Apache Corporation Announces Fourth-Quarter and Full-Year 2018 Financial and Operational Results
Fourth-quarter 2018 highlights
- Delivered reported production of 482,000 barrels of oil equivalent (BOE) per day; adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 421,000 BOE per day, in-line with guidance;
- Achieved U.S. production of 283,000 BOE per day; Permian oil production was 99,000 barrels per day, exceeding guidance;
- Posted international reported production of 199,000 BOE per day; adjusted production of 138,000 BOE per day driven by North Sea which achieved its highest quarterly production rate in two years; and
- Reported $1 billion in net cash from operating activities and adjusted EBITDAX of $1.1 billion.
Full-year 2018 highlights
- Delivered reported production of 466,000 BOE per day; adjusted production was 395,000 BOE per day, which was in-line with guidance and represented a 13 percent increase over 2017;
- Achieved U.S. production of 261,000 BOE per day and Permian oil production of 91,000 barrels per day, an increase of 27 percent and 18 percent respectively;
- Created Altus Midstream Company to fund ongoing planned midstream investments at Alpine High while also retaining a majority stake and operational control;
- Reported $3.8 billion in net cash from operating activities; adjusted EBITDAX of $4.9 billion, which represented a 30 percent increase over 2017;
- Reduced total debt for the fourth consecutive year; and
- Returned nearly $1 billion, or 25 percent of net cash from operating activities, during the year to investors through buybacks, debt reduction and the company’s 54th consecutive year of dividend payments.
- Established 2019 upstream capital budget of $2.4 billion, a decrease of 22 percent from 2018;
- Updating annual adjusted production guidance to 425,000 to 440,000 BOE per day, from a previous range of 410,000 to 440,000 BOE per day; and
- Reiterating fourth-quarter 2019 exit rate guidance of 6 to 10 percent production growth worldwide, 12 to 16 percent in the United States (U.S.), and 5 percent for Permian oil from fourth-quarter 2018 levels.
HOUSTON, Feb. 27, 2019 – Apache Corporation (NYSE, Nasdaq: APA) today announced its financial and operational results for the fourth-quarter and full-year 2018.
Apache reported a loss of $381 million or $1.00 per diluted common share during the fourth-quarter 2018. When adjusted for certain items that impact the comparability of results, including primarily the impact of asset impairments in the North Sea, Gulf of Mexico, Anadarko Basin, and Egypt, Apache’s fourth-quarter income totaled $119 million, or $0.31 per share. Net cash provided by operating activities in the fourth quarter was $1 billion, and adjusted EBITDAX was $1.1 billion.
For the full-year 2018, Apache reported income of $40 million, or $0.11 per diluted common share. On an adjusted basis, Apache’s 2018 earnings totaled $679 million, or $1.77 per share. Net cash provided by operating activities was $3.8 billion, and adjusted EBITDAX was $4.9 billion in 2018.
John J. Christmann IV, Apache’s chief executive officer and president, said, “2018 was a year of strong returns, robust growth and excellent financial performance. Total adjusted production increased 13 percent, and we significantly exceeded our corporate cash return on invested capital (CROIC) target of 18 percent.
“In the Permian, strong execution and well performance drove an 18 percent increase in oil production, and we achieved an important strategic goal with the formation of Altus Midstream Company, which will fund the growing infrastructure needs of Alpine High. On the international front, we increased production in the North Sea to its highest level in two years, and we laid a foundation for long-term potential production growth with the addition of significant acreage and progress on our extensive 3D-seismic program in Egypt.”
2019 capital budget and production outlook
In 2019, the company plans to invest $2.4 billion in upstream oil and gas capital, a reduction of 22 percent from 2018 levels. Growth will be driven by investment in the U.S., which will receive approximately 75 percent of total upstream investment. Internationally, Apache will continue to invest at a level to sustain long-term free cash flow in Egypt and the North Sea.
Even with a significant reduction in upstream capital investment, production is expected to grow at an attractive rate both year over year and exit to exit. As disclosed in a Feb. 7 press release, the company projects total adjusted production growth rates of 6 to 10 percent from fourth-quarter 2018 to fourth-quarter 2019, with 12 to 16 percent in the U.S., and 5 percent for Permian oil. The company is raising the lower end of the range for its annual guidance to 425,000 to 440,000 BOE per day from a previous range of 410,000 to 440,000 BOE per day following strong fourth-quarter momentum. Internationally, Apache expects production to decline 2 to 4 percent over the same time period.
“Our projected 2019 exit rates underscore Apache’s ability to deliver attractive and sustainable growth on a reduced activity set. This is made possible by our diverse, high-quality portfolio, relatively low base production decline rate in the mid 20 percent range, and excellent execution by our regions.
“Looking forward through 2021, we expect to spend between $2.5 to $2.8 billion per year, assuming $50 to $55 WTI. This investment level will deliver continued, attractive growth while enabling Apache to achieve cash-flow neutrality. We intend to return to investors at least 50 percent of cash flow in excess of plan, inclusive of asset sale proceeds, before increasing planned activity levels. This disciplined approach is capable of delivering long-term returns and growth and is supported by a deep inventory of development locations and exciting exploration opportunities in the U.S. and internationally,” Christmann said.
Fourth-quarter operational summary
During the fourth quarter, Apache operated an average of 31 rigs and drilled and completed 98 gross-operated wells worldwide. Highlights from Apache’s principal areas include:
United States – Apache operated an average of 18 rigs, drilled and completed 70 gross-operated wells and reported production of 283,000 BOE per day, an increase of 28 percent over fourth-quarter 2017.
Permian Basin production averaged 236,000 BOE per day, including oil production of 99,000 barrels of oil per day. Apache operated an average of 16 rigs and drilled and completed 66 gross-operated wells in the Permian during the quarter.
- In the Midland Basin, Apache averaged five rigs and placed 26 wells on production, all on multi-well pads. Oil growth in the basin was driven by strong well performance and reductions in completion times.
- At Alpine High, Apache averaged seven rigs and placed 26 wells on-line. Production exited the year at a rate of approximately 70,000 BOE per day and averaged 58,000 BOE per day for the quarter. Production volumes were impacted during the quarter by several items, including an unplanned field-wide shut-in, deferrals in the well completions schedule, and the timing of new facility commissioning. These items resulted in a slight delay in the production volume ramp, but production was back on track by the end of the quarter.
- In other areas of the Delaware Basin, Apache averaged four rigs and placed nine wells on production, including a four-well pad in the Palmillo area of Eddy County, New Mexico, which generated strong production rates and high oil cuts.
International – Apache operated an average of 13 rigs, drilled and completed 28 gross-operated wells and reported production of 199,000 BOE per day.
- Egypt – Apache averaged 10 rigs, drilled and completed 24 gross-operated wells and reported production of 136,000 BOE per day. The company drilled several strong oil wells in the Berenice and Menes fields during the quarter and made further progress on its extensive seismic acquisition program. Apache has now acquired 1.25 million acres of the planned survey area, which thus far has generated a substantial number of attractive new targets.
- North Sea – The company averaged three rigs and drilled and completed four gross operated wells during the quarter. Production was 63,000 BOE per day, the highest quarterly production average in two years and a 25 percent increase from the third-quarter 2018. The production strength was the result of the startup of the Garten development in late November, a full three months of production from the fourth development well at Callater, and turnaround activity completion in the third quarter.
- Suriname, the company has completed a substantial geologic and geophysical evaluation of Block 58 and has identified numerous, large, drill-ready prospects across multiple different play concepts. Apache has contracted a drillship and anticipates spudding its first well on the block around mid-year.
Year-end 2018 proved reserves
Worldwide estimated proved reserves totaled 1.23 billion BOE at year-end 2018, up from 1.17 billion BOE at year-end 2017. The company replaced 135 percent of 2018 production through extensions and discoveries, net of commodity price and engineering revisions. Proved undeveloped reserves represented 12 percent of total proved reserves at year-end, compared to 13 percent at year-end 2017.
Changes in Apache’s reserves during the year were primarily driven by 303 MMBOE of proved reserves added through net extensions which was partially offset by production of 170 MMBOE and downward revisions of previous estimates of 73 MMBOE.
Apache will host a conference call to discuss its fourth-quarter and full-year 2018 results at 10 a.m. Central time, Thursday, Feb. 28. 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. The conference call will also be available for playback by telephone for one week beginning at approximately 4 p.m. Central time Feb. 28. The number for the replay is 855-859-2056 or 404-537-3406 for international calls. The conference access code is 1793479. Sign up for email alerts to be reminded of the webcast at http://investor.apachecorp.com/alerts/email-alerts-subscription.
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 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 Play store.
Additional information follows, including reconciliations of adjusted earnings, adjusted EBITDAX 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.
Non-GAAP financial measures
Apache’s financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial information. It is management’s intent to provide non-GAAP financial information to enhance understanding of our consolidated financial information as prepared in accordance with GAAP. Adjusted earnings, adjusted EBITDAX and net debt are non-GAAP measures. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “guidance,” “outlook,” “projects,” “will,” 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 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, and 2018 Form 10-K when filed, with the Securities and Exchange Commission ("SEC") for a discussion of risk factors that affect our business. Any forward-looking statement made by Apache 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. Apache undertakes 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 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 news release, such as "resources," "potential resources," "resource potential," "estimated net reserves," "recoverable reserves," and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache's Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2017 (and Apache’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2018, when filed) available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, TX 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.
Investor: (281) 302-2286 Gary Clark
Media: (713) 296-7276 Phil West
Click here for the full release with quarterly financial statements and the Financial and Operational Supplement.