Apache Corporation Announces Fourth-Quarter and Full-Year 2019 Financial and Operational Results
- Delivered fourth-quarter reported production of 487,000 barrels of oil equivalent (BOE) per day; adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 430,000 BOE per day, exceeding the high end of guidance by 5,000 BOE per day;
- Achieved the highest quarterly Permian oil production rate in Apache history, averaging 103,000 barrels per day during the fourth quarter;
- Reduced capital investment in 2019 by 23% over 2018, while increasing total company adjusted production by nearly 5%, U.S. production by more than 7%, and Permian oil production by 6% year over year;
- Reported full-year net cash from operating activities of $2.9 billion and adjusted EBITDAX of $4.0 billion;
- Generated full-year cash return on invested capital on-target with the corporate incentive compensation goal of 19%;
- Signed a 50-50 joint venture agreement with Total S.A. for Block 58 offshore Suriname that significantly reduces Apache’s potential large-scale appraisal and development capital requirements;
- Drilled the Maka Central-1 well in Block 58 Suriname and announced a significant oil discovery in January 2020; currently drilling an exploration well at Sapakara West;
- Launched a comprehensive corporate redesign to further align the organization, work processes and cost structure with long-term planned activity levels, targeting a minimum annual savings of $150 million;
- Advanced sustainability efforts by initiating alignment with SASB and TCFD reporting standards, beginning to link ESG performance to short-term incentive compensation, and earmarking capital specifically for sustainability projects; and
- Establishing 2020 upstream capital investment budget of $1.6 billion to $1.9 billion, a 26% year-over-year decrease at the midpoint; projecting flat to low single digit corporate oil growth on an adjusted basis.
HOUSTON, Feb. 26, 2020 – Apache Corporation (NYSE, Nasdaq: APA) today announced its financial and operational results for the fourth-quarter and full-year 2019.
Apache reported a loss of $3.0 billion or $7.89 per diluted common share during the fourth-quarter 2019. When adjusted for certain items that impact the comparability of results, including primarily the impact of asset impairments in both the upstream assets in Alpine High and gathering, processing, and transmission assets from the consolidated results of Altus Midstream, Apache’s fourth-quarter income totaled $31 million, or $0.08 per share. Net cash provided by operating activities in the fourth quarter was $778 million, and adjusted EBITDAX was $1.1 billion.
For the full-year 2019, Apache reported a loss of $3.6 billion, or $9.43 per diluted common share. On an adjusted basis, Apache’s 2019 earnings totaled $2 million. Net cash provided by operating activities was $2.9 billion, and adjusted EBITDAX was $4.0 billion.
“Apache finished 2019 on a strong note. For the year, we achieved our corporate returns objective and came in below our upstream capital investment target of $2.4 billion. During the fourth quarter, our Permian region delivered the highest oil production in company history at 103,000 barrels per day and exceeded guidance. In December, we signed a joint venture agreement with Total in Block 58 offshore Suriname, which brings in a world-class offshore operator and enables Apache to retain a 50% working interest in the block while significantly reducing our potential exposure to large-scale appraisal and development costs. Our subsequent announcement of a significant oil discovery with the Maka Central-1 well in January 2020 underscores the transformational potential of Suriname Block 58. We are currently drilling the second well on Block 58, Sapakara West-1, and are encouraged by what we’ve seen so far. We will provide more information after reaching total depth and completing our analysis,” said John J. Christmann IV, Apache’s chief executive officer and president.
Christmann continued, “Despite steady progress on many fronts in 2019, we also encountered some significant challenges, most notably around deteriorating natural gas and NGL prices and the performance of our multi-well development pad tests at Alpine High. To further align our investment program with these dynamics, we plan to significantly reduce our spending in 2020, predominantly in Alpine High.
“Apache is well-prepared to navigate this challenging and volatile commodity price environment. We are continuing to streamline our portfolio, completing our comprehensive corporate redesign to centralize and align the organization and costs with projected long-term activity levels, investing to improve long-term returns and free cash flow, strengthening our balance sheet, and sustaining our dividend.
“While these steps are important to generate long-term returns, we must continue to deliver energy in a responsible manner and are taking a number of steps to prioritize ESG initiatives.”
Specifically, over the last year, the company started to link ESG performance to short-term incentive compensation, earmarked 2020 capital specifically for sustainability projects, and began to align its 2019 sustainability report with the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations and the Sustainability Accounting Standards Board’s (SASB) Oil and Gas Exploration and Production Sustainability Accounting Standard.
2020 capital budget and outlook
In 2020, the company plans to invest $1.6 billion to $1.9 billion in upstream oil and gas capital, which, at the midpoint, represents a 26% reduction from 2019. If oil prices deteriorate from current levels, Apache is prepared to further reduce activity and capital investment. At higher oil prices, the priority will be to retain cash for debt reduction. The company does not anticipate increasing capital investment above $1.9 billion. This 2020 capital budget is projected to deliver flat to low single-digit total company oil production growth on an adjusted basis.
“Apache’s portfolio is differentiated through both geographic diversification and an attractive balance of conventional and unconventional development opportunities. We have optionality to fund high-quality, shorter-cycle growth projects in the Permian Basin, Egypt and the North Sea, as well as longer-cycle organic exploration plays. We are choosing to allocate capital to Suriname over the next several years that could otherwise be directed toward near-term growth opportunities elsewhere in the portfolio. This is consistent with our strategy of investing for long-term returns with growth as an outcome,” Christmann concluded.
Fourth-quarter operational summary
During the fourth quarter, Apache operated an average of 21 rigs and drilled and completed 74 gross-operated wells worldwide. Highlights from Apache’s principal areas include:
United States – Operated an average of eight rigs, drilled and completed 56 gross-operated wells, all of which were in the Permian, and reported production of 299,000 BOE per day, an increase of 5% over fourth-quarter 2018.
Permian Basin production averaged 288,000 BOE per day, including oil production of 103,000 barrels of oil per day.
- Midland Basin – Averaged four rigs and placed 19 wells on production, all on multi-well pads. The 16-well Lynch-Tippett pad at Wildfire delivered strong initial production rates with an 83% oil cut on 1.5-mile laterals.
- Delaware Basin – Averaged four rigs and placed 36 wells on production, including the 6-well Ghost Rider pad in Lea County, which produced impressive initial flow rates. At year-end, there were no rigs drilling at Alpine High.
International – Operated an average of 13 rigs, drilled and completed 18 gross-operated wells and reported production of 189,000 BOE per day.
- Egypt – Averaged nine rigs, drilled and completed 16 gross-operated wells and reported production of 126,000 BOE per day, or 69,000 BOE per day on an adjusted basis. The company drilled several high-rate oil wells in the Faghur and Shushan basins and had an 81% success rate during the quarter.
- North Sea – Averaged three rigs and drilled and completed two gross operated wells during the quarter with a 100% success rate. Production was 63,000 BOE per day with the startup of the Storr development in late November and return from scheduled turnaround activity in the third quarter.
- Suriname – Drilled the first well in Block 58, the Maka Central-1, during the back half of 2019, and subsequently announced a significant oil discovery in January. The company is now working with its partner Total on an appraisal plan, which will be submitted to the state-owned oil company, Staatsolie, in the coming months.
Drilling commenced in January and is ongoing on the Sapakara West-1 exploration well in Suriname Block 58, approximately 12 miles southeast of the Maka Central-1 discovery. The company has drilled through the shallower Campanian interval and drilling continues toward the deeper Santonian objectives. Once the well reaches total depth, the company will run open-hole logs, pressure tests, fluid and core samples, and associated laboratory analyses. Following Sapakara, the rig will drill a third, and likely a fourth exploration test in Block 58.
Year-end 2019 proved reserves
Worldwide estimated proved reserves totaled 1.01 billion BOE at year-end 2019. During the year, Apache added approximately 176.4 million BOE in field extensions and discoveries, more than offsetting production of approximately 172.9 million BOE. Divestitures reduced proved reserves by 107.6 million BOE. Negative price revisions, partially offset by positive performance revisions, further reduced proved reserves by 119.5 million BOE. More than 88% of Apache’s estimated proved reserves at year-end 2019 were classified as proved developed.
Apache will host a conference call to discuss its fourth-quarter and full-year 2019 results at 10 a.m. Central time, Thursday, Feb. 27. 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 7162078. 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 and exploration activities offshore Suriname. Apache posts announcements, operational updates, investor information and all press releases on its website, www.apachecorp.com.
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,” “continues,” “could,” “estimates,” “expects,” “guidance,” “may,” “might,” “outlook,” “possibly,” “potential,” “projects,” “should,” “will,” “would,” and similar references to future periods, but the absence of these words does not mean that a statement is not forward-looking. 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 2018 Form 10-K and in our quarterly reports on Form 10-Q filed, and 2019 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, 2018 (and Apache’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2019, 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.
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