Apache responds to current challenging market by slashing spending

Houston-based oil and gas company Apache Corporation has announced multiple actions in response to current challenges in the oil market featuring an oil price war between Saudi Arabia and Russia following the OPEC+ breakdown, the effect of the coronavirus outbreak on global oil demand, and the ‘historic’ plunge of oil prices this week.

The company said on Thursday it had reduced its 2020 capital investment plan to a range of $1 billion to $1.2 billion from a previous range of $1.6 billion to $1.9 billion.

Over the coming weeks, the company will reduce its Permian rig count to zero, limiting exposure to short-cycle oil projects. Activity reductions are also planned in Egypt and the North Sea.

In Suriname, upon the conclusion of operations at the Sapakara West-1 exploration well, the company will proceed, as planned, to a third exploration prospect.

Additionally, Apache’s board of directors has approved a reduction in the company’s quarterly dividend per share from $0.25 to $0.025, effective for all dividends payable after Thursday, March 12, 2020.

The company will use the $340 million of cash retained annually from the dividend reduction to further strengthen its financial position. Apache noted it has ample liquidity through its $4 billion undrawn revolver and considerable flexibility to manage the $937 million of bonds maturing between February 2021 and January 2023.

“We are significantly reducing our planned rig count and well completions for the remainder of the year, and our capital spending plan will remain flexible based on market conditions,” said John J. Christmann IV, Apache’s chief executive officer and president.

“We are also further reducing operating and overhead costs as we continue to implement our corporate redesign program, which began in the fall of 2019. These decisive actions will benefit Apache as we navigate these challenging market conditions.”

Norwegian energy intelligence group Rystad Energy has said that the total capital and operational expenditure of exploration and production companies is now likely to be cut by $100 billion in 2020 and another $150 billion in 2021 if oil prices remain at a $30 level – a development that will heavily impact service company revenues, driving some out of the market.