Apache's Drilling Program, New Takeaway Capacity Fuel Record Third-Quarter Production In Permian And Central Regions

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Nov 01, 2012, 08:00 ET

HOUSTON, Nov. 1, 2012 /PRNewswire/ -- Apache Corporation (NYSE, Nasdaq: APA) said today that higher rig counts and new infrastructure contributed to record production from Permian and Anadarko Basin operations.

For the three-month period ending Sept. 30, 2012, Apache reported production of 771,000 barrels of oil equivalent per day, up approximately 18,300 boepd, or 2.4 percent, from the same period in the prior year. Deferred production impacted third-quarter 2012 volumes by an estimated 25,000 boepd.

Apache's third-quarter 2012 earnings totaled $161 million, or 41 cents per diluted common share, reflecting the impact of a $539 million non-cash, after-tax write-down in the carrying value of its properties in Canada resulting from lower natural gas prices. For the same period last year, Apache reported earnings of $983 million, or $2.50 per diluted share.

Apache's adjusted earnings,* which exclude the write-down and certain other items that impact the comparability of operating results, totaled $861 million, or $2.16 per diluted common share, in the third quarter as the impact of higher production was offset in part by lower prices for natural gas and natural gas liquids. In the prior-year period, Apache reported adjusted earnings of $1.16 billion, or $2.95 per share. Cash from operations before changes in operating assets and liabilities* totaled $2.42 billion in the third quarter, down from $2.69 billion in the prior-year period.

"We are continuing to add drilling rigs and accelerate activity in the Permian and Anadarko basins. Today, we are running 56 rigs in these regions with plans to expand throughout next year. All are drilling oil and liquids-rich targets and more than half are drilling horizontal wells. Production in these two regions increased 30 percent from a year ago, accounting for nearly a quarter of Apache's overall production compared with less than a fifth in third-quarter 2011. We expect this growth trajectory to continue well into the future," said G. Steven Farris, chairman and chief executive officer.

Apache's production from the Permian Basin and Central regions totaled 183,961 boepd for third quarter 2012, which includes a full three-month's contribution from Cordillera assets acquired earlier in the year. For the same period in 2011, the two regions produced 141,020 boepd.

"Another contributor to our growth was securing additional takeaway capacity, which we've done with new infrastructure projects," Farris said. "Our joint-venture gas plant at the Deadwood Field in West Texas became fully operational during the third quarter, processing more than 50 million cubic feet per day. We also installed a nine-mile pipeline in our Bivins Ranch area in the Texas Panhandle. The line is currently transporting 3.3 MMcf of associated gas per day and will enable us to continue to develop the area well beyond its present rate of 5,000 barrels of oil per day. Both projects can be expanded with production growth. We continue to pursue marketing arrangements aggressively to move our production and enhance margins.

"We're committed to growth through the drill bit across our portfolio, and Apache has nearly 100 rigs operating worldwide right now. With drilling activity and production on the rise, we look forward to concluding 2012 with our strongest quarter of the year," he said.

The company's balanced portfolio of North American and international assets, as well as oil and gas producing properties, helped to stabilize the effects of volatile prices in the commodity markets. Worldwide, Apache received an average of $102.62 per barrel of oil, a slight increase from $101.71 per barrel in the prior-year period. Apache benefitted from higher price realizations 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 premium prices to the WTI index on approximately 70 percent of crude oil production.

Apache's international regions saw natural gas price realizations increase on average 13 percent from the prior-year period to $4.21 per thousand cubic feet (Mcf). North American natural gas price realizations fell 27 percent from the same period a year ago to $3.51 per Mcf. International gas production represented 36 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 discuss its third-quarter 2012 results at 1 p.m. Central time on Thursday, Nov. 1. 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 Nov. 1. To access the telephone playback, dial 855-859-2056 or 404-537-3406 for international calls. The conference access code is 42313953.

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 infrastructure projects, 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 and other public filings 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 Nine Months
		Ended September 30,		Ended September 30,
		2012	2011	2012	2011

REVENUES AND OTHER:
	Oil and gas production revenues	$ 4,141	$ 4,282	$ 12,554	$ 12,515
	Other	38	46	133	76
		4,179	4,328	12,687	12,591

COSTS AND EXPENSES:
	Depreciation, depletion and amortization
	Recurring	1,300	1,045	3,803	2,984
	Additional	729	20	1,898	46
	Asset retirement obligation accretion	60	39	172	114
	Lease operating expenses	801	661	2,178	1,946
	Gathering and transportation	86	72	235	221
	Taxes other than income	167	244	627	663
	General and administrative	124	112	384	327
	Merger, acquisitions & transition	7	4	29	15
	Financing costs, net	40	37	125	123
		3,314	2,234	9,451	6,439

INCOME BEFORE INCOME TAXES		865	2,094	3,236	6,152
	Current income tax provision	544	473	1,729	1,692
	Deferred income tax provision	141	619	174	1,065

NET INCOME		180	1,002	1,333	3,395
	Preferred stock dividends	19	19	57	57

INCOME ATTRIBUTABLE TO COMMON STOCK		$ 161	$ 983	$ 1,276	$ 3,338

NET INCOME PER COMMON SHARE:
	Basic	$ 0.41	$ 2.56	$ 3.29	$ 8.70
	Diluted	$ 0.41	$ 2.50	$ 3.27	$ 8.49

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

	Basic	391	384	388	384
	Diluted	393	400	390	400

DIVIDENDS DECLARED PER COMMON SHARE		$ 0.17	$ 0.15	$ 0.51	$ 0.45

APACHE CORPORATION
SUMMARY OF CAPITAL COSTS INCURRED
(In millions)


				For the Quarter		For the Nine Months
				Ended September 30,		Ended September 30,
				2012	2011	2012	2011
CAPITAL EXPENDITURES (1):
	Exploration & Development Costs
		United States		$ 1,422	$ 688	$ 3,608	$ 1,976
		Canada		164	175	459	609
			North America	1,586	863	4,067	2,585
		Egypt		299	197	809	674
		Australia		265	127	518	445
		North Sea		283	197	703	618
		Argentina		65	87	222	245
		Other International		51	22	84	49
			International	963	630	2,336	2,031
			Worldwide Exploration & Development Costs	$ 2,549	$ 1,493	$ 6,403	$ 4,616

	Gathering, Transmission and Processing Facilities
		United States		$ 13	$ 9	$ 57	$ 9
		Canada		52	29	138	113
		Egypt		(22)	20	15	74
		Australia		89	136	338	255
		Argentina		3	3	12	7
			Total Gathering, Transmission and Processing	$ 135	$ 197	$ 560	$ 458

	Capitalized Interest			$ 90	$ 70	$ 241	$ 193

	Capital Expenditures, excluding Acquisitions			$ 2,774	$ 1,760	$ 7,204	$ 5,267

	Acquisitions			$ 59	$ 398	$ 3,421	$ 493

	(1) Accrual basis

APACHE CORPORATION
SUMMARY BALANCE SHEET INFORMATION
(In millions)

		September 30,	December 31,
		2012	2011

	Cash and Cash Equivalents	$ 318	$ 295
	Other Current Assets	4,726	4,508
	Property and Equipment, net	51,164	45,448
	Goodwill	1,114	1,114
	Other Assets	1,488	686
	Total Assets	$ 58,810	$ 52,051

	Short-Term Debt	$ 964	$ 431
	Other Current Liabilities	4,426	4,532
	Long-Term Debt	10,670	6,785
	Deferred Credits and Other Noncurrent Liabilities	12,036	11,310
	Shareholders' Equity	30,714	28,993
	Total Liabilities and Shareholders' Equity	$ 58,810	$ 52,051

	Common shares outstanding at end of period	391	384

APACHE CORPORATION
PRODUCTION INFORMATION

				For the Quarter		For the Nine Months
				Ended September 30,		Ended September 30,
				2012	2011	2012	2011

OIL VOLUME - Barrels per day
	Central			17,003	7,873	11,843	6,608
	Permian			60,822	51,410	58,573	49,849
	GOM Deepwater			6,982	6,155	6,342	5,859
	GOM Shelf			38,573	45,057	42,242	45,442
	GC Onshore			9,621	9,858	9,884	9,377
		United States		133,001	120,353	128,884	117,135
	Canada			15,075	13,027	15,311	14,040
		North America		148,076	133,380	144,195	131,175
	Egypt			97,546	103,289	98,648	103,913
	Australia			28,191	39,400	29,690	38,248
	North Sea			57,296	57,838	63,058	54,097
	Argentina			9,885	9,461	9,701	9,577
		International		192,918	209,988	201,097	205,835
			Total	340,994	343,368	345,292	337,010

NATURAL GAS VOLUME - Mcf per day
	Central			281,945	221,193	227,903	220,094
	Permian			180,610	181,070	179,648	171,309
	GOM Deepwater			41,267	43,596	45,333	53,557
	GOM Shelf			266,415	331,251	299,897	343,200
	GC Onshore			93,196	80,883	89,078	77,314
		United States		863,433	857,993	841,859	865,474
	Canada			604,442	619,897	617,530	633,031
		North America		1,467,875	1,477,890	1,459,389	1,498,505
	Egypt			329,793	376,259	354,856	368,898
	Australia			215,317	187,852	217,053	183,470
	North Sea			54,478	2,497	62,061	2,257
	Argentina			213,745	223,929	216,399	209,206
		International		813,333	790,537	850,369	763,831
			Total	2,281,208	2,268,427	2,309,758	2,262,336

NGL VOLUME - Barrels per day
	Central			8,305	1,961	5,271	1,156
	Permian			20,739	12,733	16,613	11,645
	GOM Deepwater			1,483	726	1,073	760
	GOM Shelf			6,663	4,560	5,345	5,559
	GC Onshore			1,886	1,939	2,083	1,881
		United States		39,076	21,919	30,385	21,001
	Canada			6,036	6,120	6,063	6,220
		North America		45,112	28,039	36,448	27,221
	Egypt			-	(4)	-	66
	North Sea			1,470	14	1,797	5
	Argentina			3,006	3,008	3,022	3,024
		International		4,476	3,018	4,819	3,095
			Total	49,588	31,057	41,267	30,316

BOE per day
	Central			72,298	46,699	55,097	44,446
	Permian			111,663	94,321	105,127	90,045
	GOM Deepwater			15,343	14,148	14,971	15,545
	GOM Shelf			89,639	104,825	97,570	108,201
	GC Onshore			27,039	25,278	26,813	24,144
		United States		315,982	285,271	299,578	282,381
	Canada			121,851	122,463	124,296	125,765
		North America		437,833	407,734	423,874	408,146
	Egypt			152,512	165,995	157,791	165,461
	Australia			64,078	70,708	65,866	68,826
	North Sea			67,845	58,269	75,198	54,478
	Argentina			48,515	49,790	48,790	47,471
		International		332,950	344,762	347,645	336,236
			Total	770,783	752,496	771,519	744,382

APACHE CORPORATION
PRICE INFORMATION

				For the Quarter		For the Nine Months
				Ended September 30,		Ended September 30,
				2012	2011	2012	2011

AVERAGE OIL PRICE PER BARREL
	Central			$ 85.54	$ 84.55	$ 88.82	$ 90.09
	Permian			87.49	86.67	90.71	91.19
	GOM Deepwater			102.46	104.05	106.10	104.50
	GOM Shelf			104.97	106.64	109.67	106.53
	GC Onshore			104.02	102.69	108.76	103.53
		United States ⁽¹⁾		93.38	93.86	96.53	94.05
	Canada			82.92	88.34	85.96	92.77
		North America ⁽¹⁾		92.32	93.32	95.41	93.91
	Egypt⁽¹⁾			113.72	110.96	112.02	111.02
	Australia⁽¹⁾			116.79	113.40	116.39	111.78
	North Sea⁽¹⁾			108.44	101.85	108.60	103.90
	Argentina			73.44	69.27	76.36	65.08
		International ⁽¹⁾		110.54	107.03	109.87	107.15
			Total⁽¹⁾	102.62	101.71	103.83	102.00

AVERAGE NATURAL GAS PRICE PER MCF
	Central			$ 3.24	$ 4.67	$ 3.04	$ 4.60
	Permian			3.07	5.35	3.20	5.21
	GOM Deepwater			3.18	4.03	2.82	4.23
	GOM Shelf			2.90	4.62	2.86	4.60
	GC Onshore			2.95	4.60	2.70	4.63
		United States ⁽¹⁾		3.63	5.06	3.63	5.02
	Canada ⁽¹⁾			3.33	4.49	3.23	4.58
		North America ⁽¹⁾		3.51	4.82	3.46	4.83
	Egypt			4.04	4.60	3.86	4.61
	Australia			4.76	2.88	4.45	2.71
	North Sea			8.65	21.43	8.67	22.87
	Argentina			2.78	2.74	2.84	2.57
		International		4.21	3.71	4.10	3.65
			Total ⁽¹⁾	3.76	4.44	3.70	4.43

AVERAGE NGL PRICE PER BARREL
	Central			$ 24.28	$ 51.55	$ 27.74	$ 52.79
	Permian			27.95	53.84	34.31	51.00
	GOM Deepwater			30.24	54.95	33.40	48.41
	GOM Shelf			31.10	53.44	33.71	48.17
	GC Onshore			37.42	62.57	41.28	59.62
		United States		28.25	54.36	33.51	51.03
	Canada			31.01	46.93	35.02	44.47
		North America		28.62	52.74	33.76	49.53
	Egypt			-	-	-	66.37
	North Sea			65.45	65.45	73.60	65.45
	Argentina			16.25	26.45	21.15	28.20
		International		32.41	26.62	40.71	29.06
			Total	28.96	50.20	34.57	47.44

⁽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 Nine Months
		Ended September 30,		Ended September 30,
		2012	2011	2012	2011

Income Attributable to Common Stock (GAAP)		$ 161	$ 983	$ 1,276	$ 3,338

Adjustments:
	Canada proved property write-down, net of tax	539	-	1,409	-
	U.K. decommissioning tax rate adjustment	118	-	118	-
	Unrealized foreign currency fluctuation impact on deferred tax expense	39	(99)	40	(68)
	Merger, acquisitions & transition, net of tax	4	2	17	9
	U.K. tax rate increase	-	274	-	218
Adjusted Earnings (Non-GAAP)		$ 861	$ 1,160	$ 2,860	$ 3,497

Net Income per Common Share - Diluted (GAAP)		$ 0.41	$ 2.50	$ 3.27	$ 8.49

Adjustments:
	Canada proved property write-down, net of tax	1.33	-	3.49	-
	U.K. decommissioning tax rate adjustment	0.30	-	0.30	-
	Unrealized foreign currency fluctuation impact on deferred tax expense	0.10	(0.25)	0.11	(0.17)
	Merger, acquisitions & transition, net of tax	0.02	0.01	0.05	0.02
	U.K. tax rate increase	-	0.69	-	0.55
Adjusted Earnings Per Share - Diluted (Non-GAAP)		$ 2.16	$ 2.95	$ 7.22	$ 8.89


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 Nine Months
		Ended September 30,		Ended September 30,
		2012	2011	2012	2011
Net cash provided by operating activities		$ 1,623	$ 2,447	$ 6,422	$ 7,171
Changes in operating assets and liabilities		793	241	1,020	399
Cash from operations before changes in
	operating assets and liabilities	$ 2,416	$ 2,688	$ 7,442	$ 7,570

APA-F

SOURCE Apache Corporation

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