Form 11-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 11-K

 

 

(Mark One):

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

Or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-4300

 

 

 

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

Apache Corporation 401(k) Savings Plan

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

 

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Apache Corporation

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

 

 

 


Apache Corporation 401(k) Savings Plan

Financial Statements and Supplemental Schedule

As of December 31, 2012 and 2011 and for the Year Ended December 31, 2012

Contents

 

Report of Independent Registered Public Accounting Firm

     1   
Audited Financial Statements   

Statements of Net Assets Available for Benefits

     2   

Statement of Changes in Net Assets Available for Benefits

     3   

Notes to Financial Statements

     4   
Supplemental Schedule   

Schedule H, Line 4(i) – Schedule of Assets (Held At End of Year)

     14   


Report of Independent Registered Public Accounting Firm

Retirement Plan Advisory Committee

Apache Corporation 401(k) Savings Plan

We have audited the accompanying statements of net assets available for benefits of the Apache Corporation 401(k) Savings Plan as of December 31, 2012 and 2011, and the related statement of changes in net assets available for benefits for the year ended December 31, 2012. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Apache Corporation 401(k) Savings Plan at December 31, 2012 and 2011, and the changes in its net assets available for benefits for the year ended December 31, 2012, in conformity with accounting principles generally accepted in the United States.

Our audits were conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2012, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. Such information has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ Ernst & Young LLP

Houston, Texas

June 28, 2013

 

1


Apache Corporation 401(k) Savings Plan

Statements of Net Assets Available for Benefits

 

     December 31,  
     2012     2011  

Assets

    

Receivables:

    

Securities sold

   $ —        $ 9,087   

Notes receivable from participants

     4,978,405        3,787,348   
  

 

 

   

 

 

 

Total receivables

     4,978,405        3,796,435   

Investments, at fair value

     474,793,969        414,369,480   
  

 

 

   

 

 

 

Net assets reflecting investments at fair value

     479,772,374        418,165,915   

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

     (738,047     (623,066
  

 

 

   

 

 

 

Net assets available for benefits

   $ 479,034,327      $ 417,542,849   
  

 

 

   

 

 

 

See accompanying notes.

 

2


Apache Corporation 401(k) Savings Plan

Statement of Changes in Net Assets Available for Benefits

Year Ended December 31, 2012

 

Additions:

  

Employer contributions

   $ 27,103,630   

Participant contributions

     33,658,839   

Rollover contributions

     5,832,311   

Investment income

     11,859,078   

Interest income on notes receivable from participants

     189,624   

Net appreciation in fair value of investments

     6,724,500   

Other income

     145,610   
  

 

 

 

Total additions

     85,513,592   

Deductions:

  

Benefits paid to participants

     23,887,104   

Administrative fees

     135,010   
  

 

 

 

Total deductions

     24,022,114   
  

 

 

 

Net increase

     61,491,478   

Net assets available for benefits at:

  

Beginning of year

     417,542,849   
  

 

 

 

End of year

   $ 479,034,327   
  

 

 

 

See accompanying notes.

 

3


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements

 

1. Description of Plan

The following description of the Apache Corporation 401(k) Savings Plan (the Plan) is provided only for general information purposes. Participants should refer to the Summary Plan Description for more complete information, a copy of which is available from Apache Corporation (the Company or Employer) or is accessible through the Company’s intranet site.

The Plan is a defined contribution plan, open to all eligible categories of employees and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

Contributions

Upon enrollment in the Plan, participants may elect to contribute up to 50 percent of their eligible compensation and will receive Company matching contributions equal to 100 percent of the first six percent of their contributions prior to January 1, 2012, and eight percent thereafter. New employees eligible for participation in the Plan are automatically enrolled with a deferral percentage of eight percent and a default investment election to one of the Fidelity Freedom age-based funds as determined by the participant’s date of birth, unless the employee elects not to participate or elects a different deferral percentage or fund option. Participants may also contribute amounts representing rollover distributions from other qualified plans. Participants direct the investment of all contributions to their accounts into various fund options offered by the Plan. Only participant contributions are eligible to be invested in the self-directed brokerage account.

Vesting

Participants are fully vested in their contributions and all related earnings. Vesting in the employer contribution portion of their accounts and related earnings is based on years of credited service. A participant becomes 20 percent vested after the completion of one year of service and continues to vest 20 percent per year, becoming fully vested after completion of five years of credited service. A participant also becomes fully vested in the event of disability or death, or upon reaching the age of 65. Forfeitures of unvested accounts may be used by the Company to reduce future employer contributions to the Plan or pay administrative expenses of the Plan.

Participant Loans

Participants may borrow from their own contributions a minimum of $500, up to the lesser of $50,000 less the participant’s highest outstanding loan balance during the preceding 12 months or 50 percent of their vested account balance. Loans are charged at a rate of interest equal to the current prime lending rate plus one percent and must generally be repaid through payroll deductions within four years.

 

4


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

1. Description of Plan (continued)

 

Benefit Payments

Participants are eligible to receive lump-sum benefits equal to the vested value of their account in the event of retirement, disability, death, or termination of employment.

Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts.

Administrative Expenses

Certain administrative expenses of the Plan are paid by the Company.

 

2. Summary of Accounting Policies

Basis of Accounting

The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP). Benefit payments are recorded when paid.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts in the financial statements, accompanying notes, and supplemental schedule. Actual results could differ from those estimates.

Investment Valuation and Income Recognition

Fidelity Management Trust Company serves as the Plan’s trustee and holds all investments of the Plan, except for the self-directed brokerage account, which is held by Fidelity Brokerage Services. The brokerage account consists primarily of common stock, mutual funds, and short-term investments.

 

5


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

2. Summary of Accounting Policies (continued)

 

Investments held by the Plan are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). See Note 4 for further discussion of fair value measurements.

The Plan invests in fully benefit-responsive investment contracts through the Fidelity Managed Income Portfolio (FMIP), a common collective trust. This fund is recorded at fair value (see Note 4); however, since these contracts are fully benefit-responsive, an adjustment is reflected in the statements of net assets available for benefits to present these investments at contract value. Contract value is the relevant measurement attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The contract value represents contributions plus earnings, less participant withdrawals and administrative expenses.

The short-term investments are stated at cost, which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Participant Loans

Participant loans are recorded on the financial statements as notes receivable from participants at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2012 and 2011. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.

Risks and Uncertainties

The Plan provides for investments in various investment securities which, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investments securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits and participant account balances.

 

6


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

2. Summary of Accounting Policies (continued)

 

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 amended Accounting Standards Codification (ASC) 820, Fair Value Measurement,(ASC 820) to converge the fair value measurement guidance in U.S. GAAP and International Financial Reporting Standards (IFRS). Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments change a particular principle in ASC Topic 820. In addition, ASU 2011-04 requires additional fair value disclosures, as defined in ASC 820. The amendments are to be applied prospectively and are effective for annual periods beginning after December 15, 2011. Adoption of ASU 2011-04 did not have an effect on the Plan’s net assets available for benefits or its changes in net assets available for benefits.

 

3. Investments

Individual investments that represent five percent or more of the Plan’s net assets available for benefits at either December 31, 2012 or 2011, are as follows:

 

     December 31,  
     2012      2011  

Apache Corporation common stock

   $ 119,567,982       $ 132,334,572   

Fidelity Institutional Money Market Portfolio

     28,005,782         26,857,186   

Fidelity Managed Income Portfolio (at contract value)*

     26,476,359         24,708,541   

Fidelity Low-Priced Stock Fund

     24,135,055         20,007,611   

Davis New York Venture Fund

     22,097,494         19,812,413   

*The fair value of the Plan’s investment in the Fidelity Managed Income Portfolio was $27,214,406 and $25,331,607 at December 31, 2012 and 2011, respectively.

 

7


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

3. Investments (continued)

 

During 2012, the Plan’s investments (including investments bought, sold, and held during the year) appreciated (depreciated) in value as follows:

 

     Year Ended
December 31,
2012
 

Mutual funds

   $ 24,977,201   

Corporate stocks

     (18,252,701
  

 

 

 
   $ 6,724,500   
  

 

 

 

 

4. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.

Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

 

   

quoted prices for similar assets and liabilities in active markets;

 

   

quoted prices for identical or similar assets or liabilities in markets that are not active;

 

   

observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals); and

 

   

inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

 

8


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

4. Fair Value Measurements (continued)

 

The level in the fair value hierarchy within which the fair value measurement is classified is determined based the lowest level input that is significant to the fair value measure in its entirety.

The Plan’s valuation methodology used to measure the fair values of corporate stock and mutual funds were derived from quoted market prices as these instruments have active markets. The valuation techniques used to measure fair value of short-term investments, and common collective trust funds, are included in Note 2.

The following tables set forth by level, within the fair value hierarchy, the Plan’s assets carried at fair value:

 

     Assets at Fair Value as of December 31, 2012  
     Level 1      Level 2          Level 3          Total  

Company stock

   $ 119,567,982       $ —         $ —         $ 119,567,982   

Stable value fund (a)

     —           27,214,406         —           27,214,406   

Mutual funds:

           

Large cap stock

     98,840,261         —           —           98,840,261   

Mid-cap stock

     32,487,794         —           —           32,487,794   

Small cap stock

     11,508,271         —           —           11,508,271   

International stock

     28,841,860         —           —           28,841,860   

Blended fund investments

     75,443,852         —           —           75,443,852   

Bond investments

     39,805,529         —           —           39,805,529   

Short-term investment fund

     31,704,301         —           —           31,704,301   

Specialty

     3,278,608         —           —           3,278,608   

Brokerage link

     6,101,105         —           —           6,101,105   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets at fair value

   $ 447,579,563       $ 27,214,406       $ —         $ 474,793,969   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

9


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

4. Fair Value Measurements (continued)

 

 

     Assets at Fair Value as of December 31, 2011  
     Level 1      Level 2          Level 3          Total  

Company stock

   $ 132,334,572       $ —         $ —         $ 132,334,572   

Stable value fund (a)

     —           25,331,607         —           25,331,607   

Mutual funds:

           

Large cap stock

     80,361,168         —           —           80,361,168   

Mid-cap stock

     26,150,743         —           —           26,150,743   

Small cap stock

     9,813,352         —           —           9,813,352   

International stock

     22,965,668         —           —           22,965,668   

Blended fund investments

     50,960,583         —           —           50,960,583   

Bond investments

     28,821,244         —           —           28,821,244   

Short-term investment fund

     30,435,617         —           —           30,435,617   

Specialty

     2,229,017         —           —           2,229,017   

Brokerage link

     4,965,909         —           —           4,965,909   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets at fair value

   $ 389,037,873       $ 25,331,607       $ —         $ 414,369,480   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) This category includes a common collective trust fund that is designed to deliver safety and stability by preserving principal and accumulating earnings. This fund is primarily invested in guaranteed investment contracts and synthetic investment contracts. Participant-directed redemptions have no restrictions; however, the Plan is required to provide a one-year redemption notice to liquidate its entire share in the fund. The fair value of this fund has been estimated based on the fair value of the underlying investment contracts in the fund as reported by the issuer of the fund. The fair value differs from the contract value. As previously discussed in Note 2, contract value is the relevant measurement attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan.

 

5. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service (IRS) dated October 28, 2010, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the IRC) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualified status. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan, as amended and restated, is qualified and the related trust is tax-exempt.

 

10


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

5. Income Tax Status (continued)

 

GAAP requires plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2012, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2009.

 

6. Related-Party Transactions

Certain investments of the Plan are managed by Fidelity Investments. Fidelity Management Trust Company is the trustee of the Plan and, therefore, these transactions qualify as party-in-interest transactions. Additionally, a portion of the Plan’s assets are invested in the Company’s common stock. Because the Company is the plan sponsor, transactions involving the Company’s common stock qualify as party-in-interest transactions. All of these transactions are exempt from the prohibited transactions rules under ERISA.

 

7. Reconciliation of Financial Statements to Form 5500

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

 

     December 31,  
     2012      2011  

Net assets available for benefits per the financial statements

   $ 479,034,327       $ 417,542,849   

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

     738,047         623,066   
  

 

 

    

 

 

 

Net assets available for benefits per the Form 5500

   $ 479,772,374       $ 418,165,915   
  

 

 

    

 

 

 

 

11


Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

7. Reconciliation of Financial Statements to Form 5500 (continued)

 

The following is a reconciliation of the net increase in net assets available for benefits per the financial statements to the Form 5500:

 

     Year Ended
December 31,
2012
 

Net increase in net assets available for benefits per the financial statements

   $ 61,491,478   

Less prior-year adjustment from fair value to contract value for fully benefit-responsive investment contracts

     (623,066

Add current-year adjustment from fair value to contract value for fully benefit-responsive investment contracts

     738,047   
  

 

 

 

Net increase in assets available for benefits per the Form 5500

   $ 61,606,459   
  

 

 

 

The accompanying financial statements present fully benefit-responsive contracts at contract value. The Form 5500 requires fully benefit-responsive investment contracts to be reported at fair value. Therefore, the adjustment from fair value to contract value for fully benefit-responsive investment contracts represents a reconciling item.

 

12


 

Supplemental Schedule

 

 

 

 

13


Apache Corporation 401(k) Savings Plan

Schedule H, Line 4(i) – Schedule of Assets (Held At End of Year)

EIN: 41-0747868 PN: 002

December 31, 2012

 

Identity of Issue, Borrower,

Lessor, or Similar Party

  Description of Investment     Current Value   

*  Apache Corporation

  1,523,159 shares of common stock     $119,567,982   

*  Fidelity Investments

  Fidelity Puritan Fund K     10,979,629   

*  Fidelity Investments

  Fidelity Cash Reserves Fund     3,698,520   

*  Fidelity Investments

  Fidelity Institutional Money Market     28,005,782   

*  Fidelity Investments

  Fidelity Intermediate Bond Fund     16,287,360   

*  Fidelity Investments

  Fidelity Blue Chip Growth Fund K     20,496,349   

*  Fidelity Investments

  Fidelity Contra Fund K     5,938,356   

*  Fidelity Investments

  Fidelity Growth Company Fund K     22,487,047   

*  Fidelity Investments

  Fidelity Managed Income Portfolio     27,214,406   

*  Fidelity Investments

  Spartan U. S. Equity Index Fund     14,403,906   

*  Fidelity Investments

  Fidelity Low-Priced Stock Fund     24,135,055   

*  Fidelity Investments

  Fidelity Freedom K Income Fund     1,760,649   

*  Fidelity Investments

  Fidelity Freedom K 2000 Fund     3,405,023   

*  Fidelity Investments

  Fidelity Freedom K 2005 Fund     494,065   

*  Fidelity Investments

  Fidelity Freedom K 2010 Fund     3,356,398   

*  Fidelity Investments

  Fidelity Freedom K 2015 Fund     4,404,434   

*  Fidelity Investments

  Fidelity Freedom K 2020 Fund     13,802,294   

*  Fidelity Investments

  Fidelity Freedom K 2025 Fund     10,475,915   

*  Fidelity Investments

  Fidelity Freedom K 2030 Fund     8,012,602   

*  Fidelity Investments

  Fidelity Freedom K 2035 Fund     4,109,350   

*  Fidelity Investments

  Fidelity Freedom K 2040 Fund     6,398,338   

*  Fidelity Investments

  Fidelity Freedom K 2045 Fund     4,039,870   

*  Fidelity Investments

  Fidelity Freedom K 2050 Fund     3,723,295   

*  Fidelity Investments

  Fidelity Freedom K 2055 Fund     481,989   

*  Fidelity Investments

  Fidelity Real Estate Fund     3,278,608   

Ariel Mutual Funds

  Ariel Appreciation Fund     8,352,739   

Davis Funds

  Davis New York Venture Fund     22,097,494   

PIMCO Funds

  PIMCO Total Return Fund     23,518,169   

Van Kampen Funds, Inc.

  Van Kampen Comstock Fund     13,417,109   

MFS Fund Distributors, Inc.

  MFS International New Discovery Fund     15,633,325   

The Royce Funds

  Royce Value Plus Institutional Fund     3,894,844   

American Beacon

  American Beacon Small Cap Value Fund     7,613,427   

Morgan Stanley

  Morgan Stanley Institutional Fund, Inc. – International Equity Portfolio I     13,208,535   

Brokerage link

  Self-directed brokerage account     6,101,105   

*  Participant loans

  Varying maturity dates and interest rates ranging from 4.25% to 9.25%     4,978,405   
   

 

 

 
      $479,772,374   
   

 

 

 

 

* Party-in-interest

 

14


SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

Apache Corporation 401(k) Savings Plan

 

(Name of Plan)

Date: June 28, 2013    

/s/ Margery M. Harris

    Margery M. Harris, Chairperson
    Retirement Plan Advisory Committee


INDEX TO EXHIBITS

 

Exhibit No.

  

Description

23.1    Consent of Ernst & Young LLP