Apache Second-Quarter Earnings Rise 53 Percent to Record $1.13 Per Share on Higher Production

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Apache Second-Quarter Earnings Rise 53 Percent to Record $1.13 Per Share on Higher Production

July 29, 2004 at 12:00 AM EDT
Apache Second-Quarter Earnings Rise 53 Percent to Record $1.13 Per Share on Higher Production HOUSTON, July 29 /PRNewswire-FirstCall/ -- Apache Corporation (NYSE, Nasdaq: APA) today reported that rising production, lower costs and continued strong commodity prices fueled second-quarter 2004 earnings of $372 million, or $1.13 per diluted common share, after unusual items. Earnings increased 53 percent from $243 million, or 74 cents per share, in the prior-year period.

Apache's earnings surpassed the previous quarterly record of $1.06 per share reported in the first quarter of 2004. Second-quarter earnings included two unusual items that together reduced the per-share results by 19 cents: a $48 million after-tax reserve for a previously announced arbitration award, which Apache intends to contest, and the $14 million after-tax impact of the employee share appreciation plan, also disclosed earlier. These items were partially offset by a lower effective tax rate, primarily from a reduction in Alberta provincial tax rates and the impact of favorable currency swings on deferred taxes. The tax items totaled $35 million (after-tax) or 11 cents per share.

Liquid hydrocarbon production averaged 234,788 barrels per day, up 3 percent from the first quarter and up 6 percent from the prior-year period. Natural gas production averaged 1.25 billion cubic feet per day, up 38 million cubic feet per day from the first quarter and a slight increase from the year- earlier period.

Cash from operations before changes in operating assets and liabilities totaled $721 million, up from $639 million in the year-earlier period. (This is a non-GAAP measure; see reconciliation below.)

"The story in the second quarter was higher production, lower lifting costs and strong commodity prices," said G. Steven Farris, president, chief executive officer and chief operating officer. "Our drilling program is showing excellent results across Apache's portfolio. We invested $1 billion on exploration and development in the first half, and this increased activity level is providing strong momentum for the second half. We also further reduced our debt-to-capitalization ratio."

Among Apache's operational highlights for the second quarter:

  • U.S. gas production increased 3 percent from the first quarter on exploitation of offshore blocks acquired from BP and Shell in 2003 and onshore on South Louisiana fee acreage acquired in 2002, as well as continued success in the Deep Springer and Red Fork plays in the Anadarko Basin, the Styles Ranch area in North Texas and in East Texas.


  • North Sea production increased 7 percent from the first quarter, to 47,179 barrels per day, as a result of six new producers and increased field efficiency. Thus far in July, net production has averaged approximately 55,000 barrels per day.


  • Apache's Egypt region set quarterly records for gross production: 100,828 barrels of oil and 276 million cubic feet of gas per day.


Commodity prices remained strong in the second quarter. Apache received $4.84 per thousand cubic feet (Mcf) of gas, up from $4.61 per Mcf; $33.06 per barrel of oil during the second quarter, up 26 percent from $26.19 in the prior-year period; and $22.92 per barrel for natural gas liquids, compared with $19.27 per barrel.

In the first half, Apache reported net income of $719 million, or $2.19 per share, up from $580 million, or $1.79 per share, in the first half of 2003. First-half cash from operations before changes in operating assets and liabilities totaled $1.46 billion, up from $1.28 billion in the year-earlier period.

Apache's debt-to-capitalization ratio declined to 23.2 percent at the end of the quarter from 24.2 percent at the end of the first quarter.

Apache Corporation is a large oil and gas independent with core operations in the United States, Canada, Egypt, the United Kingdom North Sea and Western Australia.

NOTE: Apache will webcast its conference call live at 1 p.m. Central Time from its Web site, http://www.apachecorp.com . The replay will be available on the Web site or by dialing (719) 457-0820 and using pass code 257586. The telephone replay will be available for one week beginning at approximately 5 p.m. on July 29.

This news release contains certain "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995 including, without limitation, expectations, beliefs, plans and objectives regarding production, operating costs, exploration and acquisition activities. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions and uncertainties. There is no assurance that Apache's expectations will be realized, and actual results may differ materially from those expressed in the forward-looking statements.

                                APACHE CORPORATION
                              FINANCIAL INFORMATION
                      (In thousands, except per share data)

                                For the Quarter         For the Six Months
                                 Ended June 30,           Ended June 30,
                               2004         2003         2004        2003

    REVENUES AND OTHER:
    Oil and gas production
     revenues               $1,247,412    $1,044,330  $2,400,166   $2,019,492
    Other                       (6,679)       10,026      (9,494)       1,473
                             1,240,733     1,054,356   2,390,672    2,020,965

    OPERATING EXPENSES:
    Depreciation, depletion
     and amortization          295,737       272,356     581,965      486,705
    Asset retirement
     obligation accretion       10,891        10,445      21,652       15,758
    Lease operating costs      197,097       186,286     403,126      320,421
    Share appreciation plan
     - lease operating  costs   10,992           ---      10,992          ---
    Gathering and
     transportation costs       20,162        15,131      39,796       26,992
    Severance and other
     taxes                      21,595        32,742      30,543       57,296
    General and
     administrative             36,479        30,574      80,329       58,405
    Share appreciation plan
     - general and
     administrative             11,012           ---      11,012          ---
    China litigation            71,216           ---      71,216          ---
      Total operating
       expenses                675,181       547,534   1,250,631      965,577

    OPERATING INCOME           565,552       506,822   1,140,041    1,055,388

    FINANCING COSTS:
    Interest expense            40,193        41,428      80,742       79,124
    Amortization of
     deferred loan costs           595           536       1,162        1,067
    Capitalized interest       (12,708)      (12,618)    (26,358)     (23,850)
    Interest income               (513)         (428)       (833)      (1,502)
      Net financing costs       27,567        28,918      54,713       54,839

    Preferred interests of
     subsidiaries                  ---         3,330         ---        6,692

    INCOME BEFORE INCOME
     TAXES                     537,985       474,574   1,085,328      993,857
    Provision for income
     taxes                     164,847       230,193     363,106      437,179

    INCOME BEFORE CHANGE IN
     ACCOUNTING PRINCIPLE      373,138       244,381     722,222      556,678
    Cumulative effect of
     change in accounting
     principle, net of tax         ---           ---         ---       26,632

    NET INCOME                 373,138       244,381     722,222      583,310
    Preferred stock
     dividends                   1,420         1,420       2,840        2,840

    INCOME ATTRIBUTABLE TO
     COMMON STOCK             $371,718      $242,961    $719,382     $580,470

    INCOME ATTRIBUTABLE TO
     COMMON STOCK
     BEFORE CHANGE IN
     ACCOUNTING PRINCIPLE     $371,718      $242,961    $719,382     $553,838

    BASIC NET INCOME PER
     COMMON SHARE
    Before change in
     accounting principle        $1.14         $0.75       $2.21        $1.73
    After change in
     accounting principle        $1.14         $0.75       $2.21        $1.81

    DILUTED NET INCOME PER
     COMMON SHARE
    Before change in
     accounting principle        $1.13         $0.74       $2.19        $1.71
    After change in
     accounting principle        $1.13         $0.74       $2.19        $1.79

    WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING        325,668       323,409     325,335      320,973


                               APACHE CORPORATION
                             FINANCIAL INFORMATION
                                 (In thousands)

                              For the Quarter          For the Six Months
                               Ended June 30,             Ended June 30,
                             2004           2003        2004         2003

    CAPITALIZED COSTS
     INCURRED:
      North America
       exploration and
       development        $367,287       $246,176    $717,810      $498,503
      International
       exploration and
       development         179,623        108,083     343,697       198,032
                          $546,910       $354,259  $1,061,507      $696,535
      Acquisitions:
        Oil and gas
         properties           $---       $686,443        $---    $1,230,814
        Gas gathering,
         transmission
         and processing
         facilities            ---            ---         ---         5,484
                              $---       $686,443        $---    $1,236,298

      Capitalized
       interest            $12,708        $12,618     $26,358       $23,850

      Asset retirement
       obligation costs     $7,158       $266,362     $13,181      $338,627
      Actual retirement
       expenditures         (6,833)        (8,945)    (14,992)      (11,517)
                              $325       $257,417     $(1,811)     $327,110

      Property sales          $---           $---        $---         $(286)


                           June 30,     December 31,
                            2004           2003
    BALANCE SHEET DATA:
      Current Assets    $1,157,864       $899,072
      Property and
       Equipment, net   11,815,438     11,260,085
      Goodwill             189,252        189,252
      Other Assets          87,397         67,717
      Total Assets     $13,249,951    $12,416,126

      Current
       Liabilities        $975,599       $820,378
      Long-Term Debt     2,192,070      2,326,966
      Deferred Credits
       and Other
       Noncurrent
       Liabilities       2,808,093      2,735,984
      Shareholders'
       Equity            7,274,189      6,532,798
      Total Liabilities
       and Shareholders'
       Equity          $13,249,951    $12,416,126

      Common shares
       outstanding at
       end of period       326,002        324,497


NON-GAAP FINANCIAL MEASURES:

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,
                                 2004       2003         2004         2003
    Net cash provided by
     operating activities     $646,720    $686,124    $1,299,052    $1,224,165
    Changes in operating
     assets and liabilities     74,250     (47,056)      158,644        59,657
    Cash from operations
     before changes in
     operating assets
     and liabilities          $720,970    $639,068    $1,457,696    $1,283,822


                                APACHE CORPORATION
                              FINANCIAL INFORMATION

                                For the Quarter         For the Six Months
                                 Ended June 30,           Ended June 30,
                                2004        2003         2004        2003
    FINANCIAL DATA (In
     thousands, except per
     share data):

    Revenues and other       $1,240,733   $1,054,356  $2,390,672   $2,020,965

    Income Attributable to
     Common Stock              $371,718     $242,961    $719,382     $580,470

    Basic Net Income Per
     Common Share:
       Before change in
        accounting principle      $1.14        $0.75       $2.21        $1.73
       After change in
        accounting principle      $1.14        $0.75       $2.21        $1.81

    Diluted Net Income Per
     Common Share:
       Before change in
        accounting principle      $1.13        $0.74       $2.19        $1.71
       After change in
        accounting principle      $1.13        $0.74       $2.19        $1.79

    Weighted Average Common
     Shares Outstanding         325,668      323,409     325,335      320,973

    Diluted Shares
     Outstanding                329,363      326,120     329,053      323,654


    PRODUCTION AND PRICING DATA:

    NATURAL GAS VOLUME - Mcf
     per day
       United States            665,167      702,109     654,815      627,858
       Canada                   327,537      317,079     320,800      313,164
       Egypt                    137,329      113,169     132,997      118,415
       Australia                115,824      106,698     117,323      103,941
       North Sea                  1,661        2,103       1,631        1,057
       Argentina                  3,334        7,741       4,247        7,267
         Total                1,250,852    1,248,899   1,231,813    1,171,702

    AVERAGE NATURAL GAS
     PRICE PER MCF
       United States              $5.31        $5.19       $5.33        $5.64
       Canada                      5.11         4.81        5.10         5.08
       Egypt                       4.66         3.77        4.39         4.15
       Australia                   1.65         1.40        1.67         1.35
       North Sea                   5.05         2.08        4.70         2.08
       Argentina                   0.67         0.50        0.55         0.46
         Total                     4.84         4.61        4.81         4.92

    OIL VOLUME - Barrels per day
       United States             69,080       72,477      68,167       64,947
       Canada                    26,226       24,890      25,746       24,813
       Egypt                     53,410       47,687      51,254       46,704
       Australia                 22,200       32,673      22,928       31,562
       North Sea                 47,179       33,387      45,739       16,786
       China                      5,966          ---       6,703          ---
       Argentina                    541          587         547          592
         Total                  224,602      211,701     221,084      185,404

    AVERAGE OIL PRICE PER BARREL
       United States             $37.00       $26.90      $34.71       $27.81
       Canada                     35.91        27.80       34.48        29.92
       Egypt                      34.24        24.45       32.85        27.37
       Australia                  39.03        26.61       36.88        29.67
       North Sea                  21.70        25.50       22.19        25.50
       China                      31.73          ---       30.84          ---
       Argentina                  35.10        27.02       34.26        29.49
         Total                    33.06        26.19       31.77        28.09

    NGL VOLUME - Barrels per day
       United States              7,585        7,448       7,856        6,769
       Canada                     2,601        1,894       2,600        1,652
         Total                   10,186        9,342      10,456        8,421

    AVERAGE NGL PRICE PER
     BARREL
       United States             $22.48       $20.24      $23.92       $22.07
       Canada                     24.23        15.46       21.78        19.39
         Total                    22.92        19.27       23.39        21.55


CONTACT: Apache Corporation
Media: Tony Lentini +1-713-296-6227
  Bill Mintz +1-713-296-7276
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Investors: Robert Dye +1-713-296-6662
Web site: http://www.apachecorp.com