Apache Ups Spending 11% for 2021 at $1.1B; Adding Rigs in the Permian

Apache Corp. announced its financial and operational results for the fourth-quarter and full-year 2020. The company also detailed its 2021 plans.

2021 Plans

- Capex: $1.1 billion - up 11% vs. 2020 levels of $988MM

• Production & Development (D&C): $900 million
  

• Exploration: $200 million

By Area:

• US (Permian): $385 million (35%) - up 7% vs. 2020
  

• International (Egypt / North Sea): $495 million (45%) - flat vs. 2020

• Exploration (Suriname): $220 million (20%) - up 65% vs. 2020

- Production: 340-350 MBOEPD - down 12% from full year adjusted 2020 output

• US Total: 220-225 MBOEPD - down 4% from Q4 2020

• US Oil Production: 74 MBOPD

• International: 170-175 MBOEPD - down 3% from Q4 2020
  

 - Rig Count: 10 rigs running - up 25% vs. 2020

• Permian: 1-2 rigs (adding second rig in mid-2021)
  

• Suriname: 2 rigs

• Egypt: 5 rigs

• North Sea: 1 rig

No well plans were disclosed.

This capital program will be more than fully funded by internally generated cash flow under an assumed price deck of $45 WTI oil and $3.00 Henry Hub natural gas. 

CEO John Christmann said, “Our strategic approach remains centered around capital discipline and flexibility. We have established a 2021 capital plan that prioritizes generating free cash flow for debt reduction. We will continue to aggressively manage our cost structure, focus on long-term returns over short-term growth, continuously progress our ESG efforts, and advance our global exploration activities, most notably offshore Suriname.”

 

Q4 / Full Year 2020 Results

Fourth-Quarter Highlights

• Reported production of 411,000 barrels of oil equivalent (BOE) per day; adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 365,000 BOE per day; 
• Delivered net cash from operating activities of $498 million and adjusted EBITDAX of $630 million;
• Exceeded fourth quarter adjusted production guidance; delivered upstream capital investment and LOE below guidance; and
• Continued exploration success with three oil discoveries in Suriname, Egypt and North Sea at Keskesi, Tayim-North and Losgann prospects, respectively.

Full-Year 2020 Highlights

• Responded quickly and decisively to the COVID-19 pandemic, successfully protected employees, minimized operational disruptions and preserved the balance sheet;
• Decreased upstream capital investment by 58% year over year; achieved annual run-rate cost savings associated with organizational redesign in excess of $400 million;
• Achieved a 100% success rate on Block 58 exploration drilling campaign offshore Suriname;
• Significantly improved short-term debt profile by reducing Apache bond maturities to only $337 million prior to November 2025; and
• Increased ESG short-term incentive compensation weighting from 10% to 20% and refined our focus areas to air, water, communities and people.

Apache reported net income attributable to common stock of $10 million, or on a fully diluted basis, a loss of $16 million or $0.04 per share during the fourth-quarter 2020. When adjusted for certain items that impact the comparability of results, Apache’s fourth-quarter loss totaled $20 million or $0.05 on a diluted share basis. Net cash provided by operating activities in the fourth quarter was $498 million, and adjusted EBITDAX was $630 million. 

For the full-year 2020, Apache reported a loss of $4.9 billion, or $12.86 per diluted common share. On an adjusted basis, Apache’s 2020 loss totaled $407 million or $1.08 per diluted common share. Net cash provided by operating activities was $1.4 billion, and adjusted EBITDAX was $2.2 billion. 

John J. Christmann IV, Apache’s chief executive officer and president, said: “Apache’s fourth quarter was a positive conclusion to a challenging year. Commodity prices held firm, and we executed well on our production, capital spending and costs objectives while also delivering promising exploration results internationally.

“Apache acted quickly and decisively in the face of the extreme market conditions early in 2020. Within three days of the March 9 oil price crash, we took aggressive and necessary measures to protect our financial position. As a result, we were able to absorb significant revenue losses relative to our original plan without further leveraging our balance sheet,” continued Christmann. “We exceeded our cost reduction goals while continuing to deliver excellent employee health, safety and environmental performance. I’m especially proud of our team’s swift response to the pandemic. To date, we have had no known cases of a COVID-19 transmission from one Apache employee or contractor to another. 

“It was also a banner year on the exploration front, as we announced three discoveries offshore Suriname, followed by a fourth discovery announced in January 2021, achieving a 100% success rate on Block 58 to date. We look forward to a continuation of the exploration program, as well as an appraisal program, which is now underway.”

ESG Focus

During the year, Apache developed and implemented robust COVID-19 employee safety protocols, provided pandemic assistance to the communities in which it operates and advanced diversity and inclusion programs. The company also enhanced its greenhouse gas data collection processes, expanded disclosures to more closely align with the Task Force on Climate-related Financial Disclosures (TCFD), and increased ESG-related short-term incentive compensation weighting from 10% to 20%.

Year-End 2020 Proved Reserves

Worldwide estimated proved reserves totaled 874 million BOE at year-end 2020. More than 91% of Apache’s estimated proved reserves at year-end 2020 were classified as proved developed. During the year, Apache added approximately 78 million BOE in field extensions and discoveries. Production and divestitures reduced proved reserves by 161 million and 9.6 million BOE, respectively. Negative price revisions, partially offset by positive performance revisions, further reduced proved reserves by 45 million BOE.

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