196,361 3,148,503
------------- ------------
4,049,676 4,174,662
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$ 14,513,292 $ 14,291,092
============= ============
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF OPERATIONS
(Unaudited)
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
------------------------ -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
REVENUES:
Oil and gas sales $ 3,132,379 $ 3,808,576 $ 8,946,091 $ 13,856,895
Interest income -- 1,129 -- 3,075
----------- ---------- ----------- ------------
3,132,379 3,809,705 8,946,091 13,859,970
----------- ----------- ----------- ------------
EXPENSES
Depreciation, depletion
and amortization 1,173,405 1,110,314 3,091,587 3,813,713
Lease operating 252,048 181,660 844,921 517,016
Administrative 132,500 130,002 397,500 390,000
Financing costs:
Interest expense 149,757 170,275 444,724 527,567
Amortization of deferred
financing costs -- 15,000 14,583 45,000
----------- ----------- ----------- ------------
1,707,710 1,607,251 4,793,315 5,293,296
----------- ---------- ----------- ------------
NET INCOME $ 1,424,669 $ 2,202,454 $ 4,152,776 $ 8,566,674
=========== =========== =========== ============
Allocated to:
Managing Partner $ 456,372 $ 551,700 $ 1,217,925 $ 2,098,883
Investing Partners 968,297 1,650,754 2,934,851 6,467,791
----------- ----------- ----------- ------------
$ 1,424,669 $ 2,202,454 $ 4,152,776 $ 8,566,674
=========== =========== =========== ============
NET INCOME PER WEIGHTED
AVERAGE INVESTING PARTNER UNIT$ 788 $ 1,323 $ 2,377 $ 5,062
=========== =========== ============ ============
WEIGHTED AVERAGE INVESTING
PARTNER UNITS OUTSTANDING 1,229.1 1,247.4 1,234.8 1,277.8
=========== =========== ============ ============
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended September 30,
-----------------------------
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,152,776 $ 8,566,674
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 3,091,587 3,813,713
Amortization of deferred financing costs 14,583 45,000
Changes in operating assets and liabilities:
Increase in prepaid financing costs and other -- (35,335)
Decrease in accrued revenues receivables 25,820 1,068,916
Increase in payable to Apache Corporation (557,418) (1,314,368)
-------------- -------------
Net cash provided by operating activities 6,727,348 12,144,600
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (2,881,535) (727,340)
Increase (decrease) in accrued expenses payable 509,059 (174,677)
(Increase) decrease in drilling advances (233,458) 76,434
-------------- ------------
Net cash used by investing activities (2,605,934) (825,583)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of Partnership Units (108,125) (629,881)
Distributions to Managing Partner, net (1,390,769) (2,352,710)
Distributions to Investing Partners (1,857,520) (3,879,150)
Payments of long-term debt (765,000) (3,655,000)
-------------- ------------
Net cash used by financing activities (4,121,414) (10,516,741)
-------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS -- 802,276
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 104 104
-------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 104 $ 802,380
============== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 451,024 $ 523,483
============== ============
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS CAPITAL
(Unaudited)
Managing Investing
Partner Partners Total
---------- ----------- -----------
BALANCE, DECEMBER 31, 1993 $ 1,284,426 $ 2,049,932 $ 3,334,358
Distributions, net (2,352,710) (3,879,150) (6,231,860)
Distribution payable -- (1,871,074) (1,871,074)
Acquisition of Partnership Units -- (629,881) (629,881)
Net income 2,098,883 6,467,791 8,566,674
----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1994 $ 1,030,599 $ 2,137,618 $ 3,168,217
=========== =========== ===========
BALANCE, DECEMBER 31, 1994 $ 1,026,159 $ 3,148,503 $ 4,174,662
Distributions, net (1,390,769) (1,857,520) (3,248,289)
Distribution payable -- (921,348) (921,348)
Acquisition of Partnership Units -- (108,125) (108,125)
Net income 1,217,925 2,934,851 4,152,776
----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1995 $ 853,315 $ 3,196,361 $ 4,049,676
=========== =========== ===========
APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The financial statements included herein have been prepared by
the Apache Offshore Investment Partnership (Partnership),
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, and reflect all adjustments
which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods, on a basis
consistent with the annual audited 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 generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Partnership
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 thereto included in the Partnerships latest annual
report on Form 10-K.
2. Accrued expenses payable at September 30, 1995 primarily
represented operating and drilling costs accrued in August and
September that will be paid in October.
3. The payable to/receivable from Apache Corporation (Apache)
represents the net result of the Investing Partners' revenue and
expenditure transactions in the current month. Cash in this
amount will be transferred to/from Apache in the following month
after the Partnership's transactions are processed and the net
results of operations are determined.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL RESULTS
The Partnership reported net income of $1,424,669 for the third
quarter of 1995 compared to $2,202,454 for the same period last
year. The primary factors that contributed to lower earnings were
a 10-percent decline in gas production which reduced revenues by
$268,663 and a 12-percent decrease in gas prices which reduced
revenues by $295,748.
Earnings for the first nine months of 1995 totaled $4,152,776
compared to $8,566,674 during the first nine months of 1995. Lower
gas production and prices compared to a year ago negatively
impacted revenues by $2,475,695 and $1,890,462, respectively.
RESULTS OF OPERATIONS
Volume and price information for the Partnerships oil and gas
production for 1995 and 1994 third quarter and first nine months
for 1995 and 1994, respectively, is summarized in the following
table:
For the Quarter For the Nine Months
Ended September 30, Increase Ended September 30, Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
Gas Volume - Mcf per day 16,358 18,130 (10%) 15,844 20,576 (23%)
Average Gas Price - per Mcf $ 1.45 $ 1.65 (12%) $ 1.48 $ 1.92 (23%)
Oil Volume - Barrels per day 640 677 (5%) 553 725 (24%)
Average Oil Price - Per barrel $ 16.10 $ 17.00 (5%) $ 16.88 $ 15.62 8%
Oil and gas sales for the third quarter of 1995 declined 18 percent
to $3,132,379 from the third quarter of 1994. For the first nine
months of 1995, oil and gas sales of $8,946,091 were 35 percent
below the same period in 1994. This was primarily due to the
decline in gas production and prices in the first quarter and first
nine months of 1995 as compared to 1994.
Third quarter gas sales of $2,184,519 fell $564,411, or 21 percent,
from the same period last year. The Partnership's third quarter
gas production of 16,358 Mcfd dropped 10 percent due largely to
downtime for the installation of a new compressor at Matagorda
Island 681. Sales were negatively affected by $268,663 due to the
Partnership's decline in production. Natural gas prices realized
by the Partnership fell 12 percent from the third quarter of 1994,
resulting in a $295,748 decline in revenues.
Gas sales declined 41 percent to $6,397,487 for the nine month
period of 1995, compared to $10,763,644 in 1994. The Partnership
produced 4,732 Mcfd less during the first nine months of 1995 as
compared to the same period in 1994. The 23-percent decrease in gas
production was primarily the result of natural decline at North
Padre Island 969 and the impact of shutting-in the Matagorda Island
681 wells for the installation of the new compressor. The volume
decrease negatively impacted sales by $2,475,695. A 23-percent
drop in realized gas prices resulted in $1,890,462 of lower sales.
The Partnership's realized gas price of $1.48 per Mcf during the
first nine months of 1995 was $.44 per Mcf lower than last year's
price of $1.92 per Mcf during the same period.
During July 1995, production from the Roberto field (including
Mustang Island 681) was shut-in for 17 days for the installation of
compression equipment which is intended to increase the field's
current gas producing capacity and the ultimate quantity of
recoverable reserves. The shut-in of the field, which is the
Partnership's largest producing property, reduced Roberto's July
1995 production to 2,254 Mcfd. After a slow ramping up of
production in August, September's production increased to 6,623
Mcfd.
Oil sales of $947,860 for the 1995 third quarter were $111,786, or
11 percent lower than the previous year as a result of lower oil
production. In addition to natural declines, production at South
Timbalier 295 was shut-in to perform a recompletion program. The
Partnership's five percent decline in production negatively
impacted sales by $58,825. A $.90 decrease in the Partnership's
average realized oil price negatively impacted third quarter 1995
sales by $52,961.
For the first nine months of 1995, oil sales decreased 18 percent
to $2,548,604 compared to $3,093,251 for the same period a year
ago. In the first nine months of 1995, oil production fell 24
percent as a result of shutting-in production at South Timbalier
295 to perform recompletions and due to natural depletion. Oil
revenues were negatively impacted by $735,306 due to the decline in
production volumes, offset by an increase of $190,659 as a result
of the $1.26 per barrel rise in realized oil prices.
Depreciation, depletion and amortization (DD&A) expense decreased
19 percent from a year ago due to year-to-year production and sales
decreases. The Partnership's DD&A rate, expressed as a percentage
of sales, increased from 28 percent the first nine months of 1994
to 35 percent for the first nine months of 1995. This year-to-year
increase in the DD&A rate is primarily a result of lower gas
prices.
Lease operating expense of $844,921 increased by $327,905, or 63
percent, during the first nine months of 1995 compared to the first
nine months of 1994. This increase was largely the result of higher
workover costs. During the first nine months of 1995, the
Partnership spent approximately $255,000 on workovers in the East
Cameron 60 field to maintain production from those wells. During
the third quarter 1995, lease operating expense increased by
$70,388, or 39 percent, when compared to the third quarter of 1994.
Administrative expense in the first nine months of 1995 increased
by $7,500, or two percent, when compared to the first nine months
of 1994. Administrative expenses for the calendar year 1995 are
expected to be comparable to 1994.
Interest expense in the first nine months of 1995 declined $82,843,
or 16 percent, when compared to the same period in 1994. The
decrease resulted from reduced levels of debt, partially offset by
increased interest rates. The Partnership's outstanding debt
decreased from $11,135,000 at September 30, 1994, to $8,670,000 at
September 30, 1995.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Capital Commitments
The Partnership's primary needs for cash are for operating
expenses, repayment of principal and interest on outstanding debt,
drilling and recompletion expenditures, distributions to Investing
Partners and the purchase of Units offered by Investing Partners
under the right of presentment.
During 1995, the Partnership's oil and gas property additions
totaled $2,881,535. Additions largely related to drilling
activities at the now completed East Cameron 60 # A-5 well, in
addition to recompletions performed at South Timbalier 295 and Ship
Shoal 259. Recompletion activities generally involve the
completion of previously tested behind-the-pipe zones or sands on
which proved non-producing reserves have been assigned. Based on
information provided by the operators of the properties in which
the Partnership has an interest, the Partnership anticipates oil
and gas property additions of approximately $3.5 million in 1995.
Such estimate may change based on realized prices, drilling results
or changes to the plans by the operators.
The Partnership made distributions of $1,500 and $750 per Unit in
March and October 1995, respectively. No further distributions are
planned for 1995. In 1994, distributions totaled $4,500 per Unit.
The amount of future distributions will be dependent on actual and
expected production levels, realized and expected oil and gas
prices, debt service requirements, as well as, drilling and
recompletion expenditures.
An amendment to the Partnership Agreement adopted in February 1994
created a right of presentment under which all Investing Partners
now have a limited and voluntary right to offer their Units to the
Partnership twice each year to be repurchased for cash. As a
result of the two presentment periods in 1994, the Partnership
acquired approximately 55 Units for a total of $738,000 in cash.
The first right of presentment offer for 1995 of $10,391 per Unit,
plus interest to the date of payment, was made to the Investing
Partners on April 28, 1995. As a result, the Partnership acquired
an additional 9.8 Units for a total of $108,125 in cash. As
provided in the Partnership Agreement, a second right of
presentment offer of $10,114 per Unit, plus interest to the date of
payment, was made to the Investing Partners on October 27, 1995,
based on a valuation date of June 30, 1995. The Partnership is not
in a position to predict how many additional Units will be
presented for repurchase during 1995; however, no more than 10
percent of the outstanding Units may be purchased under the right
of presentment in any year, and the Partnership has no obligation
to purchase any Units presented to the extent that it determines
that it has insufficient funds for such purchases.
Capital Resources and Liquidity
The Partnership's primary capital resources are net cash provided
by operating activities and proceeds from financing activities.
Net cash generated from operating activities of $6,727,348 for the
first nine months of 1995 decreased $5,417,252, or 45 percent, from
a year ago. The decline was the result of lower oil and gas sales
coupled with higher levels of operating costs. The balance of the
decrease related to changes in operating asset and liability
accounts during the periods covered.
The Partnership expects fourth quarter oil and gas production will
reflect increases over the averages for the first nine months of
1995 due to the compression equipment installed at Matagorda Island
681 and the recompletions conducted by operators of other
Partnership properties. The Partnership's independent petroleum
engineers will review its proved reserves during the fourth quarter
of 1995. The Partnership's future cash flow will be influenced by
product prices and future production constraints which are not
presently ascertainable.
At September 30, 1995, the available commitment under the
Partnership's reducing revolving credit facility was $15,300,000,
of which $8,670,000 was outstanding. The commitment reduces by
$1,275,000 per quarter beginning in October 1995, with the
outstanding balance to be fully repaid by July 1998. The
Partnership must comply with certain cash flow and oil and gas
reserve tests under the terms of the credit facility, and failure
to comply will result in mandatory principal payments in amounts
sufficient to meet the tests. The Partnership has met the tests
each year since the inception of the credit facility in 1992.
Based on current pricing and its reserve base, the Partnership
anticipates meeting future tests and does not expect to have an
acceleration of principal payments. The Partnership is not subject
to any financial ratio requirements; however, Apache is
contingently liable for obligations of the Partnership and is
subject to certain requirements under the terms of the credit
facility. Apache was in compliance with such covenants at
September 30, 1995. The credit facility had an average rate of
interest of 6.62 percent during the third quarter of 1995 which
compares to an average rate of 5.52 percent a year ago. The
Partnership will attempt to maintain availability under the credit
facility as cushion for unforeseen expenditures and contingencies.
It is expected that cash available under the Partnership's credit
facility, Managing Partner contributions, and net cash flows from
operating activities will be sufficient to meet the Partnership's
liquidity needs through the end of 1996. However, in the event
short-term operating cash requirements are greater than the
Partnership's financial resources, the Partnership will seek short-
term interest-bearing advances from the Managing Partner.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
27.1 Financial Data Schedule.
b. Reports on Form 8-K - None.
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 OFFSHORE INVESTMENT PARTNERSHIP
By: Apache Corporation, General Partner
Dated: November 13, 1995 /s/ Mark A. Jackson
Mark A. Jackson
Vice President, Finance
Dated: November 13, 1995 /s/ R. Kent Samuel
R. Kent Samuel
Controller and Chief Accounting Officer
5
0000727538
OFFEX27.TXT
1
U.S. DOLLARS
9-MOS
DEC-31-1995
JAN-01-1995
SEP-30-1995
1
104
0
2,242,661
0
0
2,476,223
161,807,915
(149,770,846)
14,513,292
1,793,616
8,670,000
0
0
0
4,049,676
14,513,292
8,946,091
8,946,091
3,936,508
3,936,508
856,807
0
0
4,152,776
0
4,152,776
0
0
0
4,152,776
2,377
2,377
