Continued weakness in natural gas and liquids prices has led Apache Corp. to drop rigs and defer some drilling into 2020 in its No. 1 prospect Alpine High in the Permian Basin.

The Houston-based super independent, which works in the Lower 48, deepwater Gulf of Mexico and overseas, reported third quarter losses in part on slumping commodity prices. Volatile prices also have led Apache to cut the 2020 capital expenditure outlook by 20%.

The big bet over the last few years has been within the Permian Delaware sub-basin, where Alpine High opened up opportunities in a little drilled area of West Texas. However, with little control over prices, Apache is taking control of what it can.

To that end, CEO John Christmann said the company is undergoing an overhaul.

“Apache has historically employed a decentralized, region-focused approach to operations, he said. “In recent years, we have centralized certain key activities, and today we see an opportunity to capture greater efficiencies by taking further steps in that direction.

“To accomplish this, we have initiated a comprehensive redesign of our organizational structure and operations that will position us to be competitive for the long term.”

The process, which began over the summer, is set for completion by the end of March, targeting at least $150 million of combined annual savings.

“As we look to 2020, based on current strip prices, we anticipate our upstream capital budget will be 10-20% below this year’s program of $2.4 billion,” the CEO said. “This will enable us to generate organic free cash flow that covers the current dividend and puts us on pace to fund a multi-year debt reduction program, while also delivering modest year-over-year oil production growth.”

Apache had deferred around 250 MMcf/d of gas volumes in March because of low Waha gas prices, but those lost volumes ramped in August and September as the 2 Bcf/d Gulf Coast Express ramped up.

However, “continued weakness” in gas and natural gas liquids (NGL) pricing has led Apache to reduce Alpine High drilling activity to two rigs from the five it was running in the third quarter, and it “has chosen to defer some fourth quarter completions into 2020.

“These changes, combined with a reduced production outlook for a recent multi-well pad, has resulted in a 5% decrease in fourth quarter Alpine High production guidance.”

The Alpine High had average production of 76,000 boe/d in the third quarter. In addition to running five rigs ran on average with one completion crew between July and September, 15 wells were placed on production.

Apache’s overall U.S. gas volumes from onshore and offshore in 3Q2019 declined 14% year/year to 563,162 Mcf/d. Permian gas volumes, 4% higher year/year, accounted for nearly all of the production at 539,132 Mcf/d.

U.S. NGL volumes climbed 20% to 72,005 b/d from a year ago, also carried by the Permian, with output up 53% to 69,703 b/d. Total domestic oil volumes declined by 3% to 100,045 b/d. Only the Permian, which also accounted for the bulk of oil output, had higher volumes, up 5% to 94,873 b/d.

In the Permian overall, oil output in the second half of this year “has been modestly impacted by some unplanned downtime events and completion schedule delays,” management said. As a result, fourth quarter Permian oil volumes are projected to be around 100,000 b/d.

Within the Delaware sub-basin outside of Alpine High, Apache used two rigs on average during 3Q2019 and placed nine wells on production. In the twin Midland sub-basin, three rigs were running and 22 wells were turned to sales.

“Good results from a Lower Cline test well in the Azalea Field will lead to further evaluation and potential expansion of Apache’s core development inventory” within the Midland, management said.

Apache fetched an average of only 97 cents/Mcf for its U.S. gas production, versus $2.09 in 3Q2018. For the Permian gas, the realized price was 91 cents, versus 3Q2018 prices averaging $1.98. U.S. realized oil prices fell year/year to an average of $54.70/bbl from $61.20, while NGL volumes received an average $13.26/bbl compared with $30.84.

Net losses totaled $170 million (minus 45 cents/share) in 3Q2019, versus year-ago profits of $81 million (21 cents). Revenue declined to $1.44 billion from $1.98 billion.