Apache’s Production Rises 10 Percent to Record 646,866 boe Per Day Fueling Second-Quarter Earnings of $860 Million or $2.53 Per Share

News provided by

Apache Corporation

Jul 20, 2010, 04:17 ET

HOUSTON, July 20 /PRNewswire-FirstCall/ -- Apache Corporation (NYSE, Nasdaq: APA) today reported that higher oil output from international operations fueled record production in the second quarter as net income climbed to $860 million or $2.53 per diluted common share, nearly double the net income of $443 million or $1.31 per share in the prior-year period.

Production totaled 646,866 barrels of oil equivalent (boe) per day, up 10 percent from the prior-year period. Liquid hydrocarbon production climbed to 348,272 barrels per day, up 19 percent from the prior-year period and 16 percent from the first quarter of 2010. Natural gas production increased to 1.79 billion cubic feet per day, a 1-percent increase from the year-earlier period and up 5 percent from the first quarter.

Apache’s increased oil production was the result of a nearly sixfold increase in output in Australia, including a full quarter of production from the Van Gogh and Pyrenees oil developments, and higher output from the Faghur Basin in Egypt’s Western Desert. Natural gas production was higher in Australia, Gulf Coast, Egypt and the Anadarko Basin of western Oklahoma.

Cash from operations before changes in operating assets and liabilities* totaled $1.8 billion in the second quarter, up 46 percent from $1.3 billion in the year-earlier period. At the end of the quarter, Apache’s cash balance was $1.8 billion.

Apache’s second-quarter adjusted earnings*, which exclude certain items that impact the comparability of operating results, totaled $829 million or $2.44 per diluted share, up from $474 million or $1.41 per share in the prior-year period.

“Apache’s second-quarter results illustrate the benefit of our focus on long-term growth,” said G. Steven Farris, chairman and chief executive officer. “We are realizing the benefit of significant discoveries and the investments Apache made to bring them on production. Apache’s financial results also benefitted from our balanced commodity mix at a time when oil prices remain strong relative to North American natural gas prices.”

Apache’s international operations accounted for 56 percent of worldwide production. Liquids sales were 54 percent of worldwide production and 78 percent of revenue. Apache realized an average of $74.89 per barrel of oil, essentially unchanged from the first quarter, and $4.01 per thousand cubic feet (Mcf) of natural gas, down from $4.60 per Mcf in the first quarter.

Apache’s second-quarter results include production from June 9 on Gulf Shelf assets acquired on that date from Devon Energy Corp. for $1.05 billion. The acquisition brought year-end 2009 estimated proved and probable reserves of 83 million boe across approximately 150 blocks.

Apache also expects to close its previously announced merger with Mariner Energy upon approval of regulators and Mariner’s shareholders. Mariner is an independent producer with operations in the Gulf of Mexico, the Gulf Coast and the Permian Basin with year-end 2009 estimated proved reserves of 181 million boe (47 percent liquid hydrocarbons) as well as unbooked resource potential of 2 billion boe. Approval is projected for the third quarter.

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. From time to time, Apache posts announcements, updates and investor information, in addition to copies of all press releases, on its Web site, www.apachecorp.com.

*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 www.apachecorp.com/financialinfo.

Additional Information

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.  Apache has filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 containing a preliminary proxy statement of Mariner Energy that also constitutes a preliminary prospectus of Apache.  A definitive proxy statement/prospectus will be mailed to stockholders of Mariner.  Apache and Mariner also plan to file other documents with the SEC regarding the proposed transaction.  INVESTORS AND SECURITY HOLDERS OF MARINER ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.  Investors and security holders will be able to obtain the documents (when available) free of charge at the SEC’s web site, www.sec.gov.  Copies of the documents filed with the SEC by Apache will be available free of charge on Apache’s website at www.apachecorp.com under the tab “Investors” or by contacting Apache’s Investor Relations Department at 713‐296‐6000.  Copies of the documents filed with the SEC by Mariner will be available free of charge on Mariner’s website at www.mariner‐energy.com under the tab “Investor Information” or by contacting Mariner’s Investor Relations Department at 713‐954‐5558.  You may also read and copy any reports, statements and other information filed with the SEC at the SEC public reference room at 100 F Street N.E., Room 1580, Washington, D.C. 20549.  Please call the SEC at (800) 732-0330 or visit the SEC’s website for further information on its public reference room.

Apache, Mariner, their respective directors and executive officers and other persons may be deemed, under SEC rules, to be participants in the solicitation of proxies from stockholders of Mariner in connection with the proposed transaction.  Information regarding Apache’s directors and officers can be found in its proxy statement filed with the SEC on March 31, 2010, and information regarding Mariner’s directors and officers can be found in its proxy statement filed with the SEC on April 1, 2010.  Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests in the transaction, by security holdings or otherwise, will be contained in the definitive proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.

Forward-Looking Statements

Statements in this document include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  The opinions, forecasts, projections, future plans or other statements other than statements of historical fact, are forward-looking statements.  We can give no assurance that such expectations will prove to have been correct.  Actual results could differ materially as a result of a variety of risks and uncertainties, including: the timing to consummate the proposed transaction; the risk that a condition to closing of the proposed transaction may not be satisfied; the risk that a regulatory approval that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; negative effects from the pendency of the merger; our ability to achieve the synergies and value creation contemplated by the proposed transaction; our ability to promptly and effectively integrate the merged businesses; and the diversion of management time on transaction-related issues.  Other factors that could materially affect actual results are discussed in Apache’s and Mariner’s most recent Forms 10-K as well as each company’s other filings with the SEC available at the SEC’s website at www.sec.gov.  Actual results may differ materially from those expected, estimated or projected.  Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any of them in light of new information, future events or otherwise.

APA-F

APACHE CORPORATION

FINANCIAL INFORMATION

(In thousands, except per share data)





























For the Quarter


For the Six Months


Ended June 30,

Ended June 30,


2010

2009


2010

2009










REVENUES AND OTHER:







Oil and gas production revenues

$ 2,968,765

$ 2,074,344

$ 5,662,390

$  3,677,958

Other

3,145

19,034

(17,229)

49,245


2,971,910

2,093,378

5,645,161

3,727,203









COSTS AND EXPENSES:







Depreciation, depletion and amortization







   Recurring

729,751

573,359

1,368,249

1,153,976

   Additional

-

-

-

2,818,161

Asset retirement obligation accretion

24,760

26,483

48,762

53,221

Lease operating expenses

445,949

405,273

886,195

802,762

Gathering and transportation

43,038

33,479

83,403

66,818

Taxes other than income

186,833

115,941

363,771

203,280

General and administrative

91,829

90,905

178,979

175,951

Financing costs, net

55,757

61,155

115,024

119,742


1,577,917

1,306,595

3,044,383

5,393,911









INCOME (LOSS) BEFORE INCOME TAXES

1,393,993

786,783

2,600,778

(1,666,708)

Current income tax provision

339,151

218,247

682,125

220,741

Deferred income tax provision (benefit)

194,619

123,816

353,449

(575,229)









NET INCOME (LOSS)

860,223

444,720

1,565,204

(1,312,220)

Preferred stock dividends

-

1,420

-

2,840









INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK

$    860,223

$    443,300

$ 1,565,204

$ (1,315,060)









NET INCOME (LOSS) PER COMMON SHARE:







Basic

$          2.55

$          1.32

$          4.64

$          (3.92)

Diluted

$          2.53

$          1.31

$          4.61

$          (3.92)









WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

337,618

335,637

337,273

335,372









DILUTED SHARES OUTSTANDING

339,377

337,365

339,282

335,372

APACHE CORPORATION

FINANCIAL INFORMATION

(In thousands)





























For the Quarter


For the Six Months





Ended June 30,

Ended June 30,





2010

2009


2010

2009

COSTS INCURRED: (1)








North America exploration and development


$      782,103

$        381,782

$ 1,310,492

$    887,098

International exploration and development


475,016

506,229

956,787

993,011

Oil and gas property acquisitions

1,028,724

183,195

1,033,394

243,220





$   2,285,843

$     1,071,206

$ 3,300,673

$ 2,123,329

























(1) Includes noncash asset retirement costs and capitalized interest as follows:  






Capitalized interest

$        15,747

$          14,972

$      31,676

$      30,981



Asset retirement costs

$      292,373

$          34,098

$    314,607

$      93,703

































































June 30,

December 31,








2010

2009















BALANCE SHEET DATA:








Cash and Cash Equivalents

$   1,805,347

$     2,048,117




Other Current Assets


2,701,593

2,537,732




Property and Equipment, net

25,123,455

22,900,615




Goodwill

189,252

189,252




Other Assets

612,760

510,027




Total Assets

$ 30,432,407

$   28,185,743
















Short-Term Debt

$      116,205

$        117,326




Other Current Liabilities

2,086,630

2,275,232




Long-Term Debt

4,896,127

4,950,390




Deferred Credits and Other Noncurrent Liabilities

5,657,685

5,064,174




Shareholders' Equity

17,675,760

15,778,621




Total Liabilities and Shareholders' Equity

$ 30,432,407

$   28,185,743
















Common shares outstanding at end of period

337,799

336,437



APACHE CORPORATION

FINANCIAL INFORMATION


























For the Quarter


For the Six Months




Ended June 30,

Ended June 30,




2010

2009


2010

2009












PRODUCTION DATA:






 OIL VOLUME - Barrels per day







Gulf Coast

50,788

52,054

50,649

50,441

Central

2,929

2,212

2,652

2,242

Permian

35,812

34,264

35,843

34,959


United States

89,529

88,530

89,144

87,642

Canada

14,561

15,833

14,447

16,090


North America

104,090

104,363

103,591

103,732

Egypt

98,495

95,359

94,642

89,475

Australia

60,680

10,478

43,978

9,164

North Sea

58,141

59,688

57,995

60,089

Argentina

9,874

11,948

9,897

12,192


International

227,190

177,473

206,512

170,920



Total

331,280

281,836

310,103

274,652











 NATURAL GAS VOLUME - Mcf per day







Gulf Coast

382,550

364,961

381,636

338,792

Central

206,386

202,594

198,478

206,697

Permian

85,950

95,279

93,247

92,405


United States

674,886

662,834

673,361

637,894

Canada

339,611

373,796

326,646

365,551


North America

1,014,497

1,036,630

1,000,007

1,003,445

Egypt

388,367

376,737

375,249

347,443

Australia

203,147

161,069

205,209

151,607

North Sea

2,516

2,645

2,540

2,663

Argentina

183,028

192,542

168,953

192,250


International

777,058

732,993

751,951

693,963



Total

1,791,555

1,769,623

1,751,958

1,697,408











 NGL VOLUME - Barrels per day







Gulf Coast

4,903

3,935

4,901

3,614

Central

500

201

496

279

Permian

6,475

1,347

3,977

1,305


United States

11,878

5,483

9,374

5,198

Canada

1,996

2,052

1,866

2,082


North America

13,874

7,535

11,240

7,280

Argentina

3,118

3,091

3,204

3,114



Total

16,992

10,626

14,444

10,394











 BOE per day







Gulf Coast

119,450

116,816

119,156

110,520

Central

37,827

36,178

36,228

36,971

Permian

56,612

51,491

55,362

51,665


United States

213,889

204,485

210,746

199,156

Canada

73,159

80,185

70,753

79,097


North America

287,048

284,670

281,499

278,253

Egypt

163,223

158,148

157,184

147,382

Australia

94,538

37,323

78,179

34,431

North Sea

58,560

60,129

58,418

60,533

Argentina

43,497

47,130

41,260

47,348


International

359,818

302,730

335,041

289,694



Total

646,866

587,400

616,540

567,947

APACHE CORPORATION

FINANCIAL INFORMATION


























For the Quarter


For the Six Months




Ended June 30,

Ended June 30,




2010

2009


2010

2009












PRICING DATA:






 AVERAGE OIL PRICE PER BARREL







Gulf Coast

$ 76.95

$ 57.40

$ 76.94

$ 49.05

Central

74.20

56.07

74.66

45.94

Permian

73.95

52.23

74.50

43.36


United States (1)

74.20

57.00

74.26

49.95

Canada

70.87

55.17

73.10

46.49


North America (1)

73.73

56.72

74.10

49.41

Egypt

76.08

60.30

76.27

51.90

Australia

74.42

63.01

74.58

49.74

North Sea

78.78

58.77

76.58

51.51

Argentina

55.41

46.17

56.60

46.73


International

75.43

58.99

75.05

51.28



Total (1)

74.89

58.15

74.74

50.57











 AVERAGE NATURAL GAS PRICE PER MCF







Gulf Coast

$   4.45

$   3.76

$   5.07

$   4.29

Central

4.23

2.96

4.95

3.38

Permian

4.76

4.08

6.03

3.94


United States (1)

5.11

3.88

5.58

4.21

Canada (1)

4.51

3.86

4.88

4.26


North America (1)

4.91

3.88

5.35

4.23

Egypt

3.51

3.85

3.54

3.73

Australia

2.22

1.82

2.22

1.71

North Sea

17.15

12.24

17.73

9.82

Argentina

1.88

1.89

2.01

1.94


International

2.83

2.92

2.88

2.82



Total (1)

4.01

3.48

4.29

3.65











 AVERAGE NGL PRICE PER BARREL







Gulf Coast

$ 44.27

$ 27.13

$ 49.25

$ 26.33

Central

38.87

27.28

44.40

23.21

Permian

37.73

28.04

38.96

25.30


United States

40.48

27.36

44.63

25.90

Canada

35.76

24.23

37.97

22.40


North America

39.80

26.50

43.52

24.90

Argentina

25.68

15.91

30.23

16.51



Total

37.21

23.42

40.58

22.39























(1)  Prices reflect the impact of financial derivative hedging activities.

APACHE CORPORATION

FINANCIAL INFORMATION

(In thousands, except per share data)










NON-GAAP FINANCIAL MEASURES:
















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,



2010

2009


2010

2009











Income (Loss) Attributable to Common Stock (GAAP)

$    860,223

$    443,300

$ 1,565,204

$ (1,315,060)










Adjustments:







Foreign currency fluctuation impact on deferred tax expense  

(31,511)

31,164

(24,927)

26,350

Additional depletion, net of tax

-

-

-

1,981,398

Adjusted  Earnings  (Non-GAAP)

$    828,712

$    474,464

$ 1,540,277

$     692,688










Adjusted Earnings Per Share (Non-GAAP)






   Basic

$          2.45

$          1.41

$          4.57

$           2.07

   Diluted

$          2.44

$          1.41

$          4.54

$           2.05










Average Number of Common Shares






   Basic

337,618

335,637

337,273

335,372

   Diluted

339,377

337,365

339,282

337,198










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,



2010


2009


2010


2009

Net cash provided by operating activities

$ 1,932,012

$    823,513

$ 3,085,441

$  1,366,729

Changes in operating assets and liabilities

(97,289)

436,071

317,162

875,914

Cash from operations before changes in







operating assets and liabilities

$ 1,834,723

$ 1,259,584

$ 3,402,603

$  2,242,643

SOURCE Apache Corporation

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