EX-99.1 2 h66620exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
         
CONTACTS:
        
(Media):
  Bill Mintz   (713/296-7276)
 
        
(Investors):
  Thomas P. Chambers   (713/296-6685)
 
        
(Web site):
  www.apachecorp.com    
FOR RELEASE AT 7:45 A.M. CENTRAL TIME
APACHE REPORTS STRONG FIRST-QUARTER OPERATING RESULTS
IN THE FACE OF SUBSTANTIALLY LOWER COMMODITY PRICES
     Houston, April 30, 2009 — Apache Corporation (NYSE, Nasdaq: APA) today reported that oil and gas production increased 6 percent from the fourth quarter to the first, even as lower commodity prices had a substantial impact on financial results.
     After a $1.98 billion non-cash, after-tax reduction in the carrying value of its oil and gas properties stemming from deterioration of North American natural gas prices during the first quarter, Apache recorded a net loss of $1.76 billion or $5.25 per diluted common share compared to net income of $1.02 billion or $3.03 per share in the year-earlier period.
     Apache’s first-quarter adjusted earnings,* which exclude the write-down and certain other items that impact the comparability of operating results, totaled $218 million or 65 cents per share compared to adjusted earnings of $1 billion or $2.99 per share in the prior-year period.
     “With additional oil and gas flowing in Egypt and continued recovery of volumes in Australia and the Gulf of Mexico, Apache got off to a strong start in the first quarter, and we expect this momentum will continue as we ramp up production in Egypt and the Gulf,” said G. Steven Farris, Apache’s chairman and chief executive officer. “A 35-percent deterioration in North American natural gas prices during the quarter necessitated the non-cash ceiling test write-down for the period.”
     “With nearly $4 billion in available cash and credit and debt at 25 percent of capitalization, we are in a good position to take advantage of opportunities as they emerge in today’s low commodity-price environment,” Farris said.
     Apache today also announced an agreement to acquire nine Permian Basin oil and gas fields with current production of 3,500 barrels of oil equivalent per day from Marathon Oil Corp. for $187.4 million.

 

 

     Apache produced 548,279 barrels of oil equivalent (boe) per day in the first quarter, up from 518,162 boe per day in the fourth quarter of 2008. Natural gas production rose to 1.6 billion cubic feet (Bcf) per day compared to 1.5 Bcf per day in the fourth quarter. Liquid hydrocarbon production increased to 277,547 barrels per day from 261,609 barrels per day in the fourth quarter.
     Apache’s equivalent production declined 2 percent from the first quarter of 2008, which was before production was curtailed by a pipeline explosion at the Varanus Island hub in Australia and two Gulf of Mexico hurricanes.
     Cash from operations before changes in operating assets and liabilities* totaled $983 million, down from $1.84 billion in the year-earlier period.
     “We plan to live within our annual cash flow,” Farris said. “Despite significantly reduced capital, our inventory of development projects will fuel growth in 2009, even in the current price environment.”
     Apache’s net daily gas production in Egypt increased 9 percent in the first quarter while daily oil production climbed 12 percent. Gas production was boosted by increased volumes through Shell’s Obaiyed processing plant; higher oil output reflected higher condensate production from the gas flow through Obaiyed and several new wells.
     The Egypt Region’s drilling program yielded several new oil and gas field discoveries in the Western Desert. Start-up procedures are under way at the two new processing trains at Salam Base on the Khalda Concession. “We expect to reach our targeted net production of 100 million cubic feet (MMcf) of gas and 5,000 barrels of condensate per day from the two plants during the second quarter,” Farris said.
     In Australia, gas production increased 21 percent as repairs at Varanus Island neared completion. The return to pre-incident rates is expected during the second quarter.
     Gulf Coast Region gas production increased 17 percent and liquids output rose 23 percent as third-party transportation and processing infrastructure was restored. The Geauxpher field at Garden Banks 462 is anticipated to commence production in May, adding net output of approximately 45 MMcf per day.

 

 

     “Although we are maintaining our production growth target of 6-14 percent, we expect to come in at the lower end of the range, taking into account lower capital spending and the contractor’s delay at the Van Gogh development offshore Western Australia,” Farris said.
     Apache anticipates second-quarter equivalent production will increase 3-5 percent from first-quarter volumes, Farris said.
     “Over our 54-year history, Apache’s discipline, values and contrarian spirit have enabled the company not only to live through down cycles but to emerge stronger,” he said.
     Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt, the United Kingdom North Sea, Australia and Argentina. From time to time, Apache posts announcements, updates and investor information, in addition to copies of all press releases, on its Web site, www.apachecorp.com.
Full-cost ceiling test
     Apache uses the full-cost method of accounting. The company is required to perform a calculation that establishes a ceiling on the carrying costs of its oil and gas properties in each country at the end of each quarter. The ceiling is the calculated present value of estimated future net cash flows from proved oil and gas reserves, using a 10-percent discount rate, plus the lower of the cost or fair value of unproved properties, net of related tax effects. The rules generally require pricing future production at oil and gas prices in effect at the end of the quarter. If the ceiling is exceeded, a non-cash write-down is required. The calculation does not allow for consideration of possible or probable reserves or expected future trends in commodity prices or drilling and service costs.
*Adjusted earnings and cash from operations before changes in operating assets and liabilities are non-GAAP measures. Please see reconciliations below.
     NOTE: Apache will conduct a conference call to discuss its results at 1 p.m. Central time on Thursday, April 30. The conference call will be webcast from Apache’s Web site, http://www.apachecorp.com. The webcast replay and podcast will be archived on Apache’s Web site. The conference call will be available for delayed playback by telephone for one week beginning at

 

 

approximately 4 p.m. on April 30. To access the telephone playback, dial (719) 457-0820 and provide Apache’s confirmation code, 7465121.
     This news release contains certain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 including, without limitation, expectations, beliefs, plans and objectives regarding production and exploration activities. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions, risks and uncertainties, including, without limitation, risks, uncertainties and other factors discussed in our most recently filed Annual Report on Form 10-K, on our Web site and in our other public filings and press releases. There is no assurance that Apache’s expectations will be realized, and actual results may differ materially from those expressed in the forward-looking statements. We assume no duty to update these statements as of any future date.

 

 

APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands, except per share data)
                 
    For the Quarter  
    Ended March 31,  
    2009     2008  
REVENUES AND OTHER:
                
Oil and gas production revenues
   $ 1,603,614     $ 3,177,949  
Other
     30,211       9,792  
 
            
 
     1,633,825       3,187,741  
 
            
 
                
COSTS AND EXPENSES:
                
Depreciation, depletion and amortization
                
Recurring
     580,617       620,489  
Additional
     2,818,161       —  
Asset retirement obligation accretion
     26,738       26,497  
Lease operating expenses
     397,489       454,638  
Gathering and transportation
     33,339       40,976  
Taxes other than income
     87,339       242,578  
General and administrative
     85,046       82,423  
Financing costs, net
     58,587       44,253  
 
            
 
     4,087,316       1,511,854  
 
            
INCOME (LOSS) BEFORE INCOME TAXES
     (2,453,491 )     1,675,887  
Current income tax provision
     2,494       487,800  
Deferred income tax provision (benefit)
     (699,045 )     166,574  
 
            
 
                
NET INCOME (LOSS)
     (1,756,940 )     1,021,513  
Preferred stock dividends
     1,420       1,420  
 
            
 
                
INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
   $ (1,758,360 )   $ 1,020,093  
 
            
 
                
NET INCOME (LOSS) PER COMMON SHARE:
                
Basic
   $ (5.25 )   $ 3.06  
 
            
Diluted
   $ (5.25 )   $ 3.03  
 
            
 
                
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
     335,104       333,393  
 
            

 

 

APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands)
                 
    For the Quarter  
    Ended March 31,  
    2009     2008  
COSTS INCURRED: (1)
                
North America exploration and development
   $ 505,316     $ 743,356  
International exploration and development
     486,782       608,463  
 
            
 
   $ 992,098     $ 1,351,819  
 
            
 
                
Oil and gas property acquisitions
   $ 60,025     $ 7,947  
 
            
 
(1)   Includes noncash asset retirement costs and capitalized interest as follows:
                 
Capitalized interest
   $ 16,009     $ 17,178  
Asset retirement costs
   $ 59,605     $ 85,072  
                 
    March 31,     December 31,  
    2009     2008  
BALANCE SHEET DATA:
                
Cash and Cash Equivalents
   $ 589,693     $ 1,181,450  
Short-term Investments
     789,140       791,999  
Other Current Assets
     2,423,763       2,477,525  
Property and Equipment, net
     21,732,262       23,958,517  
Restricted Cash
     —       13,880  
Goodwill
     189,252       189,252  
Other Assets
     568,694       573,862  
 
            
Total Assets
   $ 26,292,804     $ 29,186,485  
 
            
 
                
Current Liabilities
   $ 2,036,383     $ 2,615,228  
Long-Term Debt
     4,894,318       4,808,975  
Deferred Credits and Other Noncurrent Liabilities
     4,620,953       5,253,561  
Shareholders’ Equity
     14,741,150       16,508,721  
 
            
Total Liabilities and Shareholders’ Equity
   $ 26,292,804     $ 29,186,485  
 
            
 
                
Common shares outstanding at end of period
     335,186       334,710  

 

 

APACHE CORPORATION
FINANCIAL INFORMATION
                 
    For the Quarter  
    Ended March 31,  
    2009     2008  
FINANCIAL DATA (In thousands, except per share data):
                
Revenues and other
   $ 1,633,825     $ 3,187,741  
 
            
Income (Loss) Attributable to Common Stock
   $ (1,758,360 )   $ 1,020,093  
 
            
Basic Net Income (Loss) Per Common Share
   $ (5.25 )   $ 3.06  
 
            
Diluted Net Income (Loss) Per Common Share
   $ (5.25 )   $ 3.03  
 
            
 
                
Weighted Average Common Shares Outstanding
     335,104       333,393  
 
            
Diluted Shares Outstanding
     335,104       336,549  
 
            
 
                
PRODUCTION AND PRICING DATA:
                
OIL VOLUME — Barrels per day
                
United States
     86,745       100,679  
Canada
     16,349       17,347  
Egypt
     83,525       62,551  
Australia
     7,836       9,420  
North Sea
     60,494       58,771  
Argentina
     12,438       12,225  
 
            
Total
     267,387       260,993  
 
            
 
                
AVERAGE OIL PRICE PER BARREL
                
United States
   $ 42.67     $ 83.58  
Canada
     37.98       93.21  
Egypt
     42.21       97.85  
Australia
     31.81       101.67  
North Sea
     44.26       95.83  
Argentina
     47.26       45.13  
Total
     42.49       89.25  
 
                
NATURAL GAS VOLUME — Mcf per day
                
United States
     612,678       744,014  
Canada
     357,215       360,750  
Egypt
     317,823       242,977  
Australia
     142,039       191,180  
North Sea
     2,681       2,605  
Argentina
     191,955       165,133  
 
            
Total
     1,624,391       1,706,659  
 
            
 
                
AVERAGE NATURAL GAS PRICE PER MCF
                
United States
   $ 4.57     $ 8.36  
Canada
     4.67       7.56  
Egypt
     3.60       5.20  
Australia
     1.60       2.12  
North Sea
     7.40       16.31  
Argentina
     1.98       1.84  
Total
     3.84       6.42  
 
                
NGL VOLUME — Barrels per day
                
United States
     4,910       7,240  
Canada
     2,112       2,235  
Argentina
     3,138       2,720  
 
            
Total
     10,160       12,195  
 
            
 
                
AVERAGE NGL PRICE PER BARREL
                
United States
   $ 24.26     $ 57.37  
Canada
     20.60       53.35  
Argentina
     17.11       48.18  
Total
     21.29       54.58  

 

 

APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands, except per share data)
NON-GAAP FINANCIAL MEASURES:
Reconciliation of income attributable to common stock to adjusted earnings:
The press release discusses Apache’s adjusted earnings. Adjusted earnings exclude certain items that management believes affect the comparability of operating results and are meaningful for the following reasons:
  •   Management uses adjusted earnings to evaluate the company’s operational trends and performance relative to other oil and gas producing companies.
 
  •   Management believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported company earnings for items that may obscure underlying fundamentals and trends.
 
  •   The reconciling items below are the types of items management believes are frequently excluded by analysts when evaluating the operating trends and comparability of the company’s results.
                 
    For the Quarter  
    Ended March 31,  
    2009     2008  
Income (Loss) Attributable to Common Stock (GAAP)
   $ (1,758,360 )   $ 1,020,093  
 
                
Adjustments:
                
Foreign currency fluctuation impact on deferred tax expense
     (4,814 )     (12,360 )
Additional depletion, net of tax
     1,981,398       —  
 
            
Adjusted Earnings (Non-GAAP)
   $ 218,224     $ 1,007,733  
 
            
 
                
Adjusted Earnings Per Share (Non-GAAP)
                
Basic
   $ 0.65     $ 3.02  
 
            
Diluted
   $ 0.65     $ 2.99  
 
            
 
                
Average Number of Common Shares
                
Basic
     335,104       333,393  
 
            
Diluted
     336,994       336,549  
 
            
Reconciliation of net cash provided by operating activities to cash from operations before changes in operating assets and liabilities:
The press release discusses Apache’s cash from operations before changes in operating assets and liabilities. It is presented because management believes the information is useful for investors because it is used internally and widely accepted by those following the oil and gas industry as a financial indicator of a company’s ability to generate cash to internally fund exploration and development activities, fund dividend programs, and service debt. It is also used by research analysts to value and compare oil and gas exploration and production companies, and is frequently included in published research when providing investment recommendations. Cash from operations before changes in operating assets and liabilities, therefore, is an additional measure of liquidity, but is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities.
The following table reconciles net cash provided by operating activities to cash from operations before changes in operating assets and liabilities.
                 
    For the Quarter  
    Ended March 31,  
    2009     2008  
Net cash provided by operating activities
   $ 543,216     $ 1,808,404  
Changes in operating assets and liabilities
     439,843       36,280  
 
            
Cash from operations before changes in operating assets and liabilities
   $ 983,059     $ 1,844,684