Apache Corporation Announces Third-Quarter 2020 Financial and Operational Results
- Upstream capital investment significantly below guidance in the third quarter; reduced full-year 2020 capital outlook to $1.0 billion;
- Increased estimated annual run-rate cost savings associated with organizational redesign to $400 million from $300 million;
- Reported third-quarter production of 445,000 barrels of oil equivalent (BOE) per day; adjusted production unchanged from the second quarter at 394,000 BOE per day;
- Issued 2020 Sustainability Report, highlighting the company’s ESG strategy and performance; and
- In Block 58 offshore Suriname, announced Kwaskwasi discovery, finalized appraisal plans for Sapakara discovery, and initiated drilling at fourth exploration target, Keskesi.
HOUSTON, Nov. 4, 2020 – Apache Corporation (Nasdaq: APA) today announced its financial and operational results for the third quarter 2020.
The company reported a loss of $4 million or $0.02 per diluted common share during the third quarter 2020. When adjusted for certain items that impact the comparability of results, Apache reported a third-quarter loss of $59 million or $0.16 per share. Net cash provided by operating activities in the third quarter was $304 million and adjusted EBITDAX was $563 million.
“Apache made excellent progress on its cost initiatives and returned the majority of its curtailed volumes to production during the third quarter as commodity prices improved. This generated a substantial improvement in financial results compared to the second quarter. While significant macro headwinds continue to persist, our strategic approach to creating shareholder value remains unchanged: we are prioritizing long-term returns over growth; generating free cash flow; strengthening our balance sheet through debt reduction; and advancing a large-scale opportunity in Suriname,” said John J. Christmann IV, Apache’s chief executive officer and president. “We are allocating capital to the best return opportunities across our diversified portfolio, aggressively managing our cost structure, and progressing important emissions reduction and other ESG initiatives.
“During the third quarter, we completed operations on Kwaskwasi, our third oil discovery in Block 58 offshore Suriname this year and our best well in the basin thus far. We have now filed appraisal plans for the Maka and Sapakara discoveries and will submit the Kwaskwasi appraisal plan by year-end. Operations continue on the fourth exploration target, Keskesi, and we have also selected our fifth exploration well, Bonboni, which will be situated in the North Central portion of Block 58. We are in the process of transitioning operatorship to Total and look forward to robust Suriname exploration and appraisal programs in 2021.”
Third-quarter commentary and outlook
Third-quarter reported production was 445,000 BOE per day, and adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 394,000 BOE per day, unchanged from the second quarter.
Third-quarter upstream capital investment totaled $141 million, nearly all of which was attributable to international operations. Apache is currently focusing its capital investment and rig activity in higher-margin international assets. Specifically, the company operated a five-rig program in Egypt, one floating rig and one platform crew in the North Sea, and one drillship offshore Suriname in the third quarter.
The company’s organizational redesign, launched in the fall of 2019, is delivering cost efficiencies well in excess of original expectations. The associated estimated annual run-rate cost savings is now $400 million, up 33% from the previous estimate of $300 million. Given the very favorable service cost environment, Apache recently commissioned two fracture stimulation crews to begin completing its inventory of drilled but uncompleted (DUC) wells in the Permian Basin. This activity will have only a nominal impact on fourth-quarter capital, and the company has reduced its full-year 2020 upstream capital guidance to $1 billion.
“Looking ahead to 2021, we anticipate an upstream capital budget of $1 billion or less, which is based on a WTI oil price of approximately $40 per barrel, and a Henry Hub natural gas price of $2.75. In this price environment, our capital allocation priorities will be similar to 2020. Our DUC completion program should stabilize Permian oil volumes at a level consistent with fourth-quarter 2020 levels, while Egypt and the North Sea will likely see modest declines,” Christmann said. “Apache has strategically chosen to direct a significant portion of our upstream capital investment to our large-scale opportunity in Suriname. In this price environment, we believe this will create more value for our shareholders over the long term than directing capital to short-cycle projects that would generate near-term production growth at relatively lower returns.”
On September 30, Apache released its 2020 Sustainability Report, which highlights the company’s performance in governance, environmental stewardship, health and safety, workforce development and community engagement. The report is available at www.apachecorp.com/Sustainability.
Apache will host a conference call to discuss its third-quarter 2020 results at 10 a.m. Central time, Thursday, Nov. 5. 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 Nov. 5. The number for the replay is 855-859-2056 or 404-537-3406 for international calls. The conference access code is 3082947. Sign up for email alerts to be reminded of the webcast at 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. Specific information concerning Suriname, ESG performance and other investor-related topics are posted at investor.apachecorp.com.
Additional information follows, including reconciliations of adjusted earnings, adjusted EBITDAX, and upstream capital investment (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 upstream capital investment 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,” “prospects,” “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 2019 Form 10-K, and in our quarterly reports on Form 10-Q, 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, 2019 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
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