Apache ups output plan, takes $3.7bn write-down

OREANDA-NEWS. August 19, 2015. Apache raised its 2015 output guidance for both US and non-US operations, but took \\$3.7bn write-down because of falling commodity prices.

The US independent raised its 2015 onshore North American output guidance by 1-2pc from a no growth scenario it forecast earlier, bringing the full-year volume to 305,000-308,000 b/d of oil equivalent (boe/d). The Non-US output target was increased by 5-8pc to 164,000-168,000 boe/d.

The guidance increase for 2015 is a result of stronger than expected increase in output in the first half of the year despite "an aggressive 60pc reduction in budgeted capital expenditure from 2014 levels," chief executive John Christmann said. "We have exceeded our production plan in the first half of 2015 and delivered correspondingly strong cash flow from continuing operations."

Apache took an after-tax ceiling-test write-down of \\$3.7bn because of the fall in commodity prices, as well as \\$1.9bn in other charges.

Those charges were offset by the \\$5.7bn the company received in the second quarter from the sales of its LNG interests and oil and gas properties in Australia and Canada. It used those proceeds to repay \\$2.7bn of debt, lowering its long-term debt as of 30 June to \\$9.7bn, and available cash to \\$3bn.

"Exiting these businesses eliminated our exposure to projects with large capital-spending commitments and uncertain project timing," Christmann said. "This increase in activity during the second half of 2015 is not expected to have a material impact on our full-year 2015 production; however, it will establish a positive production trajectory in the fourth quarter and heading in to 2016."

Total capex in the second quarter fell by 28pc from the first quarter level of \\$857mn. It operated an average of 34 rigs, drilled 78 wells and completed 108 wells during the second quarter, down from 61 rigs operating, 119 wells drilled and 175 wells completed during the first quarter.

Apache operated 10 rigs in the Permian basin in Texas and completed 53 wells during the second quarter, down from 15 operated rigs and 88 well completions in the first quarter. Output in the area rose by 9pc from the year-ago quarter to 172,000 boe/d. It operated five rigs in the Delaware basin, unchanged from the previous quarter, and the remaining were spread over its assets in the Midland, Central Basin platform and North West Shelf.

The company's oil output in the first half rose to 299,755 b/d from 295,695 b/d a year earlier. The increase was driven primarily by the Permian, where output rose to 96,146 b/d from 89,437 b/d, offsetting the fall in the Midcontinent and Gulf Coast. Total output also got a boost from higher output in Egypt, which saw an increase to 95,995 b/d from 88,370 b/d.

It earned an average oil price of \\$58.09/bl in the quarter compared with \\$102.95/bl a year earlier and \\$47.87/bl in the earlier three months. Natural gas liquids (NGL) earnings were at \\$10.21/bl versus \\$28.64/bl a year earlier and \\$11.71/bl in the earlier three months.

Apache posted a net loss of \\$5.6bn, primarily because of the writedowns, compared with a profit of \\$505mn a year earlier.

For the rest of the year, the company plans to operate about 16 rigs in North America, of which 13 will be in the Permian. The company still plans to end the year with a backlog of 80 to 100 drilled-but-uncompleted wells in North America.