HOUSTON, Feb. 25, 2016 – Apache Corporation (NYSE, Nasdaq: APA) today announced its financial and operational results for the fourth quarter and full year 2015.
Apache reported a net loss of $7.2 billion or $19.07 per diluted common share during the fourth quarter 2015, including non-cash after-tax ceiling test write downs and impairments of $5.9 billion driven by current low commodity price levels. When adjusted for these and certain additional items that impact the comparability of results, Apache’s fourth-quarter net loss totaled $24 million, or $0.06 per share. Net cash provided by continuing operating activities in the fourth quarter was approximately $262 million, and adjusted EBITDA was $781 million. Cash flow from operations was reduced in the quarter by a one-time income tax payment of $484 million, associated with the repatriation of foreign divestment proceeds. Capital expenditures were $674 million in the fourth quarter, excluding leasehold acquisitions, capitalized interest and Egypt noncontrolling interest.
For the year ending 2015, Apache reported a net loss of $23.1 billion, or $61.20 per diluted common share. On an adjusted basis, Apache’s 2015 loss totaled $130 million, or $0.34 per share. Net cash provided by continuing operating activities was approximately $2.8 billion, and adjusted EBITDA was $3.9 billion in 2015. Total capital expenditures were $4.7 billion for the full year, or $3.6 billion when excluding leasehold acquisitions, capitalized interest, Egypt noncontrolling interest, and spending on divested LNG and associated assets. This was at the low end of the company’s full-year 2015 guidance range of $3.6 to $3.8 billion.
John J. Christmann IV, Apache’s chief executive officer and president, said, “During 2015, we completed several important portfolio-related transactions and used the proceeds from asset sales to significantly improve our liquidity and financial position. We reacted quickly to the lower price environment by dramatically reducing our activity levels and taking decisive steps to attack our overhead, operating and capital costs. Our operational focus during the year was on strategically delineating our core acreage positions and conducting key exploratory tests to position for future growth and optimal returns when the investment environment improves. In 2016, we plan to be cash flow neutral after dividends and believe this can be achieved at $35 oil with minimal non-core, non-producing asset sales. Our target is for net debt at the end of 2016 to be unchanged or lower than it was at the end of 2015.”
2016 capital budget and production outlook
Christmann continued, “With current 2016 strip prices 30 to 35 percent below year-ago levels, we believe a conservative plan and a flexible capital spending program are paramount to protecting the financial position we have worked hard to establish over the last 18 months. Accordingly, we are reducing our 2016 total capital program to $1.4 to $1.8 billion, which the company will adjust up or down to align with actual commodity prices and resulting cash flow. This is a reduction of more than 60 percent from 2015 levels and more than 80 percent from 2014 levels.”
The company’s discretionary capital is being prioritized to higher rate-of-return opportunities in Egypt and the North Sea and to key strategic testing in North America Onshore. Apache has a large inventory of low-cost drilling opportunities in North America, but with the majority of its net acreage held-by-production, does not view spending on development wells as a necessary or prudent use of limited dollars at current oil prices. The company will maintain capital allocation and operational flexibility to respond quickly to changing oil price scenarios and has developed specific plans for adding rigs back in the event prices and costs come back into better alignment.
Apache expects total pro forma production volumes (excluding Egypt noncontrolling interest and tax barrels) to range from 433 to 453 Mboe per day, which represents a decline of 7 to 11 percent from pro forma 2015 production of 486 Mboe per day. With approximately 45 percent of its 2016 budget allocated to North America Onshore, pro forma production is projected to be in a range of 263 to 273 Mboe per day, which represents a decline of 12 to 15 percent compared to 2015. The remaining 55 percent of the capital budget will be allocated to International and Offshore, where pro forma production is projected to be 170 to 180 Mboe per day, or roughly flat when compared to 2015 pro forma production of 176 Mboe per day.
Christmann concluded, “While returns in select areas are still adequate at the well level, we believe it is better to wait until fully burdened rates of return improve to higher double-digit percentages, before materially increasing our rig count and developing our acreage. In the meantime, we will focus on key strategic testing activities within our existing operating footprint to further define and expand our high-quality inventory for the future. We will also continue investing in our highly successful exploration portfolio in the North Sea and in our highly prospective blocks 53 and 58 in offshore Suriname. Apache enjoys several advantages in the current low-price environment including a strong financial position, a relatively low base production decline rate, a lean cost structure, and a disciplined capital-spending program. We have a portfolio of high-quality assets with robust inventory in North America, higher-cash-margin assets in Egypt and the North Sea and exciting longer-term exploration prospects.”
Fourth-quarter operational highlights
During the fourth quarter, Apache operated an average of 33 rigs and drilled and completed 113 gross-operated wells worldwide. Highlights from Apache’s three principal areas include:
During the fourth quarter, Apache completed the sale of its Yara Pilbara fertilizer plant in Australia and three North American gas processing facilities for total proceeds of $531 million. Earlier in 2015, the company sold its Kitimat and Wheatstone LNG assets, upstream Australian assets and its working interest in the non-operated Scott-Telford field in the North Sea, for which it received net proceeds of approximately $6 billion. A portion of the 2015 proceeds were used to reduce debt and increase the company’s cash balance. Apache also invested $340 million in new leasehold within or near its existing operational footprint, primarily in the Permian and Anadarko basins.
Debt and liquidity
At year-end, the company had access to available liquidity of approximately $5 billion, including $1.5 billion in cash on hand and $3.5 billion in available borrowing capacity under its committed credit facility. The company’s credit facility matures in June 2020. Apache reduced debt by $2.5 billion from year-end 2014 and reported debt of $8.8 billion as of Dec. 31, 2015. Apache has no debt maturities before 2018 and only $700 million of debt maturing before 2021.
Year-end 2015 proved reserves
Worldwide estimated proved reserves totaled 1.6 billion barrels of oil equivalent (Boe) at year-end 2015, down from 2.4 billion Boe at year-end 2014. The decrease in reserves is primarily driven by significant divestitures in Australia and Canada; a significant decline in oil, gas and NGL prices used to calculate reserves volumes and values; and an approximate 60-percent year-over-year reduction in capital spending. The decrease in reserves consisted of the following: divestitures of 385 million barrels of oil equivalent (MMboe); production of 204 MMboe; and revisions of previous estimates of 368 MMboe. These decreases were partially offset by 117 MMboe of proved reserves added through net extensions and discoveries.
Apache will host a conference call to discuss its fourth-quarter and full-year 2015 results at 1 p.m. Central time, Thursday, Feb. 25. The conference call will be webcast from Apache's website, www.apachecorp.com. The webcast replay will be archived on Apache's website. A replay of the conference call will be available for seven days following the call. The number for the replay is 855-859-2056 or 404-537-3406 for international calls. The conference access code is 13719037.
Sign up for email alerts to be reminded of the webcast at http://investor.apachecorp.com/alerts.cfm.
Additional information follows, including reconciliations of adjusted earnings, adjusted EBITDA and net debt (non-GAAP financial measures) to GAAP measures and information regarding pro forma production. Apache’s quarterly supplement is available at www.apachecorp.com/financialdata.
Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt and the United Kingdom. Apache posts announcements, operational updates, investor information and copies of all press releases on its website, www.apachecorp.com, and on its Media and Investor Center mobile application, which is available for free download from the Apple App Store and the Google Play Store.
Non-GAAP financial measures
Apache’s financial information includes information prepared in conformity with generally accepted accounting standards (GAAP) as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of our consolidated financial information as prepared in accordance with GAAP. Adjusted earnings, adjusted EBITDA and net debt are non-GAAP measures. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.
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,” “guidance,” 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 capital plans, drilling plans, production expectations, asset sales, and monetizations. 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 2014 Form 10-K filed, and 2015 Form 10-K when 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.
Cautionary note to investors
The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache may use certain terms in this earnings release, such as "resources," "potential resources," "resource potential," "estimated net reserves," "recoverable reserves," and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache's Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2014, (and Apache’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2015, when filed) available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, TX 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.
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