Apache Corp., while suffering from hurricane losses in the Gulf of Mexico, nevertheless reported a 56% rise in 2005 earnings to $2.6 billion or $7.84 per diluted common share, compared to $5.03 per share, or $1.7 billion, in 2004. The company credited the increased earnings to record-high oil and natural gas prices.
"Despite losing approximately 5% of our production to hurricanes, we were able to increase worldwide production by 1.4%," said G. Steven Farris, Apache president, CEO and COO. "We replaced 216% of our 2005 production, adding 352 million barrels of oil equivalent (boe) -- 98% through the drill bit, with single-digit finding costs. Our year-end reserves increased 9.3% to a record 2.1 billion boe."
Apache's liquid hydrocarbon production increased 1% to 243,900 bbl/d during 2005 and natural gas production rose 2%, to 1.26 Bcf/d.
The company's fourth-quarter worldwide production was below prior-year levels as a result of hurricane-related shut-ins, which peaked during the period. Apache's liquids production averaged 227,100 bbl/d during the quarter, 10% below the prior-year period, and gas production was 1.23 Bcf/d, 1% below the year-earlier quarter.
In the fourth quarter Apache earned $787 million, or $2.35 per share, up 55% from the prior-year period, a record, despite the continuing impact of Hurricanes Katrina and Rita on Gulf of Mexico operations.
Apache spent $3.4 billion on acquisitions and exploration and development capital in 2005, excluding a $547 million non-cash accrual for future asset retirement obligations.
"We are positive about the outlook for the year ahead," Farris said. "We started 2006 by completing our $269 million acquisition of Permian Basin assets from Amerada Hess and agreeing to purchase Pioneer's assets in Argentina for $675 million. At year-end, we had restored 85% of our gross operated gas production and 67 of gross operated oil production in the Gulf Coast Region.
"We see potential for production growth in every one of our core areas," Farris said. "We anticipate 2006 production will grow 6% to 10% above 2005 levels, excluding the Pioneer transaction in Argentina.
"Our Gulf Coast Region has been a key core area for Apache," Farris said. "It had the highest gross margin of any of our regions in 2005 and generates exceptional rates of return on capital invested.
In 2005, Apache drilled 2,383 wells with a 91% success rate, Farris said. "Barring a major political or economic event, such as the counterproductive adoption of a windfall profits tax, we should be more active in 2006."
Apache is planning wildcat wells in the North Sea outside the Forties Field, the Exmouth Basin in Australia, Northeast British Columbia in Canada and the Western Desert of Egypt, as well as possible wells targeting deep gas formations on Apache's acreage in the Gulf of Mexico, Farris said.
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