Apache Off to a Fast Start in 1Q

Apache reported first-quarter net income surged to $705 million or $2.08 per diluted common share as liquid hydrocarbon production climbed to a record 300,557 barrels per day, up 8 percent from the prior-year period.

Apache's oil output -- fueled by first production from two new oil developments in Australia -- pushed first-quarter oil and gas revenues to $2.7 billion, up 68 percent from the first quarter of 2009.

Apache's first-quarter adjusted earnings*, which exclude write-downs and certain other items that impact the comparability of operating results, totaled $712 million or $2.10 per share, up 226 percent from $218 million or 65 cents per share in the prior-year period. Using generally accepted accounting principles, Apache recorded a net loss of $1.76 billion or $5.25 per common share in the first quarter of 2009 as a result of a $1.98-billion non-cash, after-tax reduction in the carrying value of its oil and gas properties.

Cash from operations before changes in operating assets and liabilities* totaled $1.6 billion in the first quarter, up nearly 60 percent from $983 million in the year-earlier period.

"Apache is off to a fast start in 2010, with strong operational and financial results and two strategic steps that will add to the company's future growth," said G. Steven Farris, chairman and chief executive officer.

Operationally, first-quarter production totaled 585,877 barrels of oil equivalent (boe) per day, up 7 percent from the prior-year period as a result of the Australia developments and increased drilling worldwide. Natural gas production increased 5 percent to 1.7 billion cubic feet per day.

Apache's worldwide production ramped up during the first quarter, rising to 608,000 boe per day in March. First-quarter net oil production in Australia surged nearly 250 percent to 27,090 barrels per day as production commenced at the Apache-operated Van Gogh and the BHP Billiton-operated Pyrenees developments. Apache owns a 52.5-percent interest in Van Gogh and a 28.57-percent interest in Pyrenees.

Apache's exploration success in Egypt's Faghur Basin continued during the first quarter. Gross productive capacity in the Faghur Basin is expected to rise to 40,000 barrels per day as new processing facilities and transportation infrastructure are brought on line by year-end.

"Financially, Apache's strong results reflect rising production from our balanced portfolio," Farris said. Liquids sales totaled 51 percent of production but accounted for 74 percent of revenue."

"We continued to build cash during the quarter, putting us in a strong position for two strategic transactions that are expected to provide near-term production growth on the Gulf Shelf and an extensive inventory of opportunities in the deepwater Gulf of Mexico," he said.

Apache recently announced that it has agreed to merge with Mariner Energy, a successful deepwater explorer with estimated proved reserves of 181 million boe (47 percent liquid hydrocarbons) as well as unbooked resource potential of 2 billion boe. In February, Mariner produced 63,000 boe per day from the Gulf Shelf and deepwater, the Permian Basin and other onshore plays.

Apache also announced it will acquire additional Gulf Shelf assets from Devon Energy Corp. that add production of 19,000 boe per day with year-end 2009 estimated proved and probable reserves of 83 million boe across 158 blocks. Some of the properties in this acquisition are subject to preferential rights by other interest owners.

"Apache strives continually to build shareholder value over the long term," Farris said. "We are confident that these strategic steps -- not unlike our entry into the Western Desert of Egypt and the Carnarvon Basin in Western Australia -- will provide meaningful future value for our shareholders."

As they are closed, production from the Mariner and Devon transactions will add to Apache's previously announced forecast of 5-10 percent production growth.