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Apache Corp. announces 1Q20 results

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Oilfield Technology,

Apache Corp. has announced its financial and operational results for 1Q20.

Apache reported a loss of US$4.5 billion or US$11.86 per diluted common share during 1Q20. When adjusted for certain items that impact the comparability of results, primarily noncash impairments related to the company’s legacy vertical developments in the Permian Basin, Apache reported a first-quarter loss of US$51 million, or US$0.13 per share. Net cash provided by operating activities in the first quarter was US$502 million, and adjusted EBITDAX was US$764 million.

“The global economy and the energy industry have been deeply impacted by the Covid-19 pandemic. As we navigate this crisis, Apache’s priorities are protecting the health and safety of our employees and the communities in which we operate and preserving the inherent value and optionality of our diverse asset base for the long-term,” said John J. Christmann IV, Apache’s CEO and president.

Christmann continued: “We have taken several decisive actions to preserve Apache’s financial and operational strength during this difficult time, including reducing our planned 2020 capital programme, reducing our dividend, initiating a hedge position to protect from further near-term downside oil price exposure and increasing the cost-saving measures of the organisational redesign that we began last year. We also conducted a thorough economic and operational evaluation of all producing wells across the company to inform the methodical and targeted approach we are taking to production curtailments and shut-ins in this price environment. I am confident these comprehensive steps will enable us to minimise the cash flow impacts of this distressed and volatile price environment.

“Apache remains committed to our long-term objectives, which, despite the current environment, haven’t changed. We will budget conservatively and direct free cash flow, on a priority basis, to debt reduction; maintain a balanced and diversified portfolio; and prioritise investment for long-term returns over production growth. We will also maintain our capacity to generate material free cash flow in Egypt and the North Sea. And, lastly, we will advance the exploration programme and follow-on appraisal activity in Block 58 offshore Suriname.”

Following the rapid drop in oil prices in early March, Apache announced a plan to reduce activity in Egypt and the North Sea and to eliminate all US drilling and completion activity. This resulted in a US$650 million decrease in planned upstream investment, compared to the company’s initial budget announced in late February. Approximately 60% of the revised 2020 investment will be in international assets, compared to approximately 45% in the previous budget.

1Q20 reported production was 468 000 boe/d; adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 423 000 boe/d.

During 1Q20, Apache operated an average of 21 rigs and drilled and completed 44 gross-operated wells worldwide. Highlights from Apache’s principal areas include:

United States – Operated an average of seven rigs, drilled and completed 24 gross-operated wells, all of which were in the Permian, and reported production of 283 000 boe/d.

Permian Basin production averaged 273 000 boe/d, including oil production of 97 000 boe/d. Following the significant drop in oil prices in early March, Apache decided to reduce its rig count to zero in the Permian. The company is down to one rig in the Delaware Basin, which is currently finishing its last well. After which, the company will have approximately 70 drilled and uncompleted (DUC) wells in the unconventional Midland and Delaware Basins, 15 of which are in Alpine High.

  • Midland Basin – Averaged four rigs and placed 12 wells on production, all on multi-well pads. Substantially completed drilling the company’s first 3-mile lateral pad, achieving significant cost savings. Completion of these five wells has been deferred due to the current price environment.
  • Delaware Basin – Averaged three rigs and placed 11 wells on production. Alpine High production averaged 94 000 boe/d with a 39% liquids mix.

International – Operated an average of 14 rigs, drilled and completed 20 gross-operated wells and reported production of 185 000 boe/d.

  • Egypt – Averaged 11 rigs, drilled and completed 16 gross-operated wells and reported production of 116 000 boe/d, or 72 000 boe/d on an adjusted basis. Achieved a 94% drilling success rate, including four successful exploration tests.
  • North Sea – Averaged two rigs and drilled and completed four gross operated wells during the quarter. Production of 69 000 boe/d was up 9% from 4Q19, driven by the high-volume Garten-2 well, which was placed on production in late January.
  • Suriname – On 7 January, Apache (50% interest) and its partner Total S.A. (50% interest) announced a significant oil discovery offshore Suriname in Block 58 at Maka Central-1. On April 2, the partners announced a second significant oil discovery in Block 58 at Sapakara West-1, and in the second half of April, commenced drilling on a third exploration well, Kwaskwasi-1, which is located approximately 10 km (6 miles) northwest of Sapakara West-1. Following Kwaskwasi-1, a fourth exploration prospect, Keskesi East-1, will be drilled approximately 10 km (6 miles) southeast of the Sapakara discovery well.

Apache has a strong liquidity position, supported by a US$4 billion revolving credit facility that matures in March of 2024. The facility has commitments from 18 banks, 17 of which are rated A or better, is not subject to borrowing base redeterminations, has no covenants that are triggered by credit ratings, and includes a US$2 billion committed sublimit for letters of credit.

In April, Apache posted letters of credit (LCs) under the LC sublimit aggregating approximately US$800 million related to asset retirement obligations in the UK North Sea. These postings utilise a portion of that facility.

In addition to the company’s ample liquidity, Apache also maintains a very manageable bond maturity profile. In the event the company is unable to generate free cash flow to retire or refinance its bond maturities over the next three years, the revolver could be used to pay them down.

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