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 March 31, 1997
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
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF INCOME
(Unaudited)
For the Three Months
Ended March 31,
---------------------------
1997 1996
------------ -----------
REVENUES:
Oil and gas sales $ 3,698,691 $ 5,014,238
Interest income 9,392 --
------------ ------------
3,708,083 5,014,238
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EXPENSES:
Depreciation, depletion and amortization 841,467 1,303,326
Lease operating 91,168 343,835
Administrative 135,000 133,443
Interest expense 12,818 136,639
------------ ------------
1,080,453 1,917,243
------------ ------------
NET INCOME $ 2,627,630 $ 3,096,995
============ ============
NET INCOME ALLOCATED TO:
Managing Partner $ 611,456 $ 744,130
Investing Partners 2,016,174 2,352,865
------------ ------------
$ 2,627,630 $ 3,096,995
============ ============
NET INCOME PER WEIGHTED AVERAGE
INVESTING PARTNER UNIT $ 1,683 $ 1,941
============ ============
WEIGHTED AVERAGE INVESTING PARTNER
UNITS OUTSTANDING 1,197.9 1,212.3
============ ============
The accompanying notes to financial statements
are an integral part of this statement.
1
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF CASH FLOWS
(Unaudited)
For the Three Months
Ended March 31,
----------------------------
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,627,630 $ 3,096,995
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 841,467 1,303,326
Changes in operating assets and liabilities:
(Increase) decrease in accrued revenues receivable 1,069,507 (69,480)
Increase (decrease) in other accrued expenses (52,874) 160,054
Increase in receivable from Apache Corporation (1,382,853) (1,375,182)
------------ ------------
Net cash provided by operating activities 3,102,877 3,115,713
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (738,219) (18,728)
Non-cash portion of oil and gas property additions 235,372 (235,304)
Decrease in drilling advances -- 8,570
------------ ------------
Net cash used in investing activities (502,847) (245,462)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Investing Partners (1,197,827) (1,212,321)
Distributions to Managing Partner, net (690,627) (807,930)
Payments on long-term debt (1,997,500) (850,000)
------------ ------------
Net cash used in financing activities (3,885,954) (2,870,251)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (1,285,924) --
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,737,470 104
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 451,546 $ 104
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 11,073 $ 116,059
============ ============
The accompanying notes to financial statements
are an integral part of this statement.
2
APACHE OFFSHORE INVESTMENT PARTNERSHIP
BALANCE SHEET
March 31, December 31,
1997 1996
---------------- ----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 451,546 $ 1,737,470
Accrued revenues receivable 1,976,678 3,046,185
Receivable from Apache 539,769 --
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2,967,993 4,783,655
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OIL AND GAS PROPERTIES, on the basis
of full cost accounting:
Proved properties 163,616,122 162,877,903
Less - Accumulated depreciation,
depletion and amortization (156,251,361) (155,409,894)
--------------- ---------------
7,364,761 7,468,009
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$ 10,332,754 $ 12,251,664
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accrued exploration and development $ 749,320 $ 513,948
Accrued operating expenses payable and other 346,024 398,898
Payable to Apache Corporation -- 843,084
--------------- ---------------
1,095,344 1,755,930
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LONG-TERM DEBT -- 1,997,500
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PARTNERS CAPITAL:
Managing Partner 1,012,018 1,091,189
Investing Partners (1,197.9 and 1,197.9 units
outstanding, respectively) 8,225,392 7,407,045
--------------- ---------------
9,237,410 8,498,234
--------------- ---------------
$ 10,332,754 $ 12,251,664
=============== ===============
The accompanying notes to financial statements
are an integral part of this statement.
3
APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 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 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 Partnership's latest annual report on Form 10-K.
1. OTHER ACCRUED EXPENSES
Accrued expenses payable at March 31, 1997, primarily represented
operating costs accrued in February and March that will be paid in April.
2. PAYABLE TO/RECEIVABLE FROM APACHE
The payable to/receivable from Apache Corporation (Apache) represents
the net result of the Investing Partners' revenue and expenditure
transactions in the current month. Generally, 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.
3. RIGHT OF PRESENTMENT
In February 1994, an amendment to the Partnership Agreement created a
right of presentment under which all Investing Partners have a limited and
voluntary right to offer their Units to the Partnership twice each year to
be purchased for cash. The first right of presentment offer for 1997 was
based upon a valuation date of December 31, 1996 for a purchase price of
$13,621 per Unit, plus interest to the date of payment. The offer was made
to the Investing Partners on April 28, 1997 and Unitholders may elect to
exercise their right of presentment through May 30, 1997. The Partnership
is not in a position to predict how many Units will be presented for
repurchase under the April 1997 offer and cannot, at this time, determine
if the Partnership will have sufficient funds available for repurchasing
Units. The Amended Partnership Agreement contains limitations on the
number of Units that the Partnership can repurchase, including a limit of
10 percent of the outstanding Units on an annual basis.
4
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Partnership realized the third highest earnings and the fifth
highest cash flow from operating activities for the three months ended
March 31, 1997, as compared with any other three month period in its
history. Strong natural gas and crude oil prices as well as lower lease
operating and financing costs contributed to the Partnership's solid
results. The average realized natural gas price for the first three months
of 1997 was the highest in its history and crude oil prices were the
highest of any quarter since 1991. As a result of the improved cash flow
in 1997, the Partnership repaid the outstanding debt and terminated its
revolving credit facility on January 31, 1997.
Net Income and Revenue
The Partnership reported net income of $2.6 million in the first
quarter of 1997, versus $3.1 million in the prior year period. Earnings
per Investing Partner Unit decreased 13 percent, from $1,941 to $1,683.
The decrease was attributable to lower natural gas and crude oil
production, partially offset by lower depreciation, depletion and
amortization expense (DD&A), lease operating expense (LOE) and financing
costs.
Revenues decreased 26 percent, from $5.0 million in the first quarter
of 1996, to $3.7 million for the same period in 1997. Natural gas and
crude oil sales contributed 80 percent and 20 percent, respectively, to the
Partnership's total revenues, with less than one percent attributable to
interest income.
The Partnership's gas and oil production volume and price information
is summarized in the following tables:
For the Three Months
Ended March 31, Increase
1997 1996 (Decrease)
------- ------- ---------
Gas Volume - Mcf per day 11,596 17,420 (33) %
Average Gas Price - per Mcf $ 2.83 $ 2.51 13 %
Oil Volume - Barrels per day 393 618 (36) %
Average Oil Price - per barrel $ 21.15 $ 18.49 14 %
Natural gas sales revenues for the first quarter of 1997 totaled $3.0
million, 26 percent lower in the first quarter of 1996. The decrease was
driven by lower natural gas production, negatively impacting revenue by
$1.5 million. Partially offsetting this decrease was a 13 percent increase
in average realized gas prices, increasing revenues by $.5 million.
Natural gas sales were negatively impacted in the first quarter of 1997 by
the Partnership selling less than its entitlement at South Pass 83, Ship
Shoal 259 and North Padre 969, where make-up volumes were taken by under-
produced working interest owners. Additionally, natural declines in
production at Roberto and East Cameron 60 caused decreased sales.
The Partnership's crude oil sales revenues for the first quarter
totaled $.7 million, a 28 percent decrease from the first quarter of 1996.
The increase in the average realized price favorably impacted revenues by
$.2 million. Lower production offset the benefit of higher crude oil
prices, reducing sales by $.4 million. The decrease in production was
primarily the result of natural declines in production at East Cameron 60
and South Timbalier 295.
5
Given the small number of producing wells owned by the Partnership and
the fact that offshore wells tend to decline on a steeper curve than
onshore wells, the Partnership's future production will be subject to more
volatility than those entities with greater reserves and longer-lived
properties.
OPERATING EXPENSES
The Partnership's DD&A for the first quarter of 1997 decreased 35
percent from the same period last year as a result of lower production on a
million cubic feet equivalent basis and improved pricing for natural gas
and crude oil. The Partnership's DD&A rate, expressed as a percentage of
sales, was 23 percent during the first three months of 1997, a decrease
from 26 percent in 1996.
LOE decreased 73 percent, from $.3 million to $.1 million, from the
first quarter of 1996. The decrease was primarily the result of lower
workover activity in the first quarter of this year and a credit resulting
from a joint venture audit recorded in March 1997.
Financing costs decreased 91 percent in the first quarter of 1997 when
compared to the same period in 1996. The decrease was primarily a result
of the repayment of the Partnership's outstanding debt of $2.0 million on
January 31, 1997.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Capital Resources and Liquidity
The Partnership's primary capital resource is net cash provided by
operating activities, which was $3.1 million for the first three months of
1997, which is comparable to the prior year. Future cash flows will be
influenced by product prices and production.
In January 1997, the outstanding balance was repaid on the revolving
credit facility that Apache obtained on behalf of the Partnership in July
1992, and the facility was terminated.
It is expected that the net cash provided by operating activities and
Managing Partner contributions will be sufficient to meet the Partnership's
liquidity needs through the end of 1997. 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.
Capital Commitments
The Partnership's primary needs for cash are for operating expenses,
drilling and recompletion expenditures, distributions to Investing Partners
and the purchase of Units offered by Investing Partners under the right of
presentment.
During the first three months of 1997, the Partnership's oil and gas
property additions totaled $.7 million. These additions primarily related
to a recompletion performed at Ship Shoal 259 and a water injection well,
along with a development well, drilled at South Timbalier 295. Based on
information supplied by the operators of the properties, the Partnership
anticipates capital expenditures of approximately $1.4 million for the
remainder of 1997. The anticipated capital expenditures relate to planned
development activity at South Timbalier 295, which include the completion
of the water injection and development wells, and the drilling of a second
development well. Such estimates may change based on realized prices,
drilling results or changes to the plans by the operator.
6
The Partnership made a $1,000 per-Unit distribution during March 1997.
The amount of future distributions will be dependent on actual and expected
production levels, realized and expected oil and gas prices, and expected
drilling and recompletion expenditures.
As provided in the Amended Partnership Agreement, a first right of
presentment offer of $13,621 per Unit, plus interest to the date of
payment, was made to Investing Partners on April 28, 1997, based on a
valuation date of December 31, 1996. The Unitholders have until May 30,
1997 to accept the offer. The Partnership is not in a position to predict
how many Units will be presented for repurchase during 1997 and cannot, at
this time, determine if the Partnership will have sufficient funds
available to repurchase Units.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 ("PSLRA")
Certain forward-looking information contained in this report is being
provided in reliance upon the "safe harbor" provisions of the PSLRA, as set
forth in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such information
includes, without limitation, discussions as to estimates, expectations,
beliefs, plans and objectives concerning the Partnership's future financial
and operating performance. Such forward-looking information is subject to
assumptions and beliefs based on current information known to the
Partnership and factors that could yield actual results differing
materially from those anticipated. Such factors include, without
limitation, the prices received for the Partnership's oil and natural gas
production, the costs of acquiring, finding, developing and producing
reserves, the rates of production of the Partnership's hydrocarbon
reserves, the Partnership's success in acquiring or finding additional
reserves, unforeseen operational hazards, significant changes in tax or
regulatory environments, and the political and economic uncertainties of
foreign oil and gas supplies.
7
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.
8
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: May 14, 1997 /s/ Mark A. Jackson
-----------------------------------------
Mark A. Jackson
Vice President and Chief Financial Officer
Dated: May 14, 1997 /s/ Thomas L. Mitchell
-------------------------------
Thomas L. Mitchell
Controller and Chief Accounting Officer
5
0000727538
ART.5 FDS FOR 1997 FIRST QUARTER 10-Q
1,000
U.S.DOLLAR
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
1,000
451,546
0
2,516,447
0
0
2,967,993
163,616,122
(156,251,361)
10,332,754
1,095,344
0
0
0
0
9,237,410
10,332,754
3,698,691
3,708,083
932,635
932,635
135,000
0
12,818
2,627,630
0
2,627,630
0
0
0
2,627,630
1,683
1,683
