In 2008, production declined 5 percent to 534,000 barrels of oil equivalent per day as a result of the June 3 pipeline explosion and fire at Apache's Varanus Island hub offshore Western Australia as well as the impact of two hurricanes in the Gulf of Mexico. Had those events not occurred, 2008 production would have increased 2 percent.
Apache produced 1.6 billion cubic feet (Bcf) of natural gas and 265,000 barrels of liquid hydrocarbons per day in 2008, compared with 1.8 Bcf and 262,000 barrels per day in 2007. In the fourth quarter, Apache produced 1.5 Bcf of gas per day and 262,000 barrels of liquid hydrocarbons per day.
Varanus Island production is expected to be near pre-incident levels in the first quarter, but significant production volumes remain off-line in the Gulf because repairs of third-party pipelines have not been completed.
Apache replaced 122 percent of production in 2008, including 118 percent through drilling. However, 2008 proved reserves declined 2 percent to 2.4 billion barrels of oil equivalent as a result of a 2.6-percent negative reserve revision associated with low commodity prices at year-end. Absent the revisions, Apache would have recorded its 23rd consecutive year of reserve growth.
Nearly all of the reserve revisions were in fields located in North America, including U.S. oil fields with long-lived reserves, fields subject to the Alberta government's new royalty scheme, and high-cost shallow gas fields in Canada. The negative revisions in North America were partially offset by increased reserves from drilling in Egypt.
Apache's current 2009 exploration and development budget of $3.5 billion to $4 billion is based on cash-flow estimates that are predicated on benchmark prices of $4.50 per thousand cubic feet of gas and $40 per barrel of oil.
"If the current downward trend in commodity prices continues, we may scale back spending even more, and our production growth likely will land in the bottom half of our projected range," Farris said.
Strong production growth from several development projects is expected to more than offset generally declining production in North America that will be the result of lower capital spending.
"With a number of development projects coming on line in the first half of 2009, we are projecting production growth of 6 to 14 percent in 2009, depending on capital availability," said G. Steven Farris, chairman and chief executive officer.
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