As filed with the Securities and Exchange Commission on August 3, 2010

Registration No. 333-166964

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

 

Amendment No. 2

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

APACHE CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

One Post Oak Central

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

(713) 296-6000

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

P. Anthony Lannie

Executive Vice President and General Counsel

Apache Corporation

One Post Oak Central

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

(713) 296-6000

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copies To:

 

 

Approximate date of commencement of proposed sale of the securities to the public:  As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions to the closing of the merger described herein.

 

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

PRELIMINARY — SUBJECT TO COMPLETION, DATED AUGUST 3, 2010

 

 

PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

 

Dear Stockholders of Mariner Energy, Inc.:

 

     On April 14, 2010, Mariner Energy, Inc. and Apache Corporation entered into a merger agreement that provides for Mariner to merge with and into a wholly owned subsidiary of Apache. The Mariner board of directors has determined that the merger and the merger agreement are advisable and in the best interests of Mariner and its stockholders and has approved the merger agreement and the merger.

 

     Under the merger agreement, Mariner stockholders may elect to receive consideration consisting of cash, shares of Apache common stock or a combination of both in exchange for their shares of Mariner common stock, subject to a proration feature. Mariner stockholders electing to receive a mix of cash and stock consideration and non-electing stockholders will receive $7.80 in cash and 0.17043 shares of Apache common stock in exchange for each share of Mariner common stock. Subject to proration, Mariner stockholders electing to receive all cash will receive $26.00 in cash per Mariner share and Mariner stockholders electing to receive only Apache common stock will receive 0.24347 shares of Apache common stock in exchange for each share of Mariner common stock.

 

     The total amount of cash and shares of Apache common stock that will be paid and issued, respectively, pursuant to the merger agreement is fixed, and an election to receive stock consideration or cash consideration is subject to a proration feature. As a result, if Mariner stockholders elect, in the aggregate, to receive cash in an amount greater than the aggregate cash consideration payable under the merger agreement, then those holders electing to receive all cash consideration will be prorated down (in accordance with their respective shares for which the cash consideration was elected) and will receive Apache stock as a portion of the overall consideration they receive for their shares. On the other hand, if Mariner stockholders elect, in the aggregate, to receive stock in an amount greater than the aggregate number of shares issuable under the merger agreement, then those holders electing to receive all stock consideration will be prorated down (in accordance with their respective shares for which the stock consideration was elected) and will receive cash as a portion of the overall consideration they receive for their shares.

 

     Immediately following completion of the merger, it is expected that Mariner stockholders will own approximately 5% of the outstanding shares of Apache common stock, based on the number of shares of Mariner and Apache common stock outstanding as of July 28, 2010.

 

     Apache’s common stock is listed on the New York Stock Exchange, the Chicago Stock Exchange and the NASDAQ National Market under the symbol “APA.”

 

     Mariner’s common stock is listed on the New York Stock Exchange under the symbol “ME.”

 

     Mariner is holding a special meeting of stockholders on [•], 2010 to consider and vote to approve and adopt the merger agreement, as it may be amended from time to time. Your vote is very important. The merger cannot be completed unless the holders of a majority of the outstanding shares of Mariner common stock vote for the approval and adoption of the merger agreement at the special meeting. Please note that a failure to vote your shares is the equivalent of a vote “AGAINST” the approval and adoption of the merger agreement.

 

     The Mariner board of directors unanimously recommends that Mariner stockholders vote “FOR” the approval and adoption of the merger agreement.

 

     Your vote is important. Whether or not you expect to attend the Mariner special meeting in person, we urge you to submit your proxy as promptly as possible through one of the delivery methods described in the accompanying proxy statement/prospectus.

 

     In addition, we urge you to read carefully the accompanying proxy statement/prospectus (and the documents incorporated by reference into the accompanying proxy statement/prospectus), which includes important information about the merger agreement, the proposed merger, Mariner, Apache and the special meeting. The obligations of Apache and Mariner to complete the merger are subject to the satisfaction or waiver of several conditions set forth in the merger agreement. Please pay particular attention to the section titled “Risk Factors” in the accompanying proxy statement/prospectus.

 

     On behalf of the Mariner board of directors, thank you for your continued support.

 

Sincerely,

 

Scott D. Josey

Chairman of the Board, Chief Executive Officer and President

 

     Neither the Securities and Exchange Commission, which is referred to as the SEC, nor any state securities commission has approved or disapproved of the merger or the securities to be issued under this proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

     This proxy statement/prospectus is dated [•], 2010, and is first being mailed to Mariner stockholders on or about [•], 2010.

 

One BriarLake Plaza
2000 West Sam Houston Parkway South, Suite 2000
Houston, Texas 77042
(713) 954-5500

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

To the Stockholders of Mariner Energy, Inc.:

 

Notice is hereby given that a special meeting of stockholders of Mariner Energy, Inc., a Delaware corporation, which is referred to as Mariner, will be held on [•], 2010 at [•], local time, at Mariner’s principal executive offices located at One BriarLake Plaza, 2000 West Sam Houston Parkway South, Suite 2000, Houston, Texas 77042, for the following purposes:

 

 

 

These items of business, including the merger agreement and the proposed merger, are described in detail in the accompanying proxy statement/prospectus. The Mariner board of directors has determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Mariner and its stockholders and unanimously recommends that Mariner stockholders vote “FOR” the proposal to approve and adopt the merger agreement and “FOR” any proposal to adjourn the special meeting if necessary to solicit additional proxies in favor of approval and adoption. In considering the recommendation of Mariner’s board of directors, stockholders of Mariner should be aware that members of Mariner’s board of directors and its executive officers have agreements and arrangements that provide them with interests in the merger that may be different from, or in addition to, those of Mariner stockholders. See “The Merger — Interests of the Mariner Directors and Executive Officers in the Merger.”

 

Only stockholders of record as of the close of business on [•], 2010 are entitled to notice of the Mariner special meeting and to vote at the Mariner special meeting or at any adjournment or postponement thereof. A list of stockholders entitled to vote at the special meeting will be available in our principal executive offices located at One BriarLake Plaza, 2000 West Sam Houston Parkway South, Suite 2000, Houston, Texas 77042, during regular business hours for a period of no less than ten days before the special meeting and at the place of the special meeting during the meeting.

 

Approval and adoption of the merger agreement by the Mariner stockholders is a condition to the merger and requires the affirmative vote of holders of a majority of the shares of Mariner common stock outstanding and entitled to vote thereon. Therefore, your vote is very important. Your failure to vote your shares will have the same effect as a vote “AGAINST” the approval and adoption of the merger agreement.

 

By Order of the Board of Directors of
Mariner Energy, Inc.

 

Teresa G. Bushman,

Senior Vice President, General Counsel, and Secretary

Houston, Texas

[•], 2010

YOUR VOTE IS IMPORTANT!

 

WHETHER OR NOT YOU EXPECT TO ATTEND THE MARINER SPECIAL MEETING IN PERSON, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) THROUGH THE INTERNET, (2) BY TELEPHONE OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before the Mariner special meeting. If your shares are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished to you by such record holder. Brokers cannot vote on the proposal to approve and adopt the merger agreement without your instructions.

 

We urge you to read the accompanying proxy statement/prospectus, including all documents incorporated by reference into the accompanying proxy statement/prospectus, and its annexes carefully and in their entirety. If you have any questions concerning the merger, the special meeting or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus or need help voting your shares of Mariner common stock, please contact Mariner’s information agent/proxy solicitor:

 

Morrow & Co., LLC
470 West Avenue
Stamford, CT 06902
Stockholders, call toll-free: (800) 278-2141
Banks and brokers, call collect: (203) 658-9400

ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates by reference important business and financial information about Apache and Mariner from other documents filed with the SEC that are not included or delivered with this proxy statement/prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

 

Documents incorporated by reference are available to you without charge upon written or oral request. You can obtain any of these documents by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers.

 

 

To receive timely delivery of the requested documents in advance of the special meeting, you should make your request no later than [•], 2010.

 

ABOUT THIS DOCUMENT

 

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Apache (File No. 333-166964), constitutes a prospectus of Apache under Section 5 of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the shares of Apache common stock to be issued pursuant to the merger agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, with respect to the special meeting of Mariner stockholders, at which Mariner stockholders will be asked to consider and vote on, among other matters, a proposal to approve and adopt the merger agreement.

 

You should rely only on the information contained in or incorporated by reference into this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated [•], 2010. The information contained in this document is accurate only as of that date or in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Neither our mailing of this document to Mariner stockholders nor the issuance by Apache of shares of its common stock pursuant to the merger agreement will create any implication to the contrary.

Table of Contents

 

 

Annexes

 

 

The following are some questions that Mariner stockholders may have regarding the merger and the special meeting, and brief answers to those questions. You are encouraged to read carefully this entire proxy statement/prospectus, including the Annexes, and the other documents to which this proxy statement/prospectus refers or incorporates by reference because the information in this section does not provide all the information that might be important to you. Unless stated otherwise, all references in this proxy statement/prospectus to Apache are to Apache Corporation, a Delaware corporation; all references to Mariner are to Mariner Energy, Inc., a Delaware corporation; all references to Merger Sub or the surviving entity are to ZMZ Acquisitions LLC, a Delaware limited liability company and a wholly owned subsidiary of Apache; and all references to the merger agreement are to the Agreement and Plan of Merger, dated April 14, 2010, as amended by Amendment No. 1 dated August 2, 2010, by and among Apache, Merger Sub and Mariner, a copy of which is attached as Annex A to this proxy statement/prospectus and is incorporated herein by reference.

 

 

 

This document is being delivered to you as both a proxy statement of Mariner and a prospectus of Apache in connection with the merger. It is the proxy statement by which the Mariner board of directors is soliciting proxies from you to vote on the approval and adoption of the merger agreement, as it may be amended from time to time, at the special meeting or at any adjournment or postponement of the special meeting. It is also the prospectus by which Apache may issue Apache common stock to you in the merger.

 

 

 

 

 

The total amount of cash and shares of Apache common stock that will be paid and issued, respectively, pursuant to the merger agreement is fixed, and an election to receive stock consideration or cash consideration is subject to a proration feature. As a result, if Mariner stockholders elect, in the aggregate, to receive cash in an amount greater than the aggregate cash consideration payable under the merger agreement, then those holders electing to receive all cash consideration will be prorated down (in accordance with their respective shares for which the cash consideration was elected) and will receive Apache stock as a portion of the overall consideration they receive for their shares. On the other hand, if Mariner stockholders elect, in the aggregate, to receive stock in an amount greater than the aggregate number of shares issuable under the merger agreement, then those holders electing to receive all stock consideration will be prorated down (in accordance with their respective shares for which the stock consideration was elected) and will receive cash as a portion of the overall consideration they receive for their shares.

Based on the closing price of $108.06 for Apache common stock on the New York Stock Exchange, or NYSE, on April 14, 2010, the last trading day before the public announcement of the merger agreement, the mixed consideration represented approximately $26.22 in value for each share of Mariner common stock. Based on the closing price of $[•] for Apache common stock on the NYSE on [•], 2010, the most recent practicable trading day prior to the date of this proxy statement/prospectus, the mixed consideration represented approximately $[•] in value for each share of Mariner common stock. The market price of Apache common stock will fluctuate prior to the merger, and the market price of Apache common stock received by Mariner stockholders upon completion of the merger could be greater or less than the current market price of Apache common stock. See “Risk Factors.”

 

 

 

 

 

In addition, upon completion of the merger, each outstanding unvested share of Mariner restricted stock (other than shares of restricted stock granted pursuant to Mariner’s 2008 Long-Term Performance-Based Restricted Stock Program, which are referred to as the Performance-Based Restricted Stock) will vest and will entitle the holder to the merger consideration in respect of each such vested share. See “The Merger Agreement — Employee Stock Options; Restricted Shares.”

 

Also, upon completion of the merger, 40% of each outstanding award of Performance-Based Restricted Stock held by Mariner employees will vest and will entitle the holder to the merger consideration in respect of each such vested share, and the remaining portion of each award of Performance-Based Restricted Stock will be cancelled. Partial vesting of outstanding Performance-Based Restricted Stock awards occurs solely as a result of the terms of the merger agreement; otherwise, under the terms of Mariner’s 2008 Long-Term Performance-Based Restricted Stock Program, 100% of the Performance-Based Restricted Stock would be forfeited. On the date the merger agreement was executed, the value of merger consideration associated with such partial vesting was approximately $12.4 million based on a price of $26 per share for Mariner common stock. See “The Merger Agreement — Employee Stock Options; Restricted Shares” and “The Merger — Interests of the Mariner Directors and Executive Officers in the Merger — Treatment of Equity Awards.”

 

 

 

 

 

 

The approval by Mariner stockholders of the proposal to approve and adopt the merger agreement is a condition to the obligations of Mariner and Apache to complete the merger.

 

 

 

In considering the recommendation of Mariner’s board of directors, stockholders of Mariner should be aware that members of Mariner’s board of directors and its executive officers have agreements and arrangements that provide them with interests in the merger that may be different from, or in addition to, those of Mariner stockholders. See “The Merger — Interests of the Mariner Directors and Executive Officers in the Merger.”

 

 

 

 

Your vote is very important. You are encouraged to submit a proxy as soon as possible.

 

 

 

 

 

 

 

 

 

 

 

Please review carefully the information under the caption “The Merger — Material U.S. Federal Income Tax Consequences of the Merger” for a description of material U.S. federal income tax consequences of the merger. The tax consequences to you will depend on your own situation. You are encouraged to consult your own tax advisor for a full understanding of the tax consequences of the merger to you.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Please refer to your proxy card or the information forwarded by your bank, broker or other nominee to see which voting options are available to you.

 

The Internet and telephone proxy submission procedures are designed to verify your stock holdings and to allow you to confirm that your instructions have been properly recorded.

 

The method by which you submit a proxy will in no way limit your right to vote at the special meeting if you later decide to attend the meeting in person. If your shares of Mariner common stock are held in the name of a bank, broker or other nominee, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote in person at the special meeting.

 

 

 

 

 

 

 

 

 

SUMMARY

 

The Companies (See page [•])

 

The Merger (See page [•])

 

Election Procedures (See page [•])

 

Treatment of Equity Awards (See page [•])

 

Recommendation of the Mariner Board of Directors and its Reasons for the Merger (See page [•])

 

Opinion of Mariner’s Financial Advisor (See page [•])

 

Directors and Executive Officers of Apache After the Merger (See page [•])

 

Mariner Stockholder Meeting; Stockholders Entitled to Vote; Vote Required (See page [•])

	•	to consider and vote on the proposal to approve and adopt the merger agreement, as it may be amended from time to time;
	•	to consider and vote on any proposal to adjourn the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve and adopt the merger agreement at the time of the special meeting; and
	•	to transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.

 

Apache Stockholder Approval is Not Required (See page [•])

 

Ownership of Apache After the Merger (See page [•])

 

Share Ownership of Directors and Executive Officers of Mariner (See page [•])

 

Interests of the Mariner Directors and Executive Officers in the Merger (See page [•])

 

Risks Relating to the Merger (See page [•])

 

Material U.S. Federal Income Tax Consequences of the Merger (See page [•])

 

Accounting Treatment (See page [•])

 

Listing of Shares of Apache Common Stock; Delisting and Deregistration of Mariner Common Stock (See page [•])

 

Appraisal Rights in the Merger (See page [•])

 

Conditions to the Merger (See page [•])

	•	the approval and adoption of the merger agreement by the requisite affirmative vote of Mariner’s stockholders;
	•	the expiration or termination of the waiting period (and any extension of the waiting period) applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to in this proxy statement/prospectus as the HSR Act;
	•	the effectiveness of the Form S-4 registration statement, of which this proxy statement/prospectus is a part, and the absence of a stop order suspending the effectiveness of the Form S-4 or proceedings for such purpose having been initiated or threatened by the SEC;

	•	the approval for listing on the NYSE of the shares of Apache common stock issuable to the Mariner stockholders pursuant to the merger agreement, subject to official notice of issuance;
	•	the absence of any statute, rule or regulation prohibiting the merger, or any order or injunction of a court of competent jurisdiction preventing the consummation of the merger;
	•	the receipt by each of Mariner and Apache of an opinion from its outside counsel to the effect that for federal income tax purposes the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and that each of Apache and Mariner will be a party to such reorganization within the meaning of Section 368(b) of the Internal Revenue Code;
	•	the accuracy of the representations and warranties of Apache, Merger Sub and Mariner in the merger agreement, subject to certain materiality thresholds;
	•	the performance in all material respects by each of Apache and Merger Sub, on the one hand, and Mariner, on the other hand, of its respective covenants required to be performed by it under the merger agreement at or prior to the closing date;
	•	receipt of certificates by executive officers of each of Apache and Merger Sub, on the one hand, and Mariner, on the other hand, to the effect that the conditions described in the preceding two bullet points have been satisfied;
	•	there not having occurred a material adverse effect on either party since the date of the merger agreement, the effects of which are continuing; and
	•	the number of Mariner shares for which appraisal rights are properly exercised does not exceed 50% of the Mariner shares outstanding immediately prior to the merger.

 

Regulatory Approvals Required for the Merger (See page [•])

 

No Solicitation and Change in Recommendation (See page [•])

 

Termination of the Merger Agreement (See page [•])

	•	by mutual written consent of Apache, Merger Sub and Mariner;
	•	by either Apache or Mariner if:

	•	the merger is not consummated on or before January 31, 2011, referred to as the outside date, provided that the terminating party has not materially breached the merger agreement in a manner that proximately caused the failure to consummate the merger on or prior to the outside date;
	•	a court or other governmental authority issues a final, non-appealable order prohibiting the merger; or
	•	the Mariner stockholders do not approve and adopt the merger agreement at the special meeting or any adjournment or postponement thereof.

	•	by Apache if:

	•	Mariner is in material breach of the merger agreement such that certain conditions set forth in the merger agreement are not capable of being satisfied and such breach is not cured prior to the earlier of 30 days after notice of such breach to Mariner and the outside date; provided that Apache is not permitted to so terminate the merger agreement if Apache or Merger Sub is then in breach of the merger agreement in any material respect; or
	•	prior to the approval and adoption of the merger agreement by Mariner’s stockholders, Mariner’s board of directors changes its recommendation to vote for approval and adoption of the merger agreement.

	•	by Mariner if:

	•	Apache or Merger Sub is in material breach of the merger agreement such that certain conditions set forth in the merger agreement are not capable of being satisfied and such breach is not cured prior to the earlier of 30 days after notice of such breach to Apache and the outside date; provided that Mariner is not permitted to so terminate the merger agreement if it is then in breach of the merger agreement in any material respect; or

	•	prior to the approval and adoption of the merger agreement by Mariner’s stockholders, Mariner’s board of directors changes its recommendation to vote for approval and adoption of the merger agreement in order to accept a superior proposal and authorizes Mariner to enter into a definitive agreement with respect to the superior proposal.

 

Termination Fee (See page [•])

 

Source of Funding for the Merger (See page [•])

 

Comparison of Rights of Apache Stockholders and Mariner Stockholders (See page [•])

 

Litigation Relating to the Merger (See page [•])

	•	Permian Basin.  All of BP’s oil and gas operations, related infrastructure and acreage in the Permian Basin of West Texas and New Mexico. The assets include interests in 10 field areas in the Permian Basin (including Block 16/Coy Waha, Block 31, Brown Basset, Empire/Yeso, Pegasus, Southeast Lea, Spraberry, Wilshire, North Misc and Delaware Penn), approximately 405,000 net mineral and fee acres, 358,000 leasehold acres, approximately 3,629 active wells and three gas processing plants, two of which are currently operated by BP. Based on Apache’s investigation and review of data provided by BP, these assets produced 15,110 barrels of liquids and 81 MMcf of gas per day in the first six months of 2010. The Permian Basin assets had estimated net proved reserves of 140.9 MMboe at June 30, 2010 (65 percent liquids).

	•	Western Canada Sedimentary Basin.  Substantially all of BP’s Western Canadian upstream gas assets, including 1,278,000 net mineral and leasehold acres, interests in approximately 1,600 active wells, eight operated and 14 non-operated gas processing plants. The position includes many attractive drilling opportunities ranging from conventional to several unconventional targets, including shale gas, tight gas and coal bed methane in historically productive formations including the Montney, Cadonien and Doig. Based on Apache’s investigation and review of data provided by BP, during the first half of 2010 these properties accounted for 6,529 barrels of liquids and 240 MMcf of gas per day and had estimated net proved reserves of 223.7 MMboe at June 30, 2010 (94 percent gas). Apache currently has operations in approximately half of these 13 field areas.

	•	Western Desert, Egypt.  BP’s interests in four development licenses and one exploration concession (East Badr El Din), covering 394,000 net acres south of El Alamein in the Western Desert of Egypt. These properties are operated by Gulf of Suez Petroleum Company, a joint venture between BP and the Government of Egypt. The transaction includes BP’s interests in 65 active wells, a 24-inch gas line to Dashour, a liquefied petroleum gas plant in Dashour, a gas processing plant and a 12-inch oil export line to the El Hamra Terminal on the Mediterranean Sea. Based on Apache’s investigation and review of data provided by BP, during the first six months of 2010 these properties accounted for 6,016 barrels of oil and 11 MMcf of gas per day of BP’s production, and had estimated net proved reserves of 20.2 MMboe at June 30, 2010 (59 percent liquids). The BP Properties in Egypt are complementary to the over 11 million gross acres in 21 separate concessions in the Western Desert that Apache currently holds. The Merged Concession Agreement related to the development licenses runs through 2024, subject to a five year extension at the option of the operator.

	•	116.4 MMbbls of crude oil and natural gas liquids; and

	•	1,610 Bcf of natural gas.

	•	27.7 Mbbls per day of crude oil and natural gas liquids; and

	•	331 MMcf per day of natural gas.

	•	28 Mbbls per day of crude oil and natural gas liquids; and

	•	348 MMcf per day of natural gas.

		For The Quarter Ended								For the Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Financial data:
Revenues and other (thousands)		$	2,971,910			$	2,093,378			$	5,645,161			$	3,727,203
Income attributable to common stock (thousands)			860,223				443,300				1,565,204				(1,315,060	)
Basic net income per common share			2.55				1.32				4.64				(3.92	)
Diluted net income per common share			2.53				1.31				4.61				(3.92	)
Weighted average common shares outstanding (thousands)			337,618				335,637				337,273				335,372
Diluted common shares outstanding (thousands)			339,377				337,365				339,292				335,372
Production and pricing data:
Oil volume (barrels per day)			331,280				281,836				310,103				274,652
Average oil price per barrel		$	74.89			$	58.15			$	74.74			$	50.57
Natural gas volume (Mcf per day)			1,791,555				1,769,623				1,751,958				3,727,203
Average natural gas price per Mcf		$	4.01			$	3.48			$	4.29			$	3.65
NGL volume (barrels per day)			16,992				10,626				14,444				10,394
Average NGL price per barrel		$	37.21			$	23.42			$	40.58			$	22.39
Total production (boe per day)			646,866				587,400				616,540				567,947

	•	a base rate, which is defined as a rate per annum equal to the greatest of (a) JPMorgan Chase Bank, N.A.’s prime rate, (b) the federal funds rate plus .50% and (c) one-month LIBOR plus 1%, or

	•	LIBOR plus a margin varying from 1.50% to 2.50%.

 

SELECTED HISTORICAL FINANCIAL, OPERATING AND RESERVE DATA OF APACHE

		Three Months Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		($ in millions, except per share amounts)
Financial Data
Revenues and other		$	2,673			$	1,634			$	8,615			$	12,390			$	10,000			$	8,309			$	7,584
Income (loss) attributable to common stock(1)(2)		$	705			$	(1,758	)		$	(292	)		$	706			$	2,807			$	2,547			$	2,618
Net income (loss) per common share(1)(2)
Basic		$	2.09			$	(5.25	)		$	(0.87	)		$	2.11			$	8.45			$	7.72			$	7.96
Diluted		$	2.08			$	(5.25	)		$	(0.87	)		$	2.09			$	8.39			$	7.64			$	7.84
Cash dividends declared per common share		$	0.15			$	0.15			$	0.60			$	0.70			$	0.60			$	0.50			$	0.36
Total assets		$	29,228			$	26,293			$	28,186			$	29,186			$	28,635			$	24,308			$	19,272
Total debt		$	5,064			$	4,912			$	5,068			$	4,922			$	4,227			$	3,822			$	2,192
Operating Data
Average daily production:
Crude oil (MBbls)			289				267				279				254				249				225				234
Natural gas (MMcf)			1,712				1,624				1,759				1,618				1,796				1,589				1,264
Natural gas liquids (MBbls)			12				10				11				11				13				12				10
MBoe			586				548				583				535				561				502				455
Average realized price:
Crude oil — per Bbl		$	74.55				42.49			$	59.85			$	87.80			$	68.84			$	59.92			$	51.66
Natural gas — per Mcf		$	4.60				3.84			$	3.69			$	6.70			$	5.34			$	5.17			$	6.35
Natural gas liquids — per Bbl		$	45.45				21.29			$	27.63			$	51.38			$	42.78			$	37.70			$	32.13
Proved reserves:
Crude oil & natural gas liquids (MBbls)			N/A				N/A				1,067,248				1,081,144				1,133,710				1,061,041				975,910
Natural gas (MMcf)			N/A				N/A				7,796,031				7,917,025				7,872,717				7,512,919				6,848,022
MBoe			N/A				N/A				2,366,586				2,400,648				2,445,829				2,313,194				2,117,248

(1)		Loss attributable to common stock and net loss per common share for the three months ended March 31, 2009 and the year ended December 31, 2009 include a $2.82 billion ($1.98 billion net of tax) write-down of the carrying value of Apache’s March 31, 2009 proved property balances in the U.S. and Canada.
(2)		Income attributable to common stock and net income per common share for the year ended December 31, 2008 include a $5.3 billion ($3.6 billion net of tax) write-down of the carrying value of Apache’s December 31, 2008 proved property balances in the U.S., the U.K. North Sea, Canada and Argentina.

 

SELECTED HISTORICAL FINANCIAL, OPERATING AND RESERVE DATA OF MARINER

		Three Months Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		($ in millions, except per share amounts)
Financial Data
Total revenues(1)		$	243			$	243			$	943			$	1,301			$	875			$	660			$	200
Net income (loss) attributable to Mariner Energy, Inc.(2)(3)(4)		$	15			$	(424	)		$	(319	)		$	(389	)		$	144			$	121			$	40
Net income (loss) per common share:
Basic		$	0.15			$	(4.77	)		$	(3.34	)		$	(4.44	)		$	1.68			$	1.59			$	1.24
Diluted		$	0.15			$	(4.77	)		$	(3.34	)		$	(4.44	)		$	1.67			$	1.58			$	1.20
Cash dividends declared per common share		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Total assets(5)		$	3,002			$	2,820			$	2,867			$	3,393			$	3,084			$	2,680			$	666
Total debt		$	1,222			$	1,240			$	1,195			$	1,170			$	779			$	654			$	156
Operating Data
Average daily production:
Crude oil (MBbls)			15				11				12				13				12				9				5
Natural gas (MMcf)			230				245				249				218				186				154				50
Natural gas liquids (MBbls)			6				3				4				4				3				2				—
MBoe			59				55				58				54				46				37				13
Average realized price:
Crude oil — per Bbl		$	72.31			$	62.81			$	70.59			$	86.02			$	67.50			$	62.63			$	41.23
Natural gas — per Mcf		$	5.67			$	6.95			$	6.08			$	9.31			$	7.88			$	7.37			$	6.66
Natural gas liquids — per Bbl		$	48.08			$	23.70			$	33.10			$	55.02			$	45.16			$	48.37			$	—
Proved reserves:
Crude oil & natural gas liquids (MBbls)			N/A				N/A				85,950				69,304				64,563				48,136				21,647
Natural gas (MMcf)			N/A				N/A				571,435				558,048				448,439				426,687				207,686
MBoe			N/A				N/A				181,189				162,312				139,303				119,251				56,261

(1)		Total revenues for the year ended December 31, 2008 includes a $16.6 million arbitration award related to a consummated acquisition. Total revenues for the year ended December 31, 2008 includes the release of $46.5 million in suspended revenue related to a potential MMS royalty dispute.
(2)		Net loss attributable to Mariner Energy, Inc. and net loss per common share for the year ended December 31, 2009 include a $754.3 million ($486.5 million net of tax) write-down of the carrying value of Mariner’s proved property balances and a $107.3 million gain on the acquisition of the reorganized subsidiaries and operations of Edge Petroleum Corporation. The loss also included $12.0 million recorded to lease operating expense for contingent OIL insurance premiums.
(3)		Net loss attributable to Mariner Energy, Inc. and net loss per common share for the three months ended March 31, 2009 include a $704.7 million ($454.6 million, net of tax) write-down of the carrying value of Mariner’s proved property balances.
(4)		Net loss attributable to Mariner Energy, Inc. and net loss per common share for the year ended December 31, 2008 include a $575.6 million ($369.1 million, net of tax) write-down of the carrying value of Mariner’s proved property balances, a $295.6 million impairment of Mariner’s goodwill and a $15.3 million ($9.8 million, net of tax) impairment of other property. The loss also included $36.0 million recorded to lease operating expense for a contingent OIL insurance premium.
(5)		Total assets at December 31, 2009 include $237.5 million from the acquisition of the reorganized subsidiaries and operations of Edge Petroleum Corporation.

 

UNAUDITED COMPARATIVE PER SHARE INFORMATION

		Three Months Ended				Year Ended
		March 31, 2010				December 31, 2009
Apache historical
Net income (loss) per share — basic		$	2.09			$	(0.87	)
Net income (loss) per share — diluted			2.08				(0.87	)
Cash dividends per common share			0.15				0.60
Book value per share at period end(2)			49.71				46.90
Apache pro forma combined
Net income (loss) per share — basic		$	2.02			$	(1.71	)
Net income (loss) per share — diluted			2.00				(1.71	)
Cash dividends per common share(1)			0.15				0.60
Book value per share at period end(2)			51.54				N/A
Mariner historical
Net income (loss) per share — basic		$	0.15			$	(3.34	)
Net income (loss) per share — diluted			0.15				(3.34	)
Cash dividends per common share			—				—
Book value per share at period end(2)			9.13				8.67
Pro forma (equivalent)(3)
Net income (loss) per share — basic		$	0.34			$	(0.29	)
Net income (loss) per share — diluted			0.34				(0.29	)
Cash dividends per common share			0.03				0.10
Book value per share at period end(2)			8.78				N/A

(1)		Same as Apache’s historical, since no change in dividend policy is expected as a result of the merger.
(2)		Historical book value per share is calculated by dividing stockholders’ equity by the number of Apache or Mariner common shares outstanding at the end of the period. Pro forma book value per share is computed by dividing pro forma stockholders’ equity by the pro forma number of Apache common shares outstanding at the end of the period. Book value per share is required to be presented on a pro forma basis only for the most recent balance sheet date — March 31, 2010.
(3)		Amounts are calculated by multiplying the Apache pro forma combined per share amounts by the exchange ratio of 0.17043.

 

COMPARATIVE APACHE AND MARINER MARKET PRICE AND DIVIDEND DATA

		Apache				Mariner				Equivalent per
		Common Stock				Common Stock				Share Value
April 14, 2010		$	108.06			$	18.09			$	26.22
[•], 2010		$	[•]			$	[•]			$	[•]

 

Historical Market Prices

		Apache												Mariner
		Common Stock												Common Stock
										Cash												Cash
										Dividends												Dividends
		High				Low				Declared				High				Low				Declared
Fiscal Year Ended December 31, 2010:
Third Quarter (through [•], 2010)		$	[•]			$	[•]				(1)			$	[•]			$	[•]			$	—
Second Quarter		$	111.00			$	83.55			$	0.15			$	26.32			$	15.13			$	—
First Quarter		$	108.92			$	95.15			$	0.15			$	16.27			$	11.84			$	—
Fiscal Year Ended December 31, 2009:
Fourth Quarter		$	106.46			$	88.06			$	0.15			$	16.66			$	11.35			$	—
Third Quarter		$	95.77			$	65.02			$	0.15			$	15.41			$	9.65			$	—
Second Quarter		$	87.04			$	61.60			$	0.15			$	15.74			$	7.48			$	—
First Quarter		$	88.07			$	51.03			$	0.15			$	12.84			$	6.46			$	—

		Apache												Mariner
		Common Stock												Common Stock
										Cash												Cash
										Dividends												Dividends
		High				Low				Declared				High				Low				Declared
Fiscal Year Ended December 31, 2008:
Fourth Quarter		$	103.17			$	57.11			$	0.15			$	20.46			$	6.86			$	—
Third Quarter		$	145.00			$	94.82			$	0.15			$	37.25			$	19.20			$	—
Second Quarter		$	149.23			$	117.65			$	0.15			$	37.38			$	26.60			$	—
First Quarter(2)		$	122.34			$	84.52			$	0.25			$	30.06			$	22.80			$	—
Fiscal Year Ended December 31, 2007:
Fourth Quarter		$	109.32			$	87.44			$	0.15			$	25.00			$	19.78			$	—
Third Quarter		$	91.25			$	72.61			$	0.15			$	25.43			$	17.82			$	—
Second Quarter		$	87.82			$	70.53			$	0.15			$	25.87			$	19.20			$	—
First Quarter		$	73.44			$	63.01			$	0.15			$	20.55			$	16.88			$	—
Fiscal Year Ended December 31, 2006:
Fourth Quarter		$	70.50			$	59.99			$	0.15			$	21.36			$	17.68			$	—
Third Quarter		$	72.40			$	59.18			$	0.15			$	19.68			$	15.94			$	—
Second Quarter		$	75.66			$	56.50			$	0.10			$	20.65			$	14.81			$	—
First Quarter(3)		$	76.25			$	63.17			$	0.10			$	21.00			$	18.05			$	—

(1)		A dividend with respect to the third quarter of 2010 has not yet been declared or paid.

(2)		Apache’s first quarter 2008 dividends declared included a special non-recurring cash dividend of 10 cents per common share declared and paid in the first quarter of 2008.

(3)		Mariner common stock commenced regular way trading on March 3, 2006 on the NYSE.

 

Dividends

 

In addition to the other information contained or incorporated by reference into this proxy statement/prospectus, including the matters addressed in “Cautionary Statement Concerning Forward-Looking Statements,” you should carefully consider the following risk factors in determining whether to vote for the approval and adoption of the merger agreement. You should also read and consider the risk factors associated with each of the businesses of Apache and Mariner because these risk factors may affect the operations and financial results of the combined company. These risk factors may be found under Part I, Item 1A, “Risk Factors” in each company’s Annual Report on Form 10-K for the year ended December 31, 2009 and Part II, Item 1A “Risk Factors” in each company’s Form 10-Q for the quarter ended March 31, 2010, each of which is on file with the SEC and all of which are incorporated by reference into this proxy statement/prospectus.

 

Risks Relating to the Merger

 

Mariner stockholders electing to receive only cash or only Apache common stock may, as the result of proration, receive a form or combination of consideration different from the form they elect.

 

While each Mariner stockholder may elect to receive consideration consisting of all cash, all shares of Apache common stock or a combination of both in exchange for their shares of Mariner common stock, the aggregate cash consideration to be received by Mariner stockholders pursuant to the merger will be fixed at an amount equal to the product of $7.80 and the number of shares of Mariner common stock outstanding immediately prior to the closing of the merger less 714,887 shares of outstanding unvested restricted stock that will be cancelled upon the merger. Such cash amount is expected to be approximately $800 million. Similarly, the aggregate number of shares of Apache common stock to be received by Mariner stockholders pursuant to the merger will be fixed at a number equal to the product of 0.17043 and the number of shares of Mariner common stock outstanding immediately prior to closing of the merger less 714,887 shares of outstanding unvested restricted stock that will be cancelled upon the merger, which number is expected to be approximately 17.5 million shares of Apache common stock. Accordingly, if Mariner stockholders elect, in the aggregate, to receive cash in an amount greater than the aggregate cash consideration payable under the merger agreement, then those holders electing to receive all cash consideration will be prorated down and will receive Apache common stock as a portion of the overall consideration they receive for their shares. On the other hand, if Mariner stockholders elect, in the aggregate, to receive stock in an amount greater than the aggregate number of shares issuable under the merger agreement, then those holders electing to receive all stock consideration will be prorated down and will receive cash as a portion of the overall consideration they receive for their shares. As a result, Mariner stockholders that make a valid election to receive all cash or all stock consideration may not receive merger consideration entirely in the form elected.

 

As a result of the consideration election and proration provisions of the merger agreement, and because the market price of Apache common stock will fluctuate, Mariner stockholders cannot be sure of the aggregate value of the merger consideration they will receive.

 

The total number of shares of Apache common stock that will be issued to Mariner stockholders pursuant to the merger is fixed. Accordingly, the value of the merger consideration payable in Apache common stock will depend on the trading price of Apache common stock for those Mariner stockholders electing or, through the proration mechanism contained in the merger agreement, becoming entitled to receive Apache common stock pursuant to the merger. This means that there is no “price protection” mechanism contained in the merger agreement that would adjust the number of Apache shares that Mariner stockholders will receive based on any increases or decreases in the trading price of Apache common stock prior to the closing of the merger. If Apache’s stock price decreases, the market value of the consideration to be received will also decrease for those Mariner stockholders electing or, through the proration mechanism, becoming entitled to receive Apache common stock. If Apache’s stock price increases, the market value of the consideration to be received will likewise increase for those Mariner stockholders electing or becoming entitled to receive Apache common stock. The value of the merger consideration you receive in Apache common shares, if any, will vary from the date of the announcement of the merger agreement, the date that this proxy statement/prospectus was mailed to Mariner stockholders, the election deadline, the date of the Mariner special meeting and the date the merger

is completed and thereafter. Accordingly, at the election deadline and at the time of the Mariner special meeting, you will not know or be able to determine the value of the Apache common stock you will receive upon completion of the merger. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in oil and natural gas prices, changes in Apache’s and Mariner’s respective businesses, operations and prospects, regulatory considerations, market assessments of the likelihood that the merger will be completed and the timing of the merger. Many of these factors are beyond Apache’s and Mariner’s control.

 

If you tender shares of Mariner common stock to make an election, you will not be able to sell those shares unless you revoke your election prior to the election deadline.

 

If you are a Mariner stockholder and want to make a mixed, cash or stock consideration election under the merger agreement, you must deliver your stock certificates, if any (or follow the procedures for guaranteed delivery), and a properly completed and signed election form to the exchange agent. The deadline for doing this is 5:00 p.m., New York time, on [•], 2010. You will not be able to sell any shares of Mariner common stock that you have delivered under this arrangement unless you revoke your election before the deadline by providing written notice to the exchange agent. If you do not revoke your election, you will not be able to liquidate your investment in Mariner common stock for any reason until you receive cash and/or Apache common stock pursuant to the merger. In the time between delivery of your shares and the closing of the merger, the market price of Mariner or Apache common stock may increase or decrease and you might otherwise want to sell your shares of Mariner to gain access to cash, make other investments or reduce the potential for a decrease in the value of your investment.

 

The date that Mariner stockholders will receive their merger consideration is uncertain.

 

The completion of the merger is subject to the stockholder and governmental approvals described in this proxy statement/prospectus and the satisfaction or waiver of certain other conditions. While we currently expect to complete the merger promptly following the Mariner special meeting of stockholders (assuming the merger is approved and adopted at the meeting), the completion date might be later than expected due to delays in satisfying such conditions. Accordingly, we cannot provide Mariner stockholders with a definitive date on which they will receive the merger consideration.

 

Mariner stockholders will have a significantly reduced ownership and voting interest after the merger and will exercise less influence over management.

 

Immediately after the completion of the merger, it is expected that former Mariner stockholders, who collectively own 100 percent of Mariner, will own approximately 5 percent of Apache, based on the number of shares of Mariner and Apache common stock outstanding as of July 28, 2010. Consequently, Mariner stockholders will have less influence over the management and policies of Apache than they currently have over the management and policies of Mariner.

 

The market price of Apache common stock after the merger may be affected by factors different from those affecting shares of Mariner common stock currently.

 

Holders of Mariner common stock may receive Apache common stock in the merger. The business of Apache differs from that of Mariner in important respects and, accordingly, the results of operations of Apache after the merger, as well as the market price of its common stock, may be affected by factors different from those currently affecting the results of operations of Mariner as an independent company and the price of Mariner common stock. For further information on the businesses of Apache and Mariner and certain factors to consider in connection with those businesses, including risk factors associated with their businesses, see Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and its Form 10-Q for the quarter ended March 31, 2010 and Mariner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and its Form 10-Q for the quarter ended March 31, 2010, which are incorporated by reference into this proxy statement/prospectus. See also the other documents incorporated by reference into

this proxy statement/prospectus under the caption “Where You Can Find More Information; Incorporation by Reference.”

 

Mariner’s directors and executive officers have interests in the merger that may be different from, and in addition to, the interests of other Mariner stockholders.

 

When considering the recommendation of Mariner’s board of directors that Mariner stockholders vote in favor of the approval and adoption of the merger agreement, you should be aware that the executive officers and directors of Mariner are parties to agreements or participants in other arrangements that provide them with interests in the merger that are different from, or in addition to, your interests as a stockholder of Mariner. These different interests could create conflicts of interest in their determinations to recommend the merger. In particular, the executive officers of Mariner hold unvested shares of Mariner restricted stock (including Performance-Based Restricted Stock) that will vest pursuant to the terms of the merger agreement and are parties to employment agreements, which will survive the merger, that provide for severance and change of control benefits. The completion of the merger will be considered a “change of control” under these agreements. In addition, the receipt of compensation and other benefits by certain Mariner’s employees in connection with the merger may make it more difficult for Apache to retain their services after the merger, or require Apache to expend additional sums of money to do so.

 

Mariner’s board of directors was aware of these interests and considered them, among other matters, when adopting a resolution to approve the merger agreement and recommending that Mariner stockholders vote to approve and adopt the merger agreement. You should consider these interests in voting on the merger. We have further described these different interests under “The Merger — Interests of the Mariner Directors and Executive Officers in the Merger.”

 

The merger agreement contains provisions that limit Mariner’s ability to pursue alternatives to the merger with Apache, could discourage a potential competing acquirer of Mariner from making a favorable alternative transaction proposal and, in certain circumstances, could require Mariner to pay a $67 million termination fee to Apache.

 

Unless and until the merger agreement is terminated, subject to limited fiduciary exceptions (which are discussed in more detail in “The Merger Agreement — Certain Additional Agreements”), Mariner is restricted from initiating, soliciting, knowingly encouraging, knowingly facilitating, discussing or negotiating any inquiry, proposal or offer for a competing acquisition proposal with any person. Additionally, under the merger agreement, in the event of a potential change by the Mariner board of directors of its recommendation with respect to the merger, Mariner must provide Apache with three business days to propose an adjustment to the terms and conditions of the merger agreement. Mariner may terminate the merger agreement and enter into an agreement with respect to a superior proposal only if specified conditions have been satisfied, including compliance with the no solicitation provisions of the merger agreement. Additionally, Mariner may be required to pay to Apache a termination fee of $67 million (less the amount of any of Apache’s expenses reimbursed by Mariner pursuant to the merger agreement) if the merger agreement is terminated under certain circumstances. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of Mariner from considering or proposing that acquisition. In connection with the settlement of two stockholder lawsuits, on August 2, 2010, Apache and Mariner amended the merger agreement to eliminate the termination fee in the event that Mariner terminates the merger agreement in order to enter into a “superior proposal” with another party. See “The Merger — Litigation Relating to the Merger.”

 

The rights of Mariner stockholders will be governed by Apache’s restated certificate of incorporation and amended bylaws.

 

All Mariner stockholders who receive shares of Apache common stock in the merger will become Apache stockholders and their rights as stockholders will be governed by Apache’s restated certificate of incorporation and its amended bylaws. There are material differences between the current rights of Mariner stockholders, which are governed by Mariner’s second amended and restated certificate of incorporation and fourth amended

and restated bylaws, and the rights of holders of Apache common stock. See “Comparison of Rights of Apache Stockholders and Mariner Stockholders.”

 

Apache may have difficulty combining the operations of both Mariner and the BP Properties, and the anticipated benefits of these transactions may not be achieved.

 

Achieving the anticipated benefits of the merger and BP transactions will depend in part upon whether Apache can successfully integrate the operations of Mariner and the BP Properties. Apache’s ability to integrate the operations of Mariner and the BP Properties successfully will depend on Apache’s ability to monitor operations, coordinate exploration and development activities, control costs, attract, retain and assimilate qualified personnel and maintain compliance with regulatory requirements. The difficulties of integrating the operations of Mariner and the BP Properties may be increased by the necessity of combining organizations with distinct cultures and widely dispersed operations. The integration of operations following these transactions will require the dedication of management and other personnel, which may distract their attention from the day-to-day business of the combined enterprise and prevent Apache from realizing benefits from other opportunities. Completing the integration process may be more expensive than anticipated, and Apache cannot assure you that it will be able to effect the integration of these operations smoothly or efficiently or that the anticipated benefits of the transactions will be achieved.

 

Any delay in completing the merger may substantially reduce the benefits expected to be obtained from the merger.

 

The merger is subject to a number of other conditions beyond the control of Mariner and Apache that may prevent, delay or otherwise materially adversely affect its completion. See “The Merger Agreement — Conditions to the Merger.” Apache and Mariner cannot predict whether or when the conditions required to complete the merger will be satisfied. The requirements for obtaining the required clearances and approvals could delay the effective time of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger may materially adversely affect the synergies and other benefits that Apache and Mariner expect to achieve if the merger and the integration of their respective businesses are completed within the expected timeframe.

 

Mariner may have difficulty attracting, motivating and retaining executives and other key employees in light of the merger.

 

Uncertainty about the effect of the merger on Mariner employees may have an adverse effect on Mariner and consequently Apache. This uncertainty may impair Mariner’s ability to attract, retain and motivate key personnel until the merger is completed. Employee retention may be particularly challenging during the pendency of the merger, as employees may experience uncertainty about their future roles with Apache. If key employees of Mariner depart because of issues relating to the uncertainty and difficulty of integration or a desire not to become employees of Apache, Apache’s ability to realize the anticipated benefits of the merger could be delayed or reduced.

 

Failure to complete the merger could negatively impact the stock price and the future business and financial results of Mariner.

 

If the merger is not completed, the ongoing business of Mariner may be adversely affected and Mariner would be subject to a number of risks, including the following:

 

 

 

There can be no assurance that the risks described above will not materialize, and if any of them do, they may adversely affect Mariner’s business, financial results and stock price.

 

The Devon and Mariner transactions will increase Apache’s exposure to Gulf of Mexico operations.

 

Apache’s recent acquisition of oil and gas assets on the Gulf of Mexico shelf from Devon Energy Corporation has increased its exposure to Gulf of Mexico operations. Following the completion of the merger, an even larger percentage of Apache’s exploration and production operations will be related to offshore Gulf of Mexico properties. Greater offshore concentration proportionately increases risks from delays or higher costs common to offshore activity, including severe weather, availability of specialized equipment and compliance with environmental and other laws and regulations.

 

The Mariner and BP transactions will expose Apache to additional risks and uncertainties with respect to the acquired businesses and their operations.

 

Although the acquired Mariner and BP businesses will generally be subject to risks similar to those to which Apache are subject in its existing businesses, the Mariner and BP transactions may increase these risks. For example, the increase in the scale of Apache’s operations may increase its operational risks. Recent publicity associated with the oil spill in the Gulf of Mexico resulting from the fire and explosion onboard the Deepwater Horizon, which was under contract to BP, may cause regulatory agencies to scrutinize Apache’s operations more closely, as the acquiror of certain of BP’s operations. This additional scrutiny may adversely affect Apache’s operations.

 

The market value of Apache common stock could decline if large amounts of its common stock are sold following the merger.

 

Following the merger, stockholders of Apache and former stockholders of Mariner will own interests in a combined company operating an expanded business with more assets and a different mix of liabilities. Current stockholders of Apache and Mariner may not wish to continue to invest in the additional operations of the combined company, or may wish to reduce their investment in the combined company, or for other reasons may wish to dispose of some or all of their interests in the combined company. If, following the merger, large amounts of Apache common stock are sold, the price of its common stock could decline.

The merger will likely not be accretive, and may be dilutive, to Apache’s earnings per share, which may negatively affect the market price of Apache common stock.

 

Apache anticipates that the merger will not be accretive, and may be dilutive, to earnings per share for several quarters following the merger. This expectation is based on preliminary estimates that may materially change. In addition, future events and conditions could decrease or delay any accretion, result in dilution or cause greater dilution than is currently expected, including adverse changes in energy market conditions; commodity prices for oil, natural gas and natural gas liquids; production levels; reserve levels; operating results; competitive conditions; laws and regulations affecting the energy business; capital expenditure obligations; and general economic conditions. Any dilution of, or decrease or delay of any accretion to, Apache’s earnings per share could cause the price of Apache’s common stock to decline.

 

Risks Relating to Apache and Mariner

 

Apache and Mariner are, and following completion of the merger, Apache and Mariner will continue to be, subject to the risks described in (i) Part I, Item 1A in Apache’s Annual Report on Form 10-K for the year ended December 31, 2009, and Part II, Item 1A of Apache’s Form 10-Q for the quarter ended March 31, 2010, and (ii) Part I, Item 1A in Mariner’s Annual Report on Form 10-K for the year ended December 31, 2009, and Part II, Item 1A of Mariner’s 10-Q for the quarter ended March 31, 2010, each of which is on file with the SEC and all of which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

 

A drilling moratorium in the U.S. Gulf of Mexico, or other regulatory initiatives in response to the current oil spill in the Gulf of Mexico, could adversely affect Apache’s and Mariner’s business.

 

As has been widely reported, on April 20, 2010, a fire and explosion occurred onboard the semisubmersible drilling rig Deepwater Horizon, leading to the oil spill currently affecting the Gulf of Mexico. In response to this incident, the Minerals Management Service (now known as the Bureau of Ocean Energy Management, Regulation and Enforcement, or “BOE”) of the U.S. Department of the Interior issued a notice on May 30, 2010 implementing a six-month moratorium on certain drilling activities in the U.S. Gulf of Mexico. Implementation of the moratorium was blocked by a U.S. district court, which was subsequently affirmed on appeal, but on July 12, 2010, the BOE issued a new moratorium that applies to drilling operations that use subsea blowout preventers or surface blowout preventers on floating facilities. The new moratorium will last until November 30, 2010, or until such earlier time that the BOE determines that deepwater drilling operations can proceed safely. The BOE is also expected to issue new safety and environmental guidelines or regulations for drilling in the U.S. Gulf of Mexico, and potentially in other geographic regions, and may take other steps that could increase the costs of exploration and production, reduce the area of operations and result in permitting delays. This incident could also result in drilling suspensions or other regulatory initiatives in other areas of the U.S. and abroad. Although it is difficult to predict the ultimate impact of the moratorium or any new guidelines, regulations or legislation, a prolonged suspension of drilling activity in the U.S. Gulf of Mexico and other areas, new regulations and increased liability for companies operating in this sector could adversely affect Apache’s and Mariner’s operations in the U.S. Gulf of Mexico as well as in other offshore locations.

 

Our operations involve a high degree of operational risk, particularly risk of personal injury, damage or loss of equipment and environmental accidents.

 

Our operations are subject to hazards and risks inherent in the drilling, production and transportation of crude oil and natural gas, including:

 

 

 

 

 

 

 

Failure or loss of equipment, as the result of equipment malfunctions or natural disasters such as hurricanes, could result in property damages, personal injury, environmental pollution and other damages for which we could be liable. Litigation arising from a catastrophic occurrence, such as a well blowout, explosion or fire at a location where our equipment and services are used, may result in substantial claims for damages. Ineffective containment of a well blowout or pipeline rupture could result in environmental pollution and substantial remediation expenses. If a significant amount of our production is interrupted, our containment efforts prove to be ineffective or litigation arises as the result of a catastrophic occurrence, our cash flow and, in turn, our results of operations could be materially and adversely affected.

 

Several significant matters in the BP Acquisition will not be resolved by Apache before closing.

 

Because of the relatively short time period between signing the BP Purchase Agreements and the expected closing of the BP Acquisition, several significant matters commonly resolved prior to closing such an acquisition have been reserved for after closing. For example, title review with respect to most of the BP Properties will not be completed by Apache until after closing. In addition, Apache will not have sufficient time before closing to conduct a full assessment of any environmental and legal liabilities with respect to the BP Properties. As a result, Apache may discover title defects or adverse environmental or other conditions after Apache has closed the BP Acquisition and after expiration of the time periods specified in the BP Purchase Agreements during which Apache may be able to seek, in certain cases, indemnification from or cure of the defect or adverse conditions by BP for such matters. In addition, not all environmental or other conditions that may be identified will be the subject of contractual remedies, and Apache cannot assure you that its contractual remedies will be adequate for any liabilities it incurs.

 

The reserves, production, revenue and direct operating expense estimates with respect to the BP Properties may differ materially from the actual amounts.

 

The reserves and production estimates with respect to the BP Properties mentioned in this proxy statement/prospectus are based on Apache’s analysis of historical production data, assumptions regarding capital expenditures and anticipated production declines. These estimates of reserves and production are based on estimates of Apache’s engineers without review by an independent petroleum engineering firm. Data used to make these estimates were furnished by BP or obtained from publicly available sources. Apache cannot assure you that these estimates of proved reserves and production are accurate. After such data is reviewed by an independent petroleum engineering firm, the BP Acquisition reserves and production may differ materially from the amounts indicated in this proxy statement/prospectus.

 

In addition, the preliminary revenue and direct operating expense estimates with respect to the BP Properties were provided by BP, are unaudited, and have not been reviewed by Apache’s independent accountants. Apache cannot assure you that these preliminary estimates are accurate, and when Apache files separate financial statements and pro forma financial information following consummation of the BP Acquisition, such amounts may differ materially from the amounts indicated in this proxy statement/prospectus.

 

The BP Acquisition and/or Apache’s liabilities could be adversely affected in the event one or more of the BP entities become the subject of a bankruptcy case.

 

In light of the extensive costs and liabilities related to the current oil spill in the Gulf of Mexico, there has been public speculation as to whether one or more of the BP entities will become the subject of a case or proceeding under Title 11 of the United States Code or any other relevant insolvency law or similar law, which we collectively refer to as Insolvency Laws. In the event that one or more of the BP entities were to become the subject of such a case or proceeding, a court may find that the BP Purchase Agreements are executory contracts, in which case such BP entities may, subject to relevant Insolvency Laws, have the right to reject the

agreements and refuse to perform their future obligations under them. In this event, Apache’s ability to enforce its rights under the BP Purchase Agreements could be adversely affected. Furthermore, if any of the BP entities were to become the subject of such a case or proceeding, and Apache were unable to consummate the BP Acquisition, Apache may not be able to collect all or a portion of the full $5.0 billion Apache has deposited with BP pending completion of the acquisition.

 

Additionally, in a case or proceeding under relevant Insolvency Laws, a court may find that the sale of the BP Properties constitutes a constructive fraudulent conveyance that should be set aside. While the tests for determining whether a transfer of assets constitutes a constructive fraudulent conveyance vary among jurisdictions, such a determination generally requires that the seller received less than a reasonably equivalent value in exchange for such transfer or obligation and the seller was insolvent at the time of the transaction, or was rendered insolvent or left with unreasonably small capital to meet its anticipated business needs as a result of the transaction. The applicable time periods for such a finding also vary among jurisdictions, but generally range from two to six years. If a court were to make such determination in a proceeding under relevant Insolvency Laws, Apache’s rights under the BP Purchase Agreements, and its rights to the BP Properties, could be adversely affected.

 

Apache will incur significant transaction and BP Acquisition-related costs in connection with the financing of the BP Acquisition, and may be unable to complete alternative financing before closing of the BP Acquisition.

 

Apache expects to incur, until the closing of the BP Acquisition, significant non-recurring costs associated with the financing of the BP Acquisition, including obtaining and maintaining the committed Bridge Facility that assures Apache’s ability to pay the consideration for the BP Acquisition. In addition, Apache will be subject to numerous market risks in connection with its plan to raise alternative financing to fund the purchase price of the BP Acquisition prior to closing, including risks related to general economic conditions and changes in the costs of capital. In the event less than all of the BP Acquisition purchase price, or applicable portions thereof, is available to Apache when due and payable, Apache will be required to draw under the Bridge Facility in order to complete the BP Acquisition, and the costs to do so may be significant.

 

The failure to complete the BP Acquisition could adversely affect the market price of Apache’s common stock and otherwise have an adverse effect on Apache.

 

There are a number of conditions to the completion of the BP Acquisition contained in the BP Purchase Agreements that must be satisfied for the transactions to close, and there can be no assurance that the conditions will be satisfied. If Apache does not complete the acquisition under one or more of the BP Purchase Agreements, the market price of Apache’s common stock will likely fall to the extent that the market price reflects an expectation that all of the transactions will be completed. Further, a failed transaction may result in negative publicity and/or negative impression of Apache in the investment community and may affect its relationships with creditors and other business partners.

 

If the BP Acquisition is not completed, Apache also must pay costs related to the BP Acquisition including, among others, legal, accounting and financial advisory, as well as certain fees and expenses with respect to the committed Bridge Facility whether the BP Acquisition is completed or not. Apache also could be subject to litigation related to the failure to complete the BP Acquisition or other factors, which may adversely affect its business, financial results and stock price. In addition, if the BP Acquisition is not completed, Apache intends to use the net proceeds received in connection with its offerings of common stock and depositary shares and the subsequent debt financing Apache expects to undertake for general corporate purposes. However, Apache would be subject to significant earnings per share dilution and significantly increased leverage as a result.

 

The trading price of Apache’s common stock may be subject to significant fluctuations and volatility.

 

The market price of Apache’s common stock could be subject to significant fluctuations due to a change in sentiment in the market regarding its operations or business prospects. Such risks may be affected by the

factors described above and “Cautionary Statements Concerning Forward-Looking Statements” as well as in the documents incorporated by reference in this proxy statement/prospectus to which we have referred you.

 

Stock markets in general and Apache’s common stock in particular have experienced over the past two years, and continue to experience, significant price and volume volatility. As a result, the market price of Apache’s common stock may continue to be subject to similar market fluctuations that may be unrelated to its operating performance or business prospects. Increased volatility could result in a decline in the market price of Apache’s common stock.

 

Apache’s ability to declare and pay dividends is subject to limitations.

 

The payment of future dividends on Apache’s capital stock is subject to the discretion of Apache’s board of directors, which considers, among other factors, its operating results, overall financial condition, credit-risk considerations and capital requirements, as well as general business and market conditions. Apache’s board of directors is not required to declare dividends on its common stock and may decide not to declare dividends.

 

The instrument governing Apache’s revolving credit facility limits, the Bridge Facility limits, and any indentures and other financing agreements that Apache enters into in the future may limit, Apache’s ability to pay cash dividends on its capital stock, including Apache common stock. In the event that any of Apache’s indentures or other financing agreements in the future restrict Apache’s ability to pay dividends in cash on its common stock, Apache may be unable to pay dividends in cash on its common stock unless Apache can refinance amounts outstanding under those agreements.

 

In addition, under Delaware law, dividends on capital stock may only be paid from “surplus,” which is defined as the amount by which Apache’s total assets exceeds the sum of Apache’s total liabilities, including contingent liabilities, and the amount of Apache’s capital; if there is no surplus, cash dividends on capital stock may only be paid from Apache’s net profits for the then current and/or the preceding fiscal year. Further, even if Apache is permitted under its contractual obligations and Delaware law to pay cash dividends on its common stock, Apache may not have sufficient cash to pay dividends in cash on its common stock.

 

Offerings of debt by Apache, which would be senior to Apache’s common stock upon liquidation, and/or preferred equity securities, which would be senior to Apache common stock for purposes of dividend distributions or upon liquidation, may adversely affect the market price of Apache’s common stock.

 

Upon liquidation, holders of Apache’s debt securities and lenders with respect to other borrowings will receive distributions of Apache’s available assets prior to the holders of Apache’s common stock.

 

Apache’s board of directors is authorized to issue one or more classes or series of preferred stock from time to time without any action on the part of the stockholders. Apache’s board of directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over Apache’s common stock with respect to dividends or upon Apache’s dissolution, winding-up and liquidation and other terms. If Apache issues preferred stock in the future that has a preference over its common stock with respect to the payment of dividends or upon its liquidation, dissolution, or winding-up, or if Apache issues preferred stock with voting rights that dilute the voting power of the mandatory convertible preferred stock and its common stock, the rights of holders of Apache common stock or the market price of Apache’s common stock could be adversely affected.

 

In addition, offerings of Apache common stock or of securities linked to Apache common stock may dilute the holdings of Apache’s existing common stockholders or reduce the market price of Apache common stock. Holders of Apache common stock are not entitled to preemptive rights.

 

There may be future sales or other dilution of Apache’s equity, which may adversely affect the market price of Apache’s common stock.

 

In connection with its offerings of common stock and depositary shares, Apache agreed not to issue additional shares of common stock or securities convertible into common stock, subject to specified exceptions

including the issuance of shares in connection with the Mariner transaction, for a period of 90 days ending October 21, 2010. Additionally, Apache’s directors and executive officers have agreed not to sell or otherwise dispose of any of their shares, subject to specified exceptions, for a period of 90 days ending October 21, 2010.

 

Otherwise, Apache is not restricted from issuing additional shares of common stock, including the common shares issuable upon conversion of the Mandatory Convertible Preferred Stock. The issuance of any additional shares of common or of preferred stock or convertible securities or the exercise of such securities could be substantially dilutive to holders of Apache common stock. Holders of shares of Apache common stock are not entitled to any preemptive rights by virtue of their status as stockholders and that status does not entitle them to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to Apache stockholders.

 

The price of Apache’s common stock may be adversely affected by future sales of Apache common stock or securities that are convertible into or exchangeable for, or of securities that represent the right to receive, Apache common stock or other dilution of Apache’s equity, or by Apache’s announcement that such sales or other dilution may occur.

 

Contractual and statutory provisions may delay or make more difficult acquisitions or changes of control of Apache.

 

Provisions of Delaware law and Apache’s Restated Certificate of Incorporation and Bylaws, and contracts to which Apache are a party could make it more difficult for a third party to acquire control of Apache or have the effect of discouraging a third party from attempting to acquire control of Apache.

 

Apache’s Mandatory Convertible Preferred Stock could restrict Apache’s ability to pay dividends on its common stock.

 

The terms of Apache’s Mandatory Convertible Preferred Stock could restrict Apache’s ability to pay cash dividends on its common stock. Apache may not declare or pay a dividend or distribution on its common stock unless all accrued and unpaid dividends for all past quarterly dividend periods on all outstanding shares of Mandatory Convertible Preferred Stock have been or are contemporaneously declared and paid in full or a sufficient amount for such has been set aside.

 

This proxy statement/prospectus and the documents incorporated by reference in this proxy statement/prospectus contain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Representatives of Apache and Mariner may also make forward-looking statements. Forward-looking statements are opinions, forecasts, projections, future plans or other statements other than statements of historical fact and are identified by terminology such as “expect,” “anticipate,” “estimate,” “intend,” “may,” “will,” “could,” “would,” “should,” “predict,” “potential,” “plan,” “project,” “likely,” “believe” or the negative of these terms or similar terminology. Neither Mariner nor Apache can give any assurance that such expectations will prove to be correct. Actual results could differ materially as a result of a variety of risks and uncertainties, including: the timing to consummate the proposed agreement; the risk that a condition to closing the proposed agreement may not be satisfied; the risk that a regulatory approval that may be required for the proposed agreement is not obtained or is obtained subject to conditions that are not anticipated; negative effects from the pendency of the merger; Apache’s ability to achieve the synergies and value creation contemplated by the proposed agreement; Apache’s ability to promptly and effectively integrate the merged businesses; and the diversion of management time on agreement-related issues.

 

These statements are only predictions and are not guarantees of performance. Actual results may differ materially from those expected, estimated or projected because of market conditions or other factors. These statements are based upon the current beliefs and expectations of management of Apache and Mariner and are subject to numerous risks and uncertainties that could cause actual outcomes and results to be materially different from those projected or anticipated. In addition to the risks described under “Risk Factors” and those risks described in documents that are incorporated by reference into this proxy statement/prospectus, the following factors, among others, could cause actual results to be materially different from those expressed or implied by any forward-looking statements: