Apache Corporation (APA) today reported that international growth fueled record 2009 production of 583,000 barrels of oil equivalent per day, up 9 percent from 2008.
"Although we reduced capital expenditures by about 40 percent from 2008 levels to achieve our goal of living within our cash flow, Apache increased production by 9 percent and ended 2009 with $2 billion in cash," said G. Steven Farris, Apache's chairman and chief executive officer. "In 2010, we anticipate continued growth of 5 to 10 percent as we ramp up drilling activity across our portfolio and commence production from earlier discoveries."
"We are off to a fast start in 2010, with eight consecutive successful wells in the Gulf of Mexico and first oil production from our Van Gogh Field discovery in Western Australia," Farris said. "Our portfolio is balanced in terms of geology, geography and commodity mix, and each of our regions has critical mass of highly prospective acreage, much of which is held by production.
"Apache's balanced portfolio drove cash flow in 2009 as oil prices recovered," he said. "While oil and natural gas liquids comprised 50 percent of Apache's output, they provided 72 percent of revenues. We also shaved 20 percent off of our per-equivalent-barrel lifting costs."
Apache reported fourth-quarter adjusted earnings,* which exclude certain items that impact the comparability of operating results, more than doubled to $664 million or $1.96 per diluted common share from $276 million or 82 cents per share in the prior-year period. For the year ending Dec. 31, Apache reported adjusted earnings of $1.9 billion or $5.59 per share compared with $3.8 billion or $11.22 per share in 2008.
Using generally accepted accounting principles (GAAP), Apache reported fourth-quarter net income of $583 million or $1.72 per share compared with a net loss of $2.9 billion, or $8.80 per share in the prior-year period. The year-earlier results included a $3.6-billion, non-cash, after-tax reduction in the carrying value of oil and gas properties stemming from significantly lower commodity prices. For the year ending Dec. 31, Apache reported a net loss of $292 million or 87 cents per share, which included a $1.98-billion, non-cash, after-tax reduction which was the result of lower commodity prices at the beginning of 2009. Apache reported net income of $706 million or $2.09 per share in 2008.
"We plan to continue to allocate capital based on our projected cash flow," Farris said. "However, we have ample liquidity from our cash balances and committed credit facilities to pursue incremental opportunities, either through additional exploration or value-adding acquisitions."
Drivers for 2010 growth include:
- Production from Van Gogh as well as from Pyrenees, a second oil development in Australia expected to commence production in the first half;
- Increased activity in the Granite Wash play in Western Oklahoma and the Texas Panhandle;
Year-round activity at the Horn River Basin shale play in British Columbia, and
- Continued exploration and development in Egypt, including new processing capacity that will increase oil production from earlier discoveries in the Faghur Basin.
Cash from operations before changes in operating assets and liabilities* totaled $5 billion in 2009, down from $7.4 billion in 2008. Fourth-quarter cash from operations totaled $1.4 billion, up from $1.1 billion in the prior-year period.
"Cash flow came in ahead of our initial projections, which enabled Apache to invest $4.1 billion in total capital, including facilities capital and $300 million in tactical acquisitions, and end the year with slightly more cash on the balance sheet," Farris said. "Right now, we plan to spend in the range of $6 billion to $6.5 billion on exploration and development, to be reviewed quarterly."
Apache ended 2009 with proved reserves of 2.37 billion barrels of oil equivalent. The company added 216 million barrels of oil equivalent (MMboe) through discoveries, extensions and acquisitions but excluding price-related downward revisions. Apache's 2009 production was 213 MMboe. Apache spent $3.455 billion of exploration, development and acquisitions capital, excluding asset retirement obligations and capitalized interest.*
In 2009, Apache's international production increased 21 percent. Net production in Egypt increased 38 percent as a result of additional gas and condensate processing capacity at the Qasr field and from the Phiops oil discovery in the Faghur Basin. In Australia, production increased 40 percent as output was restored at Varanus Island after the June 2008 explosion; production currently exceeds pre-incident levels. The North Sea Region recorded its second consecutive year of production growth.
Apache's North American production declined slightly in 2009 as a result of curtailed drilling activity.
Fourth-quarter production increased 14 percent from the prior-year period to 589,799 boe per day.