Apache’s 12-Percent Production Growth, Higher Oil and Gas Prices Propel Record 2007 Earnings of $2.8 Billion or $8.39 Per Share
HOUSTON, Feb. 7 /PRNewswire-FirstCall/ — Apache Corporation today reported record 2007 earnings of $2.8 billion, or $8.39 per diluted common share, driven by record production and higher oil and natural gas prices. Apache earned $2.5 billion or $7.64 per share in 2006. Excluding the non-cash impact of foreign currency fluctuations and tax rate changes on deferred tax balances, Apache’s 2007 adjusted earnings* were $8.65 per share or 25 percent above 2006 adjusted earnings.
In the fourth quarter, Apache’s net income doubled to $1.07 billion, or $3.19 per share, from $519 million, or $1.56 per share, in the prior-year period. Apache’s fourth-quarter adjusted earnings were $2.92 per share, up from $1.40 per share in the prior-year period.
“Apache had a record year in 2007 by virtually all financial and operational yardsticks,” said G. Steven Farris, president and chief executive officer. “In addition to record earnings, Apache achieved these record results:
— Cash from operations before changes in operating assets and liabilities* totaled $6.2 billion in 2007, up 22 percent from 2006. Fourth-quarter cash from operations totaled $1.9 billion, up 50 percent from the year-earlier period. — Production averaged 561,239 barrels of oil equivalent (boe) per day during 2007 — a 12-percent increase and the 28th annual increase in the last 29 years. Fourth-quarter production averaged 574,646 boe per day, up 8 percent from the prior-year period. — Proved reserves totaled 2.45 billion boe, up 6 percent from 2006 and the 22nd consecutive annual increase. Apache replaced 167 percent of its 2007 production, including 140 percent from drilling activity.
“With exploration success at the Julimar complex in Australia, discoveries in Egypt, and encouraging results at the Ootla shale play in northern British Columbia, we built tremendous momentum that set the stage for 2008,” Farris said.
“We have the largest portfolio of quality exploration prospects in the 53-year history of the company, with significant exploration drilling programs planned in our ‘ACE’ core growth areas of Australia, Canada and Egypt. We also have six major development projects that are expected to add production of more than 100,000 boe per day by 2011,” he said.
Recent developments in international gas markets are expected to contribute to Apache’s future results. Natural gas prices for new contracts in Australia have climbed from less than $2 per thousand cubic feet (Mcf) to $7 or higher in the past year as demand has grown from the domestic mining industry and the liquefied natural gas export market. Apache’s Reindeer and Julimar discoveries will be coming to market in this new environment.
In Argentina, Apache’s fourth-quarter natural gas price of $1.60 per Mcf was the highest quarterly realization since Apache began operations in the country and a 72-percent increase from the third quarter.
Apache added 343 million boe of reserves from all sources in 2007. The company spent $5.25 billion on exploration and development and acquisitions, excluding asset retirement obligations and capitalized interest.
Apache will redirect capital spending in Canada as a result of Alberta’s recently announced changes in royalty rates. Activity in Alberta will be limited and refocused on shallow gas opportunities which were not affected by the royalty changes, and activity will increase at the Ootla shale play in British Columbia. Medium-depth gas and oil drilling activities in Alberta will be reduced.
Although liquid hydrocarbons represented about 47 percent of Apache’s 2007 production, liquids provided 65 percent of revenues because global oil prices outpaced natural gas prices. Apache received $68.84 per barrel of oil in 2007, up from $59.92 per barrel in 2006, and $5.34 per Mcf of gas compared with $5.17 per Mcf in the prior year. In the fourth quarter, Apache received $83 per barrel of oil and $5.65 per Mcf of gas.
Apache Corporation discovers and produces oil and gas in the United States, Canada, the United Kingdom sector of the North Sea, Egypt, Australia and Argentina.
*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 2007 results at 11 a.m. Central Time on Thursday, Feb. 7. 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. 7. To access the telephone playback, dial (719) 457-0820 and provide Apache’s confirmation code, 4030561.
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 2006 Form 10-K and on our Web site. 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, 2007 2006 2007 2006 REVENUES AND OTHER: Oil and gas production revenues $2,996,290 $1,966,013 $9,961,982 $8,074,253 Gain on China divestiture – – – 173,545 Other 17,374 665 15,876 40,981 3,013,664 1,966,678 9,977,858 8,288,779 COSTS AND EXPENSES: Depreciation, depletion and amortization 624,975 514,802 2,347,791 1,816,359 Asset retirement obligation accretion 23,804 24,663 96,438 88,931 Lease operating costs 470,442 396,574 1,705,999 1,362,374 Gathering and transportation costs 31,150 27,594 118,034 104,322 Severance and other taxes 188,497 121,458 541,982 553,978 General and administrative 75,000 59,690 275,065 211,334 Financing costs, net 54,149 45,578 219,937 141,886 1,468,017 1,190,359 5,305,246 4,279,184 INCOME BEFORE INCOME TAXES 1,545,647 776,319 4,672,612 4,009,595 Provision for income taxes 473,124 255,478 1,860,254 1,457,144 NET INCOME 1,072,523 520,841 2,812,358 2,552,451 Preferred stock dividends 1,420 1,420 5,680 5,680 INCOME ATTRIBUTABLE TO COMMON STOCK $1,071,103 $519,421 $2,806,678 $2,546,771 NET INCOME PER COMMON SHARE: Basic $3.22 $1.57 $8.45 $7.72 Diluted $3.19 $1.56 $8.39 $7.64 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 333,049 330,417 332,192 330,083 APACHE CORPORATION FINANCIAL INFORMATION (In thousands) For the Quarter For the Year Ended December 31, Ended December 31, 2007 2006 2007 2006 COSTS INCURRED: (1) North America exploration and development $653,768 $783,784 $2,683,070 $2,866,942 International exploration and development 601,543 319,902 2,027,167 1,104,456 $1,255,311 $1,103,686 $4,710,237 $3,971,398 Oil and gas property acquisitions $ – $58,690 $1,050,018 $2,473,081 (1) Includes noncash asset retirement costs and capitalized interest as follows: Capitalized interest $15,400 $15,118 $69,457 $61,301 Asset retirement costs $284,171 $14,904 $439,368 $390,612 December 31, December 31, 2007 2006 BALANCE SHEET DATA: Cash and Cash Equivalents $125,823 $140,524 Other Current Assets 2,626,428 2,349,747 Property and Equipment, net 25,231,593 21,346,252 Goodwill 189,252 189,252 Other Assets 461,555 282,400 Total Assets $28,634,651 $24,308,175 Current Liabilities $2,665,016 $3,811,612 Long-Term Debt 4,011,605 2,019,831 Deferred Credits and Other Noncurrent Liabilities 6,580,051 5,285,679 Shareholders’ Equity 15,377,979 13,191,053 Total Liabilities and Shareholders’ Equity $28,634,651 $24,308,175 Common shares outstanding at end of period 332,927 330,737 APACHE CORPORATION FINANCIAL INFORMATION For the Quarter For the Year Ended December 31, Ended December 31, 2007 2006 2007 2006 FINANCIAL DATA (In thousands, except per share data): Revenues and other $3,013,664 $1,966,678 $9,977,858 $8,288,779 Income Attributable to Common Stock $1,071,103 $519,421 $2,806,678 $2,546,771 Basic Net Income Per Common Share $3.22 $1.57 $8.45 $7.72 Diluted Net Income Per Common Share $3.19 $1.56 $8.39 $7.64 Weighted Average Common Shares Outstanding 333,049 330,417 332,192 330,083 Diluted Shares Outstanding 335,780 332,881 334,596 333,211 PRODUCTION AND PRICING DATA: OIL VOLUME – Barrels per day United States 99,953 74,413 90,759 66,832 Canada 18,511 19,504 18,756 20,715 Egypt 62,266 58,988 60,735 56,570 Australia 12,207 11,140 13,778 11,892 North Sea 56,777 59,060 53,632 58,544 Argentina 11,957 10,491 11,440 6,857 China – – – 3,167 Total 261,671 233,596 249,100 224,577 AVERAGE OIL PRICE PER BARREL United States $78.78 $51.27 $66.48 $54.22 Canada 82.02 52.21 68.29 59.90 Egypt 89.77 57.81 72.51 63.60 Australia 102.35 57.19 79.79 68.25 North Sea 86.67 58.25 70.93 63.04 Argentina 47.32 39.24 45.99 42.79 China – – – 62.73 Total 83.00 54.51 68.84 59.92 NATURAL GAS VOLUME – Mcf per day United States 772,789 707,281 769,596 666,965 Canada 393,847 391,170 388,211 404,325 Egypt 243,226 230,968 240,777 217,601 Australia 193,998 200,883 194,928 186,119 North Sea 2,175 2,079 1,933 2,061 Argentina 193,128 188,310 200,903 111,994 Total 1,799,163 1,720,691 1,796,348 1,589,065 AVERAGE NATURAL GAS PRICE PER MCF United States $7.29 $6.32 $7.04 $6.54 Canada 6.42 5.68 6.30 6.09 Egypt 5.13 4.19 4.60 4.42 Australia 2.07 1.66 1.89 1.65 North Sea 20.66 10.19 15.03 10.64 Argentina 1.60 1.05 1.17 0.97 Total 5.65 4.77 5.34 5.17 NGL VOLUME – Barrels per day United States 7,778 7,681 7,702 7,985 Canada 2,383 2,239 2,246 2,187 Argentina 2,953 2,676 2,800 1,537 Total 13,114 12,596 12,748 11,709 AVERAGE NGL PRICE PER BARREL United States $55.79 $34.83 $45.24 $38.54 Canada 50.14 31.31 40.55 35.40 Argentina 45.25 31.96 37.78 36.64 Total 52.39 33.59 42.78 37.70 APACHE CORPORATION FINANCIAL INFORMATION (In thousands, except per share data) NON-GAAP FINANCIAL MEASURES: Reconciliation of income attributable to 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, 2007 2006 2007 2006 Income Attributable to Common Stock (GAAP) $1,071,103 $519,421 $2,806,678 $2,546,771 Adjustments: Foreign currency fluctuation impact on deferred tax expense 46,035 (53,562) 232,301 (4,891) Impact of Canadian Federal tax rate reductions (135,429) – (145,503) – Impact of Canadian Federal and Provincial tax rate reductions – – – (127,683) Impact of increased tax rates in the United Kingdom – – – 63,395 Gain on China divestiture – – – (173,545) Adjusted Earnings (Non-GAAP) $981,709 $465,859 $2,893,476 $2,304,047 Adjusted Earnings Per Share (Non-GAAP) Basic $2.95 $1.41 $8.71 $6.98 Diluted $2.92 $1.40 $8.65 $6.91 Average Number of Common Shares Basic 333,049 330,417 332,192 330,083 Diluted 335,780 332,881 334,596 333,211 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, 2007 2006 2007 2006 Net cash provided by operating activities $1,799,961 $913,894 $5,677,433 $4,312,906 Changes in operating assets and liabilities 117,660 367,691 517,647 755,127 Cash from operations before changes in operating assets and liabilities $1,917,621 $1,281,585 $6,195,080 $5,068,033 APACHE CORPORATION OIL & GAS RESERVE INFORMATION For the Year Ended December 31, 2007 OIL (Mbbls) U.S. Canada Egypt Australia Balance – Dec 31, 2006 495,271 180,974 88,811 70,522 Extensions 31,504 8,083 34,148 9,812 Purchases 56,954 208 186 1,424 Revisions 5,546 (3,644) (6,369) – Production (35,938) (7,666) (22,168) (5,029) Sales (1,722) – – – Balance – Dec 31, 2007 551,615 177,955 94,608 76,729 GAS (MMcf) U.S. Canada Egypt Australia Balance – Dec 31, 2006 2,695,362 2,365,719 1,155,984 803,747 Extensions 217,560 122,745 178,978 414,896 Purchases 79,532 4,179 – – Revisions 8,881 (15,889) (64,196) – Production (280,902) (141,697) (87,883) (71,149) Sales (21,385) (1,529) – – Balance – Dec 31, 2007 2,699,048 2,333,528 1,182,883 1,147,494 TOTAL MBOE U.S. Canada Egypt Australia Balance – Dec 31, 2006 944,499 575,261 281,475 204,480 Extensions 67,763 28,541 63,978 78,961 Purchases 70,209 905 186 1,424 Revisions 7,024 (6,292) (17,068) – Production (82,755) (31,282) (36,815) (16,887) Sales (5,286) (255) – – Balance – Dec 31, 2007 1,001,454 566,878 291,756 267,978 Net Change (Growth) 56,955 (8,383) 10,281 63,498 2007 BOE Percentages 40.9% 23.2% 11.9% 11.0% North America 64.1% OIL (Mbbls) North Sea Argentina Total Balance – Dec 31, 2006 195,670 29,793 1,061,041 Extensions 28,622 3,353 115,521 Purchases – – 58,772 Revisions – 138 (4,328) Production (19,575) (5,198) (95,574) Sales – – (1,722) Balance – Dec 31, 2007 204,717 28,086 1,133,710 GAS (MMcf) North Sea Argentina Total Balance – Dec 31, 2006 6,840 485,267 7,512,919 Extensions 169 91,236 1,025,584 Purchases – – 83,712 Revisions – 287 (70,917) Production (705) (73,330) (655,667) Sales – – (22,914) Balance – Dec 31, 2007 6,304 503,460 7,872,717 TOTAL MBOE North Sea Argentina Total Balance – Dec 31, 2006 196,810 110,671 2,313,194 Extensions 28,650 18,559 286,452 Purchases – – 72,724 Revisions – 186 (16,150) Production (19,693) (17,420) (204,850) Sales – – (5,541) Balance – Dec 31, 2007 205,767 111,996 2,445,829 Net Change (Growth) 8,957 1,325 132,635 2007 BOE Percentages 8.4% 4.6% 100.0% North America Production (BOE) Oil 46.7% Gas 53.3% 100.0% APACHE CORPORATION OIL & GAS RESERVE INFORMATION For the Year Ended December 31, 2007 Reserve Additions (MBOE) U.S. Canada Egypt Australia Extensions 67,763 28,541 63,978 78,961 Revisions 7,024 (6,292) (17,068) – Purchases 70,209 905 186 1,424 Total Adds 144,996 23,154 47,096 80,385 Costs Incurred (In thousands) U.S. Canada Egypt Australia Exploration & Development $1,901,832 $781,238 $611,936 $554,947 Acquisitions 965,476 24,474 19,261 31,041 Total $2,867,308 $805,712 $631,197 $585,988 Included in the costs incurred are the following: Capitalized Interest $20,577 $13,106 $6,821 $6,447 Asset Retirement Cost $271,183 $117,456 $ – $37,866 Reserve Additions (MBOE) North Sea Argentina Total Extensions 28,650 18,559 286,452 Revisions – 186 (16,150) Purchases – – 72,724 Total Adds 28,650 18,745 343,026 Costs Incurred (In thousands) North Sea Argentina Total Exploration & Development $539,394 $320,890 $4,710,237 Acquisitions 507 9,259 1,050,018 Total $539,901 $330,149 $5,760,255 Included in the costs incurred are the following: Capitalized Interest $1,526 $20,980 $69,457 Asset Retirement Cost $ – $12,863 $439,368 APA-F
Apache Corporation
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