Apache Corporation (NYSE: APA) reported that production set a new annual record, averaging nearly 658,000 barrels of oil equivalent per day for the 12-month period ending Dec. 31, 2010, up 13 percent from the prior year. Liquids production increased 18 percent, and this, combined with higher oil prices, drove Apache to record earnings of $3.0 billion for 2010.
"The results for 2010 were outstanding, and the possibilities for future profitable growth are numerous and encouraging. Apache's accomplishments this past year and past quarter reflect the company's operating and financial discipline, with our relentless focus on rate of return, cash generation, and operating and cost oversight. This enables us to optimize existing assets and execute on major transactions, whether they be deliberate or opportunistic. During the year we expanded our global portfolio with acquisitions in the Permian Basin, Canada, the Gulf of Mexico, and Egypt," said G. Steven Farris, Apache's chairman and chief executive officer.
Highlights during 2010 include:
25 percent reserve growth, replacing 344 percent of production; 102 percent through drilling
Record annual production for North America and international
Most active acquisition year in Apache's history with over $11 billion in transactions
Van Gogh and Pyrenees, two oil fields offshore Western Australia, commenced production in February 2010, reaching payout by October and December, respectively
Purchased 51 percent equity interest in the proposed Kitimat LNG Terminal
Established new regions in the deepwater Gulf of Mexico, Gulf Onshore and Permian Basin, and expanded in Egypt, Canada, and the Gulf of Mexico Shelf.
"In 2011 we will realize a full 12 months of ownership from these newly acquired assets, as well as development and production from our legacy asset base. We also have a number of longer-term growth projects in the pipeline, including LNG developments at Kitimat (Canada) and Wheatstone (Australia) and new exploration ventures in more frontier hydrocarbon basins," he said.
"Apache's diverse asset mix, which balances oil and gas properties in North American and international basins, helped to deliver record results despite low natural gas prices. This is a testament to the effectiveness of Apache's balanced portfolio model," Farris said.
In early 2011 political changes swept through Egypt, with many issues remaining unresolved. Apache's Egyptian operations are located in remote areas of the country, and these events did not disrupt the company's oil and gas production. Apache believes that Egypt will continue to foster an environment that values foreign investment and the development of its ample resource base, and wishes the best for the people of Egypt during this time of transition.
Full-year and fourth-quarter 2010 financial results
For the year ended Dec. 31, 2010, Apache reported net income of $3.0 billion, or $8.46 per diluted common share, compared to a net loss of $292 million, or 87 cents per share in 2009. The prior year included a $1.98 billion, non-cash, after-tax write-down that was a result of lower commodity prices during the first quarter 2009.
Excluding certain items that management believes affect the comparability of operating results, Apache reported adjusted earnings of $3.2 billion in 2010, a 68 percent increase compared with 2009 adjusted earnings of $1.9 billion. On a per share basis, adjusted net earnings were $8.94 for 2010, compared with $5.59 per share in the prior year. Cash flow from operations before changes in operating assets and liabilities* for 2010 was nearly $7.4 billion, the second-best in Apache's history, and up from $5 billion in 2009.
Apache's 2010 fourth-quarter earnings increased to $670 million, or $1.77 per share, up from $582 million, or $1.72 per share, for the same period in the prior year. Fourth-quarter 2010 adjusted earnings increased 25 percent to $830 million. On a per share basis, 2010 adjusted net earnings were $2.19, up from $1.96 reported for fourth-quarter 2009.
Full-year and fourth-quarter 2010 operating highlights
Apache ended 2010 with proved reserves of 2.95 billion barrels of oil equivalent. Apache's 2010 production was 240 million barrels of oil equivalent (MMboe). The company added 827 MMboe or 344 percent of production, through discoveries, extensions and acquisitions. Approximately 245 MMboe, or 102 percent of 2010 production, in reserve additions came through drilling. Apache spent $15.8 billion on exploration, development and acquisitions capital, excluding asset retirement obligations and capitalized interest.
In 2010, Apache's international production increased 14 percent. In Australia, production climbed 96 percent with significant contributions from the start-up of the Pyrenees and Van Gogh fields. Net production in Egypt increased 6 percent, with the completion of expansion projects at our Kalabasha oil facilities.
Apache's North American production increased 11 percent in 2010, lifted in part by contributions from newly acquired fields in Canada, the Permian Basin, and Gulf of Mexico.
Globally, fourth-quarter 2010 production increased 24 percent from the prior-year period to average 729,000 boe per day.