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Apache Reports First-Quarter Results, $4 Billion Asset Sales Goal, Program To Repurchase Up To 30 Million Shares

First-quarter production growth driven by 45% increase in North American onshore liquids

HOUSTON, May 9, 2013 /PRNewswire/ -- Apache Corporation (NYSE, Nasdaq: APA) reported first-quarter earnings of $698 million, or $1.76 per diluted common share, and adjusted earnings*, which exclude certain items that impact the comparability of operating results, of $806 million or $2.02 per share. During the first quarter, worldwide production increased to 781,819 barrels of oil equivalent (boe) per day driven by a 45 percent increase in North American onshore liquid hydrocarbons output compared with the year-earlier period; earnings declined as a result of lower commodity prices. Cash from operations before changes in operating assets and liabilities* totaled $2.4 billion.

Apache also announced a plan to divest $4 billion in assets by year-end 2013. The company intends to use initial proceeds of $2 billion to reduce debt and enhance financial flexibility.  Additional proceeds are intended to be used to repurchase approximately $2 billion of Apache common shares under a 30-million-share repurchase program authorized by the Board of Directors.

G. Steven Farris, Apache's chairman and chief executive officer, said,  "We are showing strong results from the strategic shift that we outlined in 2012, with production from onshore North American liquids plays of 165,000 barrels per day in the first quarter.  We expect our onshore drilling programs will continue to contribute significantly to meeting our production targets."

Farris added, "This rationalization of our asset base flows naturally from more than $16 billion of acquisitions over the last three years. Our goal is to ensure that Apache's portfolio has the right mix of assets to generate attractive rates of return, drive production growth, and create shareholder value.

"In this vein, our Board and management team conducted a strategic portfolio review to identify assets that no longer fit our growth profile," Farris said.  "Based on this review, we have a process well under way to divest non-core assets while retaining those that drive long-term growth and generate cash from operations. We are also pursuing other monetizations including joint venture partnerships.

"Proceeds from this program will enable us to reduce debt and repurchase up to 30 million shares or approximately 7.5 percent of shares outstanding," Farris said.  "We believe that as a result of this process, we will become an even stronger company with a focused portfolio of high-growth, high-return assets."

Agreements pertaining to asset sales and monetizations are subject to market conditions including commodity prices. Apache's annual production guidance will not be adjusted until it enters into definitive agreements with potential acquirers or joint venture partners.

The timing and actual number of shares repurchased will depend on a variety of factors including the stock price, corporate and regulatory requirements and other market and economic conditions. Repurchased shares would be available for general corporate purposes.

First-quarter results

In the prior-year period, Apache reported earnings of $778 million or $2.00 per share, adjusted earnings of $1.2 billion or $3.00 per share, and cash from operations before changes in operating assets and liabilities of $2.6 billion

First-quarter 2013 worldwide production of 781,819 boe per day compared with 769,296 boe per day in the prior-year period and 800,005 boe per day in the fourth quarter of 2012. As previously disclosed, first-quarter 2013 worldwide production was negatively impacted by interruptions associated with cyclones in Australia and third-party gas plant downtime in Canada.

Apache currently is the second most-active U.S. onshore driller with 42 rigs in operation in the Permian Basin and 28 rigs active in the Anadarko Basin. The Permian and Central regions averaged 205,650 boe per day — 26 percent of Apache's worldwide output — and spent 40 percent of the company's first-quarter drilling capital.

Growth in onshore liquids output was offset by the deferred production of 4,100 boe per day in Canada and 3,500 boe per day in Australia, lower North American gas production because of reduced dry gas drilling activity and natural field declines in other international regions.

The company had previously incorporated production deferrals and declines into its production guidance, and remains on track to achieve its full-year guidance of 3 to 5 percent production growth. This production guidance has not been adjusted for any variances associated with future divestitures.

Operational highlights

  • Production in the Anadarko Basin — Apache's Central Region — increased 129 percent from the year-earlier period to 86,215 boe per day, largely a result of successful drilling in the Tonkawa, Granite Wash and other liquids-rich formations.
  • Permian Basin production rose to 119,435 boe per day, up 20 percent from the prior-year period, as a result of increased drilling and recompletion activity in oil and liquids-rich plays, including the Wolfcamp Shale, the Cline Shale and Yeso.
  • The Tonto oil field in the United Kingdom sector of the North Sea commenced production on April 24, 2013. Tonto-1, the first producing well, came on stream at an initial rate of 10,346 barrels of oil per day through a tie-back to the Forties Bravo production platform.
  • Three discoveries in three basins in Egypt — Alamein, Faghur and Matruh — highlighted the company's diverse potential for new oil and gas developments across its concessions.

Oil and gas prices

Liquid hydrocarbons represented 53 percent of first-quarter production but contributed 82 percent of revenues because of the premium prices received for crude oil versus natural gas.

Worldwide, Apache received an average price of $101.72 per barrel of oil during the first quarter, down from $111.22 per barrel during the prior-year period. Apache's oil realizations reflect higher prices relative to the West Texas Intermediate benchmark realized on Dated Brent crude produced in the company's Australia, North Sea and Egypt regions, and on sweet crude from the Gulf of Mexico regions. Apache received these premium prices on approximately 68 percent of its crude oil production.

Apache received an average of $3.72 per thousand cubic feet (Mcf) of natural gas, down from $3.82 per Mcf in the prior-year period. The average price received for Apache's international gas production — $3.99 per Mcf — exceeded the average price received for company's North American gas production for the fifth consecutive quarter. Approximately 37 percent of Apache's gas output is produced outside North America.

*Adjusted earnings and cash from operations before changes in operating assets and liabilities are non-GAAP measures. Please see reconciliations below. For supplemental financial and operational data and non-GAAP information, please go to http://www.apachecorp.com/financialinfo.

About Apache

Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt, the United Kingdom North Sea, Australia and Argentina. Apache posts announcements, operational updates, investor information and copies of all press releases on its website, www.apachecorp.com.

Conference call

Apache will conduct a conference call to discuss its results and its portfolio review at 9 a.m. Central time on Thursday, May 9. The conference call will be webcast from Apache's website, www.apachecorp.com. The webcast replay will be archived on Apache's website. The conference call will be available for delayed playback by telephone for one week beginning at approximately noon on May 9. To access the telephone playback, dial 855-859-2056 or 404-537-3406 for international calls. The conference access code is 84101004.

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" 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 drilling plans and production expectations, asset sales and monetizations and share repurchases. 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 2012 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.

 

APACHE CORPORATION

STATEMENT OF CONSOLIDATED OPERATIONS

(In millions, except per share data)






















For the Quarter




Ended March 31,




2013


2012







REVENUES AND OTHER:





  Oil revenues

$ 3,255


$ 3,512


  Gas revenues

735


811


  NGL revenues

156


134


Oil and gas production revenues

4,146


4,457


Other 


(70)


79




4,076


4,536







COSTS AND EXPENSES:





Depreciation, depletion and amortization





  Oil and gas property and equipment





     Recurring

1,265


1,135


     Additional

65


521


  Other assets

105


84


Asset retirement obligation accretion

65


55


Lease operating expenses

771


673


Gathering and transportation 

74


77


Taxes other than income

242


257


General and administrative

116


128


Merger, acquisitions & transition

-


6


Financing costs, net

53


40




2,756


2,976







INCOME BEFORE INCOME TAXES

1,320


1,560


Current income tax provision 

497


725


Deferred income tax provision

106


38







NET INCOME 


717


797


Preferred stock dividends

19


19







INCOME ATTRIBUTABLE TO COMMON STOCK

$    698


$    778







NET INCOME PER COMMON SHARE:





Basic