OREANDA-NEWS. April 15, 2013. Apache’s regions operate in wildly diverse environments and geologies and under a host of different governments with varying rules and regulations.

But the strategy for 2013 remains a constant throughout – to focus their efforts on growth through the drillbit, with safety a top priority.

“We have the inventory and the wherewithal, both financially and from our existing asset base, to continue to grow this company with the drillbit,” said Steve Farris, chairman and chief executive officer. “And that’s what we’re about.”

EXPLORE asked each region three questions about how they will implement the strategy this year.

The operational mantra for 2013 is “growth through the drillbit.” What does that mean to your region?

Gulf of Mexico Shelf

We will continue to focus on drilling high-quality, low-risk prospects that deliver high rates of return and cash flow. Most of our activities are off of existing infrastructure, which reduces the cost of development and the cycle time to first production.

Permian basin
The Permian Region is forecasted to have double-digit growth through drilling by operating a region record average of 34 rigs per day in 2013. The region plans to drill more than 700 wells, and activity will focus on the Wolfcamp Shale, Cline Shale and many other horizontal and vertical targets.

Egypt
Growing through the drillbit fits very well with Apache Egypt – this is essentially the strategy that has been employed in the region since its inception. The combined 2013 plan well count for the three Apache companies – Khalda, Qarun and Apache Egypt – is 270 wells, a number that has steadily increased year after year. This year will see a shift in focus in our exploration programs from more strategic reserve adds to lower-risk prospects aimed at production growth.

Australia
The main engines of our future growth will be projects already approved – Julimar, Balnaves and Coniston – and a high-potential exploration/appraisal program around Olympus-1, Bianchi-1 and the Greater Tallaganda area. Balnaves and Coniston will add significant oil production in 2014 and the high-potential exploration/appraisal program is targeting structures close to discoveries.

Argentina
We will focus a significant percentage of available capital toward our liquids-rich “Gas Plus” development program, which has delivered impressive economics with gas realizations exceeding North America markets. Additionally, we’ll continue our efforts to further evaluate the Vaca Muerta shale fairway in the Neuquen Basin, which we believe holds a significant resource and future opportunity for Apache.

Deepwater Gulf of Mexico
For the Deepwater Region, growth through the drillbit means adding value through the addition of reserves and production at economically attractive company metrics. This month commenced drilling an exploration test at the Staurolite prospect on Green Canyon Block 274, followed by two additional operated and four non-operated wells, including one in the Lucius field. The region has more than 100 exploration blocks, primarily in the Central Gulf of Mexico lease area.

Central
Central’s capital budget has increased 30 percent over 2012, and we plan extensive growth through drilling. The region plans to drill 300 wells in 2013, a 50-percent increase, and target the prolific liquids-rich Granite Wash, Tonkawa, Cleveland, Marmaton and Cottage Grove formations.

Canada
Oil production growth through the drillbit remains a primary focus for Apache Canada in 2013 as we look to build on strong fourth-quarter 2012 drilling results in northwest Alberta Dunvegan play acreage, liquids-rich Bluesky/Glauconite plays, and in our oil-rich Viking acreage. Adding new reserves across our 7 million gross acres and identifying future potential in the liquids-rich Montney and Duvernay plays also form a significant part of our 2013 business plan.

North Sea
A significant part of our activities during 2012 were designed to lay the groundwork for the future, such as successfully integrating the Beryl properties into our North Sea Region and preparing for a drilling campaign that encompasses wells drilled from platforms and subsea. So to us, it means that we get to apply this well-executed preparation toward growing production in 2013 as well as protecting the base with the continued drilling campaign at Forties.

Gulf Coast Onshore
Technology is going to have a big impact on the growth of our region in 2013. Industry virtually stopped investing in this area prior to the advent of modern seismic and drilling technologies. We plan to re-enter old oil fields from the 1940s and 1950s, applying new techniques to identify and recover reserves that were left behind. We’re also drilling gas wells in south Texas that have high rates of return as well as pursuing conventional and unconventional resource plays that will bring future growth to the region.

What is your team doing differently this year versus years past to accomplish this challenge?

Gulf of Mexico Shelf
We are a prospect-rich region. Even before current challenges, we have been looking at new technologies to help reduce our risks and upgrade our prospect inventory. Applying new technology is the future for the Shelf Region.

Permian basin
Given the number of wells in the plan, we have a renewed focus on cost-reduction efforts and efficiencies. To take advantage of our acreage position in key areas such as Deadwood, Barnhart and Yeso, we are accelerating the number of horizontal wells drilled in 2013 to 180.

Egypt
Like many regions, we’re growing and exploring in remote areas with limited to no infrastructure. In turn, we need to ensure we put the bit to work where it has the most impact and where production can be brought online in a timely fashion. This requires close coordination and communication between all disciplines, in particular with our projects and operations groups. This will be critical as we look to significantly expand our waterflood programs into areas where water source, water handling and facilities will be developed in parallel with drilling.

Australia
Since most of our major projects will not contribute to production in 2013, this year we will focus on near-term opportunities, such as the Macedon gas project, additional development work at Stag, and other remedial/workover opportunities to increase production.

Argentina
There has never been more urgency to find every barrel possible, maximize production, and create value within our capital resource limits. In 2013, we are spending more toward immediate production-adding projects and less toward higher-risk exploration projects. We are realigning our technical teams in order to meet that allocation, as well as assessing the resource potential of the region.

Deepwater Gulf of Mexico
Our team has been able to secure approved plans, permits and rig contracts on two deepwater rigs over the past two years. These rigs will begin drilling this year to test our extensive deepwater prospect inventory. To be successful, we must make sure our large contractor staff works to Apache’s EH&S standards, and we must continue the application of state-of-the-art technology to aid in the testing and high-grading of these resource opportunities.

Central
We have always run lean. We undertook a very aggressive growth position in 2012 and still had the best year ever. But the effort took a toll on our staff. We began adding new staff in mid-2012, and we don’t anticipate filling all open positions until mid-2013. But, even after adding more than 100 new Apaches, the Central Region still has the lowest G&A per BOE in Apache.

Canada
This past year, the region had a renewed emphasis on evaluating Canadian acreage. Prioritizing potential investments and identifying cost-reduction opportunities will all drive progress toward enhancing our return on revenue in 2013. We now have thousands of drilling prospects in inventory and will continue our 2012 program of drilling oil- or liquids-rich locations.

North Sea
During 2012, we successfully completed 1,000 square kilometers of the first 3-D seismic survey conducted over the Beryl fields since 1997. Both acquisition and processing technologies have improved significantly during this timeframe, and the new data undoubtedly will play an important role to better image and evaluate a very large and structurally complex producing field area. New opportunities to add value to this asset base are continuing to multiply, as are the great ideas the new staff  brought with them. At Forties, with the addition of the Forties Alpha Satellite Platform, drilling activity will witness a step-change from years past. We plan to drill 27 wells (24 of which will be operated by Apache), including 11 new wells at Forties and at least six at Beryl. We also plan to drill a third development well at Bacchus in the first quarter. The expanded base of operations, coupled with an enlarged exploration portfolio, sets up the region for growth for many years to come.

Gulf Coast Onshore
We intend to average one nonoperated and three operated drilling rigs during 2013 and anticipate drilling 39 wells. At Atchafalaya Bay, we anticipate our drilling activity will increase gross production from the field to 155 million cubic feet per day from 140 Mmcf/d. The capacity of the Atchafalaya Bay system is scheduled to increase to 220 Mmcf/d from 155 Mmcf/d by mid-year, after Phase II and Phase III expansions are complete.

What are one or two main things that will help drive your region’s success in 2013?

Gulf of Mexico Shelf
Technology, good data and top-tier staff. We currently are shooting wide azimuth seismic in our oil-prone blocks for subsalt potential and shooting short-cable, high-resolution seismic in the Main Pass blocks that will quadruple the frequency of the current data. This will allow us to see stratigraphic traps that we could not previously define. By midyear we should spud our first prospect generated from this new data. Our experienced staff members, especially in the geoscience realm, are quickly bringing newer staff up to speed to ensure we are successful in 2013 and beyond.

Permian basin
Execution of our plan will be a key success driver in 2013 since the Permian Region is one of the largest recipients of capital and will drill the largest number of wells. We are continuing to encourage innovation by empowering and holding personnel and teams accountable. We also are increasing our efforts of collaboration within the region at all levels and with corporate services such as Exploration and Production Technology and the Horizontal Technology groups.

Egypt
Unforeseen events are standard in operationally intensive environments, particularly in an international joint-venture-oriented setting. This requires a willingness to adapt, while not losing sight of the ultimate goal of production growth. We will draw upon our strengths of flexibility and pragmatic execution – two core values of our Apache culture that separate us from our competitors – to achieve our 2013 production goals.

Australia
Most of our capital is associated with large developments so successful execution of the operated Balnaves and Coniston projects, which will add oil production volumes in 2014, and the partner-operated Wheatstone, Macedon, Upper Pyrenees and Moon-dyne projects will be key drivers. The Australia region also has a number of key exploration wells planned in 2013 that could discover the significant quantities of hydrocarbons at the Bianchi-1, Homevale-1 and Phoenix South-1 exploration wells.

Argentina
The first thing we need to do is perform on the capital programs. If successful, we will meet and hopefully exceed our plan numbers. Another key is securing the concession extensions we have been working for the past couple of years (Tierra del Fuego and Rio Negro provinces). Two-thirds of our production comes from these areas, and it’s vital for us to extend our operating license beyond their current expirations in 2016. The culture of ownership and business efficiency driven by AIM UP is really the foundation on which we must sustain our business in the years ahead. We will focus on doing better today than we did yesterday.

Deepwater Gulf of Mexico
The primary drivers for this year’s success are the availability of capital to test prospects within our Deepwater prospect inventory and our participation in the Central GOM lease sale. Our team of geoscientists and technical professionals are poised to establish and maintain capital efficiency.

Central
Like the Permian Region, execution will be a key success driver in 2013. Our drilling activity level will increase 50 percent year over year and nearly all of our wells will be horizontal with long laterals. Cost control and efficiency will drive results. For years, we cursed the tight rocks of the Anadarko Basin that greatly limited the drainage areas and recoverable reserves of our vertical wells. Today, we feel fortunate that those same tight rocks are ideally suited for drilling horizontal wells, fracture-stimulated in multiple stages. We have thousands of potential locations spread among a million net acres. Our biggest opportunity for success is to reduce our costs. That will directly impact Apache’s bottom line today and allow us to continue to drill decades into the future.

Canada
Empowering our talented and integrated teams to build on successes by striving to find innovative ideas and solutions through collaboration are key to Canada’s success.

North Sea
Executing the plan well and taking advantage of new opportunities while maintaining a safe and competent operation are important. The North Sea Region generates some of the strongest rates of returns for the corporation with a growing set of opportunities to increase production tied to Brent pricing. So the question should not be how much, but how many! Above all, the drive will be to increase production and reserves while reducing unit costs and ultimately extending field life. In 2012, we doubled the size of the region organization of talented individuals that are now coming together as one.

Gulf Coast Onshore
A unique feature of our region is that we operate in many different environments – offshore, in the marshlands, and the bone-dry areas of South Texas. For us to ensure success, our people will have to operate in all these areas in a safe and environmentally responsible manner. We also must grow production by executing on a number of near-term growth projects, including the Atchafalaya Bay development.