Apache Corp., working overtime to throw more weight into its North America exploration and development, beat analyst expectations in the third quarter, led by substantial gains in the U.S. and Canada onshore.
The production growth in the three-month period came despite selling more than $7 billion in assets to date this year, including prime North American property (see Daily GPI,Sept. 19;July 19).
Analysts had been looking to the Houston super independent to see how it would execute following several dullish quarters and the boatload of sales, which included its No. 1 position in the Gulf of Mexico (GOM) Outer Continental Shelf. Execution was no problem.
In the North American onshore, where Apache derived almost half (47%) of total global output, production reached 372,080 boe/d in the quarter, with 277 net wells drilled (329 gross), and on average, 84 rigs were in operation. By comparison, ExxonMobil Corp. during the quarter averaged 41 rigs in the United States (see Daily GPI,Oct. 31).
To get an idea of North America's impact, consider that of the 125 total global rigs on average that Apache had in operation between July and September, two-thirds were targeting the U.S. and Canada onshore.
Net earnings also were solid, with profits of $300 million (75 cents/share), almost double those of a year ago, $161 million (41 cents). Net cash from operations totaled $2 billion. Notably, total revenue was $4.4 billion, with North America contributing the biggest piece of the pie at $1.9 billion, 44%. North American natural gas provided $4 million in revenue as well. Capital spending in North America totaled $1.64 billion, compared with $1.59 billion a year ago.
"The strength of our financial performance this quarter is a testament to the effectiveness of our strategy to rebalance our portfolio and drive returns by achieving the right mix of predictable production growth from our North American onshore assets combined with the substantial free cash flow generation from our international operations," said CEO G. Steven Farris. "Apache's focused drilling program in North America is yielding significant production growth."
North American natural gas volumes fell year/year to 1.36 Bcf/d from 1.47 billion, in part on asset sales, and in part because of the pull to liquids and oily targets. U.S. gas output fell to 830 MMcf/d from 863 MMcf/d, while Canada gas production declined to 529 MMcf/d from 604 MMcf/d. U.S. and Canada natural gas liquids production, however, increased to 64,522 b/d from 45,112.
The Permian Basin led the way production-wise -- not only in North America but globally -- followed by the U.S. Central operations, which include parts of the Texas Panhandle and Oklahoma's Anadarko Basin. Together the two basins delivered 149,000 boe/d, adding almost 13,000 boe/d sequentially and representing 35% of worldwide output, up from 27% in 3Q2012.
In the quarter, the Permian contributed 17% of total global output, followed by Canada with 14%, the Central region 12%, GOM Shelf 12%; Gulf Coast onshore 4%, and GOM deepwater 1%. The overseas operations won't be driving future growth, management indicated. International regions are to be the "primary source of excess cash" to fund future growth cycles.
The Permian broke quarterly records, with output of 132,000 boe/d, 18% higher year/year and 7% more sequentially. In the Central region, output climbed to 95,000 boe/d, 31% more than a year ago and 4% higher than in the second quarter. In just those two regions, Apache drilled 299 gross wells, or 91% of all North American wells and 77% of those worldwide.
Canada natural gas production also was strong, with total output of 113,819 boe/d, 18 net wells drilled and six rigs in operation. Horn River and Liard basin gas output averaged 176 MMcf/d, 68.2 MMcf/d net, and was 5% higher sequentially. The basins, where Apache is one of the top operators, would provide some of the gas for its joint venture with Chevron Corp. to build a liquefied natural gas export project near Kitimat, British Columbia.
Apache received an average price of $107.50/bbl for oil in 3Q2013, versus $102.62 a year ago. The average price for natural gas received was $3.49/Mcf, versus $3.76 in 3Q2012.