Apache reports 1Q net loss of $4.7 billion

Apache Corp. reported a first-quarter net loss of $4.7 billion, including an aftertax ceiling-test write down of $4.7 billion due to “substantially lower commodity prices.”

When adjusted for certain items that impact the comparability of results, Apache’s first-quarter loss totaled $139 million. Net cash provided by operating activities was $650 million and cash from operations, before changes in working capital, totaled $900 million.

During the quarter, Apache’s capital expenditures before LNG, capitalized interest and Egypt’s minority interest was $1.3 billion, in-line with expectations, the company says. Spending on LNG facilities during the quarter was $239 million, all of which was reimbursed with the closing of the LNG asset sales (OGJ Online, Dec. 15, 2014; Apr. 7, 2015).

The company noted last quarter that it expects its 2015 capital program to be frontend loaded as the drilling program continued to ramp down through the first quarter. Apache remains on track to meet its 2015 capital spending guidance for North America of $2.1-2.3 billion and continues to project relatively flat pro forma production volumes in North America compared with 2014 (OGJ Online, Feb. 12, 2015).

The company is lowering its 2015 international capital spending guidance to between $1.3-1.6 billion, reflecting a $150-million reduction from the midpoint of the prior range driven by the pending Australian asset sale expected at midyear. Apache anticipates combined production from Egypt and the North Sea will increase slightly year over year, which is essentially unchanged from its prior international production guidance.

Production exceeds expectations

“During the quarter, we significantly reduced our drilling activity and cost structure in response to the rapid oil-price downturn,” said John J. Christmann IV, Apache’s chief executive officer and president. “Drilling and completion costs across all of our key plays in North America onshore are down between 20-40% from those we provided in our North American update last November.

“Operationally, I am pleased to report that North American onshore production exceeded our first-quarter guidance despite a substantial reduction in well completions and the adverse impacts of severe winter weather in the Permian and Anadarko basins,” he said. “Internationally, production in both Egypt and the North Sea is tracking ahead of our initial expectations.”

Apache’s production during the first quarter consisted of 62% liquids and 38% natural gas. Liquids contributed 79% of the company’s revenue during the period.

Underscoring the significant planned reduction in activity, the Permian region averaged 15 rigs during the quarter, down from 42 in the previous quarter. The company continues to reduce its rig count and is currently running 11 rigs.

Total production in the Permian was down slightly from the fourth quarter primarily due to severe winter weather. Activity for the remainder of the year will be focused on the Delaware basin as well as in the deeper, more productive areas of the company's Southern Midland basin acreage.

During the quarter, the Gulf Coast region averaged 4 rigs, down from 12 in the fourth quarter. No rigs are currently running in the Eagle Ford shale as the region focuses on completing wells in backlog. There are currently 38 drilled-but-uncompleted Eagle Ford wells in backlog.

The Montney shale in Canada averaged four rigs during the quarter, but the count has since been reduced to zero as the region moves into breakup season. Activity will be focused on completing a seven-well Duvernay pad in the summer, along with two Montney wells currently in backlog.

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