Apache Corp. (APA) Reports Q4 Loss Per Share of 6c, Offers Fy16 Outlook

Apache Corp. (NYSE: APA) reported Q4 EPS of ($0.06), $0.41 better than the analyst estimate of ($0.47).

2016 capital budget and production outlook

Christmann continued, “With current 2016 strip prices 30 to 35 percent below year-ago levels, we believe a conservative plan and a flexible capital spending program are paramount to protecting the financial position we have worked hard to establish over the last 18 months. Accordingly, we are reducing our 2016 total capital program to $1.4 to $1.8 billion, which the company will adjust up or down to align with actual commodity prices and resulting cash flow. This is a reduction of more than 60 percent from 2015 levels and more than 80 percent from 2014 levels.”

The company’s discretionary capital is being prioritized to higher rate-of-return opportunities in Egypt and the North Sea and to key strategic testing in North America Onshore. Apache has a large inventory of low-cost drilling opportunities in North America, but with the majority of its net acreage held-by-production, does not view spending on development wells as a necessary or prudent use of limited dollars at current oil prices. The company will maintain capital allocation and operational flexibility to respond quickly to changing oil price scenarios and has developed specific plans for adding rigs back in the event prices and costs come back into better alignment.

Apache expects total pro forma production volumes (excluding Egypt noncontrolling interest and tax barrels) to range from 433 to 453 Mboe per day, which represents a decline of 7 to 11 percent from pro forma 2015 production of 486 Mboe per day. With approximately 45 percent of its 2016 budget allocated to North America Onshore, pro forma production is projected to be in a range of 263 to 273 Mboe per day, which represents a decline of 12 to 15 percent compared to 2015. The remaining 55 percent of the capital budget will be allocated to International and Offshore, where pro forma production is projected to be 170 to 180 Mboe per day, or roughly flat when compared to 2015 pro forma production of 176 Mboe per day.

Christmann concluded, “While returns in select areas are still adequate at the well level, we believe it is better to wait until fully burdened rates of return improve to higher double-digit percentages, before materially increasing our rig count and developing our acreage. In the meantime, we will focus on key strategic testing activities within our existing operating footprint to further define and expand our high-quality inventory for the future. We will also continue investing in our highly successful exploration portfolio in the North Sea and in our highly prospective blocks 53 and 58 in offshore Suriname. Apache enjoys several advantages in the current low-price environment including a strong financial position, a relatively low base production decline rate, a lean cost structure, and a disciplined capital-spending program. We have a portfolio of high-quality assets with robust inventory in North America, higher-cash-margin assets in Egypt and the North Sea and exciting longer-term exploration prospects.”

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