Apache’s Second-Quarter Net Income Surges to $1.4 Billion or $4.28 Per Share
HOUSTON, July 31 /PRNewswire-FirstCall/ — Apache Corporation today reported that high crude oil and natural gas prices fueled record quarterly net income of $1.4 billion or $4.28 per diluted common share, a 128-percent increase from $632 million or $1.89 per share in the prior-year period.
Second-quarter cash from operations before changes in operating assets and liabilities* totaled $2.3 billion, compared with $1.5 billion in the prior-year period, and surpassed the record of $1.9 billion set in the fourth quarter of 2007.
Second-quarter production declined 3.6 percent from the prior-year period and 1 percent from the first quarter to 551,600 barrels of oil equivalent (boe) per day. The decline is primarily the result of an explosion that disrupted operations at the gas processing and transportation hub at Varanus Island in Australia as well as a strike at a refinery in Scotland that shut in production from all of the fields on the Forties Pipeline System, including Apache’s Forties Field.
“The second quarter was highlighted by record financial results, continued exploration success, and sustained progress in delivering our pipeline of development projects,” said G. Steven Farris, Apache’s president and chief executive officer. “Despite the challenges we faced during the quarter, we remain positive about the long-term outlook. Driven by successful drilling programs and seven development projects that are expected to add 135,000 boe per day to worldwide net production over the next four years, we are confident Apache is entering a period of accelerating production growth in 2009-2012.”
Drilling highlights included: — The Geauxpher discovery in the deepwater Gulf of Mexico has estimated proved and probable reserves of 100 billion cubic feet. Apache has a 40 percent working interest in the field; — The Heqet-2 well in Egypt tested 2,100 barrels per day from a depth of more than 14,000 feet; — The Umbarka-174 well in Egypt tested 4,300 barrels per day; — In Canada, two Ootla shale wells drilled by Apache’s partner EnCana added further support to the current estimated potential of 9-16 trillion cubic feet net to Apache, and — Five wells drilled in the Forties Field in the North Sea during the first half of 2008 averaged an aggregate of 8,900 barrels per day in the second quarter. Apache has a 97 percent working interest in the Forties Field.
In Egypt, Apache expects to commence production through the Salam gas plant expansion in October. The gas plant project — one element of Apache’s development pipeline — is forecasted to contribute additional net production of 100 million cubic feet (MMcf) of gas and 5,000 barrels of condensate per day by the end of the year.
“At Varanus Island, we will resume partial gas sales over the next few days,” Farris said. “The initial rate is expected to be 110 MMcf per day; later in August, we expect production to increase to 220 MMcf per day.
“We want to assure the citizens of Western Australia that Apache understands the hardship that they have experienced and that fully restoring production is our highest priority,” Farris said.
“We are confident that Apache will overcome the temporary setbacks in Australia and the North Sea and will register its 29th annual production increase in the last 30 years,” Farris said.
During the second quarter, Apache received an average of $110.32 per barrel of oil — up 72 percent from the prior-year period — and $8.09 per thousand cubic feet (Mcf) of gas, up 47 percent.
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.
*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 first-quarter results at 1 p.m. Central time on July 31, 2008. 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 July 31. To access the telephone playback, dial (719) 457-0820 and provide Apache’s confirmation code, 5011412.
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 2007 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 Six Months Ended June 30, Ended June 30, 2008 2007 2008 2007 REVENUES AND OTHER: Oil and gas production revenues $3,904,118 $2,444,031 $7,082,067 $4,467,098 Other (3,927) 28,513 5,865 8,321 3,900,191 2,472,544 7,087,932 4,475,419 COSTS AND EXPENSES: Depreciation, depletion and amortization 627,668 591,107 1,248,157 1,122,020 Asset retirement obligation accretion 25,679 24,134 52,176 48,198 Lease operating expenses 446,738 406,667 901,376 788,774 Gathering and transportation 39,767 34,435 80,743 65,698 Taxes other than income 298,548 143,791 541,126 253,761 General and administrative 78,872 70,798 161,295 138,660 Financing costs, net 39,050 63,358 83,303 105,421 1,556,322 1,334,290 3,068,176 2,522,532 INCOME BEFORE INCOME TAXES 2,343,869 1,138,254 4,019,756 1,952,887 Current income tax provision 702,106 297,058 1,189,906 483,580 Deferred income tax provision 196,534 207,658 363,108 342,820 NET INCOME 1,445,229 633,538 2,466,742 1,126,487 Preferred stock dividends 1,420 1,420 2,840 2,840 INCOME ATTRIBUTABLE TO COMMON STOCK $1,443,809 $632,118 $2,463,902 $1,123,647 NET INCOME PER COMMON SHARE: Basic $4.32 $1.91 $7.38 $3.39 Diluted $4.28 $1.89 $7.32 $3.37 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 334,208 331,812 333,801 331,514 APACHE CORPORATION FINANCIAL INFORMATION (In thousands) For the Quarter For the Six Months Ended June 30, Ended June 30, 2008 2007 2008 2007 COSTS INCURRED: (1) North America exploration and development $801,279 $641,261 $1,544,635 $1,382,036 International exploration and development 682,766 507,874 1,291,229 934,243 $1,484,045 $1,149,135 $2,835,864 $2,316,279 Oil and gas property acquisitions $142,848 $6,098 $150,795 $1,032,994 (1) Includes noncash asset retirement costs and capitalized interest as follows: Capitalized interest $17,878 $15,898 $35,056 $37,674 Asset retirement costs $86,434 $52,007 $171,506 $126,828 June 30, December 31, 2008 2007 BALANCE SHEET DATA: Cash and Cash Equivalents $1,008,442 $125,823 Other Current Assets 3,147,904 2,626,428 Property and Equipment, net 26,934,253 25,231,593 Restricted Cash 94,357 – Goodwill 189,252 189,252 Other Assets 502,951 461,555 Total Assets $31,877,159 $28,634,651 Current Liabilities $4,124,303 $2,665,016 Long-Term Debt 3,912,136 4,011,605 Deferred Credits and Other Noncurrent Liabilities 7,326,251 6,580,051 Shareholders’ Equity 16,514,469 15,377,979 Total Liabilities and Shareholders’ Equity $31,877,159 $28,634,651 Common shares outstanding at end of period 334,451 332,927 APACHE CORPORATION FINANCIAL INFORMATION For the Quarter For the Six Months Ended June 30, Ended June 30, 2008 2007 2008 2007 FINANCIAL DATA (In thousands, except per share data): Revenues and other $3,900,191 $2,472,544 $7,087,932 $4,475,419 Income Attributable to Common Stock $1,443,809 $632,118 $2,463,902 $1,123,647 Basic Net Income Per Common Share $4.32 $1.91 $7.38 $3.39 Diluted Net Income Per Common Share $4.28 $1.89 $7.32 $3.37 Weighted Average Common Shares Outstanding 334,208 331,812 333,801 331,514 Diluted Shares Outstanding 337,676 333,906 336,802 333,595 PRODUCTION AND PRICING DATA: OIL VOLUME – Barrels per day United States 100,049 91,060 100,364 82,901 Canada 17,746 19,036 17,547 19,034 Egypt 64,886 59,890 63,718 60,129 Australia 8,367 16,071 8,894 14,117 North Sea 56,570 55,209 57,670 54,445 Argentina 12,067 11,282 12,146 11,041 Total 259,685 252,548 260,339 241,667 AVERAGE OIL PRICE PER BARREL United States $97.64 $60.08 $90.59 $58.21 Canada 119.16 63.75 106.33 58.71 Egypt 126.20 68.65 112.28 62.65 Australia 133.79 74.96 116.78 71.54 North Sea 121.10 66.59 108.23 61.57 Argentina 50.12 45.78 47.61 43.26 Total 110.32 64.12 99.76 60.21 NATURAL GAS VOLUME – Mcf per day United States 758,524 801,778 751,269 770,974 Canada 357,828 389,218 359,289 386,136 Egypt 233,793 234,466 238,385 238,951 Australia 129,531 196,249 160,355 195,608 North Sea 2,507 1,944 2,556 1,917 Argentina 197,284 216,187 181,209 207,263 Total 1,679,467 1,839,842 1,693,063 1,800,849 AVERAGE NATURAL GAS PRICE PER MCF United States $10.62 $7.29 $9.50 $7.13 Canada 9.63 6.79 8.59 6.62 Egypt 6.26 4.48 5.72 4.26 Australia 2.17 1.79 2.14 1.78 North Sea 21.90 13.39 19.05 10.90 Argentina 1.39 1.02 1.60 1.08 Total 8.09 5.51 7.25 5.37 NGL VOLUME – Barrels per day United States 7,231 8,060 7,236 7,631 Canada 1,868 2,113 2,052 2,172 Argentina 2,905 2,816 2,812 2,726 Total 12,004 12,989 12,100 12,529 AVERAGE NGL PRICE PER BARREL United States $65.27 $42.10 $61.32 $38.78 Canada 59.26 39.28 56.05 35.29 Argentina 32.31 36.06 39.98 33.68 Total 56.36 40.33 55.46 37.06 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 Six Months Ended June 30, Ended June 30, 2008 2007 2008 2007 Income Attributable to Common Stock (GAAP) $1,443,809 $632,118 $2,463,902 $1,123,647 Adjustments: Foreign currency fluctuation impact on deferred tax expense 281 68,256 (12,079) 70,652 Impact of Canadian Federal tax rate reductions – (17,685) – (17,074) Adjusted Earnings (Non-GAAP) $1,444,090 $682,689 $2,451,823 $1,177,225 Adjusted Earnings Per Share (Non-GAAP) Basic $4.32 $2.06 $7.35 $3.55 Diluted $4.28 $2.04 $7.28 $3.53 Average Number of Common Shares Basic 334,208 331,812 333,801 331,514 Diluted 337,676 333,906 336,802 333,595
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 Six Months Ended June 30, Ended June 30, 2008 2007 2008 2007 Net cash provided by operating activities $1,929,509 $1,386,446 $3,737,913 $2,450,005 Changes in operating assets and liabilities 390,240 80,575 426,520 209,476 Cash from operations before changes in operating assets and liabilities $2,319,749 $1,467,021 $4,164,433 $2,659,481
APA-F
Apache Corporation
CONTACT: Bill Mintz, +1-713-296-7276, or Investors, Robert Dye,+1-713-296-6662, or David Higgins, +1-713-296-6690, all of Apache Corporation
Web site: http://www.apachecorp.com/
