Apache Reports 1Q Adjusted Earnings of $806 Mln. Plans $4 Bln Asset Sale
Apache Corporation reported first-quarter earnings of $698 million, or $1.76 per diluted common share, and adjusted earnings, which exclude certain items that impact the comparability of operating results, of $806 million or $2.02 per share.
During the first quarter, worldwide production increased to 781,819 barrels of oil equivalent (boe) per day driven by a 45 percent increase in North American onshore liquid hydrocarbons output compared with the year-earlier period; earnings declined as a result of lower commodity prices. Cash from operations before changes in operating assets and liabilities totaled $2.4 billion.
Apache also announced a plan to divest $4 billion in assets by year-end 2013. The company intends to use initial proceeds of $2 billion to reduce debt and enhance financial flexibility. Additional proceeds are intended to be used to repurchase approximately $2 billion of Apache common shares under a 30-million-share repurchase program authorized by the Board of Directors.
G. Steven Farris, Apache’s chairman and chief executive officer, said, “We are showing strong results from the strategic shift that we outlined in 2012, with production from onshore North American liquids plays of 165,000 barrels per day in the first quarter. We expect our onshore drilling programs will continue to contribute significantly to meeting our production targets.”
Farris added, “This rationalization of our asset base flows naturally from more than $16 billion of acquisitions over the last three years. Our goal is to ensure that Apache’s portfolio has the right mix of assets to generate attractive rates of return, drive production growth, and create shareholder value.
“In this vein, our Board and management team conducted a strategic portfolio review to identify assets that no longer fit our growth profile,” Farris said. “Based on this review, we have a process well under way to divest non-core assets while retaining those that drive long-term growth and generate cash from operations. We are also pursuing other monetizations including joint venture partnerships.
“Proceeds from this program will enable us to reduce debt and repurchase up to 30 million shares or approximately 7.5 percent of shares outstanding,” Farris said. “We believe that as a result of this process, we will become an even stronger company with a focused portfolio of high-growth, high-return assets.”
Agreements pertaining to asset sales and monetizations are subject to market conditions including commodity prices. Apache’s annual production guidance will not be adjusted until it enters into definitive agreements with potential acquirers or joint venture partners.
The timing and actual number of shares repurchased will depend on a variety of factors including the stock price, corporate and regulatory requirements and other market and economic conditions. Repurchased shares would be available for general corporate purposes.
In the prior-year period, Apache reported earnings of $778 million or $2.00 per share, adjusted earnings of $1.2 billion or $3.00 per share, and cash from operations before changes in operating assets and liabilities of $2.6 billion.
First-quarter 2013 worldwide production of 781,819 boe per day compared with 769,296 boe per day in the prior-year period and 800,005 boe per day in the fourth quarter of 2012. As previously disclosed, first-quarter 2013 worldwide production was negatively impacted by interruptions associated with cyclones in Australia and third-party gas plant downtime in Canada.
Apache currently is the second most-active U.S. onshore driller with 42 rigs in operation in the Permian Basin and 28 rigs active in the Anadarko Basin. The Permian and Central regions averaged 205,650 boe per day — 26 percent of Apache’s worldwide output — and spent 40 percent of the company’s first-quarter drilling capital.
Growth in onshore liquids output was offset by the deferred production of 4,100 boe per day in Canada and 3,500 boe per day in Australia, lower North American gas production because of reduced dry gas drilling activity and natural field declines in other international regions.
The company had previously incorporated production deferrals and declines into its production guidance, and remains on track to achieve its full-year guidance of 3 to 5 percent production growth. This production guidance has not been adjusted for any variances associated with future divestitures.