HOUSTON, Oct. 30, 2019 – Apache Corporation (NYSE, Nasdaq: APA) today announced its financial and operational results for the third quarter of 2019.
Apache reported a quarterly loss of $170 million or $0.45 per diluted common share for the third 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 reported a third-quarter loss of $108 million or $0.29 per share. Adjusted earnings were generally in line with expectations except for the impact of increased depreciation, depletion and amortization costs. This was primarily associated with a reduction in Alpine High reserves due to deteriorating natural gas liquids (NGL) and gas prices. Upstream oil and gas capital investment was $590 million in the third quarter. Net cash provided by operating activities in the quarter was $635 million and adjusted EBITDAX was $905 million.
“During the third quarter, adjusted production exceeded guidance while capital expenditures remained on pace with our full-year guidance of $2.4 billion,” said Apache CEO and President John Christmann. “In September, we began drilling the first of three committed wells in Block 58 offshore Suriname. We are also nearing first production from two wells in the North Sea, which should establish strong production momentum as we enter 2020.”
Third-Quarter Operational Summary
Highlights from the company’s principal areas include:
Permian – Production averaged 254,000 BOE per day during the quarter and Apache operated an average of 10 rigs and drilled and completed 47 gross-operated wells. In the Permian Basin, our oil production in the second half of the year has been modestly impacted by some unplanned downtime events and completion schedule delays. As a result, the company is now projecting fourth-quarter Permian oil volumes of approximately 100,000 barrels per day.
Production at Alpine High averaged 76,000 BOE per day for the quarter and the company averaged five rigs and one frac crew and placed 15 wells on production. Volumes previously deferred due to low Waha prices were returned to production during August and September.
As a result of continued weakness in gas and NGL pricing, the company has reduced Alpine High drilling activity to two rigs and has chosen to defer some fourth-quarter completions into 2020. These changes, combined with a reduced production outlook for a recent multiwell pad, has resulted in a 5% decrease in fourth-quarter Alpine High production guidance.
Egypt – Apache averaged seven rigs during the quarter and drilled and completed 14 gross-operated wells. Adjusted production in Egypt, which excludes noncontrolling interest and the impact of tax barrels, averaged 72,000 BOE per day, up slightly from the second quarter. The company drilled multiple successful exploration wells during the quarter that have positive implications for future development inventory.
North Sea – Apache averaged three rigs during the quarter and produced 54,000 BOE per day, which reflects an anticipated decrease related to seasonal platform maintenance. The company expects to bring its first well at Storr online in November and its second well at Garten online around year-end. The Garten well encountered approximately 1,200 feet of pay, which significantly exceeded the company’s pre-drill estimates.
Suriname – Apache is currently drilling the Maka Central #1 well and expects to reach total depth in November at approximately 6,325 meters as measured from the deck of the drillship. The well is designed to test multiple targets and is located roughly seven miles from the Suriname / Guyana maritime border. Apache also exercised its option to drill two additional wells in Suriname Block 58 with the Noble Sam Croft drillship.
Organizational and Cost Saving Initiatives
“Apache has historically employed a decentralized, region-focused approach to operations. In recent years, we have centralized certain key activities, and today we see an opportunity to capture greater efficiencies by taking further steps in that direction,” continued Christmann. “To accomplish this, we have initiated a comprehensive redesign of our organizational structure and operations that will position us to be competitive for the long term. This process, which began in late summer, should be largely completed by the end of the first quarter 2020. We are targeting at least $150 million of combined annual savings and look forward to updating you on our progress in the future.”
“Our primary objectives are to deliver competitive, risk-adjusted returns with a long-term moderate pace of growth and improve our free cash flow yield to levels consistent with other mature industrial sectors. As we look to 2020, based on current strip prices, we anticipate our upstream capital budget will be 10% to 20% below this year’s program of $2.4 billion. This will enable us to generate organic free cash flow that covers the current dividend and puts us on pace to fund a multiyear debt reduction program, while also delivering modest year-over-year oil production growth. We look forward to sharing the details of our 2020 capital plan in February,” concluded Christmann.
Apache will host a conference call to discuss its third-quarter 2019 results at 10 a.m. Central time, Thursday, Oct. 31. 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 8089562. Sign up for email alerts to be reminded of the webcast at 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, 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.
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.
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,” “continues,” “could,” “estimates,” “expects,” “guidance,” “may,” “might,” “outlook,” “possible,” “potential,” “projects,” “should,” “would,” “will,” and similar references to future periods, but the absence of these words does not mean that a statement is not forward-looking. 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 and in our quarterly reports on Form 10-Q 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.
Investor: (281) 302-2286 Gary Clark
Media: (713) 296-7276 Phil West
Click here for the full release with quarterly financial statements.