Exploration Success Brings Record Production, Earnings for Apache
Houston-based Apache Corp. crossed the billion dollar earnings mark in 2003, earning almost twice as much as it earned in 2002, to stand at $1.1 billion ($3.43/share), compared with $544 million ($1.80) the year before. And while most of the growth followed major exploration successes overseas, the CEO noted that U.S. operations are still an important part of the company's operations.
Along with record production numbers, Apache said earnings were boosted by strong commodity prices. Cash from operations before changes in operating assets and liabilities totaled $2.8 billion in 2003, up 79% from $1.6 billion in 2002. For the fourth quarter, Apache reported income of $260 million (80 cents/share), which was 45% higher than in 4Q2002's $179 million (59 cents). Cash from operations in the quarter was up 69% to $786 million.
"Strong commodity prices are only part of the story of our 2003 record results," said CEO G. Steven Farris. "In addition to earning over $1 billion -- our best year ever -- production increased 22% and worldwide reserves increased 26%. We replaced 330% of our production through a combination of strategic acquisitions and outstanding drilling success at an all-in 2003 finding cost of $6.07/boe." He added that Apache also reduced its debt to 26% of capitalization last year.
Apache ended 2003 with proved reserves of 1.7 billion boe, which marked its 18th consecutive year of reserve growth. Production averaged a record 417,400 boe/d, and it added 234 million boe of proved reserves (154% of 2003 production) through exploration and development activities -- one of the company's best drilling performances ever. Apache also added another 267 million boe through acquisitions.
Fourth quarter production averaged 441,400 boe/d, compared with 338,300/d in 4Q2002. Liquid hydrocarbon production averaged 231,400 bbl/d, up 45%. Natural gas production averaged 1.26 Bcf/d, 17%.
Most of the production success was from exploration success in Egypt and Western Australia, and Farris said those regions would drive the company's production and financial results this year. However, while Apache has been moving a lot of its growth overseas, the CEO said U.S. operations are not a thing of the past, especially offshore.
"I expect us to do a lot of business in the Gulf of Mexico," Farris said. But he added, "In the Gulf of Mexico, we take what it gives us," and he added that included onshore as well. The deepwater is where the company has some of its "best economics." And, the company had been able to do "an awful lot more geology" on the deepwater and expects to do more of that this year and into the future. More growth also is expected in Canada, where the company has achieved some success, including in Ladyfern.
Farris said the company's strategy will not change this year. "We plan on an active growing program, in addition to several large production projects that we have."He also hinted of future acquisitions, saying, "I continually believe that the major oil companies will sell assets this year."