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 June 30, 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
---------------
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
STATEMENT OF INCOME
(Unaudited)
For the Quarter For the Six Months
Ended June 30, Ended June 30,
--------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
REVENUES:
Oil and gas sales $ 2,699,952 $ 4,802,492 $ 6,398,643 $ 9,816,730
Interest income 15,770 -- 25,162 --
----------- ----------- ----------- -----------
2,715,722 4,802,492 6,423,805 9,816,730
----------- ----------- ----------- -----------
EXPENSES:
Depreciation, depletion
and amortization 632,622 1,231,494 1,474,089 2,534,820
Lease operating 166,308 367,811 257,476 711,646
Administrative 135,000 131,557 270,000 265,000
Interest -- 74,798 12,818 211,437
----------- ----------- ----------- -----------
933,930 1,805,660 2,014,383 3,722,903
----------- ----------- ----------- -----------
NET INCOME $ 1,781,792 $ 2,996,832 $ 4,409,422 $ 6,093,827
=========== =========== =========== ===========
Net income allocated to:
Managing Partner $ 419,801 $ 719,897 $ 1,031,257 $ 1,464,027
Investing Partners 1,361,991 2,276,935 3,378,165 4,629,800
----------- ----------- ----------- -----------
$ 1,781,792 $ 2,996,832 $ 4,409,422 $ 6,093,827
=========== =========== =========== ===========
NET INCOME PER WEIGHTED
AVERAGE INVESTING PARTNER UNIT $ 1,138 $ 1,882 $ 2,822 $ 3,822
=========== =========== =========== ===========
WEIGHTED AVERAGE INVESTING PARTNER
UNITS OUTSTANDING 1,196.6 1,210.1 1,197.2 1,211.2
============ ============ ============ ===========
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 Six Months
Ended June 30,
------------------------------
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,409,422 $ 6,093,827
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 1,474,089 2,534,820
Changes in operating assets and liabilities:
(Increase) decrease in accrued revenues receivable 1,726,230 (2,596)
Increase (decrease) in accrued
operating expenses payable (157,063) 138,806
(Increase) decrease in receivable
from Apache Corporation (933,964) 126,846
------------ ------------
Net cash provided by operating activities 6,518,714 8,891,703
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (1,258,598) (181,951)
Non-cash portion of oil and gas property additions 121,993 (380,126)
Decrease in drilling advances -- 8,570
------------ ------------
Net cash used in investing activities (1,136,605) (553,507)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Partnership Units (109,272) (141,732)
Distributions to Investing Partners (1,197,827) (1,212,321)
Distributions to Managing Partner, net (1,269,264) (1,224,143)
Payments on long-term debt (1,997,500) (4,760,000)
------------ ------------
Net cash used in financing activities (4,573,863) (7,338,196)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 808,246 1,000,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,737,470 104
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,545,716 $ 1,000,104
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 11,073 $ 211,437
============ ============
The accompanying notes to financial statements
are an integral part of this statement.
2
APACHE OFFSHORE INVESTMENT PARTNERSHIP
BALANCE SHEET
June 30, December 31,
1997 1996
---------------- ----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,545,716 $ 1,737,470
Accrued revenues receivable 1,319,955 3,046,185
Receivable from Apache 90,880 --
--------------- ---------------
3,956,551 4,783,655
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OIL AND GAS PROPERTIES, on the basis
of full cost accounting:
Proved properties 164,136,501 162,877,903
Less - Accumulated depreciation,
depletion and amortization (156,883,983) (155,409,894)
--------------- ---------------
7,252,518 7,468,009
--------------- ---------------
$ 11,209,069 $ 12,251,664
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accrued exploration and development $ 635,941 $ 513,948
Accrued operating expenses payable and other 241,835 398,898
Payable to Apache Corporation -- 843,084
--------------- ---------------
877,776 1,755,930
--------------- ---------------
LONG-TERM DEBT -- 1,997,500
--------------- ---------------
PARTNERS CAPITAL:
Managing Partner 853,182 1,091,189
Investing Partners (1,190.2 and 1,197.9 units
outstanding, respectively) 9,478,111 7,407,045
--------------- ---------------
10,331,293 8,498,234
--------------- ---------------
$ 11,209,069 $ 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 June 30, 1997, primarily represented
operating costs accrued in May and June that will be paid in July.
2. PAYABLE TO/RECEIVABLE FROM APACHE
The payable to/receivable from Apache Corporation, the Partnership's
managing partner (Apache or Managing Partner), 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, as a result, the
Partnership acquired 7.666 Units for a total of $109,272 in cash. As
provided in the Partnership Agreement as amended to-date (Amended
Partnership Agreement), Investing Partners will have a second right of
presentment during the fourth quarter of 1997 based on a valuation date of
June 30, 1997. The Partnership is not in a position to predict how many
Units will be presented for repurchase under the later 1997 offer and
cannot, at this time, determine if the Partnership will have sufficient
funds available to repurchase 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
Net Income and Revenue
The Partnership reported net income of $1.8 million in the second
quarter of 1997, versus $3.0 million in the prior year period. Earnings
per Investing Partner Unit decreased 40 percent, from $1,882 to $1,138.
The decrease was attributable to lower natural gas and crude oil production
and prices, partially offset by lower depreciation, depletion and
amortization expense (DD&A), lease operating expense (LOE) and financing
costs.
For the first half of 1997, net income of $4.4 million, or $2,822 per
Investing Partner Unit, decreased 28 percent and 26 percent, respectively,
from $6.1 million and $3,822 per Unit in the same period last year.
Impacting 1997 results were lower natural gas and crude oil production,
partially offset by lower DD&A, LOE and financing costs.
Revenues decreased 43 percent, from $4.8 million in the second quarter
of 1996 to $2.7 million for the same period in 1997. Natural gas and crude
oil sales contributed 78 percent and 21 percent, respectively, to the
Partnership's total revenues, with one percent attributable to interest
income. For the first six months of 1997, revenues decreased 35 percent,
to $6.4 million compared to the same period in 1996 due primarily to lower
production, with natural gas and oil contributing 79 percent and 21
percent, respectively, to total revenue.
The Partnership's gas and oil production volume and price information
is summarized in the following tables:
For the Quarter Ended June 30, For the Six Months Ended June 30,
--------------------- ----------------------
1997 1996 Change 1997 1996 Change
------ ------ ------- ------ ------ -------
Gas Volume - Mcf per day 11,203 17,257 (35%) 11,398 17,345 (34%)
Average Gas Price - per Mcf $ 2.08 $ 2.45 (15%) $ 2.46 $ 2.48 (1%)
Oil Volume - Barrels per day 342 504 (32%) 368 561 (34%)
Average Oil Price - Per barrel $18.69 $ 20.64 (9%) $ 20.00 $ 19.48 3%
Second Quarter 1997 Compared to Second Quarter 1996
Natural gas sales revenues for the second quarter of 1997 totaled $2.1
million, 45 percent lower than the second quarter of 1996. The decrease
was driven by lower natural gas production and realized gas prices,
negatively impacting revenue by $1.3 million and $.4 million, respectively.
Natural gas sales decreased in the second quarter of 1997 primarily as a
result of natural declines in production at Roberto and the Partnership
selling less than its entitlement at South Pass 83 and North Padre 969,
where make-up volumes were taken by under-produced working interest owners.
Also contributing to the decrease was natural decline combined with
downtime for recompletions at Ship Shoal 259.
The Partnership's crude oil sales revenues for the second quarter
totaled $.6 million, a 39 percent decrease from the second quarter of 1996.
The decrease in the average realized price negatively impacted revenues by
$.1 million while lower production reduced sales by $.3 million. The
decrease in production was primarily the result of natural declines in
production at East Cameron 60 and downtime resulting from drilling
operations at South Timbalier 295.
5
Year-to-Date 1997 Compared to Year-to-Date 1996
Gas sales for the first half of 1997 of $5.1 million decreased $2.8
million, or 35 percent, when compared to the same period in 1996. Average
realized gas prices decreased $.02 per Mcf, or one percent, when compared
with the first six months of 1996. Gas production for the first half of
1997 decreased by 35 percent when compared to the same period in 1996,
negatively impacting revenues by $2.7 million. Production decreases in
1997 were primarily due to natural production declines and of make-up
volumes taken by under-produced working interest owners at South Pass 83,
Ship Shoal 259 and North Padre 969.
For the six months ended June 30, 1997, oil sales decreased 33 percent
to $1.3 million when compared to the same period last year. The
Partnership's oil sales revenues were impacted by a 35 percent decline in
oil production, which was partially offset by a three percent increase in
realized prices. The decrease in sales volumes resulted from natural
declines in production at East Cameron 60 and downtime resulting from
drilling operations at South Timbalier 295.
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 the production of entities with greater reserves and
longer-lived properties.
OPERATING EXPENSES
The Partnership's DD&A for the second quarter of 1997 decreased 49
percent from the same period in the previous year primarily as a result of
lower oil and gas sales revenue. The Partnership's DD&A rate, expressed as
a percentage of sales, was 23 percent during the first six months of 1997,
decreasing from 26 percent during the same period in 1996. The decrease in
the rate was a result of generally improving natural gas and crude oil prices
during the last twelve months and positive reserve revisions in the
fourth quarter of 1996.
LOE in the second quarter of 1997 decreased 55 percent, from $.4
million to $.2 million, from the second quarter of 1996. For the first
half of 1997, LOE of $.3 million was down 64 percent when compared to the
first half of 1996. The decrease was primarily the result of lower
workover activity in the first half of 1997 and a credit resulting from a
joint venture audit recorded in March 1997.
Financing costs decreased 94 percent in the first six months when
compared to the same period in 1996. The decrease was a result of the
repayment of the $2.0 million of the Partnership's outstanding bank debt 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 $6.5 million for the first half of 1997, a
decrease of 27 percent from a year ago, reflecting lower oil and gas
production and gas prices. Future cash flows will similarly be influenced
by fluctuations in product prices and production.
In January 1997, the Partnership repaid the outstanding balance of the
revolving credit facility obtained by Apache on behalf of the Partnership
in July 1992, and terminated the facility.
6
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 half of 1997, the Partnership's oil and gas property
additions totaled $1.3 million. These additions primarily related to a
recompletion at Ship Shoal 259 and a water injection well as well as 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 $.8 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 development plan by the operator.
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 for 1997 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. As a result, the Partnership acquired
7.666 Units for a total of $109,272 in cash. As provided in the Amended
Partnership Agreement, Investing Partners will have a second right of
presentment during the fourth quarter of 1997, based on a valuation date of
June 30, 1997. The Partnership is not in a position to predict how many
Units will be presented for repurchase during the fourth quarter 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: August 13, 1997 /s/ Roger B. Plank
------------------------------------------
Roger B. Plank
Vice President and Chief Financial Officer
Dated: August 13, 1997 /s/ Thomas L. Mitchell
------------------------------------------
Thomas L. Mitchell
Vice President and Controller
(Chief Accounting Officer)
5
0000727538
AR.5 FED FOR 1997 2ND QUARTER 10-Q
1,000
U.S.DOLLAR
6-MOS
DEC-31-1997
JAN-01-1997
JUN-30-1997
1,000
2,545,716
0
1,410,835
0
0
3,956,551
164,136,501
(156,883,983)
11,209,069
877,776
0
0
0
0
10,331,293
11,209,069
6,398,643
6,423,805
1,731,565
1,731,565
270,000
0
12,818
4,409,422
0
4,409,422
0
0
0
4,409,422
2,822
2,822
