UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Commission Only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Rule 14a-12
APACHE CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(APACHE LOGO)
ONE POST OAK CENTRAL
2000 POST OAK BOULEVARD, SUITE 100
HOUSTON, TEXAS 77056-4400
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TO THE STOCKHOLDERS OF APACHE CORPORATION:
The 2003 annual meeting of stockholders of Apache Corporation, a Delaware
corporation, will be held on Thursday, May 1, 2003, at 10:00 a.m. (Houston
time), at the Doubletree Hotel at Post Oak, 2001 Post Oak Boulevard, Houston,
Texas, for the following purposes:
1. To elect five directors to serve until the Company's annual meeting in
2006; and
2. To transact any other business that may properly come before the meeting
or any adjournment thereof.
Holders of record of the Company's common stock as of the close of business on
March 12, 2003 are entitled to notice of, and to vote at, the annual meeting.
The Company's stock transfer books will not be closed. A complete list of
stockholders entitled to vote at the annual meeting will be available for
examination by any Apache stockholder at 2000 Post Oak Boulevard, Suite 100,
Houston, Texas, for purposes relating to the annual meeting, during normal
business hours for a period of ten days before the meeting.
It is important that your shares are represented at the meeting. We encourage
you to designate the proxies named on the enclosed proxy card to vote your
shares on your behalf and per your instructions. This action does not limit your
right to vote in person or to attend the meeting.
By order of the Board of Directors
APACHE CORPORATION
/s/ C. L. PEPER
C. L. PEPER
Corporate Secretary
Houston, Texas
March 31, 2003
PROXY STATEMENT TABLE OF CONTENTS
PAGE
----
General..................................................... 1
Purpose of the Annual Meeting............................... 1
Who Can Vote................................................ 1
How to Vote................................................. 1
Voting 401(k) Plan Shares................................... 2
Revoking a Proxy............................................ 2
Quorum and Votes Needed..................................... 2
How the Votes are Counted................................... 2
Election of Directors (Proposal No. 1)...................... 3
Nominees for Election as Directors.................... 4
Continuing Directors.................................. 5
Standing Committees and Meetings of the Board of
Directors............................................ 7
Report of the Audit Committee......................... 9
Director Compensation................................. 9
Securities Ownership and Principal Holders............ 11
Section 16(a) Beneficial Ownership Reporting
Compliance........................................... 12
Equity Compensation Plan Information.................. 13
Executive Officers of the Company..................... 14
Summary Compensation Table............................ 16
Option/SAR Exercises and Year-End Value Table......... 18
The Management Development and Compensation Committee
Report on Executive Compensation..................... 19
Performance Graph..................................... 24
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements....................... 25
Compensation Committee Interlocks and Insider
Participation........................................ 26
Certain Business Relationships and Transactions....... 26
Independent Public Auditors................................. 27
Stockholder Proposals....................................... 29
Solicitation of Proxies..................................... 29
Note: References to the "stock dividends" throughout this proxy statement relate
to the five-percent stock dividend on Apache common stock payable in
shares of common stock on April 2, 2003, to stockholders of record on
March 12, 2003, and to the ten-percent stock dividend on Apache common
stock paid in shares of common stock on January 21, 2002, to stockholders
of record on December 31, 2001.
APACHE CORPORATION
ONE POST OAK CENTRAL
2000 POST OAK BOULEVARD, SUITE 100
HOUSTON, TEXAS 77056-4400
March 31, 2003
PROXY STATEMENT
GENERAL
This proxy statement contains information about the 2003 annual meeting of
stockholders of Apache Corporation. In this proxy statement "Apache" and "the
Company" both refer to Apache Corporation. This proxy statement and the enclosed
proxy card are being mailed to you by the Company's board of directors starting
on or about March 31, 2003.
PURPOSE OF THE ANNUAL MEETING
At the Company's annual meeting, stockholders will vote on the election of
directors as outlined in the accompanying notice of meeting, and on any other
business that properly comes before the meeting. As of the date of this proxy
statement, the Company is not aware of any business to come before the meeting
other than the election of directors. There are no rights of appraisal or
similar rights of dissenters arising from matters to be acted on at the meeting.
WHO CAN VOTE
Only stockholders of record holding shares of Apache common stock at the close
of business on the record date, March 12, 2003, are entitled to receive notice
of the annual meeting and to vote the shares of Apache common stock they held on
that date. As of March 12, 2003, there were 153,867,875 shares of Apache common
stock issued and outstanding. Holders of Apache common stock are entitled to one
vote per share and are not allowed to cumulate votes in the election of
directors. The enclosed proxy card shows the number of shares that you are
entitled to vote.
Apache currently has outstanding one series of preferred stock -- the 5.68%
Cumulative Preferred Stock, Series B (the "Series B Preferred Stock"). The
holders of the depositary shares, each representing 1/10th of a share of Series
B Preferred Stock, are not entitled to any voting rights, except under certain
circumstances relating to non-payment of dividends on the Series B Preferred
Stock. As of the date of this proxy statement, all dividend payments on the
Series B Preferred Stock were current.
HOW TO VOTE
If your shares of Apache common stock are held by a broker, bank or other
nominee (in "street name"), you will receive instructions from them on how to
vote your shares.
If you hold shares of Apache common stock in your own name (as a "stockholder of
record"), you may give instructions on how your shares are to be voted by:
- marking, signing, dating and returning the enclosed proxy card in the
postage-paid envelope provided.
- using the toll-free telephone number or Internet voting site listed on
the enclosed proxy card. Specific directions for using the telephone and
Internet voting systems are shown on the proxy card.
1
When using telephone or Internet voting, the systems verify that you are a
stockholder through the use of a company number for Apache and a unique control
number for you. IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT MAIL THE
ENCLOSED PROXY CARD.
Whichever of these methods you use to transmit your instructions, your shares of
Apache common stock will be voted as you direct. If you sign and return the
enclosed proxy card or otherwise designate the proxies named on the proxy card
to vote on your behalf, but do not specify how to vote, your shares will be
voted FOR the election of the nominees for director. If other matters of
business not presently known are properly raised at the meeting, the proxies
will vote on the matters in accordance with their best judgment.
VOTING 401(k) PLAN SHARES
If you are an employee or former employee participating in the Apache 401(k)
Savings Plan and have shares of Apache common stock credited to your plan
account as of the record date, such shares are shown on the enclosed proxy card
and you have the right to direct the plan trustee regarding how to vote those
shares. The trustee for the 401(k) plan is Fidelity Management Trust Company.
The trustee will vote the shares in your plan account in accordance with your
instructions. If you do not send instructions (by voting your shares as provided
above under "How to Vote") or if your proxy card is not received by April 29,
2003, the shares credited to your account will be voted by the trustee in the
same proportion as it votes shares for which it did receive timely instructions.
REVOKING A PROXY
You may revoke a proxy before it is voted by submitting a new proxy with a later
date (by mail, telephone or Internet), by voting at the meeting, or by filing a
written revocation with Apache's corporate secretary. Your attendance at the
annual meeting will not automatically revoke your proxy.
QUORUM AND VOTES NEEDED
The presence at the annual meeting, in person or by proxy, of the holders of a
majority of the shares of Apache common stock outstanding on the record date
will constitute a quorum, permitting the business of the meeting to be
conducted. The affirmative vote of a plurality of the votes cast at the annual
meeting is required for the election of directors.
HOW THE VOTES ARE COUNTED
Representatives of Wells Fargo Bank Minnesota, N.A. will tabulate the votes and
act as inspectors of election. A properly signed proxy marked to "withhold"
authority for the election of one or more directors will be counted for quorum
purposes but not for voting purposes. If a broker indicates on a proxy that they
do not have discretionary authority to vote certain shares of Apache common
stock on a matter, those shares will not be considered present and entitled to
vote at the meeting.
2
ELECTION OF DIRECTORS
(PROPOSAL NO. 1 ON PROXY CARD)
The Company's bylaws provide that the board of directors shall consist of a
minimum of seven and a maximum of 13 directors. The Company's certificate of
incorporation provides that, as near as numerically possible, one-third of the
directors shall be elected at each annual meeting of stockholders. Unless
directors earlier resign or are removed, their terms are for three years, and
continue thereafter until their successors are elected and qualify as directors.
The present terms of directors Frederick M. Bohen, George D. Lawrence, Rodman D.
Patton, Charles J. Pitman and Jay A. Precourt will expire at the 2003 annual
meeting. Mr. Precourt was appointed by the board of directors in February 2003,
to succeed Mary Ralph Lowe who resigned from the board effective December 19,
2002, after six years of service.
Mr. Bohen, Mr. Lawrence, Mr. Patton, Mr. Pitman and Mr. Precourt have been
recommended by the Company's nominating committee and nominated by the board of
directors for election by the stockholders to an additional three-year term. If
elected, Mr. Bohen, Mr. Lawrence, Mr. Patton, Mr. Pitman and Mr. Precourt will
serve beginning upon election until the annual meeting of stockholders in 2006.
Unless otherwise instructed, all proxies will be voted in favor of these
nominees. If one or more of the nominees is unwilling or unable to serve, the
proxies will be voted only for the remaining named nominees. Proxies cannot be
voted for more than five nominees. The board of directors knows of no nominee
for director who is unwilling or unable to serve.
3
NOMINEES FOR ELECTION AS DIRECTORS
Biographical information, including principal occupation and business experience
during the last five years, of each nominee for director is set forth below.
Unless otherwise stated, the principal occupation of each nominee has been the
same for the past five years.
DIRECTOR
SINCE
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FREDERICK M. BOHEN, 65, became acting executive vice 1981
president and chief operating officer of The Rockefeller
University in February 2002, having previously served in
those capacities from 1990 through September 1999. He was
senior vice president of Brown University from 1983 to 1990,
and served as vice president of finance and operations at
the University of Minnesota from 1981 to 1983. Mr. Bohen was
with the U.S. Department of Health, Education and Welfare as
assistant secretary for management and budget from 1977 to
1981. He is a director of American Council of Learned
Societies, a member of its executive committee, and chairman
of its finance committee. During 2002, Mr. Bohen was
chairman of the management development and compensation
committee and chairman of the stock option plan committee.
GEORGE D. LAWRENCE, 52, is a private investor, and joined 1996
the Company's board of directors in May 1996. Formerly, he
was president, chief executive officer and a director of The
Phoenix Resource Companies, Inc. from 1990 until May 1996,
when Phoenix became a wholly-owned subsidiary of Apache.
During 2002, Mr. Lawrence was a member of the executive
committee and the management development and compensation
committee.
RODMAN D. PATTON, 59, joined the Company's board of 1999
directors in December 1999. Mr. Patton has nearly 30 years
experience in oil and gas investment banking and corporate
finance activity, most recently serving as managing director
of the Merrill Lynch Energy Group from 1993 until April
1999. Previously, he was with First Boston and Eastman
Dillon, Union Securities (later Blyth Eastman Dillon). Mr.
Patton is a director of Valero GP, LLC, San Antonio, Texas,
and is chairman of their audit committee. Valero GP, LLC is
the general partner of Valero LP, owner and operator of
crude oil and refined product pipeline, terminalling and
storage assets. During 2002, Mr. Patton was a member of the
audit committee.
CHARLES J. PITMAN, 60, joined the Company's board of 2000
directors in May 2000. He retired from BP Amoco plc in late
1999, having served as regional president -- Middle
East/Caspian/ Egypt/India and business unit leader for new
business development -- Middle East/Caspian since December
1998. Prior to the merger of British Petroleum and Amoco
Corporation, Mr. Pitman served as chairman and president of
Amoco Eurasia Petroleum Company from 1997 to 1998, and was
president of Amoco Egypt Oil Company from 1992 to 1996. He
is the sole member of Shaker Mountain Energy Associates LLC,
a consulting company formed in September 1999, and is an
advisor to the supervisory board of Urals Energy, N.V.
During 2002, Mr. Pitman was a member of the nominating
committee.
JAY A. PRECOURT, 65, rejoined the Company's board of 2003
directors in February 2003, having been a member of the
Company's board from July 1992 to August 1995. He has been
since 2000, chairman of the board and chief executive
officer of Scissor Tail Energy, LLC, a Denver, Colorado
gatherer, transporter and processor of natural gas and
natural gas liquids, and since 1999, chairman of the board
of Hermes Consolidated, Inc., a Denver, Colorado gatherer,
transporter and refiner of crude oil and crude oil products.
Formerly, Mr. Precourt was vice chairman and chief executive
officer of Tejas Gas Corporation from 1986 to 1999 and
president from 1996 to 1998, and was chairman of the board
of Coral Energy L.P. from 1996 to 1999. He is a director of
Halliburton Company and a member of its compensation
committee, a director of The Timken Company and chairman of
its audit committee, and a director of Founders Funds, Inc.
Mr. Precourt became a member of the nominating committee in
February 2003.
4
CONTINUING DIRECTORS
Biographical information, including principal occupation and business experience
during the last five years, for each continuing member of the board of directors
whose term is not expiring at the 2003 annual meeting is set forth below. Unless
otherwise stated, the principal occupation of each director has been the same
for the past five years.
DIRECTOR TERM
SINCE EXPIRES
-------- --------
G. STEVEN FARRIS, 55, was appointed president, chief 1994 2005
executive officer and chief operating officer in May 2002,
having been president and chief operating officer of the
Company since May 1994. He was senior vice president of the
Company from 1991 to 1994, and vice president -- exploration
and production from 1988 to 1991. Prior to joining Apache,
Mr. Farris was vice president of finance and acquisitions
for Terra Resources, Inc., a Tulsa, Oklahoma oil and gas
company, from 1983 to 1988. During 2002, he was a member of
the executive committee.
RANDOLPH M. FERLIC, 66, retired in December 1993 from his 1986 2005
practice as a thoracic and cardiovascular surgeon. He is the
founder of Surgical Services of the Great Plains, P.C., and
served as its president from 1974 to 1991. Dr. Ferlic was
elected as a Regent of the University of Nebraska in
November 2000. During 2002, he was chairman of the audit
committee and a member of the executive committee and the
nominating committee.
EUGENE C. FIEDOREK, 71, is a private investor. Formerly, he 1988 2004
was managing director of EnCap Investments L.C., a Dallas,
Texas energy investment banking firm, from 1988 until March
1999, when EnCap was acquired by El Paso Energy. Mr.
Fiedorek was the managing director of the Energy Banking
Group of First RepublicBank Corp. in Dallas, Texas from 1978
to 1988. He is a director of Matador Petroleum Corp.,
Dallas, Texas, and chairman of its planning and compensation
committee. During 2002, Mr. Fiedorek was a member of the
audit committee.
A. D. FRAZIER, JR., 58, became president and chief operating 1997 2005
officer of Caremark Rx, Inc., a publicly -- traded pharmacy
benefit management company, in August 2002. From March 2001
until August 2002, Mr. Frazier was chairman and chief
executive officer of the Chicago Stock Exchange. He had been
a global partner of AMVESCAP PLC, a London-based independent
global investment management firm and the parent company of
INVESCO, Inc., from 1997 to March 2001, having served
INVESCO as president and chief executive officer of its U.S.
institutional business from 1997 to December 2000, and
executive vice president from 1996 to 1997. Mr. Frazier was
chief operating officer of the Atlanta Committee for the
Olympic Games from 1991 to 1996. He is also a director of
Caremark Rx, Inc. and R. J. Reynolds Tobacco Holdings, Inc.,
Winston-Salem, North Carolina. During 2002, Mr. Frazier was
a member of the management development and compensation
committee and the stock option plan committee.
5
DIRECTOR TERM
SINCE EXPIRES
-------- --------
PATRICIA ALBJERG GRAHAM, 67, joined the Company's board of 2002 2004
directors in September 2002. She is the Charles Warren
Research Professor of the History of American Education at
Harvard University. Dr. Graham joined the faculty of Harvard
Graduate School of Education in 1974, and was its dean from
1982 to 1991. From 1991 to 2000, she served as president of
the Spencer Foundation, which supports research into
educational improvement. Dr. Graham is also a director of
Northwestern Mutual Life Insurance Company, as well as a
director of the Annenberg Institute for School Reform, the
Hitachi Foundation, the Center for Advanced Study in the
Behavioral Sciences and the Josiah Macy, Jr. Foundation. Dr.
Graham became a member of the nominating committee in
February 2003.
JOHN A. KOCUR, 75, is engaged in the private practice of 1977 2004
law. He served as vice chairman of the Company's board of
directors from 1988 to 1991. Mr. Kocur was employed by the
Company from 1969 until his retirement in 1991, and served
as the Company's president from 1979 to 1988. During 2002,
he was chairman of the executive committee and a member of
the management development and compensation committee and
the nominating committee.
F. H. MERELLI, 66, became chairman of the board, chief 1997 2004
executive officer and president of Cimarex Energy Co., a
Denver, Colorado independent oil and gas exploration and
production company, in October 2002, upon the merger of Key
Production Company, Inc. with the oil and gas division of
Helmerich & Payne, Inc. He was chairman of the board and
chief executive officer of Key from 1992 until October 2002,
and served as Key's president from 1992 to September 1999
and from March 2002 to October 2002. Formerly, Mr. Merelli
served as Apache's president and chief operating officer
from 1988 to 1991. Prior to that, he was president of Terra
Resources, Inc., a Tulsa, Oklahoma oil and gas company, from
1979 to 1988. During 2002, Mr. Merelli was a member of the
audit committee and the executive committee.
RAYMOND PLANK, 80, has been chairman of the Company's board 1954 2004
of directors since 1979, having served as the Company's
chief executive officer from 1966 until May 2002, and
president from 1954 to 1979. During 2002, Mr. Plank was a
member of the executive committee.
6
STANDING COMMITTEES AND MEETINGS
OF THE BOARD OF DIRECTORS
The board of directors has an audit committee, a management development and
compensation ("MD&C") committee, a stock option plan committee, an executive
committee, and a nominating committee. Actions taken by these committees are
reported to the board of directors at the next board meeting. During 2002, each
of the Company's directors attended at least 80 percent of all meetings of the
board of directors and of all committees of which they were members.
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2002 MEMBERSHIP ROSTER
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NAME BOARD AUDIT MD&C STOCK OPTION EXECUTIVE NOMINATING
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Frederick M. Bohen X X* X*
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G. Steven Farris X X
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Randolph M. Ferlic X X* X X
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Eugene C. Fiedorek X X
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A. D. Frazier, Jr. X X X
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Patricia Albjerg Graham X
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John A. Kocur X X X* X*
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George D. Lawrence X X X
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Mary Ralph Lowe X X X X
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F. H. Merelli X X X
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Rodman D. Patton X X
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Charles J. Pitman X X
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Raymond Plank X* X
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No. of Meetings in 2002 6 12 5 5 0 2
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* Chairman
7
The audit committee reviews with the independent accountants and internal
auditors of the Company their respective audit and review programs and
procedures, and the scope and results of their audits. It also examines
professional services provided by the Company's independent accountants and
evaluates their costs and related fees. Additionally, the audit committee
reviews the Company's financial statements and the adequacy of the Company's
system of internal accounting controls. The audit committee makes
recommendations to the board of directors concerning the Company's independent
accountants and their engagement or discharge.
During 2002, the board of directors reviewed the composition of the audit
committee pursuant to the rules of The New York Stock Exchange, Inc. (the
"NYSE") governing audit committees. Based on this review, the board of directors
confirmed that all members of the audit committee are "independent" under the
NYSE's rules. During 2000, the audit committee adopted a charter, which was
approved by the board of directors on May 4, 2000, and which reflects the NYSE's
rules and the regulations of the Securities and Exchange Commission (the "SEC").
No changes were made to the audit committee charter during 2002.
The management development and compensation committee reviews the Company's
management resources and structure, and administers the Company's compensation
programs and retirement, stock purchase and similar plans. The duties of the
stock option plan committee include the award and administration of option
grants under the Company's stock option plans, of grants under the executive
restricted stock plan, of stock unit grants under the deferred delivery plan,
and of conditional grants under the 2000 Share Appreciation Plan.
The executive committee is vested with the authority to exercise the full power
of the board of directors, within established policies, in the intervals between
meetings of the board of directors. In addition to the general authority vested
in it, the executive committee may be vested with specific power and authority
by resolution of the board of directors.
The duties of the nominating committee include recommending to the board of
directors the slate of director nominees submitted to the stockholders for
election at the annual meeting, and proposing qualified candidates to fill
vacancies on the board of directors without regard to race, sex, age, religion
or physical disability.
Stockholders wishing to recommend candidates for consideration by the nominating
committee should forward written recommendations, together with appropriate
biographical information and details of qualifications, to Apache's corporate
secretary. In order to be considered, recommendations must be received by the
deadline for submitting stockholder proposals set forth under the heading
"Stockholder Proposals."
8
REPORT OF THE AUDIT COMMITTEE
To the Board of Directors of Apache Corporation:
We have reviewed and discussed with management the Company's audited financial
statements as of and for the year ended December 31, 2002.
We have received Ernst & Young LLP's letter and discussed with them the matters
required by Statement on Auditing Standards No. 61, Communications with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures from Ernst & Young LLP
required by Independence Standards No. 1, Independence Discussions with Audit
Committees, as amended, by the Independence Standards Board, and have discussed
with the Company's independent auditors their independence.
Based on the reviews and discussions referred to above, we recommended to the
Company's Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2002.
March 11, 2003 Members of the Audit Committee
Randolph M. Ferlic, Chairman
Eugene C. Fiedorek
F. H. Merelli
Rodman D. Patton
DIRECTOR COMPENSATION
Employee directors do not receive additional compensation for serving on the
board of directors or any committee of the board. During 2002, non-employee
directors received an annual retainer of $30,000, of which $10,000 in value was
paid in the form of shares of Apache common stock; plus $1,000 for each board of
directors or committee meeting attended, together with reimbursement of expenses
incurred in attending meetings. Non-employee directors receive an annual
retainer of $2,000 for each committee of which they are members. In addition,
the chairman of each committee receives $4,000 annually for chairing their
respective committees.
Under the terms of the Company's non-employee directors' compensation plan, as
amended in 1998, non-employee directors can elect to defer receipt of all or any
portion of their retainers or meeting attendance fees and, subject to certain
parameters, can defer those amounts in the form of cash or in the form of shares
of Apache common stock. Amounts deferred in the form of cash accrue interest
equal to the Company's rate of return on its short-term marketable securities;
amounts deferred in the form of Apache common stock accrue dividends as if the
stock were issued and outstanding when such dividends were payable. All deferred
amounts, as well as accrued interest and dividends, are maintained in a separate
memorandum account for each participating non-employee director. Amounts are
paid out in cash and/or shares of common stock, as applicable, upon the
non-employee director's retirement or other termination of his or her
directorship, or on a specific date, in a lump sum or in annual installments
over a ten-year (or shorter) period. Three non-employee directors deferred all
or a portion of their fees during 2002.
9
An unfunded retirement plan for non-employee directors was established in
December 1992. The plan is administered by the management development and
compensation committee and pays retired non-employee directors benefits equal to
two-thirds of the annual retainer for a period based on length of service.
Payments are made on an annual basis, for a maximum of ten years, and are paid
from the general assets of the Company. In the event of the director's death
prior to receipt of all benefits payable under the plan, the remaining benefits
are payable to the director's surviving spouse or designated beneficiary until
the earlier of the termination of the payment period or the death of the
surviving spouse or designated beneficiary. During 2002, benefits were paid
under this plan to, or on behalf of, five former directors who retired from the
Company's board of directors during 1997, 1998, 2000 and 2001.
The Company established an equity compensation plan for non-employee directors
in February 1994, which is administered by the management development and
compensation committee. Each non-employee director was awarded 1,000 restricted
shares of the Company's common stock every five years from July 1, 1994 through
July 1, 2000, with the shares vesting at a rate of 200 shares annually. On May
3, 2001, the plan was amended to provide that on July 1, 2001 and on July 1 of
each third year thereafter through July 1, 2009, each non-employee director will
be awarded 1,000 restricted shares of common stock, with one-third of the shares
vesting annually. Except as noted below, any unvested shares are forfeited at
the time the non-employee director ceases to be a member of the board. The
unvested portion of any award is automatically vested upon retirement or death
while still serving as a member of the board; provided that the non-employee
director (a) is at least 60 years old and has completed at least ten years of
service at the time of retirement, or (b) has completed at least ten years of
service at the time of death. Awards are made from shares of common stock held
in the Company's treasury, and are automatic and non-discretionary. New
non-employee directors will receive awards of 1,000 shares of common stock on
the July 1 next succeeding their election to the board. All shares of common
stock awarded under the plan have full dividend and voting rights. The plan
expires on July 1, 2009, with a maximum of 50,000 shares of common stock (57,750
shares after adjustment for the stock dividends) that may be awarded during the
term of the plan. No awards were made under the plan during 2002.
10
SECURITIES OWNERSHIP AND PRINCIPAL HOLDERS
The following tables set forth, as of February 28, 2003, the beneficial
ownership of each director or nominee for director of the Company, the chief
executive officer, the four other most highly compensated executive officers,
and all directors and executive officers of the Company as a group. All
ownership information is based upon filings made by those persons with the SEC
and upon information provided to the Company. (All share numbers in the table
and footnotes have been adjusted for the stock dividends.)
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AMOUNT AND PERCENT OF
NATURE OF BENEFICIAL CLASS
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP(1) OUTSTANDING
----------------------------------------------------------------------------------------------------------------
Common Stock, par value
$1.25 Frederick M. Bohen 10,048(2)(3) *
--------------------------------------------------------------------------------------
G. Steven Farris 462,770(4)(5)(6)(7) *
--------------------------------------------------------------------------------------
Randolph M. Ferlic 257,375(2)(8) *
--------------------------------------------------------------------------------------
Eugene C. Fiedorek 27,592(2) *
--------------------------------------------------------------------------------------
A. D. Frazier, Jr. 6,397(2) *
--------------------------------------------------------------------------------------
Patricia Albjerg Graham 501 *
--------------------------------------------------------------------------------------
John A. Kocur 32,813(2) *
--------------------------------------------------------------------------------------
George D. Lawrence 27,803(2)(3)(9) *
--------------------------------------------------------------------------------------
F. H. Merelli 11,827(2)(3)(6) *
--------------------------------------------------------------------------------------
Rodman D. Patton 8,709(2) *
--------------------------------------------------------------------------------------
Charles J. Pitman 5,103(2) *
--------------------------------------------------------------------------------------
Raymond Plank 501,551(4)(5)(6)(7) *
--------------------------------------------------------------------------------------
Jay A. Precourt --
--------------------------------------------------------------------------------------
Roger B. Plank 277,760(4)(5)(6)(7) *
--------------------------------------------------------------------------------------
Lisa A. Stewart 109,602(4)(5)(6)(7) *
--------------------------------------------------------------------------------------
John A. Crum 89,367(4)(5)(6)(7) *
--------------------------------------------------------------------------------------
All directors, nominees, and executive
officers as a group (including the above named
persons) 2,482,640(4)(5)(6)(7) 1.61
----------------------------------------------------------------------------------------------------------------
* Represents less than one percent of outstanding shares of common stock.
(1) All ownership is sole and direct unless otherwise noted. Inclusion of any
common shares not owned directly shall not be construed as an admission of
beneficial ownership. Fractional shares have been rounded to the nearest
whole share.
(2) Includes restricted common shares awarded under the Company's Equity
Compensation Plan for Non-Employee Directors.
(3) Includes the following common share equivalents related to retainer fees
deferred under the Company's Non-Employee Directors' Compensation Plan: Mr.
Bohen -- 3,618; Mr. Lawrence -- 1,883; and Mr. Merelli -- 180.
(4) Includes the following common stock equivalents held through the Company's
Deferred Delivery Plan: Mr. Farris -- 4,021; Mr. Raymond Plank -- 53,192;
Mr. Roger Plank -- 18,274; Ms. Stewart -- 1,817; Mr. Crum -- 1,410; and all
directors and executive officers as a group -- 95,282.
(footnotes continued on following page)
11
(5) Includes the following common shares issuable upon the exercise of
outstanding employee stock options which are exercisable within 60 days: Mr.
Farris -- 207,320; Mr. Raymond Plank -- 243,012; Mr. Roger Plank -- 160,818;
Ms. Stewart -- 83,332; Mr. Crum -- 66,570; and all directors and executive
officers as a group -- 1,284,600.
(6) Includes shares held by the trustee of the Company's 401(k) Savings Plan and
related Non-Qualified Retirement/Savings Plan: Mr. Farris -- 33,790; Mr.
Merelli -- 8,050; Mr. Raymond Plank -- 3,123; Mr. Roger Plank -- 25,833; Ms.
Stewart -- 18,253; Mr. Crum -- 16,032; and all directors and executive
officers as a group -- 161,505.
(7) Includes the following restricted stock units (each equivalent to one share
of common stock) granted under the Company's Executive Restricted Stock
Plan: Mr. Farris -- 13,545; Mr. Raymond Plank -- 13,545; Mr. Roger
Plank -- 7,035; Ms. Stewart -- 6,090; Mr. Crum -- 5,355; and all directors
and executive officers as a group -- 97,125.
(8) Includes 6,930 common shares owned directly by Ferlic Investments, Ltd. in
which Dr. Ferlic owns a 36-percent interest. Also includes a total of 10,546
common shares held by Dr. Ferlic's daughters, son and grandchildren, as to
which he has some power of disposition, but disclaims beneficial ownership.
(9) Includes 21,656 common shares issuable upon the exercise of outstanding
stock options which are fully exercisable. See "Certain Business
Relationships and Transactions".
As of February 28, 2003, the Company knows of no person or entity owning more
than five percent of outstanding shares of the Company's common stock, based on
reports filed with the SEC.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, as well as beneficial owners of ten percent or more of
the Company's common stock, to report their holdings and transactions in the
Company's securities. To the Company's knowledge, based on information furnished
to it and contained in reports provided pursuant to Section 16(a), as well as
written representations that no other reports were required for 2002, it appears
that: (a) Raymond Plank, an officer and director of the Company, filed a late
report relating to a charitable gift of 150 shares of the Company's common
stock; and (b) Thomas P. Chambers, Eric L. Harry and Jon W. Sauer, officers of
the Company, each filed a late report relating to conditional grants made under
the Company's 2000 Share Appreciation Plan.
12
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of December 31, 2002, relating to
the Company's equity compensation plans, under which grants of stock options,
restricted stock units and other rights to acquire shares of Apache common stock
may be granted from time to time. (All share numbers and per share prices in the
table and footnotes have been adjusted for the stock dividends.)
--------------------------------------------------------------------------------------------------------------
(a) (b) (c)
--------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
--------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by
security holders(1)................ 3,217,271 $37.27(4) 319,067
--------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved
by security holders(2)............. 5,760,623 $42.65(4) 1,862,206
--------------------------------------------------------------------------------------------------------------
Total(3)........................ 8,977,894 $39.53(4) 2,181,273
--------------------------------------------------------------------------------------------------------------
(1) Includes the Company's 1990 Stock Incentive Plan, 1995 Stock Option Plan and
1998 Stock Option Plan.
(2) Includes the Company's 1996 Performance Stock Option Plan, 2000 Stock Option
Plan, 2000 Share Appreciation Plan, Executive Restricted Stock Plan,
Conditional Stock Grant to G. Steven Farris, Non-Employee Directors'
Compensation Plan, Equity Compensation Plan for Non-Employee Directors and
Deferred Delivery Plan.
See Note 9 of the Notes to Consolidated Financial Statements, included in
the Company's Form 10-K for the year ended December 31, 2002, for the
material features of the 1996 Performance Stock Option Plan, 2000 Stock
Option Plan, 2000 Share Appreciation Plan and Executive Restricted Stock
Plan.
The material features of the Conditional Grant to G. Steven Farris are
discussed in the footnotes to the Summary Compensation Table. The material
features of the Non-Employees Directors' Compensation Plan and Equity Plan
for Non-Employee Directors are discussed under "Director Compensation."
The Company's Deferred Delivery Plan (i) allows officers and certain key
employees to defer income from certain equity compensation plans (such as
the stock option and restricted stock plans) in the form of deferred units,
and (ii) provides for grants of deferred units. Each deferred unit is
equivalent to one share of Apache common stock. Distributions from the plan
are made, at the election of the participant, beginning five years from
deferral or upon termination of employment.
(3) Does not include stock options to purchase an aggregate of 110,302 shares of
Apache common stock, at a weighted average exercise price of $14.71 per
share, granted under a plan assumed in connection with an acquisition. No
additional stock options may be granted under the assumed plan.
(4) Weighted average exercise price of outstanding stock options; excludes
restricted stock units, performance-based stock units and deferred stock
units.
13
EXECUTIVE OFFICERS OF THE COMPANY
Biographical information concerning the executive officers of the Company is set
forth below. Biographical information concerning Raymond Plank and G. Steven
Farris is set forth above under the caption "Continuing Directors."
MICHAEL S. BAHORICH, 46, was appointed executive vice
president -- exploration and production technology in May
2000, having been the Company's vice
president -- exploration and production technology since
January 1999, vice president -- exploration technology since
December 1997 and the Company's chief geophysicist since
1996. From 1981 until joining the Company, he held positions
of increasing responsibility at Amoco Corporation in Denver,
Colorado and Tulsa, Oklahoma, most recently as a resource
manager for Amoco's mid-continent business unit. Mr.
Bahorich is currently president of the Society of
Exploration Geophysicists and serves on an advisory board at
Stanford University.
JEFFREY M. BENDER, 51, was appointed vice president -- human
resources in September 2000. Prior to joining the Company,
he served as vice president of human resources for Vastar
Resources, Inc., Houston, Texas, since June 1994, having
helped manage its transition from an operating division of
Atlantic Richfield Company (ARCO) to an independent
organization following Vastar's initial public offering in
mid 1994. Previously, Mr. Bender held positions of
increasing responsibility with ARCO since 1975.
MICHAEL J. BENSON, 50 was appointed vice
president -- corporate security in December 2002, having
been director of corporate security since joining the
Company in 1996. From 1988 until 1996, he owned and operated
an international security consulting company advising large
corporations and high profile individuals. Previously, Mr.
Benson was with Her Majesty's Police in the United Kingdom
for 14 years.
THOMAS P. CHAMBERS, 47, was appointed vice
president -- corporate planning in September 2001, having
been director of planning since March 1995. Prior to joining
the Company, Mr. Chambers was in the international business
development group at Pennzoil Exploration and Production.
Mr. Chambers is a member of the Society of Petroleum
Engineers.
JOHN A. CRUM, 50, was appointed executive vice
president -- Eurasia and new ventures in May 2000, having
served as the Company's regional vice president in Australia
since 1995. Prior to joining the Company, he served in
executive and management roles with Aquila Energy Resources
Corporation, Pacific Enterprises Oil Company and Southland
Royalty Company. Mr. Crum served as a director of the
Australian Petroleum Production and Exploration Association
from September 1995 until July 2000.
MATTHEW W. DUNDREA, 49, was appointed vice president and
treasurer in July 1997, having been the Company's treasurer
since March 1996 and assistant treasurer since 1994. Prior
to joining the Company, he held positions of increasing
responsibility at Union Texas Petroleum Holding, Inc.,
Houston, Texas, from 1982 to 1994.
ROBERT J. DYE, 47, was appointed vice president -- investor
relations in May 1997, having been director of investor
relations since 1995. Prior to that, Mr. Dye held positions
of increasing responsibility in the corporate planning area
since joining the Company in 1992. Formerly, he was planning
manager for the offshore division of BP Exploration,
Houston, Texas, from 1988 to 1992.
RODNEY J. EICHLER, 53, was appointed executive vice
president in February 2003, having been the Company's
regional vice president in Egypt since 1999, and vice
president of exploration and production in Egypt since 1997.
Prior to that, Mr. Eichler was region vice president for the
Western region in Houston since 1996, and region exploration
and development manager for the Rocky Mountain region in
Denver since 1993. Prior to joining the Company, Mr. Eichler
was vice president-exploration for Axem Resources, LLC in
Denver, Colorado, since 1989.
ERIC L. HARRY, 44, was appointed vice president and
associate general counsel in February 2001, having been
assistant general counsel since 1995. From 1985 until
joining the Company in 1994, he was an associate and partner
in the corporate and securities section of the law firm of
Chamberlain, Hrdlicka, White, Williams and Martin in
Houston, Texas.
14
JON A. JEPPESEN, 55, was appointed senior vice president in
February 2003, having been the Company's regional vice
president for the Gulf Coast region since 2002 and the
Offshore region since 1996. He served as the Company's vice
president of exploration and development for North America
from 1994 to 1996, and manager of the Company's offshore
exploration and development from 1993 to 1994. Prior to
joining the Company, Mr. Jeppesen was vice president of
exploration and development for Pacific Enterprises Oil
Company, Dallas, Texas, from 1989 to 1992.
P. ANTHONY LANNIE, 49, was appointed vice president and
general counsel in March 2003. Prior to joining the Company,
he was president of Kinder Morgan Power Company, Houston,
Texas, from 2000 through February 2003, and was senior vice
president and general counsel for Coral Energy from 1999 to
2000, and for Tejas Gas Corporation from 1994 to 1999.
ANTHONY R. LENTINI, JR., 53, has been vice
president -- public and international affairs since January
1995. Prior to joining the Company, he was vice president of
public affairs for Mitchell Energy & Development Corp., The
Woodlands, Texas, from 1988 through 1994.
JANINE J. MCARDLE, 42, was appointed vice president -- oil
and gas marketing in November 2002. Prior to joining the
Company, she served as managing director for Aquila Europe
Ltd from November 2001 through October 2002, and held
executive and management positions with Aquila Energy
Marketing since 1993, including vice president -- trading
and vice president -- mergers and acquisitions. Previously,
she was a partner in Hesse Gas Marketing from 1991 to 1993.
Ms. McArdle was a member of the board of directors of
International Exchange, the electronic trading platform,
from 2000 to October 2002.
THOMAS L. MITCHELL, 42, was appointed vice president and
controller in July 1997, having been the Company's
controller and chief accounting officer since February 1996.
He held various positions in the Company's natural gas
marketing operation from 1990 through 1995, and served as
accounting manager for the Company's Gulf Coast operations
from 1989 to 1990. Prior to joining the Company, Mr.
Mitchell was a manager with Arthur Andersen & Co., an
independent public accounting firm, from 1982 through 1988.
CHERI L. PEPER, 49, was appointed corporate secretary of the
Company in May 1995, having been assistant secretary since
1992. Prior to joining the Company, she was assistant
secretary for Panhandle Eastern Corporation (subsequently
PanEnergy Corp.) since 1988. Ms. Peper is a director of
MemberSource Credit Union, formerly known as PT&T Federal
Credit Union.
ROGER B. PLANK, 46, was appointed executive vice president
and chief financial officer in May 2000, having been vice
president and chief financial officer since July 1997.
Previously, he was vice president -- planning and corporate
development since March 1996 and vice president -- corporate
planning since 1994. Mr. Plank was the Company's vice
president -- external affairs from 1993 to 1994, and vice
president -- corporate communications from 1987 to 1993. In
June 2000, he was elected as president of Texas Independent
Producers and Royalty Owers Association (TIPRO), a large
independent trade association. The chairman of the Company's
board of directors is Mr. Plank's father.
FLOYD R. PRICE, 53, was appointed executive vice president
in February 2003. He has been president of Apache Canada Ltd
since 1998, and was president of the Company's international
exploration and production subsidiaries from 1995 to 1998.
Mr. Price served as exploration manager from 1991 to 1994,
and geologic manager from 1990 to 1991, for the Company's
Mid-continent region. Prior to joining the Company, he was
vice president of exploration and development from 1988 to
1989, and vice president of mid-continent exploration from
1989 to 1990, for Pacific Enterprises Oil Company, Dallas,
Texas.
JON W. SAUER, 42, was appointed vice president -- tax in May
2001, having been director of tax since March 1997 and
manager of tax from August 1992. Prior to joining the
Company, Mr. Sauer was tax manager with Swift Energy
Company, Houston, Texas, and a manager in the oil and gas
tax practice of Arthur Andersen & Co.
LISA A. STEWART, formerly Lisa A. Floyd, 45, was appointed
executive vice president -- business development and E&P
services in May 2000, having been vice president -- business
development and E&P services since December 1998, vice
president -- business development since September 1997, and
vice president -- technical services since January 1995.
Previously, Ms. Stewart held positions of increasing
responsibility in the reservoir engineering area since
joining the Company in 1984.
15
SUMMARY COMPENSATION TABLE
The table below summarizes the annual and long-term compensation paid to the
individuals listed below for all services rendered to the Company and its
subsidiaries during the last three fiscal years, in accordance with SEC rules
relating to disclosure of executive compensation. The persons included in this
table are the Company's chief executive officer and the four other most highly
compensated executive officers who were serving as executive officers of the
Company at year-end 2002.
---------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- AWARDS
OTHER -------------------------------------
ANNUAL RESTRICTED SECURITIES ALL OTHER
SALARY BONUS COMPEN- STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) SATION($) AWARDS($) OPTIONS/SARS(#)* ($)
---------------------------------------------------------------------------------------------------------------------------------
Raymond Plank 2002 750,000 900,000 177,408(5) 752,313(7) 0 96,000(3)
Chairman of the Board 2001 750,000 650,000 0 0 57,750(2) 94,200(3)
2000 750,000 650,000 0 0 26,565(2) 83,142(3)
---------------------------------------------------------------------------------------------------------------------------------
G. Steven Farris 2002 750,000 900,000 95,760(5) 2,215,443(6)(7) 0 196,092(3)(4)
President, Chief Executive
Officer and 2001 712,500 650,000 17,503(5) 1,401,250(6) 57,750(2) 189,267(3)(4)
Chief Operating Officer 2000 650,000 650,000 14,853(5) 492,488(6) 22,984(2) 139,973(3)(4)
---------------------------------------------------------------------------------------------------------------------------------
Roger B. Plank 2002 390,000 220,000 51,766(5) 390,703(7) 0 74,200(3)(4)
Executive Vice President and 2001 337,292 200,000 2,951(5) 0 19,981(2) 70,020(3)(4)
Chief Financial Officer 2000 313,750 210,000 2,272(5) 0 34,650(2) 60,503(3)(4)
---------------------------------------------------------------------------------------------------------------------------------
Lisa A. Stewart 2002 335,000 190,000 2,597(5) 338,288(7) 0 66,224(3)(4)
Executive Vice
President -- Business 2001 311,042 185,000 2,420(5) 0 18,480(2) 66,088(3)(4)
Development and E&P Services 2000 291,250 210,000 2,311(5) 0 34,650(2) 56,652(3)(4)
---------------------------------------------------------------------------------------------------------------------------------
John A. Crum 2002 300,000 170,000 3,008(5) 297,415(7) 0 58,958(3)(4)
Executive Vice President -- 2001 276,042 163,000 2,822(5) 0 16,401(2) 57,080(3)(4)
Eurasia and New Ventures 2000 246,876 165,000 2,713(5) 0 34,650(2) 42,431(3)(4)
---------------------------------------------------------------------------------------------------------------------------------
* Share numbers have been adjusted for stock dividends.
(1) Includes amounts awarded under the Company's incentive compensation plans
for performance in the year indicated.
(2) During 2002, there were no stock options granted to any of the named
executive officers. Shares of the Company's common stock subject to options
awarded during 2001 and 2000. These stock options were granted on May 2,
2001 and May 3, 2000 under the terms of the 2000 Stock Option Plan. There
were no adjustments or amendments during the last fiscal year to the
exercise price of stock options previously granted to any of the named
executive officers, except for stock dividends.
(3) Includes Company contributions under the Company's 401(k) Savings Plan,
Money Purchase Retirement Plan, and related Non-Qualified Retirement/Savings
Plan for 2002, 2001 and 2000, respectively, in the following amounts: Mr.
Raymond Plank -- $96,000, $94,200 and $83,142; Mr. Farris -- $168,000,
$163,500 and $118,644; Mr. Roger Plank -- $70,800, $65,675 and $57,240; Ms.
Stewart -- $62,400, $62,525 and $53,334; and Mr. Crum -- $54,530, $52,925
and $38,535.
(4) Includes premium for executive life insurance benefits for 2002, 2001 and
2000, respectively, in the following amounts: Mr. Farris -- $28,092, $25,767
and $21,329; Mr. Roger Plank -- $3,400, $4,345 and $3,263; Ms.
Stewart -- $3,824, $3,563 and $3,318; and Mr. Crum -- $4,428, $4,155 and
$3,896.
(5) For Mr. Farris, Mr. Roger Plank, Ms. Stewart and Mr. Crum, includes amounts
reimbursed for the payment of taxes relating to executive life insurance
benefits and, for Mr. Raymond Plank, Mr. Farris and Mr. Roger Plank,
includes amounts reimbursed for the payment of taxes on income attributable
to use of Company property as approved by the board of directors.
(footnotes continued on following page)
16
(6) On December 17, 1998, the Company's board of directors granted a conditional
stock award to Mr. Farris for a total of 100,000 shares of the Company's
common stock (115,496 shares after adjustment for stock dividends). The
award is composed of five periodic installments, commencing on January 1st
of each of the next five years, and vesting on the fifth anniversary
following the applicable commencement date (subject to acceleration under
specific circumstances). To receive each installment, which is payable 40
percent in cash and 60 percent in stock, Mr. Farris must be employed by the
Company on the applicable commencement and vesting dates. For December 31,
2001, the last business day preceding the January 1, 2002 commencement date,
the per share closing price of the Company's common stock was $49.88;
($47.5048 after adjustment); for December 29, 2000, the last business day
preceding January 1, 2001, the per share closing price was $70.0625
($60.6602 after adjustment); and for December 31, 1999, the last business
day preceding January 1, 2000, the per share closing price was $36.9375
($31.9805 after adjustment). Mr. Farris has all voting, dividend and
liquidation rights for each installment of shares as of the applicable
commencement date listed below:
6,667 shares (7,699 shares after adjustment) commencing January 1, 1999,
vesting January 1, 2004
13,333 shares (15,399 shares after adjustment) commencing January 1, 2000,
vesting January 1, 2005
20,000 shares (23,100 shares after adjustment) commencing January 1, 2001,
vesting January 1, 2006
26,667 shares (30,799 shares after adjustment) commencing January 1, 2002,
vesting January 1, 2007
33,333 shares (38,499 shares after adjustment) commencing January 1, 2003,
vesting January 1, 2008
At year-end 2002, the aggregate number of shares of conditional stock held
by Mr. Farris was 76,997 shares with a value of $4,179,191 based on the
closing price of the Company's common stock as of December 31, 2002.
(7) Dollar value of restricted stock units granted during 2002 under the terms
of the Executive Restricted Stock Plan, based on the closing price of the
Company's common stock as of the date of grant. Such restricted stock units
vest ratably over four years and no dividends are paid on such units until
vested.
At year-end 2002, the aggregate number of restricted stock units and value,
based on the closing price of the Company's common stock as of December 31,
2002, was: Mr. Raymond Plank -- 13,545 units (after adjustment) and
$735,171; Mr. Farris -- 13,545 units (after adjustment) and $735,171; Mr.
Roger Plank -- 7,035 units (after adjustment) and $381,833; Ms. Stewart --
6,090 units (after adjustment) and $330,542; and Mr. Crum -- 5,355 units
(after adjustment) and $290,649.
17
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
The table below provides supplemental information relating to the value realized
upon the exercise of stock options during the last fiscal year by the executive
officers named in the Summary Compensation Table above and the number and
intrinsic value of stock options held at year end. Year-end values are based
arbitrarily on the closing price of the Company's common stock for December 31,
2002, do not reflect the actual amounts, if any, which may be realized upon the
future exercise of remaining stock options, and should not be considered
indicative of future stock performance. (All share numbers in the table and
footnotes have been adjusted for the stock dividends.)
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
-----------------------------------------------------------------------------------------------------------------------------------
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS/SARS AT OPTIONS/SARS
ACQUIRED ON VALUE FY-END(#)(3) AT FY-END($)(3)(4)
EXERCISE REALIZED -------------------------------- -------------------------------
NAME (#)(1) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-----------------------------------------------------------------------------------------------------------------------------------
Raymond Plank 33,600 952,574 278,712 28,875 5,729,694 374,646
G. Steven Farris 0 0 207,320 28,875 3,832,488 374,646
Roger B. Plank 0 0 170,058 21,845 3,918,500 264,844
Lisa A. Stewart 47,586 1,163,030 83,332 20,386 1,485,834 234,982
John A. Crum 23,100 650,800 66,570 20,517 1,124,279 235,914
-----------------------------------------------------------------------------------------------------------------------------------
(1) Number of shares with respect to which stock options were exercised during
2002.
(2) Fair market value on date of exercise minus the exercise price of stock
options.
(3) There were no SARs settled or outstanding at any time during the last fiscal
year for any of the named executive officers.
(4) Based on the closing price of $56.99 ($54.2762 after adjustment) per share
of the Company's common stock as reported on The New York Stock Exchange,
Inc. Composite Transactions Reporting System for December 31, 2002, minus
the exercise price of the stock options.
18
THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report is issued by the Management Development and Compensation Committee
of the board of directors to set out the executive compensation policies and
programs of the Company.
The objective of the Company's executive compensation program is to attract and
retain executives capable of leading the Company in a complex, competitive and
changing industry. A capable, highly-motivated senior management is an integral
part of the Company's continued success. The Company's financial performance is
in large part due to the talent and efforts of the Company's executive officers.
The program ties a significant portion of executive compensation to the
Company's success and is primarily comprised of a base salary, an incentive
bonus, and a long-term incentive component.
BASE SALARY
The Committee believes that the most effective way to compete in the executive
labor market is to offer executives a competitive base salary. To achieve this
balance, the Committee analyzes each executive's compensation using a four-step
process. First, the key executive positions within the Company are defined in
terms of scope and responsibility, job complexity, knowledge and experience
required, and other relevant factors. Second, the positions are ranked
internally on the basis of these definitions to establish a logical relationship
among them. Third, the Committee identifies the Company's direct competitors
which it believes share comparable operations, employee composition, and
capitalization, and obtains comparative compensation data about the identified
companies from independent compensation resources. Finally, easily-compared
positions are priced in terms of salary ranges by reviewing the comparative
industry data and other surveys to establish relative salary ranges for all key
executive positions in the Company. Base salaries are targeted to fall at or
above the median of executive salaries paid by comparable companies, and for
2002 they generally correspond to that practice. The Committee reviews the
salary of each of the Company's 17 executive officers, taking into account the
individual's contribution to the Company's success, how well the individual's
responsibilities are fulfilled, the individual's specific performance, growth in
qualifications for the individual's job, and other relevant aspects of
performance.
Base salaries of all executives are generally reviewed every 12 to 24 months.
Salary adjustments are made within updated, market-confirmed salary ranges
according to the Committee's assessment of the executive's individual
performance and the performance of the Company as a whole. However, changes in
the circumstances of a particular executive can prompt an interim compensation
adjustment. The Committee retained the services of an outside compensation
consultant, who was proposed by management and approved by the Committee, to
review the base salaries of the Company's executives and confirm that the
salaries are competitive with those of comparable companies. The review included
comparative data from part, but not all, of the companies comprising the
Secondary Oils Index reflected in the stock performance chart set forth below.
The exclusion from the review of some of the companies in the Index was due to
their integrated operations or operations in diversified industries.
Based on the factors discussed above, plus additional compensation data
available to the Company from other sources, seven of the Company's officers
received increases in compensation during 2002 to reflect market changes and
increased responsibilities, including none of the executives named in the
Summary Compensation Table.
19
INCENTIVE BONUS
Executives, other than the Company's chairman of the board and the Company's
president (separate plan described below), are eligible to receive a cash
incentive bonus tied directly to the Company's achievement of specified
financial, operational and strategic objectives and the executive's personal
achievements. In the early months of the year, the Committee establishes a
listing of corporate objectives based on those submitted by senior management.
The objectives are approved by both the Committee and the full board of
directors and, in 2002, 75 percent of each executive's bonus depended upon the
Company's achievement of these specified objectives. The remaining 25 percent of
the executive's eligible bonus depended upon personal achievements related to
financial strategies, operational improvements, program or project enhancements,
or other objectively determinable criteria. This incentive compensation plan
effectively correlates a large portion of executive compensation to
predetermined corporate objectives and other objectively determinable goals, all
designed to translate into value for the Company's stockholders. Committee
policy provides for bonuses to be targeted at 50 percent of each executive's
base salary and to exceed 50 percent if the Company's performance warrants.
Executive bonuses for 2002 were based on management's achievement during the
year of specific corporate objectives established by the Committee based on
accepted measures of performance in the oil and gas industry including (a)
increases in cash flow and earnings, (b) growth in reserves and production while
maintaining an acceptable ratio of debt to capitalization, and (c) control of
costs throughout the Company. Additionally, the Committee approved twelve
operational, financial and administrative strategic objectives considered
critical to the Company's success and to maximizing stockholder value. The
Company has elected not to detail the individual items within the specified
strategic corporate objectives as disclosure of such information could provide a
competitive advantage to one or more of the Company's peers; however, the
objectives were annualized for incentive purposes and were broad enough to have
potential impact beyond 2002. With the full or partial achievement of eleven of
the twelve specified objectives setting the stage for the Company's successful
year, the Committee recommended and the full board of directors unanimously
approved an incentive bonus payment in excess of the targets set for executive
officers participating in the corporate plan.
The chairman and the president are each eligible to receive a cash incentive
bonus under a separate incentive compensation plan, which functions and is
administered in the same way as the plan described above, except that their
performance goals are tied directly to the Company's annual financial and
operational results, including the performance of the Company's common stock,
all as compared to the results of a group of its peer companies. The goals
include earnings, production, cash flow, reserves and ratio of debt to
capitalization. The Committee determined to pay the chairman and the president
bonuses of 120 percent of their base salaries in recognition of their leadership
and for the Company's performance during 2002.
In addition to the Company's incentive compensation plans, the Committee may
elect to award a special achievement bonus to an executive officer who has
rendered services during the year that substantially exceed those normally
required. Special achievement bonuses (a) reflect the Committee's decision to
reward any executive whose extraordinary effort has substantially benefited the
Company and its stockholders during the year, (b) are awarded only in
exceptional circumstances, and (c) are in amounts relative to the benefit
provided to the Company. No special achievement bonuses were paid during 2002 to
any of the executive officers named in the Summary Compensation Table or to any
of the Company's other executive officers.
20
LONG-TERM INCENTIVES
Long-term incentives in forms relating to the Company's common stock serve to
align the interests of executive officers with the Company's stockholders by
tying a significant portion of each executive's total long-term compensation to
the continued growth of the Company and appreciation of its common stock. No
stock options were granted to any of the executives named in the Summary
Compensation Table during 2002. In lieu of stock options, the Company's
executive officers received grants of restricted stock units under the Company's
Executive Restricted Stock Plan. Grants of stock units covering an aggregate of
92,500 shares of the Company's common stock (97,125 shares adjusted for the
stock dividends) were made in 2002 to the Company's executive officers as a
group, including grants of restricted stock units covering 43,400 shares (45,570
shares adjusted for the stock dividends) made to the Company's officers named in
the Summary Compensation Table presented above. Grants of restricted stock units
to executives are proportionate to each officer's base salary. Individual grants
of restricted stock units are targeted up to one times base salary and vest
ratably over four years.
In October 2000, the Company established the 2000 Share Appreciation Plan, under
which conditional grants were made in December 2000 to essentially all regular,
full time employees in the United States, Canada and Australia, including each
of the executives named in the Summary Compensation Table. The conditional
grants under the 2000 Share Appreciation Plan are intended to provide specific
individual incentives toward achieving (i) significant price appreciation for
the Company's common stock based on attainment of per share price goals of $100,
$120 and $180 (after adjustment for the Company's stock dividends, the price
goals are $87, $104 and $156, respectively) prior to January 1, 2005, and (ii) a
separate goal, not tied to share price, of doubling production per share from
the 2000 level during any quarter ended prior to January 1, 2005. Benefits are
payable under the conditional grants only if one or more of the above-referenced
share price goals and/or production goal are achieved.
In recognition of his past contributions and expected future contributions to
the Company, Mr. Farris, the Company's president, was granted a conditional
stock award in December 1998, for a total of 100,000 shares of the Company's
common stock (115,496 shares after adjustment for the stock dividends). The
award is composed of five periodic installments, commencing on January 1, 1999
and on January 1st of each of the next four years (2000 through 2003). Each
installment vests on the fifth anniversary following the applicable commencement
date (subject to acceleration under specific circumstances), and is payable 40
percent in cash and 60 percent in the form of stock. To receive each
installment, Mr. Farris must be employed by the Company on the applicable
commencement and vesting dates (see footnote 6 to the Summary Compensation Table
presented above). In the event Mr. Farris elects to terminate his employment
with the Company or his employment is terminated for cause, any unvested
installments will be forfeited.
CHIEF EXECUTIVE OFFICER
Raymond Plank, the chairman of the Company's board of directors, was chief
executive officer ("CEO") from 1966 until May 2002. His activities include
direction of Apache's intensive, on-going programs to monitor, analyze and
respond creatively to the changes and new requirements in the oil and gas
industry, and leadership in maintenance of sound business relationships with the
management of many of the nation's large oil and gas companies. These
relationships are important to Apache's strategic alliances and to its
acquisition approach, which emphasizes privately negotiated transactions that
develop and achieve mutual business benefits. Mr. Plank actively participates in
developing the Company's strategies, and has been jointly responsible for
21
the Company's ongoing interest and successful exploration efforts in
international areas such as Egypt, Australia and China.
G. Steven Farris, the Company's president and chief operating officer, became
the Company's CEO in May 2002. His activities include leadership in developing
the Company's strategies, implementing the Company's capital expenditure
programs, and maintenance of sound business relationships with the management of
many of the nation's large oil and gas companies and with the investment
community. Mr. Farris has been jointly responsible for the Company's developing
interest and successful exploration efforts going forward in international areas
such as Egypt, Australia, China and the North Sea. As CEO, he oversees all of
the Company's major business and staff units and guides and develops Apache's
senior management. Reporting directly to Mr. Farris are each of the executive
vice presidents, corporate and regional vice presidents, including the chief
financial officer and the general counsel.
Base salary, incentive bonus and long-term incentives for each of Mr. Plank and
Mr. Farris are determined in the same manner as is the compensation for the
Company's other executive officers and are reflected in the Summary Compensation
Table above. Mr. Plank's last base salary adjustment was effective January 1,
1996, and Mr. Farris' last base salary adjustment was effective May 16, 2001.
Bonuses paid to Mr. Plank and Mr. Farris were based on the Company's 2002
performance, as discussed above. Each of Mr. Plank and Mr. Farris prepares
personal goals in consultation with the Committee and, throughout the year, each
reports to the Committee on his progress toward achievement of those goals. Mr.
Plank's and Mr. Farris' employment agreements are discussed under "Employment
Contracts and Termination of Employment and Change-in-Control Arrangements."
Base salaries during 2002 for Mr. Plank and Mr. Farris were within the
Committee's percentile targets and took into account the following: their active
roles in the Company's management and leadership of successful acquisitions; the
Company's financial performance during 2001; the challenges and expectations for
the Company in 2002, and for Mr. Plank, his role as a Company founder and his 48
years of service as the Company's senior executive officer. As noted above, the
bonuses paid to Mr. Plank and Mr. Farris for 2002 performance represented 120
percent of their base salaries.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") imposes a limit, with
certain exceptions, on the amount that a publicly held corporation may deduct in
any tax year commencing on or after January 1, 1994, for the compensation paid
or accrued with respect to its chief executive officer and its four most highly
compensated executive officers (other than the chief executive officer). In
December 1995, the Internal Revenue Service issued final regulations
implementing the legislation, with the regulations effective as of January 1,
1994. Certain performance-based compensation is specifically exempt from the
limit if it meets the requirements contained in these final regulations. The
Committee continues to review the Company's compensation plans based upon these
regulations and, from time to time, determines what further actions or changes
to the Company's compensation plans, if any, are appropriate.
Grants of stock options made under the Company's 1990 Stock Incentive Plan, 1995
Stock Option Plan and 1998 Stock Option Plan qualify as "performance-based"
under the regulations. The Company's existing incentive compensation plans,
special achievement bonuses, Executive Restricted Stock Plan, 2000 Stock Option
Plan and 2000 Share Appreciation Plan do not
22
currently meet the requirements of the regulations, as the stockholder approvals
necessary for exemption have not been sought. However, these plans operate
similarly to prior plans and are designed to reward the contribution and
performance of employees and to provide a meaningful incentive for achieving the
Company's goals, which in turn enhances stockholder value. While the Committee
cannot predict with certainty how the Company's compensation policies may be
further impacted by OBRA, it is anticipated that executive compensation paid or
accrued pursuant to the Company's compensation plans that do not meet the
requirements of the regulations will not result in any significant loss of tax
deductions in the foreseeable future.
SUMMARY
According to information provided to the Committee by its independent
compensation consultant, the amount of the Company's cash compensation paid to
all of its executive officers during 2002 was competitive and slightly above the
median for comparable companies. As shown on the Performance Graph following
this report, the cumulative total return on the Company's common stock has
substantially equaled or outperformed that of the Dow Jones Secondary Oil Index
over the last five years and has outperformed the Standard & Poor's Composite
500 Stock Index over the last two years. In view of the Company's competitive
performance, the Committee believes that its current executive compensation
policy is successful in providing stockholders with talented, dedicated
executives at competitive compensation levels.
March 10, 2003 Management Development and Compensation
Committee
Frederick M. Bohen
A. D. Frazier, Jr.
John A. Kocur
George D. Lawrence
23
PERFORMANCE GRAPH
The following stock price performance graph is included in accordance with the
SEC's executive compensation disclosure rules and is intended to allow
stockholders to review the Company's executive compensation policies in light of
corresponding stockholder returns, expressed in terms of the appreciation of the
Company's common stock relative to two broad-based stock performance indices.
The information is included for historical comparative purposes only and should
not be considered indicative of future stock performance. The graph compares the
yearly percentage change in the cumulative total stockholder return on the
Company's common stock with the cumulative total return of the Standard & Poor's
Composite 500 Stock Index and of the Dow Jones Secondary Oils Stock Index from
December 31, 1997 through December 31, 2002.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED DECEMBER 31, 2002
[PERFORMANCE GRAPH]
--------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------------------------------
Apache Corporation 100 73 107 204 161 185
S&P's Composite 500 Stock 100 129 156 141 125 97
DJ Secondary Oils Stock Index 100 69 79 126 116 119
24
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Raymond Plank serves the Company under an employment agreement entered into
in December 1975, amended and restated in December 1990 and amended in April
1996. The agreement has an undefined term and is terminable at will by the
Company's board of directors. Mr. Plank's annual compensation under the
agreement is determined by the board of directors, but may not be less than
$450,000. If his service as a director and an executive officer is terminated by
the board of directors, Mr. Plank will serve as advisor and consultant to the
Company for the remainder of his life at annual compensation equal to 50 percent
of his then-current annual compensation and will receive health, dental and
vision benefits for himself, his spouse and his eligible dependents during the
remainder of his life. Pursuant to the agreement and in exchange for
surrendering life insurance coverage, an annuity was purchased for Mr. Plank
that pays $31,500 annually until 2008. Mr. Plank has agreed not to render
service to any of the Company's competitors for the entire period covered by the
agreement. Upon Mr. Plank's death, a total of $750,000 shall be paid (a) to his
designee in equal monthly installments over ten years, or (b) if he has made no
designation, in a lump sum to his estate.
Mr. Farris serves the Company pursuant to an employment agreement, dated June 6,
1988, under which he received an annual salary of $750,000 during 2002. The
agreement has an undefined term and may be terminated by either the Company or
Mr. Farris on 30 days advance written notice. If Mr. Farris' employment is
terminated without cause, or if he terminates his employment within 30 days of a
reduction in his salary without a proportionate reduction in the salaries of all
other Company executives, Mr. Farris will receive, for 36 months thereafter, (a)
an amount equal to his base salary as it existed 60 days prior to termination
and (b) 50 percent of the maximum amount for which he qualified under the
Company's incentive compensation plan, calculated on his base compensation as it
existed 60 days prior to termination. In the event of Mr. Farris' death during
the 36-month period, the amounts described above shall be paid to his heirs or
estate. Mr. Farris has agreed not to render service to any of the Company's
competitors for the term of his employment or, unless he is terminated without
cause, for 36 months thereafter.
On December 17, 1998, Mr. Farris was granted a conditional stock award, the
basic provisions of which are discussed above in the footnotes to the Summary
Compensation Table and under the caption "Long-Term Incentives" in the report on
executive compensation. Under the terms of the agreement for this award, the
vesting of one or more of the five periodic installments is subject to
acceleration under specific circumstances. Those circumstances generally relate
to (a) termination of Mr. Farris' employment other than for cause, (b) his death
or total disability, (c) an individual other than Mr. Raymond Plank or Mr.
Farris becoming the Company's chief executive officer, and (d) merger,
acquisition or other "change-in-control" of the Company.
In addition to the foregoing, the Company has established an income continuance
plan. The plan provides that all officers of the Company, including the officers
named in the Summary Compensation Table, and all employees who have either
reached the age of 40, served the Company for more than ten years, or have been
designated for participation based upon special skills or experience, will
receive monthly payments approximating their monthly income and continued
medical and health benefits from the Company for up to two years, if their
employment is terminated as a result of a "change in control" of the Company, as
defined in the plan.
25
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Frederick M. Bohen, John A. Kocur, A. D. Frazier, Jr. and George D. Lawrence
served on the management development and compensation committee of the Company's
board of directors for all of 2002. Mary Ralph Lowe served on the committee
until her resignation effective December 19, 2002.
Mr. Kocur, a member of the committee since September 1991 and a director of the
Company since 1977, retired as an executive officer in June 1991. Pursuant to
the terms of an employment agreement in place at the time of his retirement, Mr.
Kocur receives health, dental and vision benefits throughout his life.
Mr. Lawrence, a member of the committee since May 1997 and a director of the
Company since May 1996, is the former president and chief executive officer of
The Phoenix Resource Companies, Inc. ("Phoenix"). See "Certain Business
Relationships and Transactions." Pursuant to the terms of his employment
agreement with Phoenix, Mr. Lawrence received medical and dental benefits
through December 1997. Since that time, he has purchased medical and dental
coverage through the Company.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
George D. Lawrence, a member of the Company's board of directors and the former
president and chief executive officer of Phoenix, joined Apache's board in
conjunction with the Company's acquisition of Phoenix by a merger (the "Merger")
on May 20, 1996, through which Phoenix became a wholly-owned subsidiary of
Apache. Merger consideration totaled $396.3 million, consisting of approximately
12,190,000 shares of Apache's common stock (14,079,450 shares after adjustment
for the stock dividends) valued at $26.00 per share ($22.5108 after adjustment),
$14.9 million of net value associated with Phoenix stock options assumed by
Apache, and $64.5 million in cash.
Upon consummation of the Merger, Apache assumed Phoenix stock options that
remained outstanding on May 20, 1996, including those granted to Mr. Lawrence
pursuant to Phoenix's 1990 Employee Stock Option Plan. As of February 28, 2003,
there is an option outstanding and exercisable by Mr. Lawrence covering a total
of 21,656 shares of Apache common stock at an exercise price of $21.5010 per
share (after adjustment for the stock dividends).
In ordinary course of business, Aquila, Inc. or related entities ("Aquila") paid
to Apache during 2002 approximately $32,525,000 for natural gas produced by
Apache and sold to Aquila. During 2002, Aquila was paid approximately $348,000
by Apache for gathering, transportation and compression services provided by
Aquila. Janine J. McArdle, a vice president of Apache since November 2002,
previously was employed by Aquila Europe Ltd. from November 2001 through October
2002.
In the ordinary course of business, Cimarex Energy, Co. ("Cimarex"), formerly
Key Production Company, Inc., paid to Apache during 2002 approximately
$2,360,000 for Cimarex's proportionate share of drilling and workover costs,
mineral interests and routine expenses relating to oil and gas wells in which
Cimarex owns interests and of which Apache is the operator. Cimarex was paid
approximately $4,215,000 directly by Apache or related entities for its
proportionate share of revenues from wells in which Cimarex marketed its
revenues with Apache as operator. Apache paid to Cimarex during 2002
approximately $217,000 for Apache's proportionate share of drilling
26
and workover costs, mineral interests and routine expenses relating to oil and
gas wells in which Apache owns interests and of which Cimarex is the operator.
Apache was paid approximately $785,000 directly by Cimarex for its proportionate
share of revenues from wells in which Apache marketed its revenues with Cimarex
as operator. F. H. Merelli, a member of the Apache's board of directors, is
chairman of the board, chief executive officer and president of Cimarex.
In the ordinary course of business, Matador Petroleum Corporation or related
entities ("Matador") paid to Apache during 2002 approximately $667,000 for
Matador's proportionate share of drilling and workover costs, mineral interests
and routine expenses relating to oil and gas wells in which Matador owns
interests and of which Apache is the operator. Matador was paid approximately
$1,126,000 directly by Apache for its proportionate share of revenues from wells
in which Matador marketed its revenues with Apache as operator. Apache paid to
Matador during 2002 approximately $1,562,000 for Apache's proportionate share of
drilling and workover costs, mineral interests and routine expenses relating to
oil and gas wells in which Apache owns interests and of which Matador is the
operator. Apache was paid approximately $551,000 directly by Matador for its
proportionate share of revenues from wells in which Apache marketed its revenues
with Matador as operator. Eugene C. Fiedorek, a member of the Apache's board of
directors, is a member of the board of directors of Matador.
In the ordinary course of business, Apache paid to Maralo, LLC or related
entities ("Maralo") during 2002 approximately $9,000 in revenues relating to
four oil and gas wells in which Maralo owns an interest and of which Apache is
operator. Maralo paid Apache approximately $1,000 in 2002 for Maralo's share of
routine expenses relating to such wells. Also during 2002, Maralo sub-leased
certain office space from Apache, for which Maralo paid Apache approximately
$95,000. Mary Ralph Lowe, a member of Apache's board of directors until December
19, 2002, is president, chief executive officer of Maralo.
INDEPENDENT PUBLIC AUDITORS
Ernst & Young LLP was the Company's independent public accounting firm for the
fiscal year 2002. Representatives of Ernst & Young will be present at the annual
meeting and will have an opportunity to make a statement if they desire to do so
and to respond to appropriate questions regarding Apache business.
Ernst & Young's audit report on Apache's consolidated financial statements as of
and for the fiscal year ended December 31, 2002 did not contain any adverse
opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope, or accounting principles.
During Apache's most recent fiscal year ended December 31, 2002, and through the
filing date of this proxy statement, there were no disagreements with Ernst &
Young on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to Ernst & Young's satisfaction, would have caused Ernst & Young to make
reference to the subject matter of the disagreement in connection with their
report; and there were no reportable events, as described in Item 304(a)(1)(v)
of Regulation S-K.
27
During 2002, Ernst & Young provided various services to Apache. During 2001,
these services were provided by Arthur Andersen LLP. The aggregate fees for each
of the following types of services are set forth below:
------------------------------------------------------------------------------------
DESCRIPTION AMOUNTS (IN THOUSANDS)
------------------------------------------------------------------------------------
2002 2001
------------------------------------------------------------------------------------
Audit Services(1) $1,478 $1,460
Audit-Related Services(2) $ 351 $ 493
Tax Services(3) $ 433 $3,134
All Other Services(4) $1,844 $ 750
(1) Audit Services include the annual financial statement audit (including
required quarterly reviews), subsidiary audits, and other procedures
required to be performed by the independent auditor to be able to form an
opinion on the Company's consolidated financial statements. These other
procedures include information systems and procedural reviews and testing
performed in order to understand and place reliance on the systems of
internal control, and consultations relating to the audit or quarterly
reviews.
(2) Audit-Related Services are assurance and related services that are
reasonably related to the performance of the audit or review of the
Company's financial statements or that are traditionally performed by the
independent auditor. Audit-related services include, among other things, due
diligence services pertaining to potential business
acquisitions/dispositions; accounting consultations related to accounting,
financial reporting or disclosure matters not classified as "Audit
Services"; assistance with understanding and implementing new accounting and
financial reporting guidance from rulemaking authorities; financial audits
of employee benefit plans; agreed upon or expanded audit procedures related
to accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements.
(3) Tax Services include, among other things, tax compliance, tax planning and
tax advice.
(4) All Other Services are fees for products and services other than those in
the three categories above. During 2002, the full amount shown relates to
certain litigation support work commenced prior to Ernst & Young's
appointment as the Company's auditors. Once these litigation support
services are completed or no later than May 5, 2004, Ernst & Young will no
longer be allowed to perform such services for the Company. During 2001, All
Other Services provided by Arthur Andersen consisted primarily of services
related to systems implementation in Canada.
The audit committee of the Company's board of directors reviews summaries of the
services provided by Ernst & Young and the related fees, and has taken into
consideration whether the provision of non-audit services by Ernst & Young is
compatible with maintaining auditor independence.
28
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the SEC and the Company's
bylaws. Should a stockholder wish to have a proposal appear in the Company's
proxy statement for next year's annual meeting, under the regulations of the
SEC, it must be received by the Company's corporate secretary (at 2000 Post Oak
Boulevard, Suite 100, Houston, Texas 77056-4400) on or before November 28, 2003.
SOLICITATION OF PROXIES
Solicitation of proxies for use at the annual meeting may be made in person or
by mail, telephone or telegram, by directors, officers and regular employees of
the Company. These persons will receive no special compensation for any
solicitation activities. The Company has requested banking institutions,
brokerage firms, custodians, trustees, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of the Company's
common stock for whom they are record holder, and the Company will, upon
request, reimburse reasonable forwarding expenses. The Company has retained
Georgeson Shareholder Communications Inc. to assist in soliciting proxies from
brokers, bank nominees and other institutional holders for a fee not to exceed
$7,500, plus expenses. All costs of the solicitation will be borne by the
Company.
By order of the Board of Directors
APACHE CORPORATION
/s/ C. L. PEPER
C. L. PEPER
Corporate Secretary
NOTE: STOCKHOLDERS ARE REQUESTED TO PROMPTLY VOTE THEIR SHARES USING ONE OF THE
METHODS EXPLAINED ON PAGES 1 AND 2 OF THIS PROXY STATEMENT.
29
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--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
MAY 1, 2003
AND PROXY STATEMENT
(APACHE LOGO)
ONE POST OAK CENTRAL
2000 POST OAK BOULEVARD, SUITE 100
HOUSTON, TEXAS 77056-4400
(LOGO)Printed on recycled paper.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APACHE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 1, 2003
10:00 A.M.
DOUBLETREE HOTEL AT POST OAK
2001 POST OAK BOULEVARD
HOUSTON, TEXAS
--------------------------------------------------------------------------------
APACHE CORPORATION - 2003 PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned appoints G. Steven Farris, Randolph M. Ferlic and Eugene C.
Fiedorek as Proxies, with the power of substitution, and authorizes them to
represent the undersigned at the annual meeting of stockholders to be held
May 1, 2003, or any adjournment thereof, and to vote all the shares of common
stock of Apache Corporation held of record by the undersigned on March 12, 2003,
as designated on the reverse side.
This Proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION OF DIRECTORS.
For participants in the Apache 401(k) Savings Plan, this proxy, when properly
executed, will be voted in the manner directed by the undersigned. If no
direction is given, if the card is not signed, or if the card is not received by
April 29, 2003, the shares credited to your account will be voted in proportion
to directions received by Fidelity, the plan trustee.
See reverse side for voting instructions.
---------------------
COMPANY #
CONTROL #
---------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY TELEPHONE - TOLL FREE - 1-800-240-6326 - QUICK ... EASY ... IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 12:00 noon (central time) on April 30, 2003.
o You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the proxy card) and the last
4-digits of the U.S. Social Security Number or Tax Identification Number for
this account. If you do not have a U.S. SSN or TIN please enter 4 zeros.
o Follow the simple instructions provided.
VOTE BY INTERNET - http://www.eproxy.com/apa/ - QUICK ... EASY ... IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 noon (central time) on April 30, 2003.
o You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the proxy card) and the last
4-digits of the U.S. Social Security Number or Tax Identification Number for
this account to obtain your records and create an electronic ballot. If you
do not have a U.S. SSN or TIN please leave blank.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to Apache Corporation, c/o Shareowner Services(SM),
P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
-- Please detach here --
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEM 1.
1. Election of directors -- director nominees:
01 Frederick M. Bohen 04 Charles J. Pitman [ ] Vote FOR [ ] Vote WITHHELD
02 George D. Lawrence 05 Jay A. Precourt all nominees from all nominees
03 Rodman D. Patton (except as marked)
(Instructions: To withhold authority to vote for ---------------------------
any individual nominee, write the number(s) of the | |
nominee(s) in the box to the right.) | |
---------------------------
2. The Proxies are authorized to vote in their best judgment upon such other
business as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
Address Change? Mark Box [ ] Date
Indicate change below: ------------------------------
----------------------------------------
| |
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Signature(s) In Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc. should
include title and authority.
Corporations should provide full name of
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officer signing the proxy.