Apache Reports Q2 Earnings, Hits Production Milestone
Apache Corp. reported second-quarter earnings of $722 million or $2.17 per diluted common share, up 23 percent from $587 million or $1.76 per share in the prior-year period. Apache’s record production, balanced product mix, and higher oil prices offset a steep decline in natural gas prices since the first quarter.
Cash from operations before changes in operating assets and liabilities totaled $1.3 billion, up from $1.1 billion in the second quarter of 2005.
Production totaled 500,888 barrels of oil equivalent (boe) per day, up from 469,617 boe per day in the prior-year period and up 10 percent from the first quarter of 2006. Gas production averaged 1.6 billion cubic feet per day, up 21 percent from the prior-year period and up 15 percent from the first quarter. Apache produced 240,122 barrels of liquid hydrocarbons per day, down 5 percent from the second quarter of 2005, but a 4 percent increase from the first quarter of 2006.
“Five of Apache’s seven core areas posted production gains from the first quarter,” said G. Steven Farris, president and chief executive officer. “Our balanced portfolio and product mix combined to deliver excellent results. Higher oil prices and record barrel-equivalent production more than offset the impact of lower natural gas prices on earnings and cash flow.”
On a barrel-equivalent basis, Apache’s second-quarter production was 52 percent natural gas and 48 percent liquid hydrocarbons.
Apache’s record gas production was the result of substantially higher output from the Qasr field in Egypt, the John Brookes field in Australia, Canada, and the onshore U.S. Central Region. Second-quarter results also included production resulting from the company’s acquisition of Pioneer Resources’ assets in Argentina, which was completed in April.
Gulf Coast Region production in the second quarter was 20 percent below the year-earlier period as a result of continuing curtailments of platforms and infrastructure damaged by the third-quarter 2005 hurricanes. Restoration activities will continue into 2007.
Apache’s Gulf of Mexico production will get a boost in coming quarters with the June 21 closing of its acquisition of BP’s producing assets in the shallow waters of the Gulf. The acquisition is expected to add net production of 3,650 barrels of oil and 85 million cubic feet of gas per day during the second half of 2006.
“Driven by $1.7 billion of producing property acquisitions closed in the first half of the year, our continuing active drilling campaign in all of our regions and the ongoing restoration of production in the Gulf, Apache is on track to achieve 10 percent to 15 percent production growth in 2006,” Farris said.
During the second quarter, Apache announced that it has agreed to sell its 24.5 percent interest in China’s producing Zhao Dong block to Australia-based ROC Oil Co. Limited for $260 million.
Also, BP has informed Apache of a required shutdown of the Forties Pipeline System in the North Sea for repairs beginning July 29, which will curtail production from Apache’s Forties Field for a period of one week or longer depending on the magnitude of the repairs. Apache will move forward work activities on its Forties platforms to coincide with the pipeline shutdown.
Apache received $64.35 per barrel of oil in the quarter, up 33 percent from the prior-year period and a 12 percent increase from the first quarter; and $4.97 per thousand cubic feet of gas, down 13 percent from the second quarter of 2005 and a 22-percent drop from the first quarter of 2006.
For the first six months of 2006, Apache earned $1.4 billion or $4.14 per diluted common share, up from $1.1 billion or $3.44 in the first half of 2005. Cash from operations for the first six months totaled $2.5 billion, up from $2.1 billion in the prior-year period.
Apache is a large oil and gas independent with operations in the United States, Canada, the United Kingdom sector of the North Sea, Egypt, Australia, and Argentina.
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