Apache Corporation Announces Third-Quarter 2016 Financial and Operational Results
- Confirmed discovery of significant resource play at Alpine High in the Delaware Basin;
- Delivered third-quarter production of 520,000 barrels of oil equivalent (Boe) per day and adjusted production of 438,000 Boe per day, which excludes Egypt noncontrolling interest and tax barrels;
- Plan to increase development drilling in the Midland Basin with the addition of three rigs in the fourth quarter; and
- Expect to end 2016 at the high end of North American Onshore production guidance and at the midpoint for International and Offshore production guidance.
HOUSTON, Nov. 3, 2016 – Apache Corporation (NYSE, Nasdaq: APA) today announced its financial and operational results for the third quarter of 2016.
Apache reported a loss of $607 million or $1.60 per diluted common share during the third quarter of 2016. These results include a number of items outside of core earnings that are typically excluded by the investment community in their published earnings estimates. When adjusted for these and certain additional items that impact the comparability of results, Apache's third-quarter loss totaled $12 million, or $0.03 per share. Net cash provided by operating activities was $651 million, and adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses (adjusted EBITDAX) was $896 million. Apache ended the quarter with $1.2 billion of cash, unchanged from the end of the second quarter.
"Our exploration success and financial results in the third quarter demonstrate the transformation that is taking place at Apache. During the quarter, Apache announced the discovery of an immense unconventional play in the Delaware Basin, Alpine High. Apache's extensive position in the play, which now totals 320,000 net acres, is an excellent example of our strategic focus on organic growth and strong technical capabilities. Our goal over time will be to ensure that we develop Alpine High in a methodical, efficient and environmentally responsible way for the benefit of our shareholders and other stakeholders," said John J. Christmann IV, Apache's chief executive officer and president.
"Our deliberate focus on strategic testing during the downturn not only yielded excellent results with our Alpine High discovery, but also significantly improved our results in our Midland and Delaware Basin focus areas. Our economic drilling inventory in the Permian Basin is more extensive today than at any time in the company's history, and we expect it will continue to grow as we further delineate our vast acreage position in the basin," said Christmann.
Third-quarter financial position and liquidity
During the third quarter, total capital investment, excluding Egypt noncontrolling interest, was $466 million. At quarter end, Apache's long-term debt remained unchanged at $8.7 billion. The company plans to balance capital spending with cash flow in the fourth quarter and expects that positive cash contributions from working capital and proceeds from noncore asset sales will enable it to achieve its targeted cash position of $1.5 billion at year-end.
Third-quarter operational summary
Apache reported global production of 520,000 Boe per day and adjusted production of 438,000 Boe per day, which excludes Egypt noncontrolling interest and tax barrels. In North America Onshore, production was 270,000 Boe per day while adjusted International and Offshore production was 168,000 Boe per day.
Highlights from Apache's key operating areas include:
- North America Onshore – Apache placed on production 35 gross-operated wells during the third quarter, predominantly in the Permian Basin.
- In the Delaware Basin at Alpine High, the company placed five gross-operated wells on production, three of which were disclosed in September. The fourth and fifth wells both targeted the Woodford formation and have confirmed Apache's geologic model and provided further data on the aerial extent and stratigraphic dimension of the play. The Redwood 1H is an over-pressured Woodford well that achieved a peak 24-hour rate of 18 million cubic feet of gas (MMcf) per day. The Blackhawk 1H is a normally pressured Woodford well that tested at a peak 24-hour rate of 5.3 MMcf of gas per day with 224 barrels of oil per day and 245 barrels of NGLs per day.
- Elsewhere in the Delaware Basin, the company placed eight gross-operated wells on production, including the Pelican 106H, which achieved a 30-day average initial production (IP) rate of 942 Boe per day from a 4,700-foot lateral in the third Bone Springs formation at the company's Pecos Bend area.
- In the Midland Basin, Northwest Shelf and Central Basin Platform, the company placed 16 gross-operated wells on production, including 13 wells (nine horizontal and four vertical) in the Yeso play on the Northwest Shelf where low well costs and strong initial production rates generate attractive economics at current oil prices.
- Outside of the Permian Basin, a Lower Montney well in the company's Wapiti focus area in Alberta tested at an initial rate of 10.6 MMcf of natural gas per day and 2,000 barrels of condensate per day with an estimated total drill and complete cost of $6.2 million.
- North Sea – Production in the quarter averaged 62,000 Boe per day, down from the previous quarter due to maintenance and third-party facility down time. The company achieved its third consecutive exploration success near the Beryl Field with a discovery in two separate fault blocks at the recently drilled Storr prospect. Results were in line with pre-drill estimates and underscore the benefits of recent vintage 3-D seismic data and the long-term exploration potential in the Beryl area.
- Egypt – Gross production averaged 350,000 Boe per day, and net production, excluding noncontrolling interest and tax barrels, averaged 98,000 Boe per day. Apache placed nine wells on production during the quarter. The company continues to benefit from an optimized drilling program, achieving a 90-percent success rate for wells drilled during the first nine months of the year.
2016 outlook and plan update
Apache's 2016 capital expenditures are tracking in line with its guidance of $2 billion. Following strong production and drilling results year-to-date, the company expects to end 2016 at the high end of North American Onshore production guidance of 268,000 to 278,000 Boe per day and at the midpoint of International and Offshore production guidance of 170,000 to 180,000 Boe per day. In the fourth quarter, the company plans to increase development drilling activity in the Midland Basin with the addition of three rigs. This will bring the total number of rigs drilling in the Midland Basin to five and will help contribute to the Permian Region's return to a growth trajectory in the second half of 2017.
"We believe long-term shareholder value is created by living within our means, protecting our strong financial position and organically building high-quality drilling inventory. Our recent discovery at Alpine High is an example of the long-term value we seek to create and is a testament to our strategy and focus during the downturn. We look forward to discussing Alpine High results in more detail over the coming months as our delineation program progresses," Christmann said.
Apache will host a conference call to discuss its third-quarter 2016 results at 1 p.m. Central time, Thursday, Nov. 3. 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. 3. To access the telephone playback, dial 855-859-2056 or 404-537-3406 for international calls. The conference access code is 13749619. Sign up for email alerts to be reminded of the webcast at investor.apachecorp.com/alerts.cfm.
Additional information follows, including reconciliations of adjusted earnings and adjusted EBITDAX to GAAP measures and information regarding adjusted production. Apache's quarterly supplement is available at www.apachecorp.com/quarterlyresults. About Apache Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt and the United Kingdom. Apache posts announcements, operational updates, investor information and all press releases on its website, www.apachecorp.com, and on its Media and Investor Center mobile application, which is available for free download from the Apple App Store and Google's Play store. To sign up to receive email alerts regarding news and other website updates, please visit http://investor.apachecorp.com/alerts.cfm.
Non-GAAP financial measures
Apache's financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP 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 and adjusted EBITDAX 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," "estimates," "expects," "guidance," and similar references to future periods. 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 2015 Form 10-K filed with the Securities and Exchange Commission for a discussion of risk factors that affect our business. Any forward-looking statement made by us 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. We undertake 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 ("SEC") 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 earnings 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, 2015, 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.
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