Cash from operations before changes in operating assets and liabilities rose 43 percent to a record $1.26 billion in the third quarter from $883 million in the year-earlier period.*
For the first three quarters of 2005, Apache reported net income of $1.8 billion or $5.49 per share, up 58 percent from $1.16 billion or $3.51 per share in the year-earlier period. Cash from operations totaled $3.4 billion for the nine-month period, up 45 percent.
Third-quarter production of 453,845 barrels of oil equivalent (boe) per day was approximately 1 percent below the prior-year period and 3 percent below the second-quarter 2005 level as a result of curtailments caused by Hurricanes Katrina and Rita.
Excluding Apache's Gulf Coast Region, Apache's production increased 3 percent in the third quarter from the second quarter.
"Even with the impact of the hurricanes' one-two punch, we had a strong quarter, with high prices and good production from all of our core areas," said G. Steven Farris, Apache president and chief executive officer.
"Despite the negative impact of the hurricanes, 2005 should be Apache's 26th year of production growth in the last 27 years," Farris said. "Our prospects for continued production growth in 2006 are excellent, as we restore production in the Gulf and continue to grow in Egypt, Australia, the North Sea, Canada and the U.S. Central Region."
The storms' impact on U.S. oil and gas production drove commodity prices higher worldwide. This had a significant offsetting influence on Apache's financial results. Apache received an average of $58.66 per barrel of oil, up 54 percent from the prior-year period, and $6.54 per thousand cubic feet (Mcf) of gas, up 37 percent. In North America, where Apache produces 76 percent of its natural gas, the average price was $7.51 per Mcf, up 19 percent.
Apache's production on the Outer Continental Shelf of the Gulf of Mexico will continue to be curtailed in the fourth quarter of 2005 and the first half of 2006 because of damage to some Apache facilities as well as damage to some third-party pipelines and infrastructure that must be repaired before they can handle Apache production.
"The two hurricanes were the most damaging storms ever to hit a region that provides 25 percent of the nation's domestic oil and gas production," Farris said. "A month after Rita, the Minerals Management Service reports that 1 million barrels per day -- nearly two-thirds of the industry's oil production in the Gulf -- and 5.6 billion cubic feet of gas per day -- more than half of the gas -- is still shut in."
Current gross operated production in Apache's Gulf Coast region, which includes Apache's Outer Continental Shelf properties as well as fields onshore Louisiana and Texas, is approximately 556 million cubic feet of gas (MMcf) per day, or 70 percent of pre-storm levels and 42,756 barrels of oil per day, or 57 percent of pre-hurricane levels.
Apache's net Gulf Coast production averaged 104,871 boe per day in the third quarter, down 20 percent from the second quarter of 2005. The production impact will be greater in the fourth quarter because it will be felt over a full period.
Apache has $750 million in total potential insurance coverage for the two hurricanes. The company carries property damage insurance of $250 million per storm (subject to a $7.5 million deductible) and another $100 million in aggregate for the policy year. The $250 million in coverage is provided through a large mutual insurer of energy companies and will be prorated if total claims received by the mutual for a single event exceed $1 billion.
Apache also carries business interruption insurance which will cover up to $150 million in revenue losses caused by storms in the Gulf during the policy year. Coverage begins Oct. 29.
Storm-related costs, including insurance premiums and increased lease operating expenses were $18 million in the third quarter. Operating expenses will continue to be higher than normal because of storm-related factors.
Even with the disruptions from the hurricanes, Apache continued its active drilling program in the Gulf Coast region, employing 10 rigs during the third quarter. The company completed 12 producers in the Gulf during the quarter.
Operational Results - In Egypt, Apache's net production of 81,793 boe per day was 6 percent above the second-quarter level, driven by Apache's active drilling program and new gas and condensate sales from the Qasr field. - In Canada, production of 86,385 boe per day was essentially flat with the second quarter. Apache has wells with a total of 110 MMcf per day of gross productive capacity awaiting tie-ins. The company expects to ramp up production over the next several quarters as processing facilities are commissioned and wells are connected. - At the Forties Field in the North Sea, production averaged 68,110 boe per day, up 4 percent from the second quarter, as Apache continued major infrastructure upgrades that will increase the field's production and operating efficiency. - In Australia, production averaged 39,543 boe per day, up 24 percent from the second quarter. Oil production increased 22 percent to 16,499 barrels per day and gas production increased 26 percent to 138 MMcf per day. - In the Central Region, production averaged 64,818 boe per day, up 1 percent from the second quarter. The region completed 53 producers during the quarter and is operating 21 rigs.
"In spite of two major hurricanes, we expect a record fourth quarter, record results in 2005 and continued production growth in 2006," Farris said.
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