HOUSTON, Feb. 19 /PRNewswire-FirstCall/ -- Apache Corporation
(NYSE, Nasdaq: APA) today reported net income of $706 million or $2.09 per
diluted common share for the year ended Dec. 31, 2008. Apache's results
include a $3.6-billion non-cash, after-tax reduction in the carrying value of
its oil and gas properties stemming from significantly lower commodity prices
at year-end 2008.
Apache's 2008 adjusted earnings,* which exclude the write-down and certain
other items that impact the comparability of operating results, totaled
$3.8 billion, or $11.22 per share. In 2007, Apache reported net income of
$2.8 billion or $8.39 per share and adjusted earnings of $2.9 billion or $8.66
per share.
In the fourth quarter, Apache reported a net loss of $2.9 billion, or
$8.80 per common share, also reflecting the $3.6-billion non-cash, after-tax
charge. Apache's fourth-quarter adjusted earnings totaled $276 million, or 82
cents per share. In the prior-year period, Apache reported net income of $1.07
billion, or $3.19 per share and adjusted earnings of $1 billion or $2.92 per
share.
Cash from operations before changes in operating assets and liabilities*
totaled $7.4 billion, up from $6.2 billion in 2007. Fourth-quarter cash from
operations totaled $1.1 billion, down from $1.9 billion from the year-earlier
period.
"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," said G. Steven Farris, chairman and chief executive officer.
"This is a non-cash event that we expect will have no impact on our operations
or financial flexibility."
"The important news going forward is that Apache exited 2008 with a debt-
to-capitalization ratio of 23 percent, more than $1.5 billion in available
cash and short-term investments, and $2.3 billion in available credit
facilities," Farris said. "With a number of development projects coming on
line in the first half of 2009, we are projecting production growth of 6 to 14
percent in 2009, depending on capital availability. We are striving to keep
our discretionary spending in line with 2009 cash flow to retain our financial
flexibility."
In 2008, production declined 5 percent to 534,000 barrels of oil
equivalent per day as a result of the June 3 pipeline explosion and fire at
Apache's Varanus Island hub offshore Western Australia as well as the impact
of two hurricanes in the Gulf of Mexico. Had those events not occurred, 2008
production would have increased 2 percent.
Apache produced 1.6 billion cubic feet (Bcf) of natural gas and 265,000
barrels of liquid hydrocarbons per day in 2008, compared with 1.8 Bcf and
262,000 barrels per day in 2007. In the fourth quarter, Apache produced 1.5
Bcf of gas per day and 262,000 barrels of liquid hydrocarbons per day.
Varanus Island production is expected to be near pre-incident levels in
the first quarter, but significant production volumes remain off-line in the
Gulf because repairs of third-party pipelines have not been completed.
Apache replaced 122 percent of production in 2008, including 118 percent
through drilling. However, 2008 proved reserves declined 2 percent to 2.4
billion barrels of oil equivalent as a result of a 2.6-percent negative
reserve revision associated with low commodity prices at year-end. Absent the
revisions, Apache would have recorded its 23rd consecutive year of reserve
growth.
Nearly all of the reserve revisions were in fields located in North
America, including U.S. oil fields with long-lived reserves, fields subject to
the Alberta government's new royalty scheme, and high-cost shallow gas fields
in Canada. The negative revisions in North America were partially offset by
increased reserves from drilling in Egypt.
Apache's current 2009 exploration and development budget of $3.5 billion
to $4 billion is based on cash-flow estimates that are predicated on benchmark
prices of $4.50 per thousand cubic feet of gas and $40 per barrel of oil.
"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.
Strong production growth from several development projects is expected to
more than offset generally declining production in North America that will be
the result of lower capital spending.
-- In Egypt, two additional gas processing trains began producing at the
end of 2008 after several years of investment. The processing trains are
expected to ramp up to net production of 100 million cubic feet (MMcf) and
5,000 barrels of condensate.
-- In Australia, the 20,000-barrels-per-day (net) Van Gogh development
remains on schedule with first production expected in the second quarter. The
Pyrenees development remains on track for a first-quarter 2010 start-up with
an additional 20,000 barrels per day (net).
-- In the Gulf of Mexico, the Geauxpher field, a large gas discovery at
Garden Banks 462, is projected to commence production in May at a net rate of
50 MMcf per day.
-- In Canada, Apache completed seven horizontal wells at the Ootla shale
gas play in the Horn River Basin during 2008. The last completed well utilized
a 10-stage fracture stimulation and had gross estimated reserves of 7.4 Bcf.
Apache plans to continue to develop the optimum strategy for Ootla well
completions in 2009.
"Apache entered this downturn with a low debt-to-capitalization ratio and
nearly $4 billion in financial resources, providing us with significant
staying power in an uncertain environment," Farris said. "Right now, the most
important thing is to protect our balance sheet by not outspending our
operating cash flow.
"We've been through 'down' cycles before. Although these periods are
painful, they ultimately present excellent acquisition opportunities," Farris
said. "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."
Full-cost ceiling test
Apache uses the full-cost method of accounting. The company is required to
perform a calculation that establishes a ceiling on the carrying costs of its
oil and gas properties in each country at the end of each quarter. The ceiling
is the calculated present value of estimated future net cash flows from proved
oil and gas reserves, using a 10-percent discount rate, plus the lower of the
cost or fair value of unproved properties, net of related tax effects. The
rules generally require pricing future production at oil and gas prices in
effect at the end of the quarter. If the ceiling is exceeded, a non-cash
write-down is required. The calculation does not allow for consideration of
possible or probable reserves or expected future trends in commodity prices or
drilling and service costs.
Apache Corporation is an oil and gas exploration and production company
with operations in the United States, Canada, Egypt, the United Kingdom North
Sea, Australia and Argentina. From time to time, Apache posts announcements,
updates and investor information, in addition to copies of all press releases,
on its Web site, http://www.apachecorp.com.
*Adjusted earnings and cash from operations before changes in operating
assets and liabilities are non-GAAP measures. Please see reconciliations
below.
NOTE: Apache will conduct a conference call to discuss its fourth-quarter
and full-year 2008 results at 1 p.m. Central Time on Thursday, Feb. 19. The
call will be webcast from Apache's Web site, http://www.apachecorp.com. The
webcast replay and podcast will be archived on Apache's Web site. The
conference call will be available for delayed playback by telephone for one
week beginning at approximately 3 p.m. on Feb. 19. To access the telephone
playback, dial (719) 457-0820 and provide Apache's confirmation code, 1248797.
This news release contains certain "forward-looking statements" within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 including, without limitation, expectations, beliefs, plans
and objectives regarding production and exploration activities. Any matters
that are not historical facts are forward-looking and, accordingly, involve
estimates, assumptions, risks and uncertainties, including, without
limitation, risks, uncertainties and other factors discussed in our most
recently filed Annual Report on Form 10-K, on our Web site and in our other
public filings and press releases. There is no assurance that Apache's
expectations will be realized, and actual results may differ materially from
those expressed in the forward-looking statements. We assume no duty to update
these statements as of any future date.
APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands, except per share data)
For the Quarter For the Year
Ended December 31, Ended December 31,
2008 2007 2008 2007
REVENUES AND OTHER:
Oil and gas
production revenues $1,876,890 $2,996,290 $12,327,839 $9,961,982
Other 60,044 23,085 61,911 37,770
1,936,934 3,019,375 12,389,750 9,999,752
COSTS AND EXPENSES:
Depreciation,
depletion and
amortization
Recurring 667,393 624,975 2,516,437 2,347,791
Additional 5,333,821 - 5,333,821 -
Asset retirement
obligation
accretion 24,202 23,804 101,348 96,438
Lease operating
expenses 520,083 454,553 1,909,625 1,652,855
Gathering and
transportation 33,373 36,822 156,491 137,407
Taxes other than
income 139,401 204,425 984,807 597,647
General and
administrative 69,938 75,000 288,794 275,065
Financing costs, net 49,441 54,149 166,035 219,937
6,837,652 1,473,728 11,457,358 5,327,140
INCOME BEFORE INCOME
TAXES (4,900,718) 1,545,647 932,392 4,672,612
Current income tax
provision (39,259) 286,270 1,456,382 970,728
Deferred income tax
provision (1,915,846) 186,854 (1,235,944) 889,526
NET INCOME (2,945,613) 1,072,523 711,954 2,812,358
Preferred stock
dividends 1,420 1,420 5,680 5,680
INCOME ATTRIBUTABLE TO
COMMON STOCK $(2,947,033) $1,071,103 $706,274 $2,806,678
NET INCOME PER COMMON
SHARE:
Basic $(8.80) $3.22 $2.11 $8.45
Diluted $(8.80) $3.19 $2.09 $8.39
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 334,967 333,049 334,351 332,192
APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands, except per share data)
For the Quarter For the Year
Ended December 31, Ended December 31,
2008 2007 2008 2007
COSTS INCURRED: (1)
North America
exploration
and development $912,016 $653,768 $3,417,275 $2,683,070
International
exploration
and development 663,119 601,543 2,595,376 2,027,167
$ 1,575,135 $ 1,255,311 $ 6,012,651 $ 4,710,237
Oil and gas property
acquisitions $- $- $149,517 $1,050,018
(1) Includes noncash
asset retirement
costs and
capitalized
interest
as follows:
Capitalized
interest $ 19,823 $ 15,400 $ 73,553 $ 69,457
Asset retirement
costs $163,519 $284,171 $513,891 $439,368
December 31, December 31,
2008 2007
BALANCE SHEET DATA:
Cash and Cash
Equivalents $1,181,450 $125,823
Other Current
Assets (2) 3,269,524 2,626,428
Property and
Equipment, net 23,958,517 25,231,593
Restricted Cash 13,880 -
Goodwill 189,252 189,252
Other Assets 573,862 461,555
Total Assets $29,186,485 $28,634,651
Current Liabilities $2,615,228 $2,665,016
Long-Term Debt 4,808,975 4,011,605
Deferred Credits and
Other Noncurrent
Liabilities 5,253,561 6,580,051
Shareholders' Equity 16,508,721 15,377,979
Total Liabilities
and Shareholders'
Equity $29,186,485 $28,634,651
Common shares
outstanding at
end of period 334,710 332,927
(2) Includes $792 million
of six-month Treasury Bills
maturing April 2, 2009.
APACHE CORPORATION
FINANCIAL INFORMATION
For the Quarter For the Year
Ended December 31, Ended December 31,
2008 2007 2008 2007
FINANCIAL DATA (In
thousands, except per
share data):
Revenues and other $1,936,934 $3,019,375 $12,389,750 $9,999,752
Income Attributable
to Common Stock $(2,947,033) $1,071,103 $706,274 $2,806,678
Basic Net Income Per
Common Share $(8.80) $3.22 $2.11 $8.45
Diluted Net Income
Per Common Share $(8.80) $3.19 $2.09 $8.39
Weighted Average
Common Shares
Outstanding 334,967 333,049 334,351 332,192
Diluted Shares
Outstanding 334,967 335,780 337,191 334,596
PRODUCTION AND PRICING
DATA:
OIL VOLUME - Barrels
per day
United States 78,406 99,953 89,797 90,759
Canada 16,877 18,511 17,154 18,756
Egypt 74,705 62,266 66,753 60,735
Australia 8,140 12,207 8,249 13,778
North Sea 61,740 56,777 59,494 53,632
Argentina 12,610 11,957 12,409 11,440
Total 252,478 261,671 253,856 249,100
AVERAGE OIL PRICE
PER BARREL
United States $56.03 $78.78 $83.70 $66.48
Canada 49.18 82.02 93.53 68.29
Egypt 43.74 89.77 91.37 72.51
Australia 30.89 102.35 91.78 79.79
North Sea 55.17 86.67 95.76 70.93
Argentina 51.47 47.32 49.46 45.99
Total 50.69 83.00 87.80 68.84
NATURAL GAS VOLUME -
Mcf per day
United States 582,629 772,789 679,876 769,596
Canada 343,489 393,847 352,731 388,211
Egypt 290,292 243,226 263,711 240,777
Australia 117,387 193,998 123,003 194,928
North Sea 2,737 2,175 2,637 1,933
Argentina 202,782 193,128 195,651 200,903
Total 1,539,316 1,799,163 1,617,609 1,796,348
AVERAGE NATURAL GAS
PRICE PER MCF
United States $6.01 $7.29 $8.86 $7.04
Canada 5.84 6.42 7.94 6.30
Egypt 4.13 5.13 5.25 4.60
Australia 1.86 2.07 2.10 1.89
North Sea 10.02 20.66 18.78 15.03
Argentina 1.85 1.60 1.61 1.17
Total 4.76 5.65 6.70 5.34
NGL VOLUME - Barrels
per day
United States 4,052 7,778 5,986 7,702
Canada 2,165 2,383 2,076 2,246
Argentina 2,914 2,953 2,887 2,800
Total 9,131 13,114 10,949 12,748
AVERAGE NGL PRICE
PER BARREL
United States $29.99 $55.79 $58.62 $45.24
Canada 23.18 50.14 49.33 40.55
Argentina 34.96 45.25 37.83 37.78
Total 29.96 52.39 51.38 42.78
APACHE CORPORATION
FINANCIAL INFORMATION
(In thousands, except per share data)
NON-GAAP FINANCIAL MEASURES:
Reconciliation of income attributable to common stock to adjusted
earnings:
The press release discusses Apache's adjusted earnings. Adjusted earnings
excludes certain items that management believes affect the comparability of
operating results. The following provides the reasons adjusted earnings is a
meaningful measure:
-- Management uses adjusted earnings to evaluate the company's operational
trends and performance relative to other oil and gas producing companies.
-- Management believes this presentation may be useful to investors who
follow the practice of some industry analysts who adjust reported company
earnings for items that may obscure underlying fundamentals and trends.
-- The reconciling items below are the types of items management believes
are frequently excluded by analysts when evaluating the operating trends and
comparability of the company's results.
For the Quarter For the Year
Ended December 31, Ended December 31,
2008 2007 2008 2007
Income Attributable to
Common Stock (GAAP) $ (2,947,033) $ 1,071,103 $ 706,274 $ 2,806,678
Adjustments:
Foreign currency
fluctuation impact
on deferred tax
expense (272,206) 46,469 (397,454) 232,301
Canadian Federal tax
rate reductions - (135,429) - (145,503)
Additional depletion,
net of tax 3,647,745 3,647,745
Out-of-period tax
adjustments (152,170) - (173,795) 4,872
Adjusted Earnings
(Non-GAAP) $ 276,336 $ 982,143 $ 3,782,770 $ 2,898,348
Adjusted Earnings Per
Share (Non-GAAP)
Basic $0.82 $2.95 $11.31 $8.72
Diluted $0.82 $2.92 $11.22 $8.66
Average Number of
Common Shares
Basic 334,967 333,049 334,351 332,192
Diluted 336,986 335,780 337,191 334,596
Reconciliation of net cash provided by operating activities to cash from
operations before changes in operating assets and liabilities:
The press release discusses Apache's cash from operations before changes
in operating assets and liabilities. It is presented because management
believes the information is useful for investors because it is used internally
and widely accepted by those following the oil and gas industry as a financial
indicator of a company's ability to generate cash to internally fund
exploration and development activities, fund dividend programs, and service
debt. It is also used by research analysts to value and compare oil and gas
exploration and production companies, and is frequently included in published
research when providing investment recommendations. Cash from operations
before changes in operating assets and liabilities, therefore, is an
additional measure of liquidity, but is not a measure of financial performance
under GAAP and should not be considered as an alternative to cash flows from
operating, investing, or financing activities.
The following table reconciles net cash provided by operating activities
to cash from operations before changes in operating assets and liabilities.
For the Quarter For the Year
Ended December 31, Ended December 31,
2008 2007 2008 2007
Net cash provided by
operating activities $1,036,776 $1,799,961 $7,065,344 $5,677,433
Changes in operating
assets and liabilities 52,230 117,660 311,676 517,647
Cash from operations
before changes in
operating assets and
liabilities $1,089,006 $1,917,621 $7,377,020 $6,195,080
APACHE CORPORATION
OIL & GAS RESERVE INFORMATION
For the Year Ended December 31, 2008
OIL (Mbbl)
Central Gulf Coast U.S. Canada Egypt
Balance -
Dec 31, 2007 371,299 180,315 551,615 177,955 94,608
Extensions 25,077 12,935 38,012 5,623 28,965
Purchases 506 1,412 1,918 7 -
Revisions (29,085) (2,457) (31,542) (18,786) 15,264
Production (14,741) (20,316) (35,057) (7,038) (24,431)
Sales (5,219) (4,963) (10,182) (2,016) -
Balance -
Dec 31, 2008 347,837 166,926 514,764 155,745 114,406
GAS (Mmcf)
Central Gulf Coast U.S. Canada Egypt
Balance -
Dec 31, 2007 1,590,351 1,108,697 2,699,048 2,333,528 1,182,883
Extensions 173,272 73,828 247,100 192,974 109,488
Purchases 21,844 5,707 27,551 1,757 -
Revisions (139,269) (36,565) (175,834) (134,563) 175,125
Production (111,756) (137,079) (248,835) (129,099) (96,518)
Sales (4,642) (7,206) (11,848) (61,235) -
Balance -
Dec 31, 2008 1,529,800 1,007,382 2,537,182 2,203,362 1,370,978
TOTAL BOE (Mboe)
Central Gulf Coast U.S. Canada Egypt
Balance -
Dec 31, 2007 636,357 365,097 1,001,454 566,878 291,756
Extensions 53,956 25,240 79,196 37,785 47,212
Purchases 4,147 2,363 6,510 300 -
Revisions (52,297) (8,551) (60,848) (41,213) 44,451
Production (33,366) (43,162) (76,527) (28,556) (40,517)
Sales (5,993) (6,164) (12,157) (12,222) -
Balance -
Dec 31, 2008 602,804 334,823 937,628 522,972 342,902
Net Change
(Growth) (33,553) (30,274) (63,826) (43,906) 51,146
Ending
Reserves % 25.1% 14.0% 39.1% 21.8% 14.3%
2008
Production % 17.1% 22.1% 39.1% 14.6% 20.7%
Production (BOE)
Oil 44.2% 47.1% 45.8% 24.6% 60.3%
Gas 55.8% 52.9% 54.2% 75.3% 39.7%
100.0% 100.0% 100.0% 100.0% 100.0%
OIL (Mbbl)
Australia North Sea Argentina Total
Balance -
Dec 31, 2007 76,729 204,717 28,086 1,133,710
Extensions 4,401 9,288 9,260 95,549
Purchases - - - 1,925
Revisions (1,576) (4,314) 30 (40,924)
Production (3,019) (21,776) (5,597) (96,918)
Sales - - - (12,198)
Balance -
Dec 31, 2008 76,535 187,915 31,779 1,081,144
GAS (Mmcf)
Australia North Sea Argentina Total
Balance -
Dec 31, 2007 1,147,494 6,304 503,460 7,872,717
Extensions 151,308 362 114,851 816,083
Purchases - - - 29,308
Revisions (238) (116) (330) (135,956)
Production (45,019) (965) (71,608) (592,044)
Sales - - - (73,083)
Balance -
Dec 31, 2008 1,253,545 5,585 546,373 7,917,025
TOTAL BOE (Mboe)
Australia North Sea Argentina Total
Balance -
Dec 31, 2007 267,978 205,767 111,996 2,445,829
Extensions 29,619 9,348 28,402 231,562
Purchases - - - 6,810
Revisions (1,616) (4,332) (25) (63,583)
Production (10,522) (21,937) (17,532) (195,591)
Sales - - - (24,379)
Balance -
Dec 31, 2008 285,459 188,846 122,841 2,400,648
Net Change
(Growth) 17,481 (16,921) 10,845 (45,181)
Ending
Reserves % 11.9% 7.9% 5.1% 100.0%
2008
Production % 5.4% 11.2% 9.0% 100.0%
Production (BOE)
Oil 28.7% 99.3% 31.9% 49.6%
Gas 71.3% 0.7% 68.1% 50.4%
100.0% 100.0% 100.0% 100.0%
APACHE CORPORATION
OIL & GAS RESERVES AND COSTS INCURRED
For the Year Ended December 31, 2008
Reserve Additions
(BOE's)
Central Gulf Coast U.S. Canada Egypt
Extensions 53,956 25,240 79,196 37,785 47,212
Revisions (52,297) (8,551) (60,848) (41,213) 44,451
Purchases 4,147 2,363 6,510 300 -
Total Adds 5,806 19,052 24,858 (3,128) 91,663
Costs Incurred
Central Gulf Coast U.S. Canada Egypt
Exploration &
Development 824,598 1,758,331 2,582,929 834,346 860,448
Acquisitions 132,394 12,685 145,079 4,938 -
Total 956,992 1,771,016 2,728,008 839,284 860,448
Included in the
costs incurred
are the following:
Capitalized
Interest 8,350 11,917 20,267 12,313 7,646
Asset Retirement
Cost 14,959 364,230 379,189 116,967 -
Reserve Additions
(BOE's)
Australia North Sea Argentina Chile Total
Extensions 29,619 9,348 28,402 - 231,562
Revisions (1,616) (4,332) (25) - (63,583)
Purchases - - - - 6,810
Total Adds 28,003 5,016 28,377 - 174,789
Costs Incurred
Australia North Sea Argentina Chile Total
Exploration &
Development 881,570 471,759 354,142 27,457 6,012,651
Acquisitions (500) - - - 149,517
Total 881,070 471,759 354,142 27,457 6,162,168
Included in the
costs incurred
are the following:
Capitalized
Interest 8,636 703 23,988 - 73,553
Asset Retirement
Cost (6,746) 11,817 12,664 - 513,891
APA-F
