HOUSTON, Aug. 1, 2018 – Apache Corporation (NYSE: APA) (Nasdaq: APA) _today announced its financial and operational results for the second quarter of 2018.
Apache reported earnings of $195 million or $0.51 per diluted common share for the second quarter of 2018. These results include a number of items outside of core earnings that are typically excluded by the investment community in their published earnings estimates. When adjusted for these and certain additional items that impact the comparability of results, Apache’s second-quarter earnings were $192 million or $0.50 per share. Net cash provided by operating activities in the quarter was $1.1 billion. Before working capital changes, Apache generated $932 million in operating cash flow. Adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses (adjusted EBITDAX) was $1.3 billion.
“Apache’s operational and strategic delivery have been exceptional through the first half of 2018. We are proactively managing our costs, operating at an activity level that maximizes capital efficiency, and we have established considerable momentum that is now showing up in our results,” said John J. Christmann IV, Apache's chief executive officer and president. “In the United States, the Permian Basin was our primary growth driver, with oil production in the Midland and Delaware basins up 20,000 barrels per day year-over-year and 6,000 barrels per day over the first quarter.”
Second-quarter operational summary
Highlights from the company’s three principal areas include:
Capital investment and financial position
Oil-and-gas capital investment was $833 million during the quarter, including $116 million for Alpine High midstream. Total capital investment for the first half of the year was $1.7 billion. The company anticipates maintaining this pace of investment in the second half of the year, bringing the full-year spending outlook to approximately $3.4 billion, compared to prior guidance of $3 billion. This spend level anticipates a full year of Alpine High midstream investment, which may change with a potential transaction.
The incremental capital is necessary to align and optimize drilling and completion activity in the Midland Basin and to fund investment in longer laterals, larger completions and facility expansions at Alpine High. These activity modifications incorporate learnings from the company’s recent strategic tests and are expected to result in increased productivity and improved returns.
At current strip prices, the capital increase will be fully funded through cash flow from operations and will provide significant incremental production in 2019 and beyond.
2018 outlook and guidance update
Strong execution and well performance in the second quarter are prompting the company to raise its 2018 U.S. production guidance for the second time this year. The updated guidance of 260,000 BOE per day is above the high-end of the previous range of 250,000 to 258,000 BOE per day. At Alpine High, full-year 2018 guidance is now 45,000 BOE per day, or the midpoint of the previous guidance range.
Adjusted international production guidance for 2018 is expected to be approximately 134,000 BOE per day, just below the midpoint of the previous range of 130,000 to 140,000 BOE per day. This includes a significant impact of higher-than-planned Brent prices on Egypt net production volumes.
Further details on other financial and operational guidance for the second quarter and full year 2018 can be found in the Second-Quarter 2018 Financial and Operational Supplement at www.apachecorp.com/financialdata.
“Apache is executing extremely well on all fronts. We are realizing capital efficiency and productivity improvements that are increasingly evident in our financial and operational results. In the Permian Basin, our drilling and completion operations are very efficient, and our wells are outperforming. Our primary infrastructure is in place at Alpine High, and we are in the very early stages of a significant, long-term production ramp up. Furthermore, we have progressed an Alpine High midstream transaction to advanced stages and anticipate closing before year-end.
“Internationally, we are generating significant free cash flow bolstered by Brent oil pricing. Our strategy and investment decisions in these regions are designed to deliver long-term oil growth in Egypt and to sustain production volumes in the North Sea. Our recent discoveries at Callater and Garten in the North Sea and our large-scale, high-density seismic and new acreage concessions in Egypt, give us confidence in our ability to deliver on this strategy while simultaneously maintaining or growing free cash flow.
“Given our strong well performance trends, capital efficiency improvements, and the planned increase in 2018 investment, we anticipate upside bias to our 2019 and 2020 production guidance, which we will revisit later this year,” Christmann concluded.
Apache will host a conference call to discuss its second-quarter 2018 results at 10 a.m. Central time, Thursday, Aug. 2. The conference call will be webcast from Apache's website at www.apachecorp.com and investor.apachecorp.com, and the webcast replay will be archived there as well. 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 3260959. Sign up for email alerts to be reminded of the webcast at http://investor.apachecorp.com/alerts/email-alerts-subscription.
Additional information follows, including reconciliations of adjusted earnings, cash flow from operations before changes in operating assets and liabilities, adjusted EBITDAX, oil and gas capital investment and net debt (non-GAAP financial measures) to GAAP measures and information regarding adjusted 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, 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's Play Store.
Non-GAAP financial measures
Apache’s financial information includes information prepared in conformity with generally accepted accounting principles (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, cash flow from operations before changes in operating assets and liabilities, oil and gas capital investment, adjusted EBITDAX 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,” “outlook,” 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 2017 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.
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, 2017, 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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