Apache Corporation Announces Second-Quarter 2019 Financial and Operational Results

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Apache Corporation Announces Second-Quarter 2019 Financial and Operational Results

July 31, 2019 at 9:00 PM EDT
  • Reported second-quarter production of 455,000 barrels of oil equivalent (BOE) per day. Adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 396,000 BOE per day, exceeding guidance of 392,000 BOE per day; 
  • Achieved U.S. production of 264,000 BOE per day, which was reduced by approximately 4,000 BOE per day as a result of asset sales during the quarter; International adjusted production was 132,000 BOE per day, in-line with guidance;
  • Invested $589 million in upstream capital, 13 percent below capital guidance midpoint, remain on track for $2.4 billion for the year; 
  • Commissioned first cryogenic processing facility at Alpine High in partnership with Altus Midstream during the quarter and second facility in July, both of which were on budget and schedule; and
  • Closed on the sale of midcontinent assets in two separate transactions in May and July, comprising approximately $560 million of cash proceeds, after customary closing adjustments. $150 million of proceeds were used to retire debt in early July.

HOUSTON, July 31, 2019 – Apache Corporation (NYSE, Nasdaq: APA) today announced its financial and operational results for the second quarter of 2019.

Apache reported a quarterly loss of $360 million or $0.96 per diluted common share for the second quarter of 2019. 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 items that impact the comparability of results, Apache’s second-quarter earnings were $41 million or $0.11 per share. Net cash provided by operating activities in the quarter was $856 million. Adjusted EBITDAX was $994 million.

“Apache has demonstrated capital discipline, refined our portfolio with the sale of the midcontinent assets, utilized asset sale proceeds to reduce debt, and successfully commissioned our first cryogenic processing facilities at Alpine High. We also delivered strong cash flow as our leverage to WTI and Brent oil prices offset the impact of very weak natural gas and natural gas liquids prices,” said John J. Christmann IV, Apache's chief executive officer and president.

“We responded quickly to weak Waha and El Paso Permian gas prices and deferred production at Alpine High. While total Permian production volumes were strong, oil volumes trailed guidance due to timing delays bringing wells online during the quarter. We will catch up in the second half of 2019 and exit the year with oil production on plan and with strong momentum heading into 2020. 

“We have balanced our quarterly investment pace, and through June 30, have invested slightly less than half of our 2019 upstream capital budget. For the full year, we anticipate spending at or below our $2.4 billion budget,” continued Christmann. 

Second-quarter operational summary     

Highlights from the company’s three principal areas include:

Permian – Production averaged 226,000 BOE per day during the quarter. Apache operated an average of 12 rigs and drilled and completed 54 gross-operated wells. 

  • Midland Basin – During the quarter, the company averaged four rigs and placed 20 wells on production. A 30-day delay in the commissioning of a new electric-powered frac fleet delayed production from nine wells during the quarter.
     
  • Delaware Basin – Outside of Alpine High in the Delaware Basin, Apache averaged three rigs and placed nine wells on production during the quarter. 

    At Alpine High, the company averaged five rigs and two frac crews and placed 26 wells on production. Approximately half of these wells came online late in the quarter and were still in the early clean-up phase as of June 30. 

    Production at Alpine High during the quarter was 49,000 BOE per day. As previously announced, Apache initiated the deferral of certain natural gas production volumes near the end of the first quarter in response to severe Waha Hub gas price weakness. The impact of these deferrals during the second quarter was approximately 22,000 BOE per day. In the third quarter, the company is continuing to defer a similar amount of lean and rich-gas volumes in response to ongoing price weakness until the GCX pipeline comes online.

    Apache continues to deliver cost reductions in the play with average drilling and completion costs per foot down 26 percent and 41 percent, respectively, from 2017 through the end of the second quarter. 

Egypt – Apache averaged seven rigs during the quarter and drilled and completed 11 gross-operated wells. Adjusted production in Egypt, which excludes noncontrolling interest and the impact of tax barrels, averaged 72,000 BOE per day. During the quarter, the company made a discovery in the Lower Bahariya on a new concession area and has identified numerous additional low-cost, short-cycle drilling locations in the immediate vicinity. 

North Sea – Apache averaged three rigs during the quarter and produced 60,000 BOE per day. During the second quarter, the company completed a farm-out agreement in a portion of the Beryl area to enable the continuation of tertiary exploration while preserving capital.

Asset sales and use of proceeds

In May and July, Apache closed the sale of noncore assets in two previously disclosed transactions, comprising approximately $560 million of net proceeds. The asset sales reflect the company’s exit from the Western Anadarko Basin and the SCOOP/STACK play.  A portion of the proceeds from these asset sales was used to retire $150 million of debt that matured in early July.

Capital and production outlook 

Upstream oil and gas investment was $589 million in the second quarter. Apache is reiterating its full-year capital investment guidance of $2.4 billion. 
  
Apache is revising its production guidance for the second half of 2019 in the Permian Basin to reflect the delays experienced in the Midland/Delaware Basins, as well as continuing gas production deferrals at Alpine High in response to ongoing weak Waha gas prices. 

For Permian Basin oil, Apache expects third-quarter production to be 94,000 to 98,000 BOE per day and fourth-quarter production to be 100,000 to 105,000 BOE per day. 

At Alpine High, Apache expects third-quarter production to be between 70,000 to 75,000 BOE per day, which includes the impact of planned production deferrals. Fourth-quarter Alpine High production guidance of greater than 100,000 BOE per day is unchanged from prior guidance. This assumes that all deferred gas production is returned to sales by the beginning of October in conjunction with the GCX pipeline startup. 

Internationally, the company expects third and fourth quarter volumes will be in-line with prior guidance. Details on additional financial and operational guidance can be found in the Second-Quarter 2019 Financial and Operational Supplement at www.apachecorp.com/financialdata

“Our objectives for the second half of 2019 include managing capital investment to a level at or below our full-year budget of $2.4 billion, increasing Permian Basin oil well completions and oil production, continuing to drive capital and operating efficiencies into our business, and enhancing our opportunity set through high-impact exploration initiatives in Suriname and the Lower 48,” concluded Christmann.

Conference call

Apache will host a conference call to discuss its second-quarter 2019 results at 10 a.m. Central time, Thursday, Aug. 1. 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 7693326 . Sign up for email alerts to be reminded of the webcast at investor.apachecorp.com/alerts/email-alerts-subscription.

Additional information

Additional information follows, including reconciliations of adjusted earnings, cash flow from operations before changes in operating assets and liabilities, adjusted EBITDAX, upstream 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.

About Apache

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.

Non-GAAP financial measures

Apache’s financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial 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, upstream 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.

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,” “guidance,” “outlook,” “projects,” “will,” 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 2018 Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) 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 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 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, 2018, 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.

Contacts

Investor:    (281) 302-2286    Gary Clark
Media:       (713) 296-7276    Phil West            
Website:    www.apachecorp.com


Click here for the full release with quarterly financial statements and the Financial and Operational Supplement.