Apache reports $7.2B loss for quarter, slashes capital spending

Apache Corp. has reported a net loss of $7.2 billion for fourth-quarter 2015 as the company took $5.9 billion in charges to write down the value of assets. Apache says that it will slash its 2016 CAPEX and that it expects to see a year-over-year production decline of 7–11%. Apache expects to spend $1.4 billion to $1.8 billion, a reduction of more than 60% from 2015 and 80% from 2014 levels.

This year, the company will focus on “high rate-of-return opportunities” in Egypt and the North Sea and on key strategic testing in North American onshore properties.

“Apache enjoys several advantages in the current low-price environment including a strong financial position, a relatively low base production decline rate, a lean cost structure, and a disciplined capital-spending program,” said CEO John Christmann. “We have a portfolio of high-quality assets with robust inventory in North America, higher-cash-margin assets in Egypt and the North Sea and exciting longer-term exploration prospects.”

For fourth-quarter 2015, Apache lost $19.07 a diluted share and reported $1.3 billion in revenue. The company lost $4.8 billion, or $12.78 a share, for fourth-quarter 2014 when it reported $2.7 billion in revenue.

Raymond James analysts echoed Christmann’s statement, saying that “with much of its acreage held-by-production and low base decline rates (22%; aided by CO2 injection well portfolio), Apache's decision to sit on the sidelines makes sense. Capital will be focused primarily on Egypt and North Sea assets that deliver higher cash returns.

“Apache holds ~$1.5 billion in cash (with 4Q15 divestiture proceeds of $531 million) on the balance sheet and has a $3.5 billion untapped revolver sitting in the flanks (~$5 billion in liquidity),” the analysts continued. “Furthermore, Apache boasted a 1.9x net debt/EBITDAX exiting 2015 and we expect them to maintain this level through 2017. This flexibility allows the large-cap operator to navigate the challenging environment.”


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