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Apache's Accelerated Drilling Program Fuels Record Second-Quarter Production

HOUSTON, Aug. 2, 2012 /PRNewswire/ -- Apache Corporation (NYSE, Nasdaq: APA) said today that accelerating worldwide drilling activity fueled record second-quarter 2012 production of 774,000 barrels of oil equivalent (boe) per day.

Apache's second-quarter earnings totaled $337 million, or 86 cents per diluted share, reflecting the impact of a $480 million non-cash, after-tax reduction in the carrying value of its oil and gas properties in Canada stemming from lower North American natural gas prices. For the same period last year, Apache reported earnings of $1.24 billion, or $3.17 per diluted share.

Apache's adjusted earnings*, which exclude certain items that impact the comparability of operating results, totaled $821 million or $2.07 per diluted common share in the second quarter, as the impact of higher production was offset in part by lower oil and gas prices. In the prior-year period, Apache reported adjusted earnings of $1.26 billion or $3.22 per share. Cash from operations before changes in operating assets and liabilities* totaled $2.38 billion in the second quarter, down from $2.64 billion in the prior-year period.

"As we announced at our Investor Day presentation in June, Apache has assembled an inventory of 67,000 drillable locations in liquids-rich onshore U.S. plays, and now is the time to drill wells," said G. Steven Farris, chairman and chief executive officer. "Rigs are running — 36 in the Permian Basin, up from 26 at the end of 2011, and 24 in the Anadarko Basin, up from seven at year-end. The impact of our accelerated drilling program is beginning to take hold."

In the Permian Basin, production was up quarter-over-quarter by 5 percent, putting Apache on track to deliver its long-term Permian production growth target of 13 percent per year. In the Anadarko Basin, production increased 47 percent sequentially, including volumes from the Cordillera Energy Partners III acquisition that closed April 30. Apache's Anadarko Basin production is on target to achieve the goal of growing by 24 percent per year through 2016.

"Apache is gaining momentum, and we project rising production throughout the second half," Farris said.

Apache anticipates achieving its long-term global growth forecast of 6 to 9 percent in 2012 from 2011, net of 11,000 boe per day from assets in Canada and East Texas sold in the second half of 2011.  Second-quarter 2012 volumes were hampered by unanticipated downtime totaling approximately 16,000 boe per day.

Although North Sea production was flat from the first quarter to the second, positive drilling results in the Bacchus and Beryl fields are projected to increase production there in the second half of 2012.

In Australia, a new development well drilled in the Pyrenees Field offshore Western Australia commenced production on July 14; the well currently is producing 11,000 barrels of oil per day (3,135 barrels per day net to Apache).

Consistent with Apache's active drilling program, the company was the apparent high bidder on 90 blocks in the Bureau of Ocean Energy and Management's recent lease sale in the Gulf of Mexico. Apache is currently operating six rigs in the Gulf.

Commodity markets continued to be marked by volatility during the second quarter. Worldwide, Apache received an average of $97.66 per barrel of oil, down from $106.31 per barrel in the prior-year period. Apache benefitted from higher prices realized on Dated Brent crude produced in the company's Australia, North Sea and Egypt regions, and on sweet crude from the Gulf of Mexico regions. Apache received these premium prices on approximately 73 percent of crude oil production.

While North American natural gas price realizations fell 35 percent from the prior-year period to $3.17 per thousand cubic feet (Mcf), Apache's international regions saw prices rise 8 percent to $4.08 per Mcf. International gas production rose 100 million cubic feet per day from the prior-year period and represented 37 percent of Apache's total gas volumes.

*Adjusted earnings and cash from operations before changes in operating assets and liabilities are non-GAAP measures. Please see reconciliations below. For supplemental and non-GAAP information, please go to http://www.apachecorp.com/financialinfo.

Apache to webcast conference call
Apache Corporation will conduct its second-quarter 2012 results at 1 p.m. Central time on Thursday, August 2. The conference call will be webcast from Apache's website, www.apachecorp.com. The webcast replay will be archived on Apache's website. The conference call will be available for delayed playback by telephone for one week beginning at approximately 4 p.m. on August 2. To access the telephone playback, dial 855-859-2056 or 404-537-3406 for international calls. The conference access code is 42313772.

About Apache
Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt, the United Kingdom North Sea, Australia and Argentina. Apache posts announcements, operational updates, investor information and copies of all press releases on its website, www.apachecorp.com.

Forward-looking statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods. These statements include, but are not limited to, statements about future plans, expectations, and objectives for Apache's operations including statements about our drilling plans and future production growth. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations. See "Risk Factors" in our 2011 Form 10-K filed with the Securities and Exchange Commission for a discussion of risk factors that affect our business. Any forward-looking statement made by us in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future development, or otherwise, except as may be required by law.

APACHE CORPORATION

STATEMENT OF CONSOLIDATED OPERATIONS

(In millions, except per share data)

                 
   

For the Quarter 

 

For the Six Months 

   

Ended June 30,

 

Ended June 30,

   

2012

 

2011

 

2012

 

2011

                 

REVENUES AND OTHER:

             
 

Oil and gas production revenues

$ 3,956

 

$ 4,355

 

$ 8,413

 

$ 8,233

 

Other 

16

 

(17)

 

95

 

30

   

3,972

 

4,338

 

8,508

 

8,263

                 

COSTS AND EXPENSES:

             
 

Depreciation, depletion and amortization

             
 

    Recurring

1,284

 

1,003

 

2,503

 

1,939

 

    Additional

648

 

26

 

1,169

 

26

 

Asset retirement obligation accretion

57

 

38

 

112

 

75

 

Lease operating expenses

704

 

662

 

1,377

 

1,285

 

Gathering and transportation 

72

 

73

 

149

 

149

 

Taxes other than income

203

 

255

 

460

 

419

 

General and administrative

132

 

103

 

260

 

215

 

Merger, acquisitions & transition

16

 

6

 

22

 

11

 

Financing costs, net

45

 

41

 

85

 

86

   

3,161

 

2,207

 

6,137

 

4,205

                 

INCOME BEFORE INCOME TAXES

811

 

2,131

 

2,371

 

4,058

 

Current income tax provision 

460

 

576

 

1,185

 

1,219

 

Deferred income tax provision

(5)

 

296

 

33

 

446

                 

NET INCOME 

356

 

1,259

 

1,153

 

2,393

 

Preferred stock dividends

19

 

19

 

38

 

38

                 

INCOME ATTRIBUTABLE TO COMMON STOCK

$    337

 

$ 1,240

 

$ 1,115

 

$ 2,355

                 

NET INCOME PER COMMON SHARE:

             
 

Basic

$   0.87

 

$   3.23

 

$   2.88

 

$   6.14

 

Diluted 

$   0.86

 

$   3.17

 

$   2.86

 

$   6.03

                 

WEIGHTED-AVERAGE NUMBER OF COMMON 

             

   SHARES OUTSTANDING:

             
 

Basic

389

 

384

 

387

 

383

 

Diluted

390

 

397

 

403

 

397

                 

DIVIDENDS DECLARED PER COMMON SHARE

$   0.17

 

$   0.15

 

$   0.34

 

$   0.30

 

APACHE CORPORATION

SUMMARY OF CAPITAL COSTS INCURRED

(In millions)

                       
         

For the Quarter 

 

For the Six Months 

         

Ended June 30,

 

Ended June 30,

         

2012

 

2011

 

2012

 

2011

CAPITAL EXPENDITURES (1):

               
 

Exploration & Development Costs

               
   

United States

 

$          1,392

 

$             673

 

$          2,186

 

$          1,288

   

Canada

 

97

 

168

 

295

 

434

     

North America

 

1,489

 

841

 

2,481

 

1,722

   

Egypt

 

260

 

284

 

510

 

477

   

Australia

 

175

 

156

 

253

 

318

   

North Sea

 

224

 

211

 

420

 

421

   

Argentina

 

73

 

89

 

157

 

158

   

Other International

 

12

 

27

 

33

 

27

     

International

 

744

 

767

 

1,373

 

1,401

     

Worldwide Exploration & Development Costs

 

$          2,233

 

$          1,608

 

$          3,854

 

$          3,123

                       
 

Gathering, Transmission and Processing Facilities

               
   

United States

 

$               32

 

$                  -

 

$               44

 

$                  -

   

Canada

 

42

 

42

 

86

 

84

   

Egypt

 

20

 

25

 

37

 

54

   

Australia

 

77

 

68

 

249

 

119

   

Argentina

 

5

 

4

 

9

 

4

     

Total Gathering, Transmission and Processing

 

$             176

 

$              139

 

$             425

 

$             261

                       
 

Capitalized Interest

 

$               85

 

$                63

 

$             151

 

$             123

                       
 

Capital Expenditures, excluding Acquisitions

 

$          2,494

 

$           1,810

 

$          4,430

 

$          3,507

                       
 

Acquisitions

 

$          3,302

 

$                84

 

$          3,362

 

$              95

                       
 

(1) Accrual basis

               
                       

APACHE CORPORATION

SUMMARY BALANCE SHEET INFORMATION

(In millions)

                       
         

June 30,

 

December 31,

       
         

2012

 

2011

       
                       
 

Cash and Cash Equivalents

 

$           361

 

$             295

       
 

Other Current Assets 

 

4,278

 

4,508

       
 

Property and Equipment, net

 

50,135

 

45,448

       
 

Goodwill

 

1,114

 

1,114

       
 

Other Assets

 

1,329

 

686

       
 

Total Assets

 

$     57,217

 

$        52,051

       
                       
 

Short-Term Debt

 

$           568

 

$             431

       
 

Other Current Liabilities

 

4,553

 

4,532

       
 

Long-Term Debt

 

9,670

 

6,785

       
 

Deferred Credits and Other Noncurrent Liabilities

 

11,753

 

11,310

       
 

Shareholders' Equity

 

30,673

 

28,993

       
 

Total Liabilities and Shareholders' Equity

 

$     57,217

 

$       52,051

       
                       
 

Common shares outstanding at end of period

 

391

 

384

       

 

APACHE CORPORATION

PRODUCTION INFORMATION

                       
         

For the Quarter 

 

For the Six Months 

         

Ended June 30,

 

Ended June 30,

         

2012

 

2011

 

2012

 

2011

                       

  OIL VOLUME - Barrels per day

               
 

Central

 

11,985

 

6,761

 

9,234

 

5,833

 

Permian

 

58,391

 

49,823

 

57,436

 

49,055

 

GOM Deepwater

 

6,237

 

6,090

 

6,019

 

5,708

 

GOM Shelf

 

41,773

 

44,792

 

44,253

 

45,670

 

GC Onshore

 

9,292

 

9,791

 

9,861

 

9,233

   

United States

 

127,678

 

117,257

 

126,803

 

115,499

 

Canada

 

15,277

 

14,408

 

15,429

 

14,555

   

North America

 

142,955

 

131,665

 

142,232

 

130,054

 

Egypt

   

98,922

 

99,634

 

99,206

 

104,230

 

Australia

 

30,497

 

40,573

 

30,447

 

37,663

 

North Sea

 

65,996

 

57,364

 

65,971

 

52,195

 

Argentina

 

9,583

 

9,656

 

9,608

 

9,636

   

International

 

204,998

 

207,227

 

205,232

 

203,724

     

Total 

 

347,953

 

338,892

 

347,464

 

333,778

                       

  NATURAL GAS VOLUME - Mcf per day

               
 

Central

 

235,308

 

189,120

 

200,585

 

180,850

 

Permian

 

178,068

 

173,609

 

179,161

 

166,348

 

GOM Deepwater

 

47,782

 

56,673

 

47,389

 

58,620

 

GOM Shelf

 

301,511

 

349,697

 

316,826

 

349,273

 

GC Onshore

 

81,744

 

111,184

 

86,992

 

114,185

   

United States

 

844,413

 

880,283

 

830,953

 

869,276

 

Canada

 

612,064

 

636,718

 

624,145

 

639,707

   

North America

 

1,456,477

 

1,517,001

 

1,455,098

 

1,508,983

 

Egypt

   

358,985

 

358,870

 

367,526

 

365,157

 

Australia

 

211,524

 

179,582

 

217,930

 

181,243

 

North Sea

 

64,722

 

2,367

 

65,894

 

2,135

 

Argentina

 

224,289

 

215,203

 

217,741

 

201,722

   

International

 

859,520

 

756,022

 

869,091

 

750,257

     

Total 

 

2,315,997

 

2,273,023

 

2,324,189

 

2,259,240

                       

  NGL VOLUME - Barrels per day

               
 

Central

 

3,962

 

687

 

3,738

 

726

 

Permian

 

16,405

 

12,824

 

14,527

 

11,092

 

GOM Deepwater

 

1,474

 

430

 

865

 

777

 

GOM Shelf

 

5,762

 

5,731

 

4,678

 

6,067

 

GC Onshore

 

2,062

 

2,131

 

2,183

 

1,872

   

United States

 

29,665

 

21,803

 

25,991

 

20,534

 

Canada

 

5,844

 

5,998

 

6,078

 

6,270

   

North America

 

35,509

 

27,801

 

32,069

 

26,804

 

Egypt

   

-

 

(24)

 

-

 

101

 

North Sea

 

1,957

 

-

 

1,962

 

-

 

Argentina

 

3,067

 

3,014

 

3,030

 

3,035

   

International

 

5,024

 

2,990

 

4,992

 

3,136

     

Total

 

40,533

 

30,791

 

37,061

 

29,940

                       

  BOE per day

               
 

Central

 

55,165

 

38,969

 

46,403

 

36,701

 

Permian

 

104,475

 

91,582

 

101,824

 

87,872

 

GOM Deepwater

 

15,675

 

15,965

 

14,782

 

16,255

 

GOM Shelf

 

97,787

 

108,806

 

101,735

 

109,949

 

GC Onshore

 

24,978

 

30,451

 

26,543

 

30,136

   

United States

 

298,080

 

285,773

 

291,287

 

280,913

 

Canada

 

123,131

 

126,526

 

125,531

 

127,443

   

North America

 

421,211

 

412,299

 

416,818

 

408,356

 

Egypt

   

158,752

 

159,422

 

160,460

 

165,190

 

Australia

 

65,751

 

70,503

 

66,769

 

67,870

 

North Sea

 

78,741

 

57,758

 

78,915

 

52,551

 

Argentina

 

50,031

 

48,537

 

48,928

 

46,291

   

International

 

353,275

 

336,220

 

355,072

 

331,902

     

Total 

 

774,486

 

748,519

 

771,890

 

740,258

 

APACHE CORPORATION

PRICE INFORMATION

                       
         

For the Quarter 

 

For the Six Months 

         

Ended June 30,

 

Ended June 30,

         

2012

 

2011

 

2012

 

2011

                       

  AVERAGE OIL PRICE PER BARREL

               
 

Central

 

$ 88.14

 

$ 96.79

 

$ 91.88

 

$ 93.72

 

Permian

 

86.71

 

98.28

 

92.44

 

93.60

 

GOM Deepwater

 

105.82

 

110.91

 

108.23

 

104.74

 

GOM Shelf

 

109.20

 

114.29

 

111.76

 

106.46

 

GC Onshore

 

108.41

 

109.60

 

111.05

 

103.97

   

United States (1)

 

94.37

 

98.41

 

98.20

 

94.15

 

Canada

 

82.35

 

102.42

 

87.46

 

94.78

   

North America (1)

 

93.08

 

98.85

 

97.03

 

94.22

 

Egypt(1)

 

98.73

 

115.26

 

111.18

 

111.05

 

Australia(1)

 

109.46

 

115.18

 

116.20

 

110.92

 

North Sea(1)

 

104.16

 

108.44

 

108.67

 

105.06

 

Argentina

 

72.69

 

65.58

 

77.88

 

62.99

   

International (1)

 

100.86

 

111.04

 

109.56

 

107.22

     

Total(1)

 

97.66

 

106.31

 

104.43

 

102.15

                       

  AVERAGE NATURAL GAS PRICE PER MCF

               
 

Central

 

$   2.73

 

$   4.81

 

$   2.89

 

$   4.70

 

Permian

 

2.79

 

5.25

 

3.26

 

5.13

 

GOM Deepwater

 

2.34

 

4.53

 

2.65

 

4.31

 

GOM Shelf

 

2.47

 

4.65

 

2.84

 

4.59

 

GC Onshore

 

2.31

 

4.55

 

2.57

 

4.40

   

United States (1)

 

3.33

 

5.05

 

3.63

 

4.99

 

Canada (1)

 

2.94

 

4.71

 

3.18

 

4.63

   

North America (1)

 

3.17

 

4.91

 

3.44

 

4.84

 

Egypt

   

3.75

 

4.79

 

3.77

 

4.61

 

Australia

 

4.41

 

2.74

 

4.29

 

2.62

 

North Sea

 

9.42

 

26.41

 

8.68

 

23.72

 

Argentina

 

2.76

 

2.74

 

2.87

 

2.48

   

International

 

4.08

 

3.79

 

4.05

 

3.61

     

Total (1)

 

3.51

 

4.54

 

3.67

 

4.43

                       

  AVERAGE NGL PRICE PER BARREL

               
 

Central

 

$ 26.45

 

$ 61.55

 

$ 31.63

 

$ 54.67

 

Permian

 

34.36

 

52.09

 

38.90

 

49.34

 

GOM Deepwater

 

35.73

 

65.10

 

36.14

 

45.31

 

GOM Shelf

 

31.02

 

50.31

 

35.59

 

46.16

 

GC Onshore

 

38.29

 

59.59

 

42.97

 

57.93

   

United States

 

32.99

 

52.91

 

37.51

 

49.22

 

Canada

 

32.07

 

46.63

 

37.03

 

43.25

   

North America

 

32.84

 

51.56

 

37.42

 

47.82

 

Egypt

   

-

 

43.53

 

-

 

65.73

 

North Sea

 

69.23

 

-

 

76.69

 

-

 

Argentina

 

21.09

 

27.64

 

23.61

 

29.08

   

International

 

39.84

 

27.51

 

44.47

 

30.26

     

Total

 

33.71

 

49.22

 

38.37

 

45.98

                       

(1)  Prices reflect the impact of financial derivative hedging activities. 

 

APACHE CORPORATION

NON-GAAP FINANCIAL MEASURES

(In millions, except per share data)

                 

Reconciliation of income attributable to common stock to adjusted earnings:

The press release discusses Apache's adjusted earnings.  Adjusted earnings exclude certain items that management believes affect the comparability of operating results and are meaningful for the following reasons:

                 
  • ŸManagement uses adjusted earnings to evaluate the company's operational trends and performance relative to other oil and gas producing companies.
  • ŸManagement believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported company earnings for items that may obscure underlying fundamentals and trends.  
  • ŸThe reconciling items below are the types of items management believes are frequently excluded by analysts when evaluating the operating trends and comparability of the company's results.
                 
   

For the Quarter 

 

For the Six Months 

   

Ended June 30,

 

Ended June 30,

   

2012

 

2011

 

2012

 

2011

                 

Income Attributable to Common Stock (GAAP)

$       337

 

$    1,240

 

$    1,115

 

$    2,355

                 

Adjustments:

             
 

Canada proved property write-down, net of tax

480

 

-

 

870

 

-

 

Merger, acquisitions & transition, net of tax

10

 

3

 

13

 

7

 

Unrealized foreign currency fluctuation impact on deferred tax expense  

(6)

 

19

 

1

 

31

Adjusted Earnings  (Non-GAAP)

$       821

 

$    1,262

 

$    1,999

 

$    2,393

                 

Net Income per Common Share - Diluted (GAAP)

$      0.86

 

$      3.17

 

$      2.86

 

$      6.03

                 

Adjustments:

             
 

Canada proved property write-down, net of tax

1.19

 

-

 

2.16

 

-

 

Merger, acquisitions & transition, net of tax

0.03

 

0.01

 

0.03

 

0.02

 

Unrealized foreign currency fluctuation impact on deferred tax expense  

(0.01)

 

0.04

 

0.01

 

0.07

Adjusted Earnings Per Share - Diluted (Non-GAAP)

$      2.07

 

$      3.22

 

$      5.06

 

$      6.12

                 
                 

Reconciliation of net cash provided by operating activities to cash from operations before changes in operating assets and liabilities:

The press release discusses Apache's cash from operations before changes in operating assets and liabilities.  It is presented because management believes the information is useful for investors because it is used internally and widely accepted by those following the oil and gas industry as a financial indicator of a company's ability to generate cash to internally fund exploration and development activities, fund dividend programs, and service debt.  It is also used by research analysts to value and compare oil and gas exploration and production companies, and is frequently included in published research when providing investment recommendations.  Cash from operations before changes in operating assets and liabilities, therefore, is an additional measure of liquidity, but is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities.

 

The following table reconciles net cash provided by operating activities to cash from operations before changes in operating assets and liabilities.

                 
   

For the Quarter 

 

For the Six Months 

   

Ended June 30,

 

Ended June 30,

   

2012

 

2011

 

2012

 

2011

Net cash provided by operating activities

$    2,792

 

$    2,745

 

$    4,799

 

$     4,724

Changes in operating assets and liabilities

(414)

 

(106)

 

227

 

158

Cash from operations before changes in

             
 

operating assets and liabilities

$    2,378

 

$    2,639

 

$    5,026

 

$     4,882

 

 

APA-F

SOURCE Apache Corporation

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