Apache’s first-quarter 2009 adjusted earnings, which exclude the write-down and certain other items that impact the comparability of operating results, totaled $218 million or 65 cents per share compared to adjusted earnings of $1 billion or $2.99 per share in the prior-year period.
With additional oil and gas flowing in Egypt and continued recovery of volumes in Australia and the Gulf of Mexico, Apache got off to a strong start in the first quarter, and we expect this momentum will continue as we ramp up production in Egypt and the Gulf, said G. Steven Farris, Apache’s chairman and chief executive officer. A 35-percent deterioration in North American natural gas prices during the quarter necessitated the non-cash ceiling test write-down for the period.
With nearly $4 billion in available cash and credit and debt at 25 percent of capitalization, we are in a good position to take advantage of opportunities as they emerge in today’s low commodity-price environment, Farris said.
The company also announced an agreement to acquire nine Permian basin oil and gas fields with present production of 3,500 barrels of oil equivalent per day from Marathon Oil Corp. for $187.4 million.
The company pumped around 548,279 barrels of oil equivalent (boe) per day in the first quarter 2009, up from 518,162 boe per day in the fourth quarter of 2008. Natural gas production increased to 1.6 billion cubic feet (Bcf) per day compared to 1.5 Bcf per day in the fourth quarter. Liquid hydrocarbon production increased to 277,547 barrels per day from 261,609 barrels per day in the fourth quarter 2008.
The company’s equivalent production dropped 2% from the first quarter of 2008, which was before production was curtailed by a pipeline explosion at the Varanus Island hub in Australia and two Gulf of Mexico hurricanes.
Cash from operations before changes in operating assets and liabilities totaled $983 million, down from $1.84 billion in the year-earlier period.
We plan to live within our annual cash flow, Farris said. Despite significantly reduced capital, our inventory of development projects will fuel growth in 2009, even in the current price environment.
Apache’s net daily gas production in Egypt increased 9 percent in the first quarter while daily oil production increased 12%. Gas production was boosted by increased volumes through Shell’s Obaiyed processing plant; higher oil output reflected higher condensate production from the gas flow through Obaiyed and several new wells.
The Egypt Region’s drilling program yielded several new oil and gas field discoveries in the Western Desert. Start-up procedures are under way at the two new processing trains at Salam Base on the Khalda Concession. We expect to reach our targeted net production of 100 million cubic feet (MMcf) of gas and 5,000 barrels of condensate per day from the two plants during the second quarter, Farris said.
In Australia, gas production increased 21 percent as repairs at Varanus Island neared completion. The return to pre-incident rates is anticipated during the second quarter.
Gulf Coast Region gas production raised 17% and liquids output increased 23% as third-party transportation and processing infrastructure was restored. The Geauxpher field at Garden Banks 462 is anticipated to commence production in May 2009, adding net output of approximately 45 MMcf per day.
Although we are maintaining our production growth target of 6-14 percent, we expect to come in at the lower end of the range, taking into account lower capital spending and the contractor’s delay at the Van Gogh development offshore Western Australia, Farris said.
The company anticipates second-quarter equivalent production will increase 3-5% from first-quarter 2009 volumes, Farris said.
Over our 54-year history, Apache’s discipline, values and contrarian spirit have enabled the company not only to live through down cycles but to emerge stronger, he said.
