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

Aug 02, 2012, 08:00 ET from Apache Corporation

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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