Apache Third-Quarter Earnings: $646 million or $1.94 per share
1 January 1970 Apache Corporation (NYSE, Nasdaq: APA) today reported third-quarter earnings of $646 million or $1.94 per diluted common share as worldwide production rose to a record 513,000 barrels of oil equivalent (boe) per day, up 13 percent from the prior-year period. Apache earned $686 million or $2.05 per share in the prior-year period.
Third-quarter results include a non-recurring gain of $174 million on the sale of assets in China; a $92 million, one-time prior-period adjustment reflecting increased tax rates in the United Kingdom; and a $24 million negative adjustment related to foreign currency fluctuations.
Cash from operations before changes in operating assets and liabilities totaled $1.3 billion, up from $1.26 billion in the year-earlier period. (This is a non-GAAP measure; see reconciliation below.)
Apache's gas production averaged 1.7 billion cubic feet (Bcf) per day, up 35 percent from the prior-year period and up 9 percent from the second quarter. Apache produced 228,551 barrels of liquid hydrocarbons per day, down 6 percent from the third quarter of 2005 and a 5 percent decline from the second quarter, as a result of the sale of the Zhao Dong field in China and shut-ins in the North Sea and Egypt.
"We are pleased with Apache's progress thus far in 2006," said G. Steven Farris, president and chief executive officer. "We plowed through a lot of variables during the third quarter; despite extended shut-ins in the North Sea and Egypt and the sale of our China assets, Apache's worldwide production increased 2.4 percent from the second quarter to an all-time high of 513,000 boe per day.
"Our North Sea production has been stable thus far in October and, barring any unforeseen events, we should exit 2006 with production rates 20 percent higher than we started the year, giving us good momentum going into 2007," Farris said.
"We remain on track to achieve 10 to 15 percent production growth this year," Farris said. "We expect a strong finish to a record year in nearly every financial and operational aspect."
Apache received $63.66 per barrel of oil in the quarter, up about 9 percent from the prior-year period and down 1 percent from the second quarter; and $4.83 per thousand cubic feet of gas, down 26 percent from the year- earlier period and a 3 percent drop from the second quarter of 2006.
Third-quarter operational update
U.S. Central Region production increased to 265 million cubic feet (MMcf) and 31,727 barrels of liquids per day on drilling success at Stiles Ranch in the Texas Panhandle, the Red Fork and Springer formations in Western Oklahoma, and in the Permian Basin.
Gulf Coast Region production increased to 455 MMcf of gas and 44,165 barrels of liquids per day during the third quarter as Apache took over operations on 96 platforms acquired from BP. Recovery from hurricanes Katrina and Rita is progressing, although net production of 3,000 barrels and 10 MMcf per day will likely remain shut-in at year end. Apache expects to recover those volumes during the first half of 2007.
In Canada, Apache's third-quarter production was flat with the second quarter, averaging 422 MMcf and 22,613 barrels per day. Production was up 8 percent from the prior-year period on a barrel-equivalent basis.
Although the BP pipeline shut-in impacted third-quarter production from the North Sea, the company shifted planned maintenance at the Delta platform to coincide with the pipeline shut-in. The downtime reduced the region's production by 13,000 barrels per day during the quarter. During October, gross production has averaged approximately 70,000 barrels per day.
The North Sea Region continues to make progress on facilities upgrade projects, including the electric generation/gas and power ring project, which should result in substantial fuel savings and reliability. The first well from the Charlie platform to determine the westerly extent of the Forties Field was spudded; if successful, this project could extend the field to the west. Apache also began its North Sea exploration program.
In Australia, Apache established a single-day gas production record of 240 MMcf and a quarterly record of 204 MMcf per day, up 11 percent from the second quarter. Apache submitted a field development plan to regulatory agencies for the Van Gogh/Theo oil field in the Exmouth area off Western Australia. The project is expected to commence production in the second half of 2008 with net production rates of 20,000 barrels per day.
Net production in Egypt declined 3 percent from the second quarter, mainly the result of a 14-day shut-in at the Shell-operated Obayied gas processing plant and 10-day shut-ins at Apache's Salam and Tarek plants for maintenance; the shut-ins also impacted condensate production associated with the gas. However, Apache set records for gross operated production: 120,374 barrels of oil per day on July 7 and 525 MMcf of gas per day on Sept. 13. Apache also drilled a new-field discovery: The Hathor Deep 1X wildcat tested 12 MMcf per day from the Alem el Buieb formation. The Qasr 34 well extended the Qasr field -- already Apache's largest discovery -- approximately 1.6 miles to the northwest and appraised a previously unproven area of 2,700 acres.
Apache's operating costs increased 12 percent from the second quarter to $7.67 per boe. Costs in Canada, Australia, Egypt and Argentina were flat to lower, and Central Region costs were up slightly. North Sea operating costs were up 39 percent because they were spread over much lower volumes. Gulf Coast Region costs were up 31 percent because the focus shifted from hurricane-related activity to the backlog of workovers and maintenance.
In China, the $174 million gain was the result of Apache's sale of its 24.5 percent interest the Zhao Dong block for $260 million.
Apache Corporation is a discoverer and producer of oil and gas energy resources for the advancement of mankind in the interest of long-term investors seeking share appreciation.
EDITOR'S NOTE: Apache will webcast a conference call to discuss its third- quarter results at 1 p.m. Central Time, Thursday, Oct. 26, from Apache's Web site, http://www.apachecorp.com. The conference call will be available for delayed playback by telephone for one week beginning at approximately 5 p.m. on Oct. 26. To access the telephone playback, dial (719) 457-0820 and provide Apache's confirmation code, 2427547. The webcast replay and podcast will be archived on Apache's Web site. To have the podcast delivered to you, sign up for Financial RSS Feeds at http://investor.apachecorp.com/rss.cfm. To be reminded of the live webcast, sign up for E-mail Alerts at http://investor.apachecorp.com/alerts.cfm.
This news release contains certain "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995 including, without limitation, expectations, beliefs, plans and objectives regarding production, operating costs, exploration and acquisition activities. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions and uncertainties. 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.
APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands, except per share data)
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
2006 2005 2006 2005
REVENUES AND OTHER:
Oil and gas production
revenues $2,072,815 $2,051,744 $6,108,240 $5,452,928
Gain on China
divestiture 173,545 --- 173,545 ---
Other 15,121 9,308 40,316 29,643
2,261,481 2,061,052 6,322,101 5,482,571
OPERATING EXPENSES:
Depreciation, depletion
and amortization 487,542 357,159 1,301,557 1,055,583
Asset retirement
obligation accretion 22,762 13,527 64,268 40,016
Lease operating costs 361,784 279,995 965,800 768,596
Gathering and
transportation costs 24,815 23,571 76,728 73,529
Severance and other taxes 117,704 150,394 432,520 309,173
General and administrative 53,781 50,047 151,644 152,460
Total operating
expenses 1,068,388 874,693 2,992,517 2,399,357
OPERATING INCOME 1,193,093 1,186,359 3,329,584 3,083,214
FINANCING COSTS:
Interest expense 61,074 43,517 154,073 133,590
Amortization of deferred
loan costs 501 521 1,530 3,226
Capitalized interest (16,108) (14,990) (46,183) (42,653)
Interest income (3,481) (2,201) (13,112) (4,003)
Net financing costs 41,986 26,847 96,308 90,160
INCOME BEFORE INCOME
TAXES 1,151,107 1,159,512 3,233,276 2,993,054
Provision for income taxes 504,043 472,517 1,201,666 1,157,546
NET INCOME 647,064 686,995 2,031,610 1,835,508
Preferred stock dividends 1,420 1,420 4,260 4,260
INCOME ATTRIBUTABLE TO
COMMON STOCK $645,644 $685,575 $2,027,350 $1,831,248
BASIC NET INCOME PER
COMMON SHARE $1.96 $2.08 $6.14 $5.57
DILUTED NET INCOME PER
COMMON SHARE $1.94 $2.05 $6.08 $5.49
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 329,643 329,219 329,971 328,615
APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands)
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
2006 2005 2006 2005
COSTS INCURRED:
North America
exploration and
development $581,483 $617,123 $1,830,782 $1,657,329
International
exploration and
development 307,837 308,507 777,267 874,165
$889,320 $925,630 $2,608,049 $2,531,494
Oil and gas property
acquisitions $518,588 $10,172 $2,252,163 $35,826
Capitalized interest $16,108 $14,990 $46,183 $42,653
Asset retirement costs $231,022 $39,417 $375,708 $76,706
September 30, December 31,
2006 2005
BALANCE SHEET DATA:
Current Assets $2,380,231 $2,162,077
Property and Equipment, net 20,637,689 16,791,340
Goodwill 189,252 189,252
Other Assets 218,753 129,127
Total Assets $23,425,925 $19,271,796
Current Liabilities $3,489,819 $2,186,564
Long-Term Debt 2,189,487 2,191,954
Deferred Credits and Other
Noncurrent Liabilities 5,111,575 4,352,063
Shareholders' Equity 12,635,044 10,541,215
Total Liabilities
and Shareholders' Equity $23,425,925 $19,271,796
Common shares outstanding
at end of period 329,413 330,121
NON-GAAP FINANCIAL MEASURES:
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 For the Nine Months
Ended September 30, Ended September 30,
2006 2005 2006 2005
Net cash provided
by operating
activities $1,134,745 $1,330,915 $3,399,012 $3,160,096
Changes in
operating assets
and liabilities 161,824 (67,354) 387,436 232,181
Cash from operations
before changes in
operating assets
and liabilities $1,296,569 $1,263,561 $3,786,448 $3,392,277
APACHE CORPORATION
FINANCIAL INFORMATION
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
2006 2005 2006 2005
FINANCIAL DATA (In
thousands, except per
share data):
Revenues and other $2,261,481 $2,061,052 $6,322,101 $5,482,571
Income Attributable to
Common Stock $645,644 $685,575 $2,027,350 $1,831,248
Basic Net Income Per
Common Share $1.96 $2.08 $6.14 $5.57
Diluted Net Income Per
Common Share $1.94 $2.05 $6.08 $5.49
Weighted Average Common
Shares Outstanding 329,643 329,219 329,971 328,615
Diluted Shares
Outstanding 332,855 334,164 333,402 333,602
PRODUCTION AND PRICING DATA:
OIL VOLUME - Barrels per day
United States 67,996 64,906 64,277 71,860
Canada 20,509 21,974 21,123 22,226
Egypt 54,634 54,728 55,756 54,110
Australia 12,249 16,499 12,146 15,323
North Sea 49,375 67,713 58,370 64,966
Argentina 8,960 1,339 5,632 1,074
China 2,745 6,533 4,234 9,224
Total 216,468 233,692 221,538 238,783
AVERAGE OIL PRICE PER
BARREL
United States $58.39 $53.85 $55.38 $47.72
Canada 66.09 60.66 62.30 52.12
Egypt 66.88 60.38 65.66 53.29
Australia 73.80 66.52 71.67 58.06
North Sea 67.04 60.46 64.68 52.33
Argentina 46.41 39.18 45.03 36.96
China 62.53 50.76 62.73 42.35
Total 63.66 58.66 61.85 51.05
NATURAL GAS VOLUME - Mcf
per day
United States 719,324 586,111 653,379 625,716
Canada 422,397 373,079 408,758 366,892
Egypt 207,686 162,386 213,097 154,839
Australia 204,465 138,267 181,143 120,759
North Sea 1,738 2,384 2,055 2,287
Argentina 151,122 2,715 86,275 3,142
Total 1,706,732 1,264,942 1,544,707 1,273,635
AVERAGE NATURAL GAS
PRICE PER MCF
United States $6.27 $7.73 $6.62 $6.71
Canada 5.38 7.17 6.22 6.28
Egypt 4.63 4.97 4.50 4.67
Australia 1.70 1.69 1.65 1.73
North Sea 13.20 10.57 10.79 7.63
Argentina 0.89 1.35 0.91 1.14
Total 4.83 6.54 5.32 5.86
NGL VOLUME - Barrels per day
United States 7,896 7,097 8,088 8,529
Canada 2,104 2,232 2,169 2,187
Argentina 2,083 --- 1,154 ---
Total 12,083 9,329 11,411 10,716
AVERAGE NGL PRICE PER
BARREL
United States $42.19 $34.54 $39.73 $31.10
Canada 38.66 32.13 36.83 27.59
Argentina 42.15 --- 40.31 ---
Total 41.57 33.97 39.23 30.38
Source: prnewswire
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