Apache Reports Increase in 2004 Earnings of 49%

Apache Corporation (NYSE, Nasdaq: APA) reported that record production combined with continued strong commodity prices drove 2004 net income to a record $1.7 billion, or $5.03 per diluted common share, up from $1.1 billion, or $3.43 per share, in 2003.

In the fourth quarter, Apache recorded net income of $507 million, or $1.52 per share, up 90 percent on a per-share basis from the year-earlier period. Apache earned $260 million, or 80 cents per share, in the fourth quarter of 2003.

"We added 467 million barrels of oil equivalent from a capital investment of $3.4 billion, which fueled 7 percent production growth," said G. Steven Farris, president, chief executive officer and chief operating officer. "With that growth and strong commodity prices, Apache turned in a very good year. We enter 2005 with record production and a strong portfolio of drilling opportunities across our core areas."

Apache's 2004 operational and financial highlights included:

  • Cash from operations before changes in operating assets and liabilities totaled $3.4 billion, up 22 percent from 2003. In the fourth quarter, cash from operations totaled $1.1 billion, up from $786 million in the year-earlier period. (Cash from operations before changes in operating assets and liabilities is a non-GAAP measure; see reconciliation below.)

  • Proved reserves increased for the 19th consecutive year, climbing 17 percent or 280 million barrels of oil equivalent (MMboe) after production and revisions, to 1.94 billion barrels of oil equivalent.

  • For the year, Apache produced an average of 448,000 barrels of oil equivalent (boe) per day, up from 417,000 boe per day in 2003. Apache's production has increased in 25 of the last 26 years.

  • In total, Apache added 467 MMboe of proved reserves through drilling and acquisitions during 2004, substantially more than the 164 MMboe produced during the year. Apache added proved reserves of 335 MMboe from exploration and development activities - the most ever - and 132 MMboe through acquisitions. The company spent $2.3 billion on exploration and development activities and $1.1 billion on acquisitions.

  • At year-end, Apache's debt was 24 percent of total capitalization despite $3.4 billion in spending for acquisitions and exploration and development activities.

  • In the fourth quarter, Apache's production of 461,000 boe per day was up slightly from the third quarter despite the lingering effects from Hurricane Ivan in the Gulf of Mexico, which curtailed production by an estimated 9,700 barrels of oil and 34 million cubic feet (MMcf) of gas per day during the quarter.

    Apache's fourth-quarter financial results also included $44 million in other income - business interruption insurance for reimbursement for production lost because of the storm. Apache expects to file an additional claim for production curtailments continuing into 2005. Apache also incurred $12 million in additional expenses related to storm damage.

    A change in accounting rules concerning stock-based compensation has reduced the earlier projected fourth-quarter expense associated with achievement of goals in Apache's share appreciation plan to less than 1 cent per share. More than 1,900 employees were awarded shares of Apache stock after the company's share price doubled over the four-year term of the plan, which ended on Dec. 31, 2004. Non-executive employees were awarded more than 90 percent of the incentives.