Almost a quarter of Apache Corp.’s gross oil and natural gas production remains off-line in the Gulf of Mexico (GOM), five months after hurricanes Ike and Gustav struck the Gulf Coast, the company’s CEO said Thursday.

Apache operates across the globe, but for nine straight years the GOM unit has remained the company’s top producer for volumes and revenues. Offshore operations in 2007 contributed close to 25% of Apache’s production and 27% of its revenues. At year-end 2007 the region accounted for almost 15% of its estimated proved reserves.

Last September’s hurricanes caused damage to third-party pipelines, which are still being repaired, CEO G. Steven Farris told energy analysts during a conference call.

“We’re hopeful to have all of the volumes restored in the second quarter,” Farris said. “But the timing, in every instance, is out of our control.”

He declined to detail how much of Apache’s oil and gas volumes remain curtailed because of the repairs. However, the production volumes reported for 4Q2008 tell the tale. According to Apache’s 4Q2008 earnings report, the company’s U.S. gas production totaled 582,629 Mcf/d, versus 4Q2007’s total of 772,789 Mcf/d. U.S. oil output in 4Q2008 totaled 78,406 b/d, versus 99,953 b/d in 4Q2007.

Farris was optimistic that the GOM volumes would be restored within the next few months.

“From a projection standpoint, we really should be fully operational on shut-in production by the middle of the second quarter,” or sometime in April, he said.

Until the pipelines are repaired, Apache obviously is losing some steam. However, Farris said that by the end of 2009, GOM volume totals should resemble last year’s volumes because of the start-up of the Geauxpher field, a large gas discovery at Garden Banks 462. Geauxpher is projected to ramp up in May at a net rate of 50 MMcf/d.

“We know from a 2009 planning standpoint that if we get the recoveries we are projecting…with 50 MMcf/d from Geauxpher, we’ll be slightly ahead of last year’s Gulf production this year,” Farris said.

The GOM was not Apache’s only operating area to suffer problems last year. Last June Apache’s Varanus Island hub offshore Australia was impacted by a pipeline explosion and fire.

The company in 4Q2008 reported a net loss of $2.9 billion (minus $8.80/share), compared with net income of $1.07 billion ($3.19) a year earlier. The noncash writedown totaled $3.6 billion. Adjusted 4Q2008 earnings totaled $276 million (82 cents/share), versus earnings in 4Q2007 of $1 billion ( $2.92).

“Certainly, the magnitude of the write-down is large; however, considering oil prices have collapsed from a peak of more than $140 per barrel for West Texas Intermediate at mid-year to less than $45 per barrel at year-end, it was not unexpected,” Farris said.

Minus the operational issues, Apache’s production last year would have been up 2% from 2007, Farris said. The company last year produced on average 1.6 Bcf/d of natural gas and 265,000 b/d of liquid hydrocarbons, compared with 1.8 Bcf/d and 262,000 b/d in 2007. In 4Q2008, Apache produced 1.5 Bcf/d and 262,000 b/d.

The current 2009 exploration and development budget of $3.5-4 billion is based on cash-flow estimates that are predicated on benchmark prices of $4.50/Mcf and $40/bbl. But if oil and gas prices continue to fall, Apache will adjust, said the CEO.

“If the current downward trend in commodity prices continues, we may scale back spending even more, and our production growth likely will land in the bottom half of our projected range,” Farris said. Apache, he said, is 54 years old, and “we’ve been through ‘down’ cycles before. Although these periods are painful, they ultimately present excellent acquisition opportunities…We are well-positioned entering 2009, with projected production growth and ample liquidity to pursue transactions. I expect Apache will emerge an even stronger company when the cycle turns.”

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