Apache Corporation is an international, independent energy enterprise engaged in the exploration, development, production, gathering, processing, and marketing of natural gas and crude oil. Its corporate headquarters are in Houston, Texas, and it has operations in 18 states of the United States as well as Australia, the Congo, France, Myanmar, and Indonesia.

The 1994 annual report of Apache Corporation disclosed the following information:

\section*{Instructions}

(a) Identify the face amount, contractual interest rate, and selling price of the newly issued bonds due in 2002. Explain whether the bonds sold at a premium or a discount.

(b) For what purposes has Apache Corporation been incurring more debt?

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APACHE CORPORATION Management Discussion Apache CORPORATION In May 1994, Apache issued 9.25% bonds due 2002 in the principal amount of $100 million. The proceeds of $99 million from the offering were used to reduce bank debt, to pay off the 9.5% convertible debentures due 1996, and for general corporate purposes. In December 1994, the company privately placed 3.93% convertible notes due 1997 in the principal amount of $75 million. The notes are not redeemable before maturity and are convertible into Apache common stock at the option of the holders at any time prior to maturity, at a conversion price of $27 per share. Proceeds from the sale of the notes were used for the repayment of bank debt.