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Apache Corp. Third Quarter 2020 Results
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Apache Corp. announced its financial and operational results for the third quarter 2020.
Highlights:
- Upstream capital investment significantly below guidance in the third quarter; reduced full-year 2020 capital outlook to $1.0 billion
- Increased estimated annual run-rate cost savings associated with organizational redesign to $400 million from $300 million
- Reported third-quarter production of 445,000 barrels of oil equivalent (BOE) per day; adjusted production unchanged from the second quarter at 394,000 BOE per day
- Issued 2020 Sustainability Report, highlighting the company’s ESG strategy and performance
- In Block 58 offshore Suriname, announced Kwaskwasi discovery, finalized appraisal plans for Sapakara discovery, and initiated drilling at fourth exploration target, Keskesi
The company reported a loss of $4 million or $0.02 per diluted common share during the third quarter 2020. When adjusted for certain items that impact the comparability of results, Apache reported a third-quarter loss of $59 million or $0.16 per share. Net cash provided by operating activities in the third quarter was $304 million and adjusted EBITDAX was $563 million.
John J. Christmann IV, Apache’s chief executive officer and president, said: “Apache made excellent progress on its cost initiatives and returned the majority of its curtailed volumes to production during the third quarter as commodity prices improved. This generated a substantial improvement in financial results compared to the second quarter. While significant macro headwinds continue to persist, our strategic approach to creating shareholder value remains unchanged: we are prioritizing long-term returns over growth; generating free cash flow; strengthening our balance sheet through debt reduction; and advancing a large-scale opportunity in Suriname. We are allocating capital to the best return opportunities across our diversified portfolio, aggressively managing our cost structure, and progressing important emissions reduction and other ESG initiatives.
“During the third quarter, we completed operations on Kwaskwasi, our third oil discovery in Block 58 offshoreSuriname this year and our best well in the basin thus far. We have now filed appraisal plans for the Maka and Sapakara discoveries and will submit the Kwaskwasi appraisal plan by year-end. Operations continue on the fourth exploration target, Keskesi, and we have also selected our fifth exploration well, Bonboni, which will be situated in the North Central portion of Block 58. We are in the process of transitioning operatorship to Total and look forward to robust Suriname exploration and appraisal programs in 2021.”
Q3 Commentary and Outlook
Third-quarter reported production was 445,000 BOE per day, and adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 394,000 BOE per day, unchanged from the second quarter.
Third-quarter upstream capital investment totaled $141 million, nearly all of which was attributable to international operations. Apache is currently focusing its capital investment and rig activity in higher-margin international assets. Specifically, the company operated a five-rig program in Egypt, one floating rig and one platform crew in the North Sea, and one drillship offshore Suriname in the third quarter.
The company’s organizational redesign, launched in the fall of 2019, is delivering cost efficiencies well in excess of original expectations. The associated estimated annual run-rate cost savings is now $400 million, up
33% from the previous estimate of $300 million. Given the very favorable service cost environment, Apache recently commissioned two fracture stimulation crews to begin completing its inventory of drilled but uncompleted (DUC) wells in the Permian Basin. This activity will have only a nominal impact on fourth-quarter capital, and the company has reduced its full-year 2020 upstream capital guidance to $1 billion.
“Looking ahead to 2021, we anticipate an upstream capital budget of $1 billion or less, which is based on a WTI oil price of approximately $40 per barrel, and a Henry Hub natural gas price of $2.75. In this price environment, our capital allocation priorities will be similar to 2020. Our DUC completion program should stabilize Permian oil volumes at a level consistent with fourth-quarter 2020 levels, while Egypt and the North Sea will likely see modest declines,” Christmann said. “Apache has strategically chosen to direct a significant portion of our upstream capital investment to our large-scale opportunity in Suriname. In this price environment, we believe this will create more value for our shareholders over the long term than directing capital to short-cycle projects that would generate near-term production growth at relatively lower returns.”
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