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Apache Reports Third-Quarter Net Income of $1.2 Billion or $3.52 Per Share

Posted on: Thursday, 30 October 2008, 09:00 CDT

HOUSTON, Oct. 30 /PRNewswire-FirstCall/ -- Apache Corporation today reported that strong crude oil and natural gas prices fueled third-quarter net income of $1.2 billion or $3.52 per diluted common share, up 94 percent from $612 million or $1.83 per share in the prior-year period.

Third-quarter cash from operations -- prior to changes in operating assets and liabilities* -- totaled $2.1 billion, compared with $1.6 billion in the prior-year period.

Third-quarter production declined 9 percent from the prior-year period and 7 percent from the second quarter to 510,672 barrels of oil equivalent (boe) per day. The decline was the result of two hurricanes that curtailed production in the Gulf of Mexico and onshore Louisiana and continued shut-ins following the June 3 explosion at the gas processing and transportation hub at Varanus Island in Australia. Most of the curtailed production in the Gulf and Australia is expected to be restored by year end, setting the stage for renewed growth in 2009.

"We faced several challenges on the production side during the third quarter; we also had strong earnings, continued progress on our pipeline of development projects, and drilling success in several areas," said G. Steven Farris, Apache's president and chief executive officer.

Three developments are expected to impact Apache's 2009 production: Two new gas processing trains are expected to commence operations in Egypt by year end, boosting net production by approximately 100 million cubic feet (MMcf) of gas and 5,000 barrels of condensate per day; the Van Gogh field in Australia is expected to contribute a net 20,000 barrels of oil per day beginning in mid-2009; and the Geauxpher field in the Gulf of Mexico is expected to commence production during the first quarter at a net rate of approximately 50 MMcf of gas per day.

Apache had notable drilling results in Egypt, where the company drilled four discoveries; at its emerging Ootla shale play in Canada; and in the North Sea, where nine new wells fueled a 25-percent increase in third-quarter production compared with the prior-year period.

"Apache continues to show operational progress, in spite of the recent turmoil in the commodity and equity markets and the global economic slowdown," Farris said. "Although we have an abundant inventory of drillable prospects across 36 million acres, Apache intends to continue to live within our means. Our major development projects are critical to Apache's future growth - and we intend to fund them -- but we will adjust other capital spending to a level that does not exceed operating cash flow."

During the third quarter, Apache received an average of $101.04 per barrel of oil and $7.43 per thousand cubic feet of gas. Oil and gas prices were up 43 percent and 49 percent, respectively, above year-earlier levels, but both were 8 percent below second-quarter prices.

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 third-quarter results at 1 p.m. Central time on Oct. 30, 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 Oct. 30. To access the telephone playback, dial (719) 457-0820 and provide Apache's confirmation code, 4705013.

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 Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 REVENUES AND OTHER: Oil and gas production revenues $3,368,882 $2,498,594 $10,450,949 $6,965,692 Other (3,998) 6,364 1,867 14,685 3,364,884 2,504,958 10,452,816 6,980,377 COSTS AND EXPENSES: Depreciation, depletion and amortization 600,887 600,796 1,849,044 1,722,816 Asset retirement obligation accretion 24,970 24,436 77,146 72,634 Lease operating expenses 488,166 409,528 1,389,542 1,198,302 Gathering and transportation 42,375 34,887 123,118 100,585 Taxes other than income 304,280 139,461 845,406 393,222 General and administrative 57,561 61,405 218,856 200,065 Financing costs, net 33,291 60,367 116,594 165,788 1,551,530 1,330,880 4,619,706 3,853,412 INCOME BEFORE INCOME TAXES 1,813,354 1,174,078 5,833,110 3,126,965 Current income tax provision 305,735 200,878 1,495,641 684,458 Deferred income tax provision 316,794 359,852 679,902 702,672 NET INCOME 1,190,825 613,348 3,657,567 1,739,835 Preferred stock dividends 1,420 1,420 4,260 4,260 INCOME ATTRIBUTABLE TO COMMON STOCK $1,189,405 $611,928 $3,653,307 $1,735,575 NET INCOME PER COMMON SHARE: Basic $3.55 $1.84 $10.93 $5.23 Diluted $3.52 $1.83 $10.84 $5.19 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 334,825 332,668 334,145 331,903 APACHE CORPORATION FINANCIAL INFORMATION (In thousands) For the Quarter For the Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 COSTS INCURRED: (1) North America exploration and development $960,624 $647,266 $2,505,259 $2,029,302 International exploration and development 641,028 491,381 1,932,257 1,425,624 $1,601,652 $1,138,647 $4,437,516 $3,454,926 Oil and gas property acquisitions $4,863 $17,025 $155,658 $1,050,019 (1) Includes noncash asset retirement costs and capitalized interest as follows: Capitalized interest $18,674 $16,383 $53,730 $54,057 Asset retirement costs $178,866 $28,369 $350,372 $155,197 September 30, December 31, 2008 2007 BALANCE SHEET DATA: Cash and Cash Equivalents $1,644,604 $125,823 Other Current Assets 2,527,688 2,626,428 Property and Equipment, net 28,118,818 25,231,593 Restricted Cash 13,844 - Goodwill 189,252 189,252 Other Assets 498,226 461,555 Total Assets $32,992,432 $28,634,651 Current Liabilities $2,916,306 $2,665,016 Long-Term Debt 3,917,327 4,011,605 Deferred Credits and Other Noncurrent Liabilities 7,395,693 6,580,051 Shareholders' Equity 18,763,106 15,377,979 Total Liabilities and Shareholders' Equity $32,992,432 $28,634,651 Common shares outstanding at end of period 334,670 332,927 APACHE CORPORATION FINANCIAL INFORMATION For the Quarter For the Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 FINANCIAL DATA (In thousands, except per share data): Revenues and other $3,364,884 $2,504,958 $10,452,816 $6,980,377 Income Attributable to Common Stock $1,189,405 $611,928 $3,653,307 $1,735,575 Basic Net Income Per Common Share $3.55 $1.84 $10.93 $5.23 Diluted Net Income Per Common Share $3.52 $1.83 $10.84 $5.19 Weighted Average Common Shares Outstanding 334,825 332,668 334,145 331,903 Diluted Shares Outstanding 337,894 335,117 337,151 334,086 PRODUCTION AND PRICING DATA: OIL VOLUME - Barrels per day United States 80,284 97,025 93,622 87,660 Canada 16,655 18,451 17,247 18,838 Egypt 64,803 60,395 64,082 60,219 Australia 7,083 14,685 8,286 14,308 North Sea 60,856 48,888 58,740 52,572 Argentina 12,729 11,708 12,342 11,266 Total 242,410 251,152 254,319 244,863 AVERAGE OIL PRICE PER BARREL United States $93.69 $67.70 $91.48 $61.75 Canada 111.81 73.95 108.10 63.74 Egypt 105.60 74.04 110.01 66.50 Australia 99.66 76.65 111.86 73.30 North Sea 113.56 73.18 110.08 65.21 Argentina 50.95 49.70 48.76 45.52 Total 101.04 70.43 100.17 63.74 NATURAL GAS VOLUME - Mcf per day United States 635,891 763,693 712,529 768,520 Canada 349,000 386,659 355,834 386,312 Egypt 287,231 241,919 254,786 239,951 Australia 54,726 194,520 124,888 195,242 North Sea 2,697 1,721 2,604 1,851 Argentina 217,091 196,168 193,257 203,524 Total 1,546,636 1,784,680 1,643,898 1,795,400 AVERAGE NATURAL GAS PRICE PER MCF United States $9.96 $6.59 $9.64 $6.95 Canada 8.70 5.54 8.63 6.25 Egypt 5.62 4.72 5.68 4.42 Australia 2.36 1.93 2.18 1.83 North Sea 27.17 16.98 21.88 12.80 Argentina 1.41 0.93 1.53 1.03 Total 7.43 4.99 7.30 5.24 NGL VOLUME - Barrels per day United States 5,450 7,766 6,636 7,677 Canada 2,034 2,253 2,046 2,199 Argentina 3,005 2,794 2,877 2,749 Total 10,489 12,813 11,559 12,625 AVERAGE NGL PRICE PER BARREL United States $72.82 $47.18 $64.49 $41.64 Canada 63.77 40.39 58.62 37.05 Argentina 36.63 37.74 38.81 35.07 Total 60.70 43.92 57.06 39.41 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 Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 Income Attributable to Common Stock (GAAP) $1,189,405 $611,928 $3,653,307 $1,735,575 Adjustments: Foreign currency fluctuation impact on deferred tax expense (113,169) 115,180 (125,248) 185,832 Impact of Canadian Federal tax rate reductions - - - (17,074) Adjusted Earnings (Non-GAAP) $1,076,236 $727,108 $3,528,059 $1,904,333 Adjusted Earnings Per Share (Non-GAAP) Basic $3.21 $2.19 $10.56 $5.74 Diluted $3.19 $2.17 $10.46 $5.70 Average Number of Common Shares Basic 334,825 332,668 334,145 331,903 Diluted 337,894 335,117 337,151 334,086

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 Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 Net cash provided by operating activities $2,290,654 $1,427,467 $6,028,567 $3,877,472 Changes in operating assets and liabilities (167,073) 190,511 259,447 399,987 Cash from operations before changes in operating assets and liabilities $2,123,581 $1,617,978 $6,288,014 $4,277,459

APA-F

Apache Corporation

CONTACT: Media, 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/

Source: PRNewswire-FirstCall

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