Apache Corp.’s legacy Permian Basin portfolio is still churning out the hits after the operations team produced the best-ever well in history in the Delaware play during the second quarter.
There was a reason that the Permian overwhelmingly carried the super independent’s North American output with nearly 60% of the total, CEO John Christmann said during a conference call to discuss 2Q2016 results.
“Apache’s cash margins in the Permian averaged approximately $17/boe in the second quarter, which is more than double those in the rest of North America,” he said.
Although total North American onshore production declined roughly 16,000 boe/d sequentially, only 20 gross operated wells were placed online between April and June, “so these declines were expected. Notably, less than 5,600 boe/d of this decline was in the Permian…”
In the Delaware sub-basin, two operated wells came online, both targeting the Third Bone Spring formation in the Pecos Bend. The Blue Jay Unit 103H well was the highlight, ramping up in April with a 30-day average rate of nearly 3,200 boe/d with a lateral length of 5,100 feet.
“In fact, in its first 90 days on production, the oil component alone of this well was 147,000 bbl, making it Apache's best well to date in the Delaware Basin,” Christmann said.
Apache has begun taking advantage of the Delaware’s “natural fracture systems” to enhance production rates in the Waha hub area.
“This has significantly improved the economics at Waha and reduced our breakeven oil price,” the CEO said. For example, the 905H well ramped up in June, achieving a peak 24-hour initial production rate of 100,750 boe.
“As a result of our technical progress, we now have an expanding inventory of attractive locations at Waha, in both the Wolfcamp A and third Bone Spring formations,” Christmann said.
In the Permian’s other sub-basins -- Midland, Central Basin Platform and Northwest Shelf -- Apache placed a combined 16 gross operated wells on production, down from 25 wells in the first quarter.
Two Wolfcamp B wells in the Midland came online in the quarter, each achieving a 30-day average rate of more than 1,300 boe/d from one-mile laterals. A second rig was added in the Midland in late July to focus on Lower Spraberry and Wolfcamp B targets.
Beyond the Permian, Apache had no active drilling rigs working North America during the quarter and it placed on production only two operated wells, both in the Woodford Shale, where producers are targeting Oklahoma’s stacked reservoirs.
“Limited activity” is planned through 2016 in the Woodford, but a two- or three-rig program is expected to continue “for many years to come,” the CEO said.
Despite Apache’s low level of reinvestment, North American onshore production guidance “is tracking in line” with previous 2016 guidance range of 268,000-278,000 boe/d.
During the quarter, total global oil and gas output reached 461,000 boe/d pro forma, with 282,000 boe/d in North America’s onshore and 179,000 boe/d from international/offshore businesses, including the Gulf of Mexico.
The Houston-based company's net loss narrowed year/year to $244 million (minus 65 cents/share) from $860 million (minus $2.28). Total revenue slumped nearly 39%. However, total costs and expenses also declined sharply, falling to $1.66 billion from $2.43 billion.
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