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Apache Posts Record 1Q Production

Apache Corp. CEO Steve Farris last week credited the company's portfolio and employees for helping achieve record oil-equivalent production and the third-highest quarter for earnings during 1Q2011, and he predicted that exploration would grow in Oklahoma and Texas.

On Thursday the Houston-based company said it produced 732,000 boe/d in the first quarter, a 25% increase from the same period last year, and earnings of $1.1 billion for the quarter, which comes to $2.86/share. Apache also produced 358,000 b/d of liquid hydrocarbons, 92% of which was crude oil.

"We faced a number of unexpected external challenges around the world since the beginning of the year," Farris said during an earnings conference call, citing six consecutive cyclones in Australia, unrest in Egypt and closings due to cold weather and third-party plant outages in the Permian Basin. "You would think our performance would have suffered, and it did somewhat. But despite the challenges, Apache produced near-record financial results and had broad-based drillbit success with multiple new field discoveries."

Farris said Apache produced nearly the same amount of crude oil in the Gulf of Mexico as the Permian Basin, with another 60% coming from other countries. Unrest in Egypt forced Apache to evacuate many of its workers, but Farris said most have since returned.

"We didn't slow production; we didn't drop a rig, and we didn't even stop shooting seismic," Farris said.

Apache is operating 24 rigs in the Permian Basin, a nearly five-fold increase from 2010. Primarily targeting oil, the company drilled 110 wells in the region during 1Q2011, including 15 horizontal wells. COO Rod Eichler said the 23 horizontal wells Apache has drilled over the last year have increased production in the basin 57% to 7,700 b/d.

"[That's] a level not seen in a decade," Eichler said.

Apache also said that since drilling the first-ever horizontal Hogshooter well last year the company has drilled six wells into the oil-rich segment of the Anadarko basin's Granite Wash formation. So far, every well has tested in excess of 1,000 b/d and 2 MMcf/d.

Eichler described the Permian rig program as "running full out" but said that despite tight services and supplies in a high-price oil environment, "we have everything we need to see us through the year for our program that we have budgeted."

Farris said that although the Permian had prospect inventory opportunities, "we are just only scratching the surface in many [other] plays. I see continued acceleration and growth in exploitation in our Granite Wash program in Oklahoma and the Panhandle of Texas.

"We have a substantial inventory of locations to be drilled, so it's just a matter of how much we want to apply to the program to move forward."

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