Apache Corp. on Thursday reported that record oil and natural gas production, combined with strong commodity prices, drove 2004 net income to a record $1.7 billion ($5.03/share), up from $1.1 billion ($3.43) in 2003. Canadian gas volumes were up for the quarter, while U.S. gas output fell.

Fourth quarter profit was up 90% over a year ago to stand at $507 million ($1.52), compared with $260 million (80 cents). Thomson First Call analysts expected earnings of $1.58 a share.

“We added 467 MMboe from a capital investment of $3.4 billion, which fueled 7% production growth,” said CEO G. Steven Farris. “With that growth and strong commodity prices, Apache turned in a very good year. We enter 2005 with record production and a strong portfolio of drilling opportunities across our core areas.”

In the fourth quarter, Apache’s production of 461,000 boe/d was up slightly from the third quarter despite the lingering effects from Hurricane Ivan in the Gulf of Mexico, which curtailed production by an estimated 9,700 bbl of oil and 34 MMcf/d of gas during the quarter.

Gas production slipped 1% to an average of 1.24 Bcf/d, but sold at an average price of $5.24/Mcf, up from $4.18 the year before.

In the United States, Apache’s natural gas volumes for the quarter were 636 MMcf/d, down from 685 MMcf/d in 4Q2003. For the year, U.S. gas production was 646 MMcf/d, down from 665 MMcf/d. Gas production in Canada for the quarter was higher, to stand at 340 MMcf/d, compared with 328 MMcf/d, and for the year, production stood at 327 MMcf/d, up from 318 MMcf/d in 2003.

Lehman Brothers analysts said Apache had reported “very encouraging” finding and development (F&D) costs. “Overall F&D was $7.28/boe but more significantly, the drill bit F&D works out to a very attractive $6.86/boe. Acquisition related costs averaged $8.33/boe.”

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