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): October 31, 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 October 31, 2018, Apache Corporation issued a press release announcing financial and operating results for the fiscal quarter ended September 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 October 31, 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: November 1, 2018                /s/ Rebecca A. Hoyt
      Rebecca A. Hoyt
     

Senior Vice President,

Chief Accounting Officer,

and Controller

(Principal Accounting Officer)

Exhibit 99.1

Exhibit 99.1

 

LOGO       NEWS RELEASE

 

APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018

FINANCIAL AND OPERATIONAL RESULTS

 

   

Reported third-quarter production of 476,000 barrels of oil equivalent (BOE) per day. Adjusted production, which excludes Egypt noncontrolling interest and tax barrels and 2017 divestitures, was 401,000 BOE per day, up 13 percent over third-quarter 2017;

 

   

Achieved U.S. production of 272,000 BOE per day and record Permian Basin production of 222,000 BOE per day, up 31 percent and 38 percent over third-quarter 2017, respectively;

 

   

Delivered strong cash flow from operations of $1 billion, with nearly 70 percent of reported oil production receiving Brent or Gulf Coast-linked pricing;

 

   

Expecting strong fourth-quarter adjusted production volume growth of 20,000 BOE per day, approximately half of which will come from oil; raising full-year 2018 U.S. production guidance to 262,000 BOE per day;

 

   

Altus Midstream Company transaction to close in November 2018, which is expected to fund fourth quarter 2018 and future Alpine High midstream expenditures;

 

   

Anticipate 2019 production at the high-end of previously announced guidance of 410,000 to 440,000 BOE per day on an annual upstream capital program of $3 billion; and

 

   

Resumed share buyback program during the third quarter; announced additional share repurchase authorization of 40 million shares.

HOUSTON, Oct. 31, 2018 – Apache Corporation (NYSE, Nasdaq: APA) today announced its financial and operational results for the third quarter of 2018.

Apache reported earnings of $81 million or $0.21 per diluted common share for the third 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, the most significant of which was a $75 million after tax loss incurred as a result of the bond tender exercise. When adjusted for this and other smaller items that impact the comparability of results, Apache’s third-quarter earnings were $244 million or $0.63 per share. Net cash provided by operating activities in the quarter was $1 billion. Adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses (adjusted EBITDAX) was $1.4 billion.

 

LOGO


APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS — PAGE 2 of 9

 

“Apache continued our strong performance in the third quarter of 2018, delivering 31 percent growth in U.S. production year over year. The Permian Basin continues to be the key driver, with oil production up 16 percent and total production up 38 percent year over year. Our significant Brent and LLS oil price leverage and robust NGL realizations, combined with this production performance, resulted in impressive earnings and cash flow growth. Our positive production trends will continue in the fourth quarter, prompting us to again raise our full-year 2018 U.S. production guidance,” said John J. Christmann IV, Apache’s chief executive officer and president.

“During the third quarter, we also achieved a very important objective with the announcement of our Altus Midstream transaction. This will establish an entity capable of funding future midstream investment needs at Alpine High. Importantly, the deal will allow Apache to maintain control of the midstream buildout as we ramp up production at Alpine High,” continued Christmann.    

Third-quarter operational summary     

Highlights from the company’s three principal areas include:

 

   

United States – U.S. production averaged 272,000 BOE per day. The company averaged 18 rigs and drilled and completed 47 gross-operated wells.


APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS — PAGE 3 of 9

 

   

Permian Basin – Third-quarter production in the Permian Basin averaged 222,000 BOE per day, with total production up 38 percent and oil up 16 percent year over year. This growth reflects the ongoing development of Wolfcamp oil zones in the Midland and Delaware basins and the continued ramp up at Alpine High. The company averaged 18 rigs and five frac crews in the Permian Basin during the quarter and drilled and completed 47 gross-operated wells.

 

   

Midland Basin – Activity continues to focus on pad development in the Wolfcamp formation. During the quarter, the company drilled and completed 11 gross-operated wells and added one rig to optimize its rig-to-frac crew ratio. Contribution to oil growth from this addition will begin during the fourth quarter and continue into 2019.

 

   

Delaware Basin – Apache’s activity in the Delaware Basin currently includes operations in Alpine High, Dixieland, and Pecos Bend in Reeves County and the slope play in southeast New Mexico.

At Alpine High, production in the third quarter averaged 49,000 BOE per day, a 52-percent increase over the second quarter of 2018. During the quarter, the company drilled and completed 23 gross-operated wells. Well costs and lease operating costs in the play continue to come down in-line with expectations despite upward pressure on service costs.


APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS — PAGE 4 of 9

 

   

Egypt – Apache averaged 12 rigs during the quarter and drilled and completed 24 gross-operated wells with an 83-percent success rate. Adjusted production in Egypt, which excludes minority interest and the impact of tax barrels, averaged 78,000 BOE per day. The company has acquired approximately 1 million acres to date of a planned 2.6 million-acre seismic shoot. During the quarter, Apache initiated the next phase of the program in our new Northwest Razzak concession.

 

   

North Sea – Apache averaged three rigs during the quarter and produced 51,000 BOE per day, which was down slightly from the second quarter due to scheduled turnaround maintenance. Production is expected to increase in the fourth quarter, as the company brought its fourth development well online in the Callater field in September and plans to accelerate initial production at Garten from first-quarter 2019 to fourth-quarter 2018, only seven months after its discovery.

Financial liquidity update

During the quarter, the company restructured its debt portfolio with a tender offer and a new $1 billion 10-year, senior-debt offering. Proceeds from the new note offering were used to refinance existing debt and resulted in an extension of the debt maturity profile and a reduction in the average cost of debt.

The company also reinitiated share repurchase activity under an existing authorization which had 7.8 million shares remaining as of June 30, 2018. 924,000 shares were repurchased under this authorization in the third quarter and repurchases continue in the fourth quarter. Apache’s board of directors recently authorized an additional 40 million share-repurchase program.


APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS — PAGE 5 of 9

 

Capital and production outlook

Upstream oil and gas investment was $844 million in the third quarter, which included $48 million for incremental leasehold acquisition and retention. Apache also invested $122 million for Alpine High midstream activity. Effective Oct. 1, 2018, Alpine High midstream infrastructure will be funded by Altus Midstream Company following the closing of the transaction which is expected in November 2018.

Apache anticipates upstream capital investment of approximately $800 million in the fourth quarter, which includes $65 million for leasehold acquisition and retention, bringing the expected 2018 upstream total budget to approximately $3.1 billion. Strong execution and well performance in the third quarter are prompting the company to raise its 2018 U.S. production guidance to 262,000 BOE per day. Adjusted international production guidance for 2018 is now 133,000 BOE per day.

In 2019, Apache is planning a $3 billion annual capital program, which will enable the company to maintain its current activity levels. The company expects 2019 production levels at the high-end of previously announced 2019 guidance of 410,000 to 440,000 BOE per day.

Details on additional financial and operational guidance can be found in the Third-Quarter 2018 Financial and Operational Supplement at www.apachecorp.com/financialdata.

“During the third quarter, we increased activity to optimize drilling and completions and improve efficiencies through longer laterals, larger fracs and facility expansions. Looking ahead to the fourth quarter, we expect our upstream capital spending to be in line with levels we have maintained for more than a year.


APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS — PAGE 6 of 9

 

“As we head into 2019, we are well positioned to generate sustainable liquids production growth and positive free cash flow, while maintaining flexibility to respond quickly to changing industry conditions,” concluded Christmann.

Conference call

Apache will host a conference call to discuss its third-quarter 2018 results at 10 a.m. Central time, Thursday, Nov. 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 4354928. Sign up for email alerts to be reminded of the webcast at http://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, 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 THIRD-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,” “will,” and similar references to future periods. These statements include, but are not limited to, statements about future plans, expectations and objectives


APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS — PAGE 8 of 9

 

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


APACHE CORPORATION ANNOUNCES THIRD-QUARTER 2018 FINANCIAL AND OPERATIONAL RESULTS — PAGE 9 of 9

 

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.

Contacts

Investor: (281) 302-2286 Gary Clark

Media:    (713) 296-7276 Castlen Kennedy

Phil West

Website: www.apachecorp.com

Click here for the third-quarter 2018 materials.

-end-


APACHE CORPORATION

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

(In millions, except per share data)

 

     For the Quarter     For the Nine Months  
     Ended September 30,     Ended September 30,  
     2018     2017     2018     2017  

REVENUES AND OTHER:

        

Oil and gas production revenues

        

Oil revenues

   $  1,555     $  1,070     $  4,524     $  3,292  

Natural gas revenues

     241       238       675       726  

Natural gas liquids revenues

     180       81       446       229  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,976       1,389       5,645       4,247  

Derivative instrument gain (loss)

     (23     (110     (46     (69

Gain (loss) on divestiture

     1       296       10       616  

Other

     29       —         50       43  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,983       1,575       5,659       4,837  
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES:

        

Lease operating expenses

     382       353       1,087       1,059  

Gathering, transmission and processing

     92       44       260       151  

Taxes other than income

     58       46       162       117  

Exploration

     99       231       251       431  

General and administrative

     99       98       330       307  

Transaction, reorganization and separation

     8       20       20       14  

Depreciation, depletion and amortization:

        

Oil and gas property and equipment

     575       524       1,666       1,598  

Other assets

     35       35       105       109  

Asset retirement obligation accretion

     27       30       81       103  

Impairments

     10       —         10       8  

Financing costs, net

     192       101       385       300  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,577       1,482       4,357       4,197  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME BEFORE INCOME TAXES

     406       93       1,302       640  

Current income tax provision

     262       99       709       413  

Deferred income tax provision (benefit)

     (17     (111     (43     (758
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME INCLUDING NONCONTROLLING INTEREST

     161       105       636       985  

Net income attributable to noncontrolling interest

     80       42       215       137  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME ATTRIBUTABLE TO COMMON STOCK

   $ 81     $ 63     $ 421     $ 848  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME PER COMMON SHARE:

        

Basic

   $ 0.21     $ 0.16     $ 1.10     $ 2.23  

Diluted

   $ 0.21     $ 0.16     $ 1.09     $ 2.22  

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

        

Basic

     383       381       383       381  

Diluted

     385       383       385       383  

DIVIDENDS DECLARED PER COMMON SHARE

   $ 0.25     $ 0.25     $ 0.75     $ 0.75  

 

Page 1


APACHE CORPORATION

PRODUCTION INFORMATION

 

    For the Quarter Ended     % Change     For the Nine Months Ended  
    September 30,     June 30,     September 30,     3Q18 to     3Q18 to     September 30,     September 30,  
    2018     2018     2017     2Q18     3Q17     2018     2017  

OIL VOLUME - Barrels per day

             

Permian

    90,434       89,928       77,701       1%       16     88,629       74,943  

MidContinent/Gulf Coast

    10,067       11,492       9,670       -12%       4     10,683       10,331  

Gulf of Mexico

    3,037       3,743       3,512       -19%       -14     3,518       3,954  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    103,538       105,163       90,883       -2%       14     102,830       89,228  

Canada

    —         —         3,441             NM       —         8,881  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

North America

    103,538       105,163       94,324       -2%       10     102,830       98,109  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt (1, 2)

    97,129       96,185       93,749       1%       4     96,201       97,447  

North Sea

    42,769       46,150       49,945       -7%       -14     45,076       49,274  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International (1)

    139,898       142,335       143,694       -2%       -3     141,277       146,721  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total (1)

    243,436       247,498       238,018       -2%       2     244,107       244,830  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

NATURAL GAS VOLUME - Mcf per day

             

Permian

    516,930       403,267       278,308       28%       86     426,421       247,991  

MidContinent/Gulf Coast

    124,572       135,629       115,982       -8%       7     127,095       117,978  

Gulf of Mexico

    10,280       8,881       10,196       16%       1     9,783       12,656  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    651,782       547,777       404,486       19%       61     563,299       378,625  

Canada

    —         —         107,524             NM       —         175,787  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

North America

    651,782       547,777       512,010       19%       27     563,299       554,412  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt (1, 2)

    331,681       340,991       378,426       -3%       -12     338,813       389,533  

North Sea

    41,455       43,297       50,057       -4%       -17     41,932       42,800  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International (1)

    373,136       384,288       428,483       -3%       -13     380,745       432,333  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total (1)

    1,024,918       932,065       940,493       10%       9     944,044       986,745  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

NGL VOLUME - Barrels per day

             

Permian

    45,671       44,693       36,737       2%       24     42,800       35,070  

MidContinent/Gulf Coast

    14,311       14,050       12,137       2%       18     13,815       12,649  

Gulf of Mexico

    257       293       275       -12%       -7     271       344  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    60,239       59,036       49,149           56,886       48,063  

Canada

    —         —         2,183             NM       —         3,780  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

North America

    60,239       59,036       51,332       2%       17     56,886       51,843  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt (1, 2)

    753       1,127       916       -33%       -18     939       917  

North Sea

    1,008       1,104       1,219       -9%       -17     1,092       1,044  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International (1)

    1,761       2,231       2,135       -21%       -18     2,031       1,961  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total

    62,000       61,267       53,467       1%       16     58,917       53,804  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

BOE per day

             

Permian

    222,259       201,832       160,823       10%       38     202,499       151,346  

MidContinent/Gulf Coast

    45,140       48,147       41,138       -6%       10     45,680       42,643  

Gulf of Mexico

    5,007       5,516       5,486       -9%       -9     5,420       6,407  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    272,406       255,495       207,447       7%       31     253,599       200,396  

Canada

    —         —         23,544             NM       —         41,959  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

North America

    272,406       255,495       230,991       7%       18     253,599       242,355  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt (1, 2)

    153,163       154,144       157,737       -1%       -3     153,609       163,286  

North Sea

    50,686       54,470       59,507       -7%       -15     53,157       57,451  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International (1)

    203,849       208,614       217,244       -2%       -6     206,766       220,737  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total (1)

    476,255       464,109       448,235       3%       6     460,365       463,092  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total excluding noncontrolling interests

    425,156       412,693       395,578       3%       7     409,114       408,502  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

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

 

       

Oil (b/d)

    32,385       32,066       31,275           32,077       32,573  

Gas (Mcf/d)

    110,777       113,846       126,459           113,164       130,263  

NGL (b/d)

    251       376       305           313       306  

(2) Egypt Gross Production - BOE per day

    337,738       341,636       339,069       -1%       0     336,506       333,942  

 

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 Nine Months Ended  
    September 30,
2018
    June 30,
2018
    September 30,
2017
    3Q18 to
2Q18
    3Q18 to
3Q17
    September 30,
2018
    September 30,
2017
 

OIL VOLUME - Barrels per day

             

Permian

    90,434       89,928       77,701       1     16     88,629       74,796  

MidContinent/Gulf Coast

    10,067       11,492       9,670       -12     4     10,683       10,331  

Gulf of Mexico

    3,037       3,743       3,512       -19     -14     3,518       3,954  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    103,538       105,163       90,883       -2     14     102,830       89,081  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt

    47,260       47,837       49,992       -1     -5     47,694       51,134  

North Sea

    42,769       46,151       49,945       -7     -14     45,076       49,274  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International

    90,029       93,988       99,937       -4     -10     92,770       100,408  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total

    193,567       199,151       190,820       -3     1     195,600       189,489  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

NATURAL GAS VOLUME - Mcf per day

             

Permian

    516,930       403,267       278,308       28     86     426,421       247,335  

MidContinent/Gulf Coast

    124,572       135,629       115,982       -8     7     127,095       117,978  

Gulf of Mexico

    10,280       8,881       10,196       16     1     9,783       12,656  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    651,782       547,777       404,486       19     61     563,299       377,969  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt

    179,539       188,012       216,990       -5     -17     185,806       218,061  

North Sea

    41,455       43,296       50,057       -4     -17     41,932       42,800  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International

    220,994       231,308       267,047       -4     -17     227,738       260,861  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total

    872,776       779,085       671,533       12     30     791,037       638,830  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

NGL VOLUME - Barrels per day

             

Permian

    45,671       44,693       36,737       2     24     42,800       34,968  

MidContinent/Gulf Coast

    14,311       14,050       12,137       2     18     13,815       12,909  

Gulf of Mexico

    257       293       275       -12     -7     271       379  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    60,239       59,036       49,149       2     23     56,886       48,256  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt

    402       596       534       -33     -25     498       526  

North Sea

    1,008       1,104       1,219       -9     -17     1,092       955  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International

    1,410       1,700       1,753       -17     -20     1,590       1,481  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total

    61,649       60,736       50,902       2     21     58,476       49,737  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

BOE per day

             

Permian

    222,259       201,832       160,823       10     38     202,499       150,988  

MidContinent/Gulf Coast

    45,140       48,147       41,138       -6     10     45,680       42,643  

Gulf of Mexico

    5,007       5,516       5,486       -9     -9     5,420       6,407  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

United States

    272,406       255,495       207,447       7     31     253,599       200,038  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Egypt

    77,585       79,769       86,691       -3     -11     79,159       88,006  

North Sea

    50,686       54,470       59,507       -7     -15     53,157       57,451  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

International

    128,271       134,239       146,198       -4     -12     132,316       145,457  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total

    400,677       389,734       353,645       3     13     385,915       345,495  
 

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

 

Page 3


APACHE CORPORATION

PRICE INFORMATION

 

     For the Quarter Ended      For the Nine Months Ended  
     September 30,      June 30,      September 30,      September 30,      September 30,  
     2018      2018      2017      2018      2017  

AVERAGE OIL PRICE PER BARREL

              

Permian

   $ 60.07      $ 62.69      $ 45.68      $ 61.41      $ 46.64  

MidContinent/Gulf Coast

     69.38        65.98        45.99        65.83        47.21  

Gulf of Mexico

     70.87        67.76        46.50        69.19        47.24  

United States

     61.20        63.27        45.68        62.08        46.54  

Canada

     —          —          42.23        —          45.25  

North America

     61.20        63.27        45.56        62.08        46.42  

Egypt

     74.92        74.14        51.23        71.85        50.78  

North Sea

     75.01        73.05        53.11        71.32        51.35  

International

     74.95        73.78        51.87        71.68        50.97  

Total

     69.12        69.35        49.34        67.65        49.15  

AVERAGE NATURAL GAS PRICE PER MCF

              

Permian

   $ 1.98      $ 1.85      $ 2.56      $ 2.06      $ 2.54  

MidContinent/Gulf Coast

     2.45        2.21        2.78        2.44        2.93  

Gulf of Mexico

     2.87        2.95        2.97        3.16        3.04  

United States

     2.09        1.94        2.62        2.15        2.58  

Canada

     —          —          1.90        —          2.17  

North America

     2.09        1.94        2.47        2.15        2.45  

Egypt

     2.85        2.85        2.81        2.85        2.77  

North Sea

     7.78        6.82        5.27        7.07        5.27  

International

     3.40        3.29        3.10        3.31        3.02  

Total

     2.56        2.50        2.75        2.62        2.70  

AVERAGE NGL PRICE PER BARREL

              

Permian

   $  32.38      $  26.97      $  16.68      $  28.24      $  15.47  

MidContinent/Gulf Coast

     25.89        22.90        12.92        23.70        12.65  

Gulf of Mexico

     34.48        32.52        19.64        32.47        18.46  

United States

     30.84        26.03        15.77        27.15        14.75  

Canada

     —          —          15.80        —          16.39  

North America

     30.84        26.03        15.77        27.15        14.87  

Egypt

     45.92        40.80        36.47        40.67        35.98  

North Sea

     54.73        44.71        26.92        47.16        30.51  

International

     50.96        42.73        31.02        44.16        33.07  

Total

     31.42        26.64        16.38        27.74        15.53  

 

Page 4


APACHE CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

(In millions)

SUMMARY OF DERIVATIVE INSTRUMENT GAINS (LOSSES), NET

 

     For the Quarter
Ended September 30,
     For the Nine Months
Ended September 30,
 
     2018      2017      2018      2017  

Derivative settlements - realized gain/(loss)

   $ 7      $ 23      $ (110    $ 23  

Amortization of call and put premium

     (14      (50      (24      (50
  

 

 

    

 

 

    

 

 

    

 

 

 

Realized loss

     (7      (27      (134      (27

Unrealized mark-to-market gain/(loss)

     (16      (83      88        (42
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (23    $ (110    $ (46    $ (69
  

 

 

    

 

 

    

 

 

    

 

 

 

SUMMARY EXPLORATION EXPENSE INFORMATION

 

     For the Quarter
Ended September 30,
     For the Nine Months
Ended September 30,
 
     2018      2017      2018      2017  

Unproved leasehold impairments

   $ 39      $ 160      $ 76      $ 214  

Dry hole expense

     21        38        57        136  

Geological and geophysical expense

     6        12        41        24  

Exploration overhead and other

     33        21        77        57  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 99      $ 231      $ 251      $ 431  
  

 

 

    

 

 

    

 

 

    

 

 

 

SUMMARY CASH FLOW INFORMATION

 

     For the Quarter Ended
September 30,
     For the Nine Months
Ended September 30,
 
     2018      2017      2018      2017  

Net cash provided by operating activities

     1,006        554        2,734        1,760  

Net cash used in investing activities

     (926      (94      (2,840      (623

Net cash used in financing activities

     (459      (185      (969      (572

SUMMARY BALANCE SHEET INFORMATION

 

     September 30,
2018
     December 31,
2017
 

Cash and cash equivalents

   $ 593      $ 1,668  

Other current assets

     2,192        2,057  

Property and equipment, net

     18,646        17,759  

Other assets

     439        438  
  

 

 

    

 

 

 

Total assets

   $ 21,870      $ 21,922  
  

 

 

    

 

 

 

Current debt

   $ 150      $ 550  

Current liabilities

     2,057        2,014  

Long-term debt

     8,053        7,934  

Deferred credits and other noncurrent liabilities

     2,664        2,633  

Apache shareholders’ equity

     7,612        7,416  

Noncontrolling interest

     1,334        1,375  
  

 

 

    

 

 

 

Total Liabilities and shareholders’ equity

   $ 21,870      $ 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 Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,  
     2018     2018     2017     2018     2017  

Net cash provided by operating activities

   $ 1,006     $ 1,113     $ 554     $ 2,734     $ 1,760  

Adjustments:

          

Exploration expense other than dry hole expense and unproved leasehold impairments

     39       39       33       118       81  

Current income tax provision

     262       249       99       709       413  

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

     (40     (58     (87     (147     (166

Changes in operating assets and liabilities

     (6     (181     101       (3     228  

Financing costs, net (excluding loss on early extinguishment of debt)

     98       94       101       291       299  

Transaction, reorganization & separation costs

     8       12       20       20       14  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAX (Non-GAAP)

   $ 1,367     $ 1,268     $ 821     $ 3,722     $ 2,629  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

Income including noncontrolling interest (GAAP)

   $ 406     $ (245   $ 161     $ 0.42     $ 93     $ 12     $ 105     $ 0.27  

Income attributable to noncontrolling interest

     147       (67     80       0.21       76       (34     42       0.11  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stock

     259       (178     81       0.21       17       46       63       0.16  

Adjustments: *

                

Loss on extinguishment of debt

     94       (19     75       0.19       —         —         —         —    

Asset impairments

     49       (13     36       0.10       160       (56     104       0.27  

Valuation allowance and other tax adjustments

     —         24       24       0.06       —         (1     (1     —    

Modification of stock comp plans

     11       (2     9       0.02       —         —         —         —    

Transaction, reorganization & separation costs

     8       (1     7       0.02       20       (7     13       0.03  

Gain on divestitures

     (1     —         (1     —         (296     77       (219     (0.56

Unrealized derivative instrument (gain)/loss

     16       (3     13       0.03       83       (29     54       0.14  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings (Non-GAAP)

   $ 436     $ (192   $ 244     $ 0.63     $ (16   $ 30     $ 14     $ 0.04  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     For the Nine Months Ended     For the Nine Months Ended  
     September 30, 2018     September 30, 2017  
     Before     Tax     After     Diluted     Before     Tax     After     Diluted  
     Tax     Impact     Tax     EPS     Tax     Impact     Tax     EPS  

Income including noncontrolling interest (GAAP)

   $ 1,302     $ (666   $ 636     $ 1.65     $ 640     $ 345     $ 985     $ 2.58  

Income attributable to noncontrolling interest

     393       (178     215       0.56       251       (114     137       0.36  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stock

     909       (488     421       1.09       389       459       848       2.22  

Adjustments: *

                

Loss on extinguishment of debt

     94       (19     75       0.19       1       —         1       —    

Asset impairments

     86       (20     66       0.18       222       (78     144       0.38  

Valuation allowance and other tax adjustments

     —         30       30       0.08       —         (641     (641     (1.69

Modification of stock comp plans

     39       (9     30       0.07       —         —         —         —    

Transaction, reorganization & separation costs

     20       (4     16       0.04       14       (5     9       0.03  

Gain on divestitures

     (10     1       (9     (0.02     (616     194       (422     (1.10

Unrealized derivative instrument (gain)/loss

     (88     19       (69     (0.18     42       (15     27       0.07  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Earnings (Non-GAAP)

   $ 1,050     $ (490   $ 560     $ 1.45     $ 52     $ (86   $ (34   $ (0.09
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

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.

 

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

Current debt

   $ 150      $ 400      $ 400      $ 550      $ 550  

Long-term debt

     8,053        7,937        7,936        7,934        7,933  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

     8,203        8,337        8,336        8,484        8,483  

Cash and cash equivalents

     593        972        1,077        1,668        1,846  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net debt

   $ 7,610      $ 7,365      $ 7,259      $ 6,816      $ 6,637  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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      For the Nine Months Ended  
     Ended September 30,      Ended September 30,  
     2018      2017      2018      2017  

Costs incurred in oil and gas property:

           

Acquisitions

           

Proved

   $ —        $  —        $ —        $ 3  

Unproved

     48        85        86        149  

Exploration and development

     872        734        2,461        1,980  
  

 

 

    

 

 

    

 

 

    

 

 

 
     920        819        2,547        2,132  

GTP capital investments:

           

GTP facilities

     124        109        367        397  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Costs incurred and GTP capital investments

   $ 1,044      $ 928      $ 2,914      $ 2,529  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

           

Asset retirement obligations incurred and revisions—oil and gas property

   $ (12    $ (1    $ (18    $ (106

Asset retirement obligations incurred and revisions—GTP facilities

     2        —          (10      (14

Asset retirement obligations settled

     15        10        39        32  

Exploration expense other than dry hole expense and unproved leasehold impairments

     (39      (33      (118      (81

Less noncontrolling interest

     (44      (61      (151      (133
  

 

 

    

 

 

    

 

 

    

 

 

 

Oil and gas capital investment

   $ 966      $ 843      $ 2,656      $ 2,227  
  

 

 

    

 

 

    

 

 

    

 

 

 

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 Nine Months Ended  
     September 30,     June 30,     September 30,      September 30,  
     2018     2018     2017      2018     2017  

Net cash provided by operating activities

   $ 1,006     $ 1,113     $ 554      $ 2,734     $ 1,760  

Changes in operating assets and liabilities

     (6     (181     101        (3     228  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Cash flows from operations before changes in operating assets and liabilities

   $ 1,000     $ 932     $ 655      $ 2,731     $ 1,988  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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