Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 1, 2018

 

 

APACHE CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware   1-4300   41-0747868

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

2000 Post Oak Boulevard

Suite 100

Houston, Texas 77056-4400

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (713) 296-6000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

 

 


The information in this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of Section 18, and shall not be incorporated by reference in any filing under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing.

 

Item 2.02.

Results of Operations and Financial Condition.

On August 1, 2018, Apache Corporation issued a press release announcing financial and operating results for the fiscal quarter ended June 30, 2018. The full text of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.

  

Description

99.1    Press Release of Apache Corporation dated August 1, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    APACHE CORPORATION
Date: August 2, 2018     /s/ Rebecca A. Hoyt
    Rebecca A. Hoyt
    Senior Vice President, Chief Accounting Officer, and Controller (Principal Accounting Officer)
EX-99.1

Exhibit 99.1

 

LOGO

NEWS RELEASE

APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018

FINANCIAL AND OPERATIONAL RESULTS

 

 

Reported second-quarter production of 464,000 barrels of oil equivalent (BOE) per day and adjusted production of 390,000 BOE per day, which excludes Egypt noncontrolling interest and tax barrels;

 

 

Delivered U.S. production of 255,000 BOE per day, exceeding guidance by 7,000 BOE per day driven by strong oil production in the Permian Basin;

 

 

Achieved record Permian Basin production of 202,000 BOE per day;

 

 

Reported Alpine High net production of 32,000 BOE per day during the quarter, which increased approximately 70 percent to 54,000 BOE per day by the end of July;

 

 

Realized significant capital efficiency improvements in the Permian Basin, reducing both Midland Basin completion cycle times and Alpine High well costs per lateral foot by 25 percent over 2017 averages; and

 

 

Raising 2018 U.S. production guidance to 260,000 BOE per day, from previous guidance of 250,000 to 258,000 BOE per day.

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.

 

LOGO


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 2 of 9

 

“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:

 

 

United States – U.S. production averaged 255,000 BOE per day. The company averaged 17 rigs and drilled and completed 70 gross-operated wells.

 

   

Permian Basin – Second-quarter production in the Permian Basin averaged 202,000 BOE per day, with total production up 39 percent and oil up 25 percent year-over-year.

 

   

Midland Basin – Activity continues to focus on pad development in the Wolfcamp and Spraberry formations. During the quarter, the company brought 22 wells online in the Midland Basin. Learnings from strategic testing are enabling highly efficient and optimized full-field development. Apache has recently made significant changes to its completion designs, resulting in lower cycle times and cost reductions of nearly $400,000 for the average completion.


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 3 of 9

 

   

Delaware Basin – Apache’s activity in the Delaware Basin includes operations in Dixieland and Alpine High in Reeves County and the slope play in southeast New Mexico. The company brought 41 Delaware Basin wells online, most of which were late in the quarter.

At Alpine High, production in the second quarter averaged 32,000 BOE per day, a 23-percent increase over the first quarter of 2018. Well costs in the play continue to come down despite upward pressure on service costs. Year-to-date, average costs per treated lateral foot are down by 25 percent. After analyzing successful results from its strategic testing programs, the company is increasing its investment in longer laterals and larger stimulations.

 

 

Egypt – Apache averaged 13 rigs during the quarter and drilled and completed 34 gross-operated wells. Adjusted production in Egypt, which excludes minority interest and the impact of tax barrels, averaged 80,000 BOE per day. The company recently added a third new concession of 650,000 gross acres in the East Bahariya area, bringing Apache’s total Egypt position to more than 6 million gross acres. This further enhances a highly prospective acreage position and provides a substantial inventory of opportunities for many years to come.

 

 

North Sea – Apache averaged three rigs during the quarter and produced 54,000 BOE per day, which was relatively flat over the first quarter. Two high-rate wells at Callater and Garten are expected to materially increase the North Sea production profile in late 2018 and early 2019.


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 4 of 9

 

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.


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 5 of 9

 

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.


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 6 of 9

 

“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.

Conference call

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 investor.apachecorp.com/alerts.cfm.

Additional information

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.

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, 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.


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 7 of 9

 

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.

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,” 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


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 8 of 9

 

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


APACHE CORPORATION ANNOUNCES SECOND-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 9 of 9

 

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.

Contacts

 

Investor:    (281) 302-2286    Gary Clark
Media:    (713) 296-7276    Castlen Kennedy
   (713) 296-6223    Phil West

Website: www.apachecorp.com

-end-


APACHE CORPORATION

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

(In millions, except per share data)

 

     For the Quarter
Ended June 30,
    For the Six Months
Ended June 30,
 
     2018     2017     2018     2017  

REVENUES AND OTHER:

        

Oil and gas production revenues

        

Oil revenues

   $ 1,576     $ 1,050     $ 2,969     $ 2,222  

Natural gas revenues

     212       233       434       488  

Natural gas liquids revenues

     148       63       266       148  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,936       1,346       3,669       2,858  

Derivative instrument gain (loss)

     (25     41       (23     41  

Gain (loss) on divestiture

     2       (21     9       320  

Other

     16       18       21       43  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,929       1,384       3,676       3,262  
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES:

        

Lease operating expenses

     356       372       705       708  

Gathering, transmission and processing

     82       48       168       105  

Taxes other than income

     49       29       104       71  

Exploration

     76       108       152       200  

General and administrative

     117       106       231       209  

Transaction, reorganization and separation

     12       4       12       (6

Depreciation, depletion and amortization:

        

Oil and gas property and equipment

     573       536       1,091       1,074  

Other assets

     35       36       70       74  

Asset retirement obligation accretion

     27       37       54       73  

Impairments

     —         —         —         8  

Financing costs, net

     94       99       193       199  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,421       1,375       2,780       2,715  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME BEFORE INCOME TAXES

     508       9       896       547  

Current income tax provision

     249       126       447       314  

Deferred income tax provision (benefit)

     (10     (730     (26     (647
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME INCLUDING NONCONTROLLING INTEREST

     269       613       475       880  

Net income attributable to noncontrolling interest

     74       41       135       95  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME ATTRIBUTABLE TO COMMON STOCK

   $ 195     $ 572     $ 340     $ 785  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME PER COMMON SHARE:

        

Basic

   $ 0.51     $ 1.50     $ 0.89     $ 2.06  

Diluted

   $ 0.51     $ 1.50     $ 0.88     $ 2.05  

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

        

Basic

     382       381       382       380  

Diluted

     385       383       384       383  

DIVIDENDS DECLARED PER COMMON SHARE

   $ 0.25     $ 0.25     $ 0.50     $ 0.50  

 

Page 1


APACHE CORPORATION

PRODUCTION INFORMATION

 

     For the Quarter Ended      % Change     For the Six Months Ended  
     June 30,
2018
     March 31,
2018
     June 30,
2017
     2Q18 to
1Q18
    2Q18 to
2Q17
    June 30,
2018
     June 30,
2017
 

OIL VOLUME—Barrels per day

                  

Permian

     89,928        85,469        71,891        5     25     87,711        73,541  

MidContinent/Gulf Coast

     11,492        10,494        10,197        10     13     10,996        10,667  

Gulf of Mexico

     3,743        3,784        3,983        -1     -6     3,763        4,178  

Canada

     —          —          11,638        —         NM       —          11,647  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     105,163        99,747        97,709        5     8     102,470        100,033  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt (1, 2)

     96,185        95,270        96,961        1     -1     95,730        99,327  

North Sea

     46,150        46,348        48,091        0     -4     46,249        48,933  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     142,335        141,618        145,052        1     -2     141,979        148,260  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total (1)

     247,498        241,365        242,761        3     2     244,449        248,293  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NATURAL GAS VOLUME—Mcf per day

                  

Permian

     403,267        357,311        237,455        13     70     380,416        232,582  

MidContinent/Gulf Coast

     135,629        121,046        114,534        12     18     128,378        118,993  

Gulf of Mexico

     8,881        10,187        12,063        -13     -26     9,530        13,906  

Canada

     —          —          205,408        —         NM       —          210,484  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     547,777        488,544        569,460        12     -4     518,324        575,965  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt (1, 2)

     340,991        343,901        383,296        -1     -11     342,438        395,179  

North Sea

     43,297        41,039        34,348        6     26     42,174        39,111  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     384,288        384,940        417,644        0     -8     384,612        434,290  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total (1)

     932,065        873,484        987,104        7     -6     902,936        1,010,255  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NGL VOLUME—Barrels per day

                  

Permian

     44,693        37,950        34,067        18     31     41,341        34,223  

MidContinent/Gulf Coast

     14,050        13,072        12,636        7     11     13,563        12,909  

Gulf of Mexico

     293        262        326        12     -10     278        379  

Canada

     —          —          4,365        —         NM       —          4,592  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     59,036        51,284        51,394        15     15     55,182        52,103  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt (1, 2)

     1,127        937        880        20     28     1,033        917  

North Sea

     1,104        1,168        741        -5     49     1,135        955  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     2,231        2,105        1,621        6     38     2,168        1,872  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     61,267        53,389        53,015        15     16     57,350        53,975  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

BOE per day

                  

Permian

     201,832        182,972        145,533        10     39     192,455        146,528  

MidContinent/Gulf Coast

     48,147        43,740        41,923        10     15     45,955        43,408  

Gulf of Mexico

     5,516        5,744        6,319        -4     -13     5,629        6,875  

Canada

     —          —          50,238        —         NM       —          51,319  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     255,495        232,456        244,013        10     5     244,039        248,130  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt (1, 2)

     154,144        153,524        161,724        0     -5     153,836        166,107  

North Sea

     54,470        54,356        54,556        0     0     54,413        56,407  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     208,614        207,880        216,280        0     -4     208,249        222,514  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total (1)

     464,109        440,336        460,293        5     1     452,288        470,644  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total excluding noncontrolling interests

     412,693        389,098        405,989        6     2     400,960        415,073  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

(1) Includes net production volumes attributed to our noncontrolling partner in Egypt below:

 

    

Oil (b/d)

     32,066        31,774        32,562            31,921        33,232  

Gas (Mcf/d)

     113,846        114,913        128,696            114,377        132,197  

NGL (b/d)

     376        312        293            344        306  

(2) Egypt Gross Production—BOE per day

     341,636        330,063        334,496        4     2     335,882        331,336  

 

Page 2


APACHE CORPORATION

ADJUSTED PRODUCTION INFORMATION

Adjusted production excludes certain items that management believes affect the comparability of operating results for the periods presented. Adjusted production excludes production attributable to 1) divested assets, 2) noncontrolling interest in Egypt, and 3) Egypt tax barrels. Management uses adjusted production to evaluate the company’s operational trends and performance and believes it is useful to investors and other third parties.

 

     For the Quarter Ended      % Change     For the Six Months Ended  
     June 30,
2018
     March 31,
2018
     June 30,
2017
     2Q18 to
1Q18
    2Q18 to
2Q17
    June 30,
2018
     June 30,
2017
 

OIL VOLUME—Barrels per day

                  

Permian

     89,928        85,469        71,891        5     25     87,711        73,320  

MidContinent/Gulf Coast

     11,492        10,494        10,197        10     13     10,996        10,667  

Gulf of Mexico

     3,743        3,784        3,983        -1     -6     3,763        4,178  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     105,163        99,747        86,071        5     22     102,470        88,165  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt

     47,837        47,993        51,776        0     -8     47,915        51,714  

North Sea

     46,151        46,348        48,091        0     -4     46,249        48,933  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     93,988        94,341        99,867        0     -6     94,164        100,647  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     199,151        194,088        185,938        3     7     196,634        188,812  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NATURAL GAS VOLUME—Mcf per day

                  

Permian

     403,267        357,311        237,455        13     70     380,416        231,592  

MidContinent/Gulf Coast

     135,629        121,046        114,534        12     18     128,378        118,993  

Gulf of Mexico

     8,881        10,187        12,063        -13     -26     9,530        13,906  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     547,777        488,544        364,052        12     50     518,324        364,491  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt

     188,012        189,982        220,061        -1     -15     188,991        218,605  

North Sea

     43,296        41,039        34,348        5     26     42,174        39,111  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     231,308        231,021        254,409        0     -9     231,165        257,716  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     779,085        719,565        618,461        8     26     749,489        622,207  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NGL VOLUME—Barrels per day

                  

Permian

     44,693        37,950        34,067        18     31     41,341        34,069  

MidContinent/Gulf Coast

     14,050        13,072        12,636        7     11     13,563        12,909  

Gulf of Mexico

     293        262        326        12     -10     278        379  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     59,036        51,284        47,029        15     26     55,182        47,357  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt

     596        495        540        20     10     546        526  

North Sea

     1,104        1,168        741        -5     49     1,135        955  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     1,700        1,663        1,281        2     33     1,681        1,481  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     60,736        52,947        48,310        15     26     56,863        48,838  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

BOE per day

                  

Permian

     201,832        182,972        145,533        10     39     192,455        145,988  

MidContinent/Gulf Coast

     48,147        43,740        41,923        10     15     45,955        43,408  

Gulf of Mexico

     5,516        5,744        6,319        -4     -13     5,629        6,875  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

North America

     255,495        232,456        193,775        10     32     244,039        196,271  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Egypt

     79,769        80,153        88,993        0     -10     79,960        88,674  

North Sea

     54,470        54,356        54,556        0     0     54,413        56,407  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     134,239        134,509        143,549        0     -6     134,373        145,081  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     389,734        366,965        337,324        6     16     378,412        341,352  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

 

Page 3


APACHE CORPORATION

PRICE INFORMATION

 

     For the Quarter Ended      For the Six Months Ended  
     June 30,
2018
     March 31,
2018
     June 30,
2017
     June 30,
2018
     June 30,
2017
 

AVERAGE OIL PRICE PER BARREL

              

Permian

   $ 62.69      $ 61.50      $ 45.09      $ 62.12      $ 47.16  

MidContinent/Gulf Coast

     65.98        62.18        46.19        64.18        47.78  

Gulf of Mexico

     67.76        69.24        45.85        68.50        47.56  

Canada

     —          —          44.52        —          45.70  

North America

     63.27        61.76        45.10        62.54        46.84  

Egypt

     74.14        66.30        47.98        70.26        50.57  

North Sea

     73.05        65.87        48.21        69.58        50.51  

International

     73.78        66.16        48.06        70.04        50.55  

Total

     69.35        64.34        46.89        66.90        49.06  

AVERAGE NATURAL GAS PRICE PER MCF

              

Permian

   $ 1.85      $ 2.40      $ 2.50      $ 2.11      $ 2.53  

MidContinent/Gulf Coast

     2.21        2.68        2.88        2.43        3.01  

Gulf of Mexico

     2.95        3.64        3.03        3.32        3.07  

Canada

     —          —          2.14        —          2.24  

North America

     1.94        2.49        2.39        2.20        2.44  

Egypt

     2.85        2.85        2.73        2.85        2.75  

North Sea

     6.82        6.60        4.54        6.71        5.27  

International

     3.29        3.25        2.88        3.27        2.98  

Total

     2.50        2.82        2.60        2.65        2.67  

AVERAGE NGL PRICE PER BARREL

              

Permian

   $ 26.97      $ 24.64      $ 13.08      $ 25.90      $ 14.81  

MidContinent/Gulf Coast

     22.90        22.13        10.03        22.53        12.52  

Gulf of Mexico

     32.52        30.39        13.10        31.52        18.02  

Canada

     —          —          15.99        —          16.53  

North America

     26.03        24.02        12.58        25.10        14.42  

Egypt

     40.80        36.19        31.11        38.72        35.74  

North Sea

     44.71        42.82        22.92        43.75        32.85  

International

     42.73        39.87        27.37        41.35        34.26  

Total

     26.64        24.65        13.03        25.72        15.10  

 

Page 4


APACHE CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

(In millions)

SUMMARY OF DERIVATIVE INSTRUMENT GAINS (LOSSES), NET

 

     For the Quarter
Ended June 30,
     For the Six Months
Ended June 30,
 
     2018      2017      2018      2017  

Derivative settlements—realized loss

   $ (75    $ —        $ (117    $ —    

Amortization of call and put premium

     (5      —          (10      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Realized loss

     (80      —          (127      —    

Unrealized mark-to-market gain

     55        41        104        41  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (25    $ 41      $ (23    $ 41  
  

 

 

    

 

 

    

 

 

    

 

 

 

SUMMARY EXPLORATION EXPENSE INFORMATION

 

     For the Quarter
Ended June 30,
     For the Six Months
Ended June 30,
 
     2018      2017      2018      2017  

Unproved leasehold impairments

   $ 21      $ 39      $ 37      $ 54  

Dry hole expense

     16        46        36        98  

Geological and geophysical expense

     17        6        35        12  

Exploration overhead and other

     22        17        44        36  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 76      $ 108      $ 152      $ 200  
  

 

 

    

 

 

    

 

 

    

 

 

 

SUMMARY CASH FLOW INFORMATION

 

     For the Quarter
Ended June 30,
     For the Six Months
Ended June 30,
 
     2018      2017      2018      2017  

Net cash provided by operating activities

     1,113        751        1,728        1,206  

Net cash used in investing activities

     (1,024      (436      (1,914      (529

Net cash used in financing activities

     (194      (169      (510      (387

SUMMARY BALANCE SHEET INFORMATION

 

     June 30,
2018
     December 31,
2017
 

Cash and cash equivalents

   $ 972      $ 1,668  

Other current assets

     2,167        2,057  

Property and equipment, net

     18,336        17,759  

Other assets

     435        438  
  

 

 

    

 

 

 

Total assets

   $ 21,910      $ 21,922  
  

 

 

    

 

 

 

Current debt

   $ 400      $ 550  

Current liabilities

     1,912        2,014  

Long-term debt

     7,937        7,934  

Deferred credits and other noncurrent liabilities

     2,666        2,633  

Apache shareholders’ equity

     7,640        7,416  

Noncontrolling interest

     1,355        1,375  
  

 

 

    

 

 

 

Total Liabilities and shareholders’ equity

   $ 21,910      $ 21,922  
  

 

 

    

 

 

 

Common shares outstanding at end of period

     382        381  

 

Page 5


APACHE CORPORATION

NON-GAAP FINANCIAL MEASURES

(In millions, except per share data)

Reconciliation of net cash provided by operating activities to adjusted EBITDAX

Management believes EBITDAX, or earnings before income tax expense, interest expense, depreciation, amortization and exploration expense is a widely accepted financial indicator, and useful for investors, to assess a company’s ability to incur and service debt, fund capital expenditures, and make distributions to shareholders. We define adjusted EBITDAX, a non-GAAP financial measure, as EBITDAX adjusted for certain items presented in the accompanying reconciliation. Management uses adjusted EBITDAX to evaluate our ability to fund our capital expenditures, debt services and other operational requirements and to compare our results from period to period by eliminating the impact of certain items that management does not consider to be representative of the Company’s on-going operations. Management also believes adjusted EBITDAX facilitates investors and analysts in evaluating and comparing EBITDAX from period to period by eliminating differences caused by the existence and timing of certain operating expenses that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted EBITDAX may not be comparable to similar measures of other companies in our industry.

 

     For the Quarter Ended     For the Six Months Ended  
     June 30,     March 31,     June 30,     June 30,  
     2018     2018     2017     2018     2017  

Net cash provided by operating activities

   $ 1,113     $ 615     $ 751     $ 1,728     $ 1,206  

Adjustments:

          

Exploration expense other than dry hole expense and unproved leasehold impairments

     39       40       23       79       48  

Current income tax provision

     249       198       126       447       314  

Other adjustments to reconcile net loss to net cash provided by operating activities

     (58     (49     (46     (107     (80

Changes in operating assets and liabilities

     (181     184       (148     3       127  

Financing costs, net

     94       99       99       193       199  

Transaction, reorganization & separation costs

     12       —         4       12       (6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAX (Non-GAAP)

   $ 1,268     $ 1,087     $ 809     $ 2,355     $ 1,808  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of income attributable to common stock to adjusted earnings

Our presentation of adjusted earnings and adjusted earnings per share are non-GAAP measures because they exclude the effect of certain items included in Income Attributable to Common Stock. Management believes that adjusted earnings and adjusted earnings per share provides relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management in assessing the Company’s operational trends and comparability of results to our peers.

Management uses adjusted earnings and adjusted earnings per share to evaluate our operating and financial performance because it eliminates the impact of certain items that management does not consider to be representative of the Company’s on-going business operations. As a performance measure, adjusted earnings may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, capital structure and asset sales and other divestitures, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted earnings and adjusted earnings per share may not be comparable to similar measures of other companies in our industry.

 

     For the Quarter Ended
June 30, 2018
    For the Quarter Ended
June 30, 2017
 
     Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
    Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
 

Income including noncontrolling interest (GAAP)

   $ 508     $ (239   $ 269     $ 0.70     $ 9     $ 604     $ 613     $ 1.60  

Income attributable to noncontrolling interest

     134       (60     74       0.19       75       (34     41       0.10  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stock

     374       (179     195       0.51       (66     638       572       1.50  

Adjustments:*

                

Unrealized derivative instrument gain

     (55     12       (43     (0.11     (41     15       (26     (0.07

(Gain) / loss on divestitures

     (2     —         (2     (0.01     21       (3     18       0.05  

Asset impairments

     21       (4     17       0.05       39       (14     25       0.07  

Modification of stock comp plans

     14       (3     11       0.03       —         —         —         —    

Valuation allowance and other tax adjustments

     —         5       5       0.01       —         (670     (670     (1.77

Transaction, reorganization & separation costs

     12       (3     9       0.02       4       (2     2       0.01  

Loss on extinguishment of debt

     —         —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings (Non-GAAP)

   $ 364     $ (172   $ 192     $ 0.50     $ (43   $ (36   $ (79   $ (0.21
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     For the Six Months Ended
June 30, 2018
    For the Six Months Ended
June 30, 2017
 
     Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
    Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
 

Income including noncontrolling interest (GAAP)

   $ 896     $ (421   $ 475     $ 1.23     $ 547     $ 333     $ 880     $ 2.30  

Income attributable to noncontrolling interest

     246       (111     135       0.35       175       (80     95       0.25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stock

     650       (310     340       0.88       372       413       785       2.05  

Adjustments:*

                

Unrealized derivative instrument gain

     (104     22       (82     (0.21     (41     15       (26     (0.07

(Gain) / loss on divestitures

     (9     1       (8     (0.02     (320     116       (204     (0.53

Asset impairments

     37       (7     30       0.08       62       (22     40       0.11  

Modification of stock comp plans

     28       (7     21       0.05       —         —         —         —    

Valuation allowance and other tax adjustments

     —         6       6       0.02       —         (639     (639     (1.68

Transaction, reorganization & separation costs

     12       (3     9       0.02       (6     1       (5     (0.01

Loss on extinguishment of debt

     —         —         —         —         1       —         1       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Earnings (Non-GAAP)

   $ 614     $ (298   $ 316     $ 0.82     $ 68     $ (116   $ (48   $ (0.13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

The income tax effect of the reconciling items are calculated based on the statutory rate of the jurisdiction in which the discrete item resides.

 

Page 6


APACHE CORPORATION

NON-GAAP FINANCIAL MEASURES

(In millions)

Reconciliation of Debt to Net debt

Net debt, or outstanding debt obligations less cash and cash equivalents, is a non-GAAP financial measure. Management uses net debt as a measure of the Company’s outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand.

 

     June 30,
2018
     March 31,
2018
     December 31,
2017
     September 30,
2017
     June 30,
2017
 

Current debt

   $ 400      $ 400      $ 550      $ 550      $ 150  

Long-term debt

     7,937        7,936        7,934        7,933        8,329  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

     8,337        8,336        8,484        8,483        8,479  

Cash and cash equivalents

     972        1,077        1,668        1,846        1,667  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net debt

   $ 7,365      $ 7,259      $ 6,816      $ 6,637      $ 6,812  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Costs incurred and GTP capital investments to Oil and gas capital investment

Management believes the presentation of oil and gas capital investments is useful for investors to assess Apache’s expenditures related to our oil and gas capital activity. We define oil and gas capital investments as costs incurred for oil and gas activities and GTP activities, adjusted to exclude asset retirement obligations revisions and liabilities incurred, while including amounts paid during the period for abandonment and decommissioning expenditures. Capital expenditures attributable to a one-third noncontrolling interest in Egypt are also excluded. Management believes this provides a more accurate reflection of Apache’s cash expenditures related to oil and gas capital activity and is consistent with how we plan our capital budget.

 

     For the Quarter
Ended June 30,
     For the Six Months
Ended June 30,
 
     2018      2017      2018      2017  

Costs incurred in oil and gas property:

           

Acquisitions

           

Proved

   $ —        $ 3      $ —        $ 3  

Unproved

     26        15        38        64  

Exploration and development

     772        733        1,589        1,246  
  

 

 

    

 

 

    

 

 

    

 

 

 
     798        751        1,627        1,313  

GTP capital investments:

           

GTP facilities

     124        146        243        288  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Costs incurred and GTP capital investments

   $ 922      $ 897      $ 1,870      $ 1,601  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Costs incurred and GTP to Oil and gas capital investment

           

Asset retirement obligations incurred and revisions—oil and gas property

   $ (4    $ (90    $ (6    $ (105

Asset retirement obligations incurred and revisions—GTP facilities

     (7      (14      (12      (14

Asset retirement obligations settled

     16        9        24        22  

Exploration expense other than dry hole expense and unproved leasehold impairments

     (39      (23      (79      (48

Less noncontrolling interest

     (55      (41      (107      (72
  

 

 

    

 

 

    

 

 

    

 

 

 

Oil and gas capital investment

   $ 833      $ 738      $ 1,690      $ 1,384  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of net cash provided by operating activities to cash flows from operations before changes in operating assets and liabilities

Cash flows from operations before changes in operating assets and liabilities is a non-GAAP financial measure. Apache uses it internally and provides the information because management believes it is useful for investors 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 flows 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.

 

     For the Quarter Ended     For the Six Months Ended  
     June 30,     March 31,      June 30,     June 30,  
     2018     2018      2017     2018      2017  

Net cash provided by operating activities

   $ 1,113     $ 615      $ 751     $ 1,728      $ 1,206  

Changes in operating assets and liabilities

     (181     184        (148     3        127  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Cash flows from operations before changes in operating assets and liabilities

   $ 932     $ 799      $ 603     $ 1,731      $ 1,333  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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