Apache Corp., which now claims to be the second biggest North American onshore operator, reported a 45% increase in total liquids output year/year in the United States and Canada, driven by a revamped drilling program in the legacy Permian and Anadarko basins.
Onshore drilling also rose 6% from the fourth quarter, CEO G. Steven Farris told analysts during a conference call last week. “Our onshore North American liquids production averaged 165,000 b/d of oil, which constitutes 21% of our total worldwide production,” he said. Farris credited the U.S. onshore asset base, “which we bolstered over the last three years,” as the biggest contributor. “Apache is currently the second most active U.S. onshore driller. During the first quarter, we averaged 206,000 boe/d from the Permian and Central regions alone, or 26% of our worldwide production.”
Apache today is running 42 rigs in the Permian Basin and 28 rigs in the Anadarko Basin, “and we expect this level to continue.” North American natural gas production fell 5% year/year “as we chose not to drill any dry gas wells during the first quarter…However, we’ve already incorporated these deferrals and declines into our plans and we remain on track to achieve our full year guidance of 3-5%.”
Natural gas, once Apache’s sole focus, accounted for 29% of total output worldwide. Even though there was no U.S. dry gas driling, production still rose to 95 MMcf/d from 73 MMcf/d. Third-party infrastructure issues in Canada reduced gas production by more than 18% to 87 MMcf/d from 106 MMcf/d. Gas remains a big target in Canada, with prospects in the Liard Basin, Horn River and Montney shales. A proposed joint venture with Chevron Corp. is appraising plans to export liquefied natural gas from British Columbia near Kitimat. The final investment decision hasn’t been made, and Farris gave no indication that it was coming anytime soon.
Apache shares jumped last Thursday on news that $4 billion worth of assets are up for sale this year. The determining factor as to what would be sold is based on the rate of return, cash flow, as well as long- and short-term growth, Farris told analysts. The highest costs are overseas and in the deepwater, but he couldn’t be pinned down on any specific sales.
However, it appears to be clear from the latest results that North America’s onshore portfolio will remain intact. Worldwide, Apache’s total output averaged 781,00 boe/d in 1Q2013, with liquids comprising 53%. Consider how much the North American onshore is contributing to Apache’s bottom line: total global revenues, the bellwether for any business, were $4.2 billion in 1Q2013, with North American natural gas liquids (NGL) accounting for more than one-third at $1.5 billion (37%). North American natural gas also provided 11%, or $5 million, to revenues.
Apache earned $698 million ($1.76/share) in 1Q2013, 19 cents below Wall Street’s consensus forecast and down from $778 million ($2.00) in the year-ago period. Adjusting for one-time items, which included lower-than-expected commodity prices, earnings were $806 million ($2.02/share), versus $1.2 billion ($3.00). Cash from operations totaled $2.4 billion, compared with $2.6 billion in 1Q2012. Revenues also declined, to $4.08 billion from $4.54 billion.
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