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

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Aug 02, 2012, 08:00 ET

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:

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