Apache Reports Strong First-quarter Results As Record Production Leverages Higher Oil Prices

News provided by

Apache Corporation

May 03, 2012, 08:00 ET

HOUSTON, May 3, 2012 /PRNewswire/ -- Apache Corporation (NYSE, Nasdaq: APA) reported record worldwide production in the first-quarter of 2012 as the company benefitted from higher prices for oil and natural gas liquids and its balanced approach helped it weather the continuing deterioration of North  American natural gas prices. Daily production increased 7 percent over the same period the prior year, adjusted for dispositions.

Worldwide production was 769,000 barrels of oil equivalent (boe) per day, compared with 732,000 boe per day the same period the year before. Last year's total included 11,000 boe per day from certain assets in Canada and East Texas that were sold in the second half of 2011.

U.S. liquids production reached 148,000 barrels per day, representing an 11 percent increase over first-quarter 2011 results, as global liquids production rose 6 percent over the same period.

Apache reported earnings of $778 million, or $2.00 per diluted share, for the three-month period ending March 31, 2012, reflecting the impact of a $390-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 $1.1 billion, or $2.86 per diluted share.

Apache's adjusted earnings*, which exclude the write-down and certain other items that impact the comparability of operating results, totaled $1.2 billion or $3.00 per diluted common share compared to adjusted earnings of $1.1 billion or $2.90 per share in the prior-year period.

Apache reported record revenues of $4.5 billion in the first quarter. Cash from operations before changes in operating assets and liabilities* rose 18 percent to $2.6 billion.

 "Apache is off to a strong start with first-quarter daily production growth of 7 percent, adjusted for 2011 asset sales," said G. Steven Farris, chairman and chief executive officer. "We expect overall production to continue to grow on the strength of an active worldwide drilling program, including accelerated activity on the 312,000 newly acquired acres in the Anadarko Basin."

Operational highlights:

  • Apache has increased onshore U.S. drilling activity from 36 rigs operating at the beginning of the year to 56 currently, a rise of 56 percent.
  • Permian Basin production rose to 99,000 boe per day in the current quarter as a result of increased drilling and recompletion activity in liquids-rich plays, representing an 18 percent rise from the first quarter of 2011. Apache currently operates 31 rigs in the region, including six horizontals.
  • With the recently completed acquisition of Cordillera Energy Partners III, Apache more than doubled its position in the Anadarko wash play to nearly 550,000 acres. The company has increased its exposure to the horizontal Granite Wash, Tonkawa, Cleveland and Marmaton gas condensate and oil plays. Rig count has increased from six at the beginning of the year to the current total of 22 of which 21 are horizontal. 

Apache's diverse portfolio of worldwide assets enabled the company to post strong financial results despite low North American natural gas prices. Liquid hydrocarbons represented 50 percent of production but contributed 82 percent of revenues due to the wide gap between crude oil and natural gas prices.

Apache's results also reflect the benefit of 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 region. Apache received these premium prices on approximately 75 percent of its crude oil production. Worldwide, the overall average price received was $111.22 per barrel during the period, up from $97.83 in the first quarter of 2011.

While North American natural gas price realizations fell 22 percent over the prior-year period, Apache's international regions, which represent 38 percent of its total gas volumes, saw prices rise 17 percent to $4.02 per Mcf. The worldwide average price received this quarter for natural gas was $3.82 per Mcf, compared with $4.32 per Mcf in the same quarter the previous year.

Apache confirmed its projected 2012 production growth forecast of 7 percent to 13 percent from full-year 2011 production levels, after adjusting for 2011 divestitures.

NOTE: Apache will conduct a conference call to discuss its first-quarter 2012 results at 1 p.m. Central time on Thursday, May 3. 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 May 3. To access the telephone playback, dial 855-859-2056 or 404-537-3406 for international calls. The conference access code is 42313544.

*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.

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 production expectations. 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



Ended March 31,



2012

2011






REVENUES AND OTHER:



Oil and gas production revenues

$                    4,457

$                    3,878

Other 

79

47



4,536

3,925






COSTS AND EXPENSES:



Depreciation, depletion and amortization



    Recurring

1,219

936

    Additional

521

-

Asset retirement obligation accretion

55

37

Lease operating expenses

673

623

Gathering and transportation 

77

76

Taxes other than income

257

164

General and administrative

128

112

Merger, acquisitions & transition

6

5

Financing costs, net

40

45



2,976

1,998






INCOME BEFORE INCOME TAXES

1,560

1,927

Current income tax provision 

725

643

Deferred income tax provision

38

150






NET INCOME 

797

1,134

Preferred stock dividends

19

19






INCOME ATTRIBUTABLE TO COMMON STOCK

$                       778

$                    1,115






NET INCOME PER COMMON SHARE:



Basic

$                      2.02

$                      2.91

Diluted 

$                      2.00

$                      2.86






WEIGHTED-AVERAGE NUMBER OF COMMON 


   SHARES OUTSTANDING:



Basic

385

383

Diluted

399

397






DIVIDENDS DECLARED PER COMMON SHARE

$                      0.17

$                      0.15


APACHE CORPORATION

SUMMARY OF CAPITAL COSTS INCURRED

(In millions)













For the Quarter





Ended March 31,





2012

2011

CAPITAL EXPENDITURES (1):




Exploration & Development Costs





United States

$                       794

$                       615


Canada

198

266



North America

992

881


Egypt

250

193


Australia

78

162


North Sea

196

210


Argentina

84

69


Other International

21

-



International

629

634



Worldwide Exploration & Development Costs

$                    1,621

$                    1,515









Gathering, Transmission and Processing Facilities





United States

$                         12

$                             -


Canada

44

42


Egypt

17

29


Australia

172

51


Argentina

4

-



Total Gathering, Transmission and Processing

$                       249

$                       122









Capitalized Interest

$                         66

$                         60









Capital Expenditures, excluding Acquisitions

$                    1,936

$                    1,697









Acquisitions

$                         60

$                         11









(1) Accrual basis











APACHE CORPORATION

SUMMARY BALANCE SHEET INFORMATION

(In millions)













March 31,

December 31,





2012

2011









Cash and Cash Equivalents

$                       245

$                       295

Other Current Assets 

4,709

4,508

Property and Equipment, net

45,829

45,448

Goodwill

1,114

1,114

Other Assets

1,340

686

Total Assets

$                 53,237

$                 52,051









Short-Term Debt

$                       429

$                       431

Other Current Liabilities

4,269

4,532

Long-Term Debt

7,444

6,785

Deferred Credits and Other Noncurrent Liabilities

11,380

11,310

Shareholders' Equity

29,715

28,993

Total Liabilities and Shareholders' Equity

$                 53,237

$                 52,051









Common shares outstanding at end of period

384

384


APACHE CORPORATION

PRODUCTION INFORMATION















For the Quarter






Ended March 31,






2012

2011









  OIL VOLUME - Barrels per day




Central

6,466

5,046

Permian

56,481

48,280

GOM Deepwater

5,801

5,322

GOM Shelf

46,732

46,558

GC Onshore

10,448

8,517


United States

125,928

113,723

Canada

15,582

14,704


North America

141,510

128,427

Egypt


99,490

108,876

Australia

30,398

34,720

North Sea

65,946

46,968

Argentina

9,632

9,617


International

205,466

200,181



Total 

346,976

328,608









  NATURAL GAS VOLUME - Mcf per day




Central

166,452

215,612

Permian

180,253

159,005

GOM Deepwater

46,996

60,589

GOM Shelf

332,140

348,845

GC Onshore

91,652

74,095


United States

817,493

858,146

Canada

636,227

642,729


North America

1,453,720

1,500,875

Egypt

376,067

371,514

Australia

224,337

182,922

North Sea

67,066

1,901

Argentina

211,193

188,092


International

878,663

744,429



Total 

2,332,383

2,245,304









  NGL VOLUME - Barrels per day




Central

3,512

787

Permian

12,650

9,341

GOM Deepwater

256

1,129

GOM Shelf

3,594

6,407

GC Onshore

2,305

1,588


United States

22,317

19,252

Canada

6,312

6,545


North America

28,629

25,797

Egypt

-

228

North Sea

1,966

-

Argentina

2,994

3,055


International

4,960

3,283



Total

33,589

29,080









  BOE per day




Central

37,719

41,768

Permian

99,173

84,121

GOM Deepwater

13,890

16,549

GOM Shelf

105,683

111,106

GC Onshore

28,028

22,455


United States

284,493

275,999

Canada

127,932

128,370


North America

412,425

404,369

Egypt

162,168

171,023

Australia

67,788

65,207

North Sea

79,090

47,285

Argentina

47,825

44,021


International

356,871

327,536



Total 

769,296

731,905


APACHE CORPORATION

PRICE INFORMATION















For the Quarter






Ended March 31,






2012

2011









  AVERAGE OIL PRICE PER BARREL




Central

$           98.82

$           89.33

Permian

98.36

88.72

GOM Deepwater

110.83

97.61

GOM Shelf

114.04

98.84

GC Onshore

113.36

97.73


United States (1)

102.08

89.72

Canada

92.47

87.21


North America (1)

101.02

89.43

Egypt(1)

123.55

107.14

Australia(1)

122.95

105.89

North Sea(1)

113.19

100.89

Argentina

83.03

60.36


International (1)

118.24

103.21



Total(1)

111.22

97.83









  AVERAGE NATURAL GAS PRICE PER MCF




Central

$             3.09

$             4.42

Permian

3.72

4.99

GOM Deepwater

2.98

4.10

GOM Shelf

3.17

4.53

GC Onshore

2.82

4.51


United States (1)

3.93

4.94

Canada (1)

3.41

4.54


North America (1)

3.70

4.77

Egypt

3.79

4.44

Australia

4.18

2.50

North Sea

7.97

20.34

Argentina

2.98

2.18


International

4.02

3.43



Total (1)

3.82

4.32









  AVERAGE NGL PRICE PER BARREL




Central

$           37.50

$           48.34

Permian

44.78

45.52

GOM Deepwater

38.51

37.69

GOM Shelf

42.93

42.41

GC Onshore

47.12

55.85


United States

43.51

44.99

Canada

41.63

40.12


North America

43.09

43.76

Egypt

-

63.35

North Sea

84.11

-

Argentina

26.20

30.51


International

49.16

32.79



Total

43.99

42.52



















(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:










*

Management uses adjusted earnings to evaluate the company's operational trends and performance relative to other oil and gas producing companies.










Ÿ*

Management 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.  










Ÿ*

The 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






Ended March 31,






2012

2011













Income Attributable to Common Stock (GAAP)

$              778

$           1,115













Adjustments:







Canada proved property write-down, net of tax

390

-




Unrealized foreign currency fluctuation impact on deferred tax expense  

7

12




Merger, acquisitions & transition, net of tax

3

4



Adjusted Earnings  (Non-GAAP)

$           1,178

$           1,131













Net Income per Common Share - Diluted (GAAP)

$             2.00

$             2.86













Adjustments:







Canada proved property write-down, net of tax

0.97

-




Unrealized foreign currency fluctuation impact on deferred tax expense  

0.02

0.03




Merger, acquisitions & transition, net of tax

0.01

0.01



Adjusted Earnings Per Share - Diluted (Non-GAAP)

$             3.00

$             2.90











































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






Ended March 31,






2012

2011



Net cash provided by operating activities

$           2,007

$           1,979



Changes in operating assets and liabilities

641

264



Cash from operations before changes in







operating assets and liabilities

$           2,648

$           2,243



APA-F

SOURCE Apache Corporation

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