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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