While there are “some naysayers” about the oil and natural gas production potential of the Gulf of Mexico, Apache Corp. CEO Steven Farris said Tuesday he isn’t one of them.
“I will tell you [the Gulf of Mexico] is a great place to be,” Farris told energy analysts at a conference sponsored by Lehman Brothers in New York City. “It is the highest rate-of-return project we can do.”
The Houston-based independent producer was the most active driller on the Shelf of the Gulf last year. From a fleet of 457 platforms, it currently produces 470 MMcf/d of natural gas there and 38,000 bbl/d of oil, he said. With the addition of new of new rigs and the return of shut-in production, Farris said he expects his company’s Gulf production to increase markedly by the end of the year.
But “certainly there are some downsides to being in the Gulf of Mexico,” namely the weather, Farris said. He noted that the company still has 10,000 b/d of oil and 30 MMcf/d of gas production shut in one year after Hurricanes Katrina and Rita struck. He said he expects one-half of the shut-in oil production and most of the shut-in gas volumes to come back by the end of the year.
In addition to the U.S. offshore, Apache is also active in the Anadarko Basin in Oklahoma, the Permian Basin in West Texas and East Texas, Farris noted. The company is a “big player” in Canada as well. It has 7.8 million acres there, making it the sixth largest acreage holder, he said. Apache currently produces 400 MMcf/d of natural gas from wells in Canada, and 21,000 b/d of oil.
The Kaybob area located in Alberta is “a very hot play,” with a gas production rate of 1 Bcf/d, Farris said. Apache picked up about 43 sections in this area from ExxonMobil.
Apache also is active in the United Kingdom’s North Sea, Australia, Egypt and Argentina. As a result of its widespread drilling program and lucrative lease acquisitions, the company’s oil and gas reserves have quadrupled over the past decade, and its production has grown 3.5 times. “We buy things and we drill things,” Farris said.
The company is considered one of the largest independent producers in the United States, earning $1.4 billion during the first half of this year, up from $1.1 billion in the comparable period in 2006. It invested $1.7 billion in exploration and development activities and closed on property acquisitions of $1.8 billion in the first half, including the purchase of BP’s producing assets in the shallow waters of the Gulf. That acquisition is expected to add net production of 3,650 b/d of oil and 85 MMcf/d of gas during the second half of 2006.
Apache expects its overall production to grow by 10-15% this year to 500,000-520,000 boe from 454,000 boe in 2005, according to Farris.
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