Apache Corp. is off to “fast start” in 2010 with eight consecutive successful wells in the Gulf of Mexico and plans in place to begin developing some of its big prospects onshore in North America, CEO G. Steven Farris said Thursday.

Farris, who presided over a conference call to discuss the Houston-based producer’s quarterly and year-end results, said the company was able to achieve balanced growth in 2009 despite lower capital spending, which gives it a head’s start for this year.

“Although we reduced capital expenditures by about 40% from 2008 levels to achieve our goal of living within our cash flow, Apache increased production by 9% and ended 2009 with $2 billion in cash,” Farris said. “In 2010, we anticipate continued growth of 5-10% as we ramp up drilling activity across our portfolio and commence production from earlier discoveries.”

North American production declined slightly for the year on curtailed drilling activity. However, output in 4Q2009 jumped 14% from a year earlier to 589,799 boe/d, and the company is counting on its array of U.S. and Canadian assets to lift output in 2010. The company said it plans to run, on average, 26 rigs in North America in 2010, with 381 development wells planned along with 32 exploration wells.

Focus this year will be on development drilling in the Granite Wash, where Apache plans to run five rigs and drilling 17-25 net wells. Another five rigs will be running in the Permian Basin, where 171 net wells are planned. And in the Horn River Basin of British Columbia, Apache is planning to increase gross wells on production to 44 from four by the end of this year.

Apache’s “value proposition is simple,” said analysts with Tudor, Pickering & Holt Inc. (TPH) This year the producer plans to deliver a 10-15% rate of return on capital employed, grow production 5-10% year/year and live within its cash flow, they noted. “We think acceleration into North American resource plays…plus conversion of big discoveries into cash flow/reserves puts some juice back in the stock.” Total output by the end of 2011 is estimated by TPH to be up 13% from 2010’s average, “suggesting upside to our production estimates is likely from Apache’s robust 2010 program.”

In addition to its North American assets, the company’s worldwide portfolio is deep, and the balanced portfolio drove Apache’s cash flow in 2009 as oil prices recovered, Farris noted. “While oil and natural gas liquids comprised 50% of Apache’s output, they provided 72%. We also shaved 20% off of our per-equivalent-barrel lifting costs.”

Apache reported 4Q2009 fourth-quarter adjusted earnings, excluding one-time items, more than doubled to $664 million ($1.96/share) from $276 million (82 cents) in 4Q2008. For 2009 adjusted earnings were $1.9 billion ($5.59/share), down from $3.8 billion ($11.22) in the prior year.

“We plan to continue to allocate capital based on our projected cash flow,” Farris said. “However, we have ample liquidity from our cash balances and committed credit facilities to pursue incremental opportunities, either through additional exploration or value-adding acquisitions.”

Apache ended 2009 with proved reserves of 2.37 billion boe. Excluding price-related revisions, Apache added 216 million boe through discoveries, extensions and acquisitions. Last year the company produced 213 million boe and spent close to $3.5 billion on exploration, development and acquisitions.

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