APA Apache Corporation

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 11-K

 

 

(Mark One):

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

For the fiscal year ended December 31, 2014

Or

 

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

For the transition period from                      to                     

Commission file number 1-4300

 

 

 

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

Apache Corporation 401(k) Savings Plan

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

 

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

Apache Corporation

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

 

 

 

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Apache Corporation 401(k) Savings Plan

Financial Statements and Supplemental Schedule

As of December 31, 2014 and 2013 and for the Year Ended December 31, 2014

Contents

 

Report of Independent Registered Public Accounting Firm			1
Audited Financial Statements
Statements of Net Assets Available for Benefits			2
Statement of Changes in Net Assets Available for Benefits			3
Notes to Financial Statements			4
Supplemental Schedule
Schedule H, Line 4(i) – Schedule of Assets (Held At End of Year)			13

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Report of Independent Registered Public Accounting Firm

Retirement Plan Advisory Committee

Apache Corporation 401(k) Savings Plan

We have audited the accompanying statements of net assets available for benefits of the Apache Corporation 401(k) Savings Plan as of December 31, 2014 and 2013, and the related statement of changes in net assets available for benefits for the year ended December 31, 2014. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Apache Corporation 401(k) Savings Plan at December 31, 2014 and 2013, and the changes in its net assets available for benefits for the year ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2014, has been subjected to audit procedures performed in conjunction with the audit of Apache Corporation 401(k) Savings Plan’s financial statements. The information in the supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Ernst & Young LLP

Houston, Texas

June 25, 2015

 

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Apache Corporation 401(k) Savings Plan

Statements of Net Assets Available for Benefits

 

		December 31,
		2014				2013
Assets
Receivables:
Securities sold		$	—			$	292,344
Notes receivable from participants			4,757,447				5,148,418
Total receivables			4,757,447				5,440,762
Investments, at fair value			561,782,829				564,084,707
Net assets reflecting investments at fair value			566,540,276				569,525,469
Adjustment from fair value to contract value for fully benefit-responsive investment contracts			(434,302	)			(422,220	)
Net assets available for benefits		$	566,105,974			$	569,103,249

See accompanying notes.

 

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Apache Corporation 401(k) Savings Plan

Statement of Changes in Net Assets Available for Benefits

Year Ended December 31, 2014

 

Additions:
Employer contributions		$	26,211,497
Participant contributions			32,263,932
Rollover contributions			4,045,032
Roth contributions			1,230,859
Investment income			24,640,264
Interest income on notes receivable from participants			204,851
Other income			302,388
Total additions			88,898,823
Deductions:
Benefits paid to participants			68,380,987
Net depreciation in fair value of investments			23,293,966
Administrative fees			221,145
Total deductions			91,896,098
Net decrease			(2,997,275	)
Net assets available for benefits at:
Beginning of year			569,103,249
End of year		$	566,105,974

See accompanying notes.

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements

December 31, 2014 and 2013

1. Description of Plan

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

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

Contributions

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

Vesting

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

Participant Loans

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

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

Benefit Payments

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

Plan Termination

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

Administrative Expenses

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

2. Summary of Accounting Policies

Basis of Accounting

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

Use of Estimates

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

Investment Valuation and Income Recognition

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

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

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

The Plan invests in fully benefit-responsive investment contracts through the Fidelity Managed Income Portfolio (FMIP), a common collective trust. This fund is recorded at fair value; however, since these contracts are fully benefit-responsive, an adjustment is reflected in the statements of net assets available for benefits to present these investments at contract value.

Contract value is the relevant measurement attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The contract value represents contributions plus earnings, less participant withdrawals and administrative expenses.

The short-term investments are stated at cost, which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on an accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

Participant Loans

Participant loans are recorded on the financial statements as notes receivable from participants at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2014 and 2013. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.

Risks and Uncertainties

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

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

3. Investments

Individual investments that represent five percent or more of the Plan’s net assets available for benefits at either December 31, 2014 or 2013 are as follows:

 

		December 31,
		2014				2013
Apache Corporation common stock		$	84,674,574			$	127,639,586
Spartan U.S. Equity Index Fund			51,441,145				48,407,674
Fidelity Growth Company Fund			41,158,342				35,674,675
Fidelity Blue Chip Growth Fund			38,030,349				32,223,243
Fidelity Low-Priced Stock Fund			33,047,792				32,183,815
Fidelity Managed Income Portfolio (at contract value)(a)			29,741,269				29,572,674

 

(a)	The fair value of the Plan’s investment in the Fidelity Managed Income Portfolio was $30,175,571 and $29,994,894 at December 31, 2014 and 2013, respectively.

During 2014, the Plan’s investments (including investments bought, sold, and held during the year) appreciated (depreciated) in value, net, as follows:

 

		Year Ended December 31, 2014
Mutual funds		$	7,068,156
Corporate stocks			(30,362,122	)
		$	(23,293,966	)

4. Fair Value Measurements

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

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

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

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

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

 

•

quoted prices for similar assets and liabilities in active markets;

 

•

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

 

•

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

 

•

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

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

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

The Plan’s valuation methodology used to measure the fair values of corporate stock and mutual funds were derived from quoted market prices as these instruments have active markets.

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

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

 

		Assets at Fair Value as of December 31, 2014
		Level 1				Level 2				Level 3				Total
Company stock		$	84,674,574			$	—			$	—			$	84,674,574
Stable value fund (a)			—				30,175,571				—				30,175,571
Mutual funds:
Large cap stock			153,690,743				—				—				153,690,743
Mid-cap stock			45,537,057				—				—				45,537,057
Small cap stock			17,958,655				—				—				17,958,655
International stock			35,034,363				—				—				35,034,363
Blended fund investments			112,661,622				—				—				112,661,622
Bond investments			41,595,521				—				—				41,595,521
Short-term investment fund			29,126,462				—				—				29,126,462
Specialty			3,338,072				—				—				3,338,072
Brokerage link			7,990,189				—				—				7,990,189
Total assets at fair value		$	531,607,258			$	30,175,571			$	—			$	561,782,829
		Assets at Fair Value as of December 31, 2013
		Level 1				Level 2				Level 3				Total
Company stock		$	127,639,586			$	—			$	—			$	127,639,586
Stable value fund (a)			—				29,994,894				—				29,994,894
Mutual funds:
Large cap stock			135,352,147				—				—				135,352,147
Mid-cap stock			45,995,570				—				—				45,995,570
Small cap stock			15,112,327				—				—				15,112,327
International stock			34,349,750				—				—				34,349,750
Blended fund investments			98,439,885				—				—				98,439,885
Bond investments			35,327,540				—				—				35,327,540
Short-term investment fund			32,100,023				—				—				32,100,023
Specialty			2,418,422				—				—				2,418,422
Brokerage link			7,354,563				—				—				7,354,563
Total assets at fair value		$	534,089,813			$	29,994,894			$	—			$	564,084,707

 

(a)

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

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan.

5. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service (IRS) dated January 28, 2015, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualified status. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan is qualified and the related trust is tax-exempt.

GAAP requires plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2014, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2011.

6. Related-Party Transactions

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

 

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Apache Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

7. Reconciliation of Financial Statements to Form 5500

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

 

		December 31,
		2014				2013
Net assets available for benefits per the financial statements		$	566,105,974			$	569,103,249
Adjustment from fair value to contract value for fully benefit-responsive investment contracts			434,302				422,220
Net assets available for benefits per the Form 5500		$	566,540,276			$	569,525,469

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

 

		Year Ended
		December 31, 2014
Net decrease in net assets available for benefits per the financial statements		$	(2,997,275	)
Less prior-year adjustment from fair value to contract value for fully benefit-responsive investment contracts			(422,220	)
Add current-year adjustment from fair value to contract value for fully benefit-responsive investment contracts			434,302
Net loss per the Form 5500		$	(2,985,193	)

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

 

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Supplemental Schedule

 

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Apache Corporation 401(k) Savings Plan

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

EIN: 41-0747868 PN: 002

December 31, 2014

 

Identity of Issue, Borrower, Lessor, or Similar Party		Description of Investment		Current Value
* Apache Corporation		1,351,118 shares of common stock		$	84,674,574
* Fidelity Investments		Fidelity Puritan Fund K			14,832,364
* Fidelity Investments		Fidelity Cash Reserves Fund			4,046,780
* Fidelity Investments		Fidelity Institutional Money Market			25,079,683
* Fidelity Investments		Fidelity Intermediate Bond Fund			21,931,523
* Fidelity Investments		Fidelity Blue Chip Growth Fund K			38,030,349
* Fidelity Investments		Spartan Global U.S. Index Fund			5,227,284
* Fidelity Investments		Fidelity Growth Company Fund K			41,158,342
* Fidelity Investments		Fidelity Managed Income Portfolio			30,175,571
* Fidelity Investments		Spartan U.S. Equity Index Fund			51,441,145
* Fidelity Investments		Spartan Small Cap Index Fund			6,350,587
* Fidelity Investments		Fidelity Low-Priced Stock Fund			33,047,792
* Fidelity Investments		Fidelity Freedom K Income Fund			5,575,368
* Fidelity Investments		Fidelity Freedom K 2005 Fund			269,098
* Fidelity Investments		Fidelity Freedom K 2010 Fund			2,721,036
* Fidelity Investments		Fidelity Freedom K 2015 Fund			7,491,834
* Fidelity Investments		Fidelity Freedom K 2020 Fund			17,158,122
* Fidelity Investments		Fidelity Freedom K 2025 Fund			14,031,295
* Fidelity Investments		Fidelity Freedom K 2030 Fund			10,167,170
* Fidelity Investments		Fidelity Freedom K 2035 Fund			6,982,938
* Fidelity Investments		Fidelity Freedom K 2040 Fund			11,318,027
* Fidelity Investments		Fidelity Freedom K 2045 Fund			8,930,735
* Fidelity Investments		Fidelity Freedom K 2050 Fund			9,737,471
* Fidelity Investments		Fidelity Freedom K 2055 Fund			3,446,165
* Fidelity Investments		Fidelity Real Estate Fund			3,338,072
Ariel Mutual Funds		Ariel Appreciation Fund			12,489,266
Invesco		Invesco Comstock Fund			23,060,906
PIMCO Funds		PIMCO Total Return Fund			19,663,997
MFS Fund Distributors, Inc.		MFS International New Discovery Fund			16,770,967
American Beacon		American Beacon Small Cap Value Fund			11,608,067
Morgan Stanley		Morgan Stanley Institutional Fund, Inc. – International Equity Portfolio I			13,036,112
* Fidelity Brokerage link		Self-directed brokerage account			7,990,189
* Participant loans		Varying maturity dates and interest rates ranging from 4.25% to 9.25%			4,757,447
				$	566,540,276

 

*	Party-in-interest

 

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SIGNATURES

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

 

				Apache Corporation 401(k) Savings Plan
				(Name of Plan)
Date: June 25, 2015				/s/ Margery M. Harris
				Margery M. Harris, Chairperson
				Retirement Plan Advisory Committee

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INDEX TO EXHIBITS

 

Exhibit No.		Description
23.1		Consent of Ernst & Young LLP

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-63817) pertaining to the 401(k) Savings Plan of Apache Corporation of our report dated June 25, 2015, with respect to the financial statements and schedule of the Apache Corporation 401(k) Savings Plan included in this Annual Report (Form 11-K) for the year ended December 31, 2014.

/s/ Ernst & Young LLP

Houston, Texas

June 25, 2015