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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 11-K
Annual Report
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark One):
     
þ   Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934
(No fee required, effective October 7, 1996)
For the fiscal year ended December 31, 2006
Or
     
o   Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934
(No fee required)
For the transition period from                                          to                                          
Commission file number 33-63817
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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Financial Statements and Supplemental Schedules
Apache Corporation 401(k) Savings Plan
December 31, 2006 and 2005 and Year Ended December 31, 2006

 


 

Apache Corporation 401(k) Savings Plan
Financial Statements and Supplemental Schedules
December 31, 2006 and 2005 and Year Ended December 31, 2006
Contents
         
    1  
 
       
Audited Financial Statements
       
 
       
    2  
    3  
    4  
 
       
       
 
       
    10  
    11  
 Consent of Ernst & Young LLP

 


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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, 2006 and 2005, and the related statement of changes in net assets available for benefits for the year ended December 31, 2006. 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 Plan at December 31, 2006 and 2005, and the changes in its net assets available for benefits for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets (held at end of year) as of December 31, 2006, and delinquent participant contributions for the year then ended, are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP                     
Houston, Texas
June 25, 2007

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Apache Corporation 401(k) Savings Plan
Statements of Net Assets Available for Benefits
                 
    December 31  
    2006     2005  
     
Assets
               
Receivables:
               
Securities sold
  $ 8,619     $ 213,763  
Investments, at fair value
    277,673,168       253,596,428  
     
Net assets available for benefits, at fair value
    277,681,787       253,810,191  
Adjustment from fair value to contract value for fully benefit-responsive investment contracts
    177,888       180,783  
     
Net assets available for benefits
  $ 277,859,675     $ 253,990,974  
     
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, 2006
         
Additions:
       
Employer contributions
  $ 7,882,726  
Participant contributions
    12,315,183  
Rollover contributions
    1,390,499  
Investment income
    8,932,249  
Net appreciation in fair value of investments
    5,678,337  
 
     
Total additions
    36,198,994  
 
       
Deductions:
       
Benefits paid to participants
    12,281,645  
Administrative fees
    48,648  
 
     
Total deductions
    12,330,293  
 
     
 
       
Net increase
    23,868,701  
 
       
Net assets available for benefits at:
       
Beginning of year
    253,990,974  
 
     
End of year
  $ 277,859,675  
 
     
See accompanying notes.

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Apache Corporation 401(k) Savings Plan
Notes to Financial Statements
December 31, 2006
1. Description of Plan
The following brief 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
Beginning on the first day of the month following their date of hire, participants may elect to contribute up to 50% of their eligible compensation and will receive Company matching contributions equal to 100% of the first 6% of their contributions. Effective April 1, 2006, new employees eligible for the Plan will be automatically enrolled with a deferral percentage of 6% and a default investment election to the Fidelity Managed Income Portfolio investment option, unless the employee elects not to participate or elects a different deferral percentage or fund option. 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% vested after completion of one year of service and continues to vest 20% per year, becoming fully vested after completion of five years of credited service. Forfeitures of unvested accounts may be used by the Company to reduce future Employer contributions to the Plan or pay administrative expenses of the Plan.
Participant Loans
Participants may borrow from their own contributions a minimum of $500, up to the lesser of $50,000 less the participant’s highest outstanding loan balance during the preceding 12 months or 50% of their vested account balance. Loans are charged at a rate of interest equal to the current prime lending rate plus 1%. Loans 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)
1. Description of Plan (continued)
Benefit Payments
Participants are eligible to receive lump-sum benefits equal to the vested value of their account in the event of retirement, disability, death, or termination of employment.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants become fully vested.
Administrative Expenses
Certain administrative expenses of the Plan are paid by the Company.
2. Summary of Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. Benefit payments are recorded when paid.
New Accounting Pronouncement
In December 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP). The FSP defines the circumstances in which an investment contract is considered fully benefit-responsive and provides certain reporting and disclosure requirements for fully benefit-responsive investment contracts in defined contribution health and welfare and pension plans. The financial statement presentation and disclosure provisions of the FSP are effective for financial statements issued for annual periods ending after December 15, 2006, and are required to be applied retroactively to all prior periods presented for comparative purposes. The Plan has adopted the provisions of the FSP at December 31, 2006.

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Apache Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
2. Summary of Accounting Policies (continued)
As required by the FSP, investments in the accompanying statements of net assets available for benefits include fully benefit-responsive investment contracts recognized at fair value. American Institute of Certified Public Accountants (AICPA) Statement of Position 94-4-1, Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined Contribution Pension Plans, as amended, requires fully benefit-responsive investment contracts to be reported at fair value in the Plan’s statement of net assets available for benefits with a corresponding adjustment to reflect these investments at contract value. The requirements of the FSP have been applied retroactively to the statement of net assets available for benefits as of December 31, 2005, presented for comparative purposes. Adoption of the FSP had no effect on the statement of changes in net assets available for benefits.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the reported amounts in the financial statements, accompanying notes, and supplemental schedules. 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. Investments in mutual funds and corporate stocks are stated at fair value based on quotations obtained from national securities exchanges. The money market funds and participant loans are stated at cost, which approximates fair value.
The Fidelity Managed Income Portfolio is a common collective trust that invests in fully benefit-responsive investment contracts. Investments in wrap contracts are fair valued using a discounted cash flow model that considers recent fee bids as determined by recognized dealers, discount rate, and the duration of the underlying portfolio securities. Fair value of the underlying debt securities for which quotations are readily available are valued at their most recent bid prices or on the basis of information provided by a pricing service.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

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Apache Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
2. Summary of Accounting Policies (continued)
Risks and Uncertainties
The Plan provides for investments in various investment securities which, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits and participant account balances.
3. Investments
Individual investments that represent 5% or more of the Plan’s net assets at either December 31, 2006 or 2005, are as follows:
                 
    December 31  
    2006     2005  
     
Apache Corporation common stock
  $ 116,239,328     $ 121,545,092  
Fidelity Managed Income Portfolio (at contract value)
    17,876,975       16,105,065  
Fidelity Low-Priced Stock Fund
    17,775,775       14,709,393  
Davis New York Venture Fund
    26,276,348       23,067,647  
During 2006, the Plan’s investments (including investments bought, sold, and held during the year) appreciated in value as follows:
         
    Year Ended  
    December 31  
    2006  
Mutual funds
  $ 7,862,499  
Corporate stocks
    (2,184,162 )
 
     
 
  $ 5,678,337  
 
     

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Apache Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service (IRS) dated July 22, 2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the IRC) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan, as amended and restated, is qualified and the related trust is tax exempt.
5. 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.
6. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2006, to the Form 5500:
         
Net assets available for benefits per the financial statements
  $ 277,859,675  
Adjustment from fair value to contract value for fully benefit-responsive investment contracts
    (177,888 )
 
     
Net assets available for benefits per the Form 5500
  $ 277,681,787  
 
     
The following is a reconciliation of the net increase in net assets available for benefits per the financial statements for the year ended December 31, 2006, to the Form 5500:
         
Net increase in net assets available for benefits per the financial statements
  $ 23,868,701  
Adjustment from fair value to contract value for fully benefit-responsive investment contracts
    (177,888 )
 
     
Net increase in assets available for benefits per the Form 5500
  $ 23,690,813  
 
     

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Apache Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
6. Reconciliation of Financial Statements to Form 5500 (continued)
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 Schedules

 


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Apache Corporation 401(k) Savings Plan
Schedule H, Line 4(a) – Schedule of Delinquent Participant Contributions
EIN: 41-0747868 PN: 002
Year Ended December 31, 2006
     
Participant Contributions
  Total That Constitute Nonexempt
Transferred Late to Plan   Prohibited Transactions
 
 
$30   $30

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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, 2006
                 
Identity of Issue, Borrower,            
Lessor, or Similar Party   Description of Investment   Current Value  
 
*   Apache Corporation  
1,747,687 shares of common stock
  $ 116,239,328  
*   Fidelity Investments  
Fidelity Puritan Fund
    6,821,906  
*   Fidelity Investments  
Fidelity Cash Reserves Fund
    2,233  
*   Fidelity Investments  
Fidelity Intermediate Bond Fund
    7,165,596  
*   Fidelity Investments  
Fidelity Blue Chip Growth Fund
    11,653,710  
*   Fidelity Investments  
Fidelity Magellan Fund
    728,519  
*   Fidelity Investments  
Fidelity Growth Company Fund
    7,070,924  
*   Fidelity Investments  
Fidelity Retirement Money Market Portfolio
    13,223,055  
*   Fidelity Investments  
Fidelity Managed Income Portfolio
    17,699,087  
*   Fidelity Investments  
Spartan U. S. Equity Index Fund
    6,873,774  
*   Fidelity Investments  
Fidelity Low-Priced Stock Fund
    17,775,775  
*   Fidelity Investments  
Fidelity Freedom Income Fund
    247,329  
*   Fidelity Investments  
Fidelity Freedom 2000 Fund
    44,496  
*   Fidelity Investments  
Fidelity Freedom 2010 Fund
    1,545,614  
*   Fidelity Investments  
Fidelity Freedom 2020 Fund
    3,261,398  
*   Fidelity Investments  
Fidelity Freedom 2030 Fund
    1,053,466  
*   Fidelity Investments  
Fidelity Freedom 2040 Fund
    1,406,257  
    Ariel Mutual Funds  
Ariel Appreciation Fund
    3,898,358  
    Davis Funds  
Davis New York Venture Fund
    26,276,348  
    Western Asset Funds, Inc.  
Western Asset Core Portfolio Institutional Fund
    904,633  
    Van Kampen Funds, Inc.  
Van Kampen Comstock Fund
    13,766,888  
    MFS Fund Distributors, Inc.  
MFS International New Discovery Fund
    4,980,250  
    American Beacon  
American Beacon Small Cap Value Fund
    2,995,252  
    Morgan Stanley  
Morgan Stanley Institutional Fund, Inc.
     – Intermediate Equity Portfolio
    8,223,697  
    Brokerage link  
Self-directed brokerage account
    2,128,688  
*   Participant loans  
Varying maturity dates and interest rates ranging from 5% to 9.25%
    1,686,587  
       
 
     
       
 
  $ 277,673,168  
       
 
     
 
*   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 26, 2007
  /s/ Jeffrey M. Bender
 
   
 
  Jeffrey M. Bender, Chairman
 
  Retirement Plan Advisory Committee

 


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INDEX TO EXHIBITS
     
Exhibit No.   Description
 
23.1
  Consent of Ernst & Young LLP