Exploration & Production | Quarterly / Earnings Reports | Production | Third Quarter (3Q) Update
Apache Hit by $1.3 Billion Net Loss; Tax Charges to Blame
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Apache Corporation announced that non-cash charges resulted in a third-quarter 2014 net loss of $1.3 billion or $3.50 per diluted common share. Adjusted earnings, which exclude certain items that impact the comparability of results, totaled $528 million or $1.38 per share. Net cash provided by operating activities totaled approximately $1.9 billion in the third quarter of 2014, with cash from operations before changes in operating assets and liabilities totaling $2.1 billion.
Apache's third-quarter net loss was the result of three non-cash charges:
- An $814 million U.S. deferred tax charge related to the company's change in policy and outlook regarding the permanent reinvestment of its foreign earnings;
- A $249 million income tax expense related to the repatriation of cash from its Egyptian operations during the third quarter; and
- A $1 billion after-tax reduction in the carrying value of its oil and gas properties driven by lower oil and natural gas liquids price realizations and the previously announced deep water sale.
G. Steven Farris, Apache chairman, chief executive officer and president, commented: "Our North American onshore regions delivered another strong quarter as we continued to execute our strategy to profitably grow North American liquids production. Liquids production increased 5 percent from the second quarter and 15 percent from the prior-year quarter when adjusted for asset sales.
"We are excited about the progress we have made in North America thus far in 2014, particularly in the Permian and Eagle Ford. Our Permian Region continues to deliver impressive liquids growth increasing 26 percent from the prior year quarter. In our Eagle Ford program we spud 29 wells during the quarter and have now ramped to 10 rigs. We anticipate this region will be a key contributor to profitable liquids growth going forward."
Apache is advancing its unconventional resource capabilities and high-grading its North American onshore portfolio. During the third quarter, the company opportunistically invested $521 million in new leasehold and property acquisitions. In addition, the company is currently marketing non-core North American asset packages as part of its portfolio high-grading initiative and continues to acquire acreage in key growth areas.
Farris added: "Our international businesses also delivered during the quarter with strong drilling results in Egypt, first oil production from Balnaves in Australia and a successful turnaround season in the North Sea. We have built premier businesses in each of these regions and remain highly committed to the strategic separation of these assets. We will provide an update as material events unfold."
Third Quarter Results
During the quarter, Apache returned capital to shareholders through the purchase of an additional 5.7 million shares of its common stock on the open market. This brings total shares repurchased as of Sept. 30 to approximately 32 million of the 40 million shares authorized. Apache continues to see share buy-backs as an attractive use of capital.
Highlights:
- North American onshore regions increased liquids production to approximately 211,000 barrels per day, an increase of 28,000 barrels per day or 15 percent from the prior-year period when adjusted for asset sales.
- The Permian Region achieved record production of approximately 162,000 boe per day, up 23 percent from the prior-year period. The region averaged 42 operated rigs during the quarter and drilled 195 gross operated wells.
- Total reported worldwide net daily production of oil, natural gas and natural gas liquids (NGLs) averaged 637,000 boe per day, with pro forma production averaging 562,000 boe per day, up 6 percent from the prior year.
- Balnaves, a floating production, storage and offloading project in Australia, commenced production during the quarter and is currently producing at approximately 12,000 barrels of oil per day (net).
Oil and Gas Prices
Apache's hydrocarbon production during the third-quarter 2014 consisted of approximately 60 percent liquids and 40 percent natural gas. Liquids contributed 84 percent of the company's revenue during the period. In North America onshore, Apache received an average price of $90.30 per barrel of crude oil during the third quarter, compared with $103.44 per barrel in the prior-year period. North American onshore natural gas prices averaged $3.97 per thousand cubic feet (Mcf), compared with $3.26 per Mcf in the prior-year period. Globally, Apache received an average price of $94.69 per barrel of crude oil during the third quarter, compared with $108.27 per barrel in the prior-year period. Global natural gas prices averaged $3.88 per Mcf of natural gas, compared with $3.56 per Mcf in the prior-year period.
In the fourth quarter of 2014, Apache has oil hedges covering 62,500 barrels per day at an average West Texas Intermediate price of $90.83 per barrel and 62,500 barrels per day at an average Brent price of $100.05 per barrel.