earnings release operations supplement ... - Apache Corporation
Note: Updated at 4:45 PM (CT) on November 25, 2013.
2013 3rd Quarter
EARNINGS RELEASE OPERATIONS SUPPLEMENT
TABLE OF CONTENTS Overview ............................................................................................................................................................................... 2 NORTH AMERICA .............................................................................................................................................................. 6 Permian......................................................................................................................................................................... 6 Central .......................................................................................................................................................................... 9 Gulf Coast Onshore ..................................................................................................................................................... 12 Gulf of Mexico Shelf.................................................................................................................................................... 14 Gulf of Mexico Deepwater .......................................................................................................................................... 15 Canada ........................................................................................................................................................................ 16 INTERNATIONAL ............................................................................................................................................................. 19 Egypt ........................................................................................................................................................................... 19 Australia ...................................................................................................................................................................... 22 North Sea .................................................................................................................................................................... 24 Argentina .................................................................................................................................................................... 25
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
NOTICE TO INVESTORS This operations supplement contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and, whenever possible, are identified by use of the words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions, risks and uncertainties, including, without limitation, our assumptions and estimates about the market prices of oil, natural gas, NGLs and other products or services, our commodity hedging arrangements, the supply and demand for oil, natural gas, NGLs and other products or services, production and reserve levels, drilling risks, the number of wells drilled, economic and competitive conditions, the availability of capital resources, capital expenditure and other contractual obligations, and our ability to complete, test and produce the wells identified in this supplement. Because such statements involve risks and uncertainties, Apache’s actual results and performance may differ materially from the results expressed or implied by the forward-looking statements contained in this Supplement. Other important factors that could cause actual results to differ materially from expected results are described in “Risk Factors” in our most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q and amendments thereto, available on our Web site and in our other public filings and press releases. There is no assurance that Apache's expectations will be realized, and readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date hereof. Unless otherwise required by law, we assume no duty to update these statements as of any future date. Cautionary Note to Investors: The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache may use certain terms in this operational update supplement, such as “resources,” “potential resources,” “resource potential,” “reserves potential,” and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov. Certain information provided in this supplement includes financial measurements that are not required by, or presented in accordance with, generally accepted accounting principles (GAAP), including these measures: adjusted earnings, pre-tax margin, and cash from operations. These non-GAAP measures should not be considered as alternatives to GAAP measures, such as net income or cash from operating activities, and may be calculated differently from, and therefore may not be comparable to, similarly titled measures used at other companies. Reconciliation to the most directly comparable GAAP financial measure has been provided. None of the information contained in this document has been audited by any independent auditor. This supplemental document is prepared as a convenience for securities analysts and investors and may be useful as a reference tool. Apache intends to continue to publish this supplement in conjunction with our quarterly earnings release, but may elect to modify the format or discontinue publication at any time, without notice to securities analysts or investors.
1
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Overview North America onshore liquids production grew 8 percent over the second quarter 2013 and by 49,000 Bbls/d or, 35 percent, over the third quarter 2012
Apache averaged 125 rigs worldwide during the third quarter, GLOBAL KEY STATS* 67 percent of which were onshore North America. Third-Quarter 2013 The company completed 389 gross wells during the quarter, 85 Q3 Production: 784,331 Boe/d percent of which were onshore North America. Q3 Wells: 389 wells, 278 net North American onshore regions, which include Permian, Q3 Operated Rigs: Avg 125 rigs Central, Gulf Coast Onshore and Canada, collectively grew liquids production 8 percent over the second quarter of 2013 to 188 Mbbls/d. The Permian and Central regions were the main drivers of NA ONSHORE KEY STATS North American onshore liquids growth. Third-Quarter 2013 These two regions drilled 299 gross wells, or 91 percent of Q3 Production: 372,080 Boe/d the total wells drilled in North America and 77 percent of Q3 Wells: 329 wells, 227 net the wells drilled globally. Q3 Operated Rigs: Avg 84 rigs Permian and Central combined grew liquids production 12.6 Mbbls/d over the second quarter of 2013, or 9 percent, to over 149 Mbbls/d, which represented 35 percent of total worldwide liquids production. Combined total production from the Permian and Central regions was 226 Mboe/d, representing 29 percent of total company production. Total worldwide net daily production of oil, natural gas, and natural gas liquids averaged 784 Mboe/d in the third quarter with liquids production comprising 54 percent of the total. APACHE WORLDWIDE OPERATIONS
2
* The number of wells reported as drilled and/or completed could be subject to reclassification which may cause adjustments to reported amounts in future periods. The number of wells reported is subject to SEC standards and therefore, along with other SEC guidelines, includes completed wells only.
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
THIRD-QUARTER PRODUCTION BY REGION 784 Mboe/d Australia
Argentina
7%
North Sea
5%
9%
Central
12%
19%
Egypt
N.A. Onshore 47%
17% Permian
GOM DW
1% 4%
12% GOM Shelf
GC Onshore
14% Canada
THIRD-QUARTER PRODUCTION BY PRODUCT 784 Mboe/d
THIRD-QUARTER REVENUE BY PRODUCT $4.4 Billion International Liquids $1.8 Bn
North American Liquids
International Liquids
North American Liquids $1.9 Bn
31%
23%
40%
44%
17%
29% International Gas
6%
North American Gas
North America Onshore
International Gas $0.3 Bn
International & Offshore
3
Liquids
10%
North American Gas $0.4 Bn
Natural Gas
30%
19%
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT 21% 29%
ACTUAL 2009 VERSUS PRO FORMA 3Q 2013 PRODUCTION COMPARISON* ACTUAL 2009 583 Mboe/d Australia
7%
PRO FORMA THIRD-QUARTER 2013 625 Mboe/d Australia
Argentina
8%
9%
Central
6%
North Sea
Argentina
7%
North Sea
11%
Central
11%
15%
9% Permian GC
3% Onshore
Egypt
26%
Egypt N.A. Onshore 32%
N.A. Onshore 56%
16%
13%
21%
Canada
1% Permian
GOM DW
15%
17% Canada GOM Shelf
ACTUAL 2009 PRODUCTION BY PRODUCT 583 Mboe/d International Liquids
North American Liquids
International Liquids
24%
19%
31%
18%
21% International Gas
GC Onshore
PRO FORMA THIRD-QUARTER 2013 PRODUCTION BY PRODUCT 625 Mboe/d
North American Liquids
30%
5%
29%
27%
International Gas North American Gas
North America Onshore
North American Gas
International & Offshore
Liquids
Natural Gas
*Pro forma represents third-quarter volumes less divested volumes from GOM Shelf, Canada and Egypt (once completed).
4
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
CENTRAL AND PERMIAN PRODUCTION
232
636
725 333 139 618
Total Production (Mboe/d)
240
240
226 23%
220 200
Liquids Production (Mbbls/d)
220 200
184
180
180
160
18%
132
Permian
140 120
120
100
80
80
60
31%
107
72
28%
Central 40
69%
49
NGLs
100
Oil
29
60
94
20
78
20
0
% Liquids
Liquids
39%
140
112
100
40
149
160
0 3Q 2012
3Q 2013
58%
66%
3Q 2012
5
3Q 2013
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
NORTH AMERICA Permian
Third-quarter 2013 production in the Permian averaged a record 131,665 Boe/d (76 percent liquids), increasing 18 percent over the third quarter of PERMIAN KEY STATS Third-Quarter 2013 2012. Production was affected by unplanned facility downtime resulting in Q3 Production: 131,665 Boe/d Q3 Wells: 208 wells, 155 net deferred production of approximately 2,814 Boe/d. Q3 Operated Rigs: Avg 45 rigs For the quarter, the Permian averaged 45 drilling rigs, spud 240 gross wells (of which 66 were horizontal) and completed 208 gross (155 net) wells. Looking into the fourth quarter of 2013, the region expects to maintain an active rig count of 44 rigs, with approximately 23 drilling horizontal wells.
APACHE PERMIAN REGION ACREAGE AND KEY PLAYS
6
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Permian (Continued) WOLFCAMP SHALE
Apache has an estimated 450,000 gross acres (345,000 net) prospective for Wolfcamp Shale with an estimated 347 MMboe of resource potential from 971 identified drilling locations. The Barnhart area was extremely active during the third quarter, with six rigs drilling 20 Middle and Upper Wolfcamp laterals. By the end of the third quarter, the region had drilled 56 wells with plans to spud 20 additional wells in the fourth quarter. To handle this growing production from the region, a new gas delivery point has been added to the Barnhart area. In addition to the six rigs drilling horizontal wells in the Barnhart area of Irion county, Apache also had one rig in Upton county and one in Reagan county drilling Upper and Middle Wolfcamp Shale wells with encouraging results.
CLINE SHALE
Apache has an estimated 650,000 gross acres (520,000 net) prospective for Cline Shale development with an estimated 642 MMboe of resource potential from 2,300 identified drilling locations. Three rigs drilled 12 Lower Cline wells during the quarter. Fewer wells per section, more stages per frac and 3D seismic inversion interpretations have all helped to increase the overall production of these wells; ongoing evaluation of these parameters will further optimize the Lower Cline horizontal program.
MIDLAND BASIN VERTICAL
Apache has an estimated 1.1 million gross acres (625,000 net) in the Midland Basin vertical play area with an estimated 1.7 Bboe of resource potential from over 17,800 identified drilling locations. During the third quarter, Apache continued to focus on building inventory in the vertical Fusselman play, testing Fusselman field extensions in new structures. In addition, the region continued to highgrade Wolfwood locations and test 20-acre infill wells. During the third quarter, three notable Fusselman wells averaged approximately 340 Boe/d (76 percent oil) and a notable Wolfwood well from the southern area of the Deadwood core acreage averaged approximately 688 Boe/d on a 12-day test. The Deadwood Plant continues to process at capacity and after an additional delivery point upgrade to increase capacity in the second quarter, no gas takeaway constraints were experienced.
CENTRAL BASIN PLATFORM (CBP)
Apache has an estimated 1.7 million gross acres (780,000 net) in the CBP with an estimated 690 MMboe of resource potential from nearly 9,800 identified drilling locations. In the Three Bar Shallow Unit, three active drilling rigs spud a total of six horizontal wells during the third quarter with development focused on the Lower Wichita Albany landing zone. Production optimization operations are focused on water handling, gas takeaway and pump placement. The initial phase of field development at the Three Bar Shallow Unit will commence in the fourth quarter and an infill drilling program will be tested in early 2014.
7
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Permian (Continued) NORTHWEST SHELF - YESO
Apache has approximately 105,000 gross acres (70,000 net) in the Yeso play with 1,800 identified locations and an estimated 108 MMboe of resource potential. Three drilling rigs (two vertical and one horizontal) spud a total of 22 vertical wells and five horizontal wells during the third quarter.
DELAWARE BASIN
Apache has an estimated 609,000 gross acres (287,000 net) in the Delaware Basin with an estimated 284 MMboe resource. In the Pecos Bend area of Loving and Reeves Counties, Texas, Apache are running two rigs and six additional rd horizontal wells are expected to be completed by year-end. The Cardinal 4-1H was drilled to 3 Bone Springs sand fracing the Upper Wolfcamp section across 17 stages. The 30-day average IP for the Cardinal was 824 Boe/d.
PERMIAN WELL HIGHLIGHTS Third-Quarter 2013
PLAY/TARGET Fusselman Wolfwood Wolfcamp Shale (U)
Wolfcamp Shale (M)
WELL NAME
COUNTY, ST
TVD
LATERAL
IP (30-Day)
Squire 9007
Glasscock, TX
10,460’
N/A
567 Boe/d
Maui 5 #1
Glasscock, TX
10,810’
N/A
410 Boe/d
Cook 21 #19
Glasscock, TX
10,420’
N/A
734 Boe/d
Upton, TX
9,057’
4,876’
784 Boe/d (7 days)
Sugg 4948 #H23M
Irion, TX
7,900’
7,150’
502 Boe/d
Clinch #H53LU
Irion, TX
8,137’
8,589’
620 Boe/d
Upton, TX
9,438’
4,878’
821 Boe/d
Glasscock, TX
9,300’
4,917’
413 Boe/d
Ector, TX
11,100’
N/A
549 Boe/d
Andrews, TX
7,028’
6,342’
1,086 Boe/d
Miller 36 #2 HU
Miller 36 #1 HM Cline Shale
Marlin 47 #4H
Wolfberry/Penn
Augusta Barrow #2302
Wichita Albany
Three Bar Shallow Unit 117H
Grayburg
Cowden 10 #6H
Crane, TX
2,970’
4,263’
553 Boe/d
Wolfcamp
Cardinal 4 1H
Loving, TX
11,114’
3,500’
824 Boe/d
8
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Central
Third-quarter 2013 production in the Central Region was a record 94,773 CENTRAL KEY STATS Boe/d, up 4 percent over the second quarter of 2013 and up 31 percent Third-Quarter 2013 over the third quarter of 2012. Q3 Production: 94,773 Boe/d Liquids production increased 9 percent over the second quarter of 2013 to Q3 Wells: 91 wells, 49 net 49 Mbbl/d and up 94 percent from the third quarter of 2012. Q3 Operated Rigs: Avg 31 rigs Liquids constitute 52 percent of production (oil is 27%), up from 35 percent in the third quarter of 2012. For the quarter, the Central Region averaged 31 drilling rigs and drilled 91 gross (49 net) wells. Apache continues to work numerous plays across its two million gross acreage position focusing on the liquids-rich Granite Wash and the oily Tonkawa, Marmaton, Cottage Grove, Cleveland and Canyon Wash plays. Horizontal drilling and multi-stage fracking have resulted in tremendous opportunities in the low permeability Anadarko Basin. Apache is continuing to set itself up for future development by expanding our existing plays. During the quarter, the Apache increased its acreage position by continuing to lease and renew acres. By year-end Apache expect to have added over 50,000 net acres in strategic locations throughout the basin.
APACHE CENTRAL REGION ACREAGE AND KEY PLAYS
9
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Central (Continued) GRANITE WASH
Apache holds approximately 828,000 gross (418,000 net) acres prospective for the Granite Wash with an estimated resource potential of 4.5 Bboe from 22,800 drilling locations. During the quarter, Apache drilled and completed 15 gross Granite Wash wells. Apache has drilled over 164 Granite Wash horizontals during the last 5 years with consistently strong results.
TONKAWA
Apache holds an estimated 810,000 gross (310,000 net) acres prospective for the Tonkawa with an estimated resource potential of 202 MMboe from 2,800 drilling locations. During the quarter, Apache drilled and completed 31 gross Tonkawa wells. Apache continues to be a dominant player in the Tonkawa play, completing more wells in the formation than any other company.
MARMATON
Apache holds an estimated 662,000 gross (512,000 net) acres in the Marmaton with an estimated resource potential of 161 MMboe from 1,593 drilling locations. During the quarter, Apache drilled and completed 15 gross Marmaton wells.
CLEVELAND
Apache holds an estimated 768,000 gross (438,000 net) acres in the oil-rich Cleveland play with an estimated resource potential of 195 MMboe from 2,302 drilling locations. During the quarter, Apache drilled and completed 11 gross Cleveland wells.
COTTAGE GROVE
Apache holds an estimated 238,000 gross (100,000 net) acres in the oil-rich Cottage Grove. During the quarter, Apache drilled and completed ten gross Cottage Grove wells. The Cottage Grove play now has over a dozen successful tests to date with another 18 scheduled in 2014.
CANYON WASH
Apache holds an estimated 147,000 gross (100,000 net) acres prospective for the Canyon Wash in the Bivins Ranch area (Whittenburg Basin) with an estimated 101 MMboe of resource potential from 1,016 drilling locations. During the quarter, Apache drilled and completed five gross Canyon Wash wells.
10
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Central (Continued) CENTRAL WELL HIGHLIGHTS Third-Quarter 2013
PLAY/TARGET
WELL NAME
COUNTY, ST
TVD
IP
Granite Wash
Ramp 26 #7H
Hemphill, TX
11,193’
191 Bo/d, 7,354 Mcf/d
Granite Wash
Stiles 3 #20-3H
Wheeler, TX
12,646’
436 Bo/d, 6,900 Mcf/d
Sweetwater
Stiles 29-3H
Wheeler, TX
11,322’
726 Bo/d, 1,660 Mcf/d
Tonkawa
Hagerman #1-25H
Roger Mills, OK
9,620’
1,059 Bo/d, 1,490 Mcf/d
Tonkawa
Denny 2-19H
Roger Mills, OK
8,467’
480 Bo/d, 400 Mcf/d
Cleveland
Knox Pipkin 28 #4H
Ochiltree, TX
6,836’
1,079 Bo/d, 1,229 Mcf/d
Cleveland
Leland Mekeel 226-5H
Ochiltree, TX
7,608’
407 Bo/d, 680 Mcf/d
Cottage Grove
Bartz 19 #21-19H
Wheeler, TX
10,703’
1,124 Bo/d, 1,400 Mcf/d
Canyon Wash
Boys Ranch 116 #5
Oldham, TX
9,501’
1,983 Bo/d, 1,576 Mcf/d
11
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf Coast Onshore
Third-quarter 2013 production in the Gulf Coast Onshore averaged GULF COAST 31,823 Boe/d, 3 percent higher than the second quarter of 2013 and 18 ONSHORE KEY STATS percent higher than the third quarter of 2012. Third-Quarter 2013 Gas production grew to 111 MMcf/d, primarily due to a new well at Q3 Production: 31,823 Boe/d Flores field and recompletions at South Pass 24 and Second Bayou Q3 Wells: 7 wells, 6 net Q3 Operated Rigs: Avg 1 rigs fields. In addition, in Atchafalaya Bay the SL 20369 #3 well IP’d at 41.5 MMcf/d and 136 Bo/d. Oil production for the quarter averaged 11,126 bo/d, up 5 percent over the second quarter of 2013. Increased oil volumes were driven by workovers, recompletions and new drilling activities at South Pass 24, Golden Meadow and rate improved performance from the Lake Paige field. In early September, an additional compressor at the W-1 facility was installed to allow for new drills and recompletions in the South Pass 24 field resulting in increased production. To handle increased production at Golden Meadow, a new facility will be constructed and completed in the fourth quarter of 2013. Also, a new 8” flow line to connect two other batteries in the field is nearing completion and will enable Apache to open new production to the north and optimize existing production.
APACHE GULF COAST ONSHORE REGION ACREAGE AND KEY PROJECTS
12
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf Coast Onshore (Continued) GULF COAST ONSHORE WELL HIGHLIGHTS Third-Quarter 2013
PLAY/TARGET Atchafalaya Bay Austin Chalk Golden Meadow Field
WELL NAME SL 20369 #3 Liebscher O.L. Unit #2H SL 378 #156 SL 378 #154
COUNTY, ST
TVD
LATERAL
IP
St. Mary, LA
18,800’
N/A
136 Bo/d, 41,510 Mcf/d
Washington, TX
17,000’
5,659’
591 Bo/d, 2,662 Mcf/d
LaFourche, LA
2,879’
N/A
384 Bo/d, 85 Mcf/d
LaFourche, LA
2,846’
N/A
140 Bo/d, 27 Mcf/d
13
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf of Mexico Shelf
Third-quarter 2013 production in the Gulf of Mexico Shelf was 91,245 GOM SHELF KEY STATS Boe/d, a 2 percent increase from the third quarter of 2012. Third-Quarter 2013 During the quarter, Apache averaged five rigs and drilled a total of five Q3 Production: 91,245 Boe/d gross (three net) wells. Q3 Wells: 5 wells, 3 net In Apache’s shallow-water sub-salt exploration play, the Heron well (Main Q3 Operated Rigs: Avg 5 rigs Pass Block 295), has reached measured depth of 19,555 feet. In addition to the previously announced 76 feet of net oil pay encountered in two shallow sands, the well subsequently found oil pay across multiple sands between 11,400 feet and 16,700 feet MD, bringing the total to 100 feet of net oil pay. The well is being evaluated to determine delineation and development program for the discovery, with follow-up drilling expected to begin around year-end 2013. On September 30, 2013, Apache closed its previously announced sale of Gulf of Mexico Shelf assets. Apache retained 50 percent ownership in all explorations blocks and in horizons below production in developed blocks, where high-potential deep hydrocarbon plays are being tested.
14
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf of Mexico Deepwater
Third-quarter 2013 production in the Gulf of Mexico Deepwater was 10,098 Boe/d. In September, Apache began drilling the San Marcos Prospect utilizing the Ensco 8505 rig. Located in MC 983, the well is targeting middle Miocene sands in a three-way sub-salt closure. Apache has 10 Exploration Plans for new wells approved by the Federal Government allowing the region to stay out in front of contracted rigs.
GOM DW KEY STATS
Third-Quarter 2013 Q3 Production: 10,098 Boe/d Q3 Wells: 0 wells Q3 Operated Rigs: Avg
2013 3rd Quarter
EARNINGS RELEASE OPERATIONS SUPPLEMENT
TABLE OF CONTENTS Overview ............................................................................................................................................................................... 2 NORTH AMERICA .............................................................................................................................................................. 6 Permian......................................................................................................................................................................... 6 Central .......................................................................................................................................................................... 9 Gulf Coast Onshore ..................................................................................................................................................... 12 Gulf of Mexico Shelf.................................................................................................................................................... 14 Gulf of Mexico Deepwater .......................................................................................................................................... 15 Canada ........................................................................................................................................................................ 16 INTERNATIONAL ............................................................................................................................................................. 19 Egypt ........................................................................................................................................................................... 19 Australia ...................................................................................................................................................................... 22 North Sea .................................................................................................................................................................... 24 Argentina .................................................................................................................................................................... 25
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
NOTICE TO INVESTORS This operations supplement contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and, whenever possible, are identified by use of the words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions, risks and uncertainties, including, without limitation, our assumptions and estimates about the market prices of oil, natural gas, NGLs and other products or services, our commodity hedging arrangements, the supply and demand for oil, natural gas, NGLs and other products or services, production and reserve levels, drilling risks, the number of wells drilled, economic and competitive conditions, the availability of capital resources, capital expenditure and other contractual obligations, and our ability to complete, test and produce the wells identified in this supplement. Because such statements involve risks and uncertainties, Apache’s actual results and performance may differ materially from the results expressed or implied by the forward-looking statements contained in this Supplement. Other important factors that could cause actual results to differ materially from expected results are described in “Risk Factors” in our most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q and amendments thereto, available on our Web site and in our other public filings and press releases. There is no assurance that Apache's expectations will be realized, and readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date hereof. Unless otherwise required by law, we assume no duty to update these statements as of any future date. Cautionary Note to Investors: The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache may use certain terms in this operational update supplement, such as “resources,” “potential resources,” “resource potential,” “reserves potential,” and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov. Certain information provided in this supplement includes financial measurements that are not required by, or presented in accordance with, generally accepted accounting principles (GAAP), including these measures: adjusted earnings, pre-tax margin, and cash from operations. These non-GAAP measures should not be considered as alternatives to GAAP measures, such as net income or cash from operating activities, and may be calculated differently from, and therefore may not be comparable to, similarly titled measures used at other companies. Reconciliation to the most directly comparable GAAP financial measure has been provided. None of the information contained in this document has been audited by any independent auditor. This supplemental document is prepared as a convenience for securities analysts and investors and may be useful as a reference tool. Apache intends to continue to publish this supplement in conjunction with our quarterly earnings release, but may elect to modify the format or discontinue publication at any time, without notice to securities analysts or investors.
1
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Overview North America onshore liquids production grew 8 percent over the second quarter 2013 and by 49,000 Bbls/d or, 35 percent, over the third quarter 2012
Apache averaged 125 rigs worldwide during the third quarter, GLOBAL KEY STATS* 67 percent of which were onshore North America. Third-Quarter 2013 The company completed 389 gross wells during the quarter, 85 Q3 Production: 784,331 Boe/d percent of which were onshore North America. Q3 Wells: 389 wells, 278 net North American onshore regions, which include Permian, Q3 Operated Rigs: Avg 125 rigs Central, Gulf Coast Onshore and Canada, collectively grew liquids production 8 percent over the second quarter of 2013 to 188 Mbbls/d. The Permian and Central regions were the main drivers of NA ONSHORE KEY STATS North American onshore liquids growth. Third-Quarter 2013 These two regions drilled 299 gross wells, or 91 percent of Q3 Production: 372,080 Boe/d the total wells drilled in North America and 77 percent of Q3 Wells: 329 wells, 227 net the wells drilled globally. Q3 Operated Rigs: Avg 84 rigs Permian and Central combined grew liquids production 12.6 Mbbls/d over the second quarter of 2013, or 9 percent, to over 149 Mbbls/d, which represented 35 percent of total worldwide liquids production. Combined total production from the Permian and Central regions was 226 Mboe/d, representing 29 percent of total company production. Total worldwide net daily production of oil, natural gas, and natural gas liquids averaged 784 Mboe/d in the third quarter with liquids production comprising 54 percent of the total. APACHE WORLDWIDE OPERATIONS
2
* The number of wells reported as drilled and/or completed could be subject to reclassification which may cause adjustments to reported amounts in future periods. The number of wells reported is subject to SEC standards and therefore, along with other SEC guidelines, includes completed wells only.
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
THIRD-QUARTER PRODUCTION BY REGION 784 Mboe/d Australia
Argentina
7%
North Sea
5%
9%
Central
12%
19%
Egypt
N.A. Onshore 47%
17% Permian
GOM DW
1% 4%
12% GOM Shelf
GC Onshore
14% Canada
THIRD-QUARTER PRODUCTION BY PRODUCT 784 Mboe/d
THIRD-QUARTER REVENUE BY PRODUCT $4.4 Billion International Liquids $1.8 Bn
North American Liquids
International Liquids
North American Liquids $1.9 Bn
31%
23%
40%
44%
17%
29% International Gas
6%
North American Gas
North America Onshore
International Gas $0.3 Bn
International & Offshore
3
Liquids
10%
North American Gas $0.4 Bn
Natural Gas
30%
19%
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT 21% 29%
ACTUAL 2009 VERSUS PRO FORMA 3Q 2013 PRODUCTION COMPARISON* ACTUAL 2009 583 Mboe/d Australia
7%
PRO FORMA THIRD-QUARTER 2013 625 Mboe/d Australia
Argentina
8%
9%
Central
6%
North Sea
Argentina
7%
North Sea
11%
Central
11%
15%
9% Permian GC
3% Onshore
Egypt
26%
Egypt N.A. Onshore 32%
N.A. Onshore 56%
16%
13%
21%
Canada
1% Permian
GOM DW
15%
17% Canada GOM Shelf
ACTUAL 2009 PRODUCTION BY PRODUCT 583 Mboe/d International Liquids
North American Liquids
International Liquids
24%
19%
31%
18%
21% International Gas
GC Onshore
PRO FORMA THIRD-QUARTER 2013 PRODUCTION BY PRODUCT 625 Mboe/d
North American Liquids
30%
5%
29%
27%
International Gas North American Gas
North America Onshore
North American Gas
International & Offshore
Liquids
Natural Gas
*Pro forma represents third-quarter volumes less divested volumes from GOM Shelf, Canada and Egypt (once completed).
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
CENTRAL AND PERMIAN PRODUCTION
232
636
725 333 139 618
Total Production (Mboe/d)
240
240
226 23%
220 200
Liquids Production (Mbbls/d)
220 200
184
180
180
160
18%
132
Permian
140 120
120
100
80
80
60
31%
107
72
28%
Central 40
69%
49
NGLs
100
Oil
29
60
94
20
78
20
0
% Liquids
Liquids
39%
140
112
100
40
149
160
0 3Q 2012
3Q 2013
58%
66%
3Q 2012
5
3Q 2013
APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
NORTH AMERICA Permian
Third-quarter 2013 production in the Permian averaged a record 131,665 Boe/d (76 percent liquids), increasing 18 percent over the third quarter of PERMIAN KEY STATS Third-Quarter 2013 2012. Production was affected by unplanned facility downtime resulting in Q3 Production: 131,665 Boe/d Q3 Wells: 208 wells, 155 net deferred production of approximately 2,814 Boe/d. Q3 Operated Rigs: Avg 45 rigs For the quarter, the Permian averaged 45 drilling rigs, spud 240 gross wells (of which 66 were horizontal) and completed 208 gross (155 net) wells. Looking into the fourth quarter of 2013, the region expects to maintain an active rig count of 44 rigs, with approximately 23 drilling horizontal wells.
APACHE PERMIAN REGION ACREAGE AND KEY PLAYS
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Permian (Continued) WOLFCAMP SHALE
Apache has an estimated 450,000 gross acres (345,000 net) prospective for Wolfcamp Shale with an estimated 347 MMboe of resource potential from 971 identified drilling locations. The Barnhart area was extremely active during the third quarter, with six rigs drilling 20 Middle and Upper Wolfcamp laterals. By the end of the third quarter, the region had drilled 56 wells with plans to spud 20 additional wells in the fourth quarter. To handle this growing production from the region, a new gas delivery point has been added to the Barnhart area. In addition to the six rigs drilling horizontal wells in the Barnhart area of Irion county, Apache also had one rig in Upton county and one in Reagan county drilling Upper and Middle Wolfcamp Shale wells with encouraging results.
CLINE SHALE
Apache has an estimated 650,000 gross acres (520,000 net) prospective for Cline Shale development with an estimated 642 MMboe of resource potential from 2,300 identified drilling locations. Three rigs drilled 12 Lower Cline wells during the quarter. Fewer wells per section, more stages per frac and 3D seismic inversion interpretations have all helped to increase the overall production of these wells; ongoing evaluation of these parameters will further optimize the Lower Cline horizontal program.
MIDLAND BASIN VERTICAL
Apache has an estimated 1.1 million gross acres (625,000 net) in the Midland Basin vertical play area with an estimated 1.7 Bboe of resource potential from over 17,800 identified drilling locations. During the third quarter, Apache continued to focus on building inventory in the vertical Fusselman play, testing Fusselman field extensions in new structures. In addition, the region continued to highgrade Wolfwood locations and test 20-acre infill wells. During the third quarter, three notable Fusselman wells averaged approximately 340 Boe/d (76 percent oil) and a notable Wolfwood well from the southern area of the Deadwood core acreage averaged approximately 688 Boe/d on a 12-day test. The Deadwood Plant continues to process at capacity and after an additional delivery point upgrade to increase capacity in the second quarter, no gas takeaway constraints were experienced.
CENTRAL BASIN PLATFORM (CBP)
Apache has an estimated 1.7 million gross acres (780,000 net) in the CBP with an estimated 690 MMboe of resource potential from nearly 9,800 identified drilling locations. In the Three Bar Shallow Unit, three active drilling rigs spud a total of six horizontal wells during the third quarter with development focused on the Lower Wichita Albany landing zone. Production optimization operations are focused on water handling, gas takeaway and pump placement. The initial phase of field development at the Three Bar Shallow Unit will commence in the fourth quarter and an infill drilling program will be tested in early 2014.
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Permian (Continued) NORTHWEST SHELF - YESO
Apache has approximately 105,000 gross acres (70,000 net) in the Yeso play with 1,800 identified locations and an estimated 108 MMboe of resource potential. Three drilling rigs (two vertical and one horizontal) spud a total of 22 vertical wells and five horizontal wells during the third quarter.
DELAWARE BASIN
Apache has an estimated 609,000 gross acres (287,000 net) in the Delaware Basin with an estimated 284 MMboe resource. In the Pecos Bend area of Loving and Reeves Counties, Texas, Apache are running two rigs and six additional rd horizontal wells are expected to be completed by year-end. The Cardinal 4-1H was drilled to 3 Bone Springs sand fracing the Upper Wolfcamp section across 17 stages. The 30-day average IP for the Cardinal was 824 Boe/d.
PERMIAN WELL HIGHLIGHTS Third-Quarter 2013
PLAY/TARGET Fusselman Wolfwood Wolfcamp Shale (U)
Wolfcamp Shale (M)
WELL NAME
COUNTY, ST
TVD
LATERAL
IP (30-Day)
Squire 9007
Glasscock, TX
10,460’
N/A
567 Boe/d
Maui 5 #1
Glasscock, TX
10,810’
N/A
410 Boe/d
Cook 21 #19
Glasscock, TX
10,420’
N/A
734 Boe/d
Upton, TX
9,057’
4,876’
784 Boe/d (7 days)
Sugg 4948 #H23M
Irion, TX
7,900’
7,150’
502 Boe/d
Clinch #H53LU
Irion, TX
8,137’
8,589’
620 Boe/d
Upton, TX
9,438’
4,878’
821 Boe/d
Glasscock, TX
9,300’
4,917’
413 Boe/d
Ector, TX
11,100’
N/A
549 Boe/d
Andrews, TX
7,028’
6,342’
1,086 Boe/d
Miller 36 #2 HU
Miller 36 #1 HM Cline Shale
Marlin 47 #4H
Wolfberry/Penn
Augusta Barrow #2302
Wichita Albany
Three Bar Shallow Unit 117H
Grayburg
Cowden 10 #6H
Crane, TX
2,970’
4,263’
553 Boe/d
Wolfcamp
Cardinal 4 1H
Loving, TX
11,114’
3,500’
824 Boe/d
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Central
Third-quarter 2013 production in the Central Region was a record 94,773 CENTRAL KEY STATS Boe/d, up 4 percent over the second quarter of 2013 and up 31 percent Third-Quarter 2013 over the third quarter of 2012. Q3 Production: 94,773 Boe/d Liquids production increased 9 percent over the second quarter of 2013 to Q3 Wells: 91 wells, 49 net 49 Mbbl/d and up 94 percent from the third quarter of 2012. Q3 Operated Rigs: Avg 31 rigs Liquids constitute 52 percent of production (oil is 27%), up from 35 percent in the third quarter of 2012. For the quarter, the Central Region averaged 31 drilling rigs and drilled 91 gross (49 net) wells. Apache continues to work numerous plays across its two million gross acreage position focusing on the liquids-rich Granite Wash and the oily Tonkawa, Marmaton, Cottage Grove, Cleveland and Canyon Wash plays. Horizontal drilling and multi-stage fracking have resulted in tremendous opportunities in the low permeability Anadarko Basin. Apache is continuing to set itself up for future development by expanding our existing plays. During the quarter, the Apache increased its acreage position by continuing to lease and renew acres. By year-end Apache expect to have added over 50,000 net acres in strategic locations throughout the basin.
APACHE CENTRAL REGION ACREAGE AND KEY PLAYS
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Central (Continued) GRANITE WASH
Apache holds approximately 828,000 gross (418,000 net) acres prospective for the Granite Wash with an estimated resource potential of 4.5 Bboe from 22,800 drilling locations. During the quarter, Apache drilled and completed 15 gross Granite Wash wells. Apache has drilled over 164 Granite Wash horizontals during the last 5 years with consistently strong results.
TONKAWA
Apache holds an estimated 810,000 gross (310,000 net) acres prospective for the Tonkawa with an estimated resource potential of 202 MMboe from 2,800 drilling locations. During the quarter, Apache drilled and completed 31 gross Tonkawa wells. Apache continues to be a dominant player in the Tonkawa play, completing more wells in the formation than any other company.
MARMATON
Apache holds an estimated 662,000 gross (512,000 net) acres in the Marmaton with an estimated resource potential of 161 MMboe from 1,593 drilling locations. During the quarter, Apache drilled and completed 15 gross Marmaton wells.
CLEVELAND
Apache holds an estimated 768,000 gross (438,000 net) acres in the oil-rich Cleveland play with an estimated resource potential of 195 MMboe from 2,302 drilling locations. During the quarter, Apache drilled and completed 11 gross Cleveland wells.
COTTAGE GROVE
Apache holds an estimated 238,000 gross (100,000 net) acres in the oil-rich Cottage Grove. During the quarter, Apache drilled and completed ten gross Cottage Grove wells. The Cottage Grove play now has over a dozen successful tests to date with another 18 scheduled in 2014.
CANYON WASH
Apache holds an estimated 147,000 gross (100,000 net) acres prospective for the Canyon Wash in the Bivins Ranch area (Whittenburg Basin) with an estimated 101 MMboe of resource potential from 1,016 drilling locations. During the quarter, Apache drilled and completed five gross Canyon Wash wells.
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Central (Continued) CENTRAL WELL HIGHLIGHTS Third-Quarter 2013
PLAY/TARGET
WELL NAME
COUNTY, ST
TVD
IP
Granite Wash
Ramp 26 #7H
Hemphill, TX
11,193’
191 Bo/d, 7,354 Mcf/d
Granite Wash
Stiles 3 #20-3H
Wheeler, TX
12,646’
436 Bo/d, 6,900 Mcf/d
Sweetwater
Stiles 29-3H
Wheeler, TX
11,322’
726 Bo/d, 1,660 Mcf/d
Tonkawa
Hagerman #1-25H
Roger Mills, OK
9,620’
1,059 Bo/d, 1,490 Mcf/d
Tonkawa
Denny 2-19H
Roger Mills, OK
8,467’
480 Bo/d, 400 Mcf/d
Cleveland
Knox Pipkin 28 #4H
Ochiltree, TX
6,836’
1,079 Bo/d, 1,229 Mcf/d
Cleveland
Leland Mekeel 226-5H
Ochiltree, TX
7,608’
407 Bo/d, 680 Mcf/d
Cottage Grove
Bartz 19 #21-19H
Wheeler, TX
10,703’
1,124 Bo/d, 1,400 Mcf/d
Canyon Wash
Boys Ranch 116 #5
Oldham, TX
9,501’
1,983 Bo/d, 1,576 Mcf/d
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf Coast Onshore
Third-quarter 2013 production in the Gulf Coast Onshore averaged GULF COAST 31,823 Boe/d, 3 percent higher than the second quarter of 2013 and 18 ONSHORE KEY STATS percent higher than the third quarter of 2012. Third-Quarter 2013 Gas production grew to 111 MMcf/d, primarily due to a new well at Q3 Production: 31,823 Boe/d Flores field and recompletions at South Pass 24 and Second Bayou Q3 Wells: 7 wells, 6 net Q3 Operated Rigs: Avg 1 rigs fields. In addition, in Atchafalaya Bay the SL 20369 #3 well IP’d at 41.5 MMcf/d and 136 Bo/d. Oil production for the quarter averaged 11,126 bo/d, up 5 percent over the second quarter of 2013. Increased oil volumes were driven by workovers, recompletions and new drilling activities at South Pass 24, Golden Meadow and rate improved performance from the Lake Paige field. In early September, an additional compressor at the W-1 facility was installed to allow for new drills and recompletions in the South Pass 24 field resulting in increased production. To handle increased production at Golden Meadow, a new facility will be constructed and completed in the fourth quarter of 2013. Also, a new 8” flow line to connect two other batteries in the field is nearing completion and will enable Apache to open new production to the north and optimize existing production.
APACHE GULF COAST ONSHORE REGION ACREAGE AND KEY PROJECTS
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf Coast Onshore (Continued) GULF COAST ONSHORE WELL HIGHLIGHTS Third-Quarter 2013
PLAY/TARGET Atchafalaya Bay Austin Chalk Golden Meadow Field
WELL NAME SL 20369 #3 Liebscher O.L. Unit #2H SL 378 #156 SL 378 #154
COUNTY, ST
TVD
LATERAL
IP
St. Mary, LA
18,800’
N/A
136 Bo/d, 41,510 Mcf/d
Washington, TX
17,000’
5,659’
591 Bo/d, 2,662 Mcf/d
LaFourche, LA
2,879’
N/A
384 Bo/d, 85 Mcf/d
LaFourche, LA
2,846’
N/A
140 Bo/d, 27 Mcf/d
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf of Mexico Shelf
Third-quarter 2013 production in the Gulf of Mexico Shelf was 91,245 GOM SHELF KEY STATS Boe/d, a 2 percent increase from the third quarter of 2012. Third-Quarter 2013 During the quarter, Apache averaged five rigs and drilled a total of five Q3 Production: 91,245 Boe/d gross (three net) wells. Q3 Wells: 5 wells, 3 net In Apache’s shallow-water sub-salt exploration play, the Heron well (Main Q3 Operated Rigs: Avg 5 rigs Pass Block 295), has reached measured depth of 19,555 feet. In addition to the previously announced 76 feet of net oil pay encountered in two shallow sands, the well subsequently found oil pay across multiple sands between 11,400 feet and 16,700 feet MD, bringing the total to 100 feet of net oil pay. The well is being evaluated to determine delineation and development program for the discovery, with follow-up drilling expected to begin around year-end 2013. On September 30, 2013, Apache closed its previously announced sale of Gulf of Mexico Shelf assets. Apache retained 50 percent ownership in all explorations blocks and in horizons below production in developed blocks, where high-potential deep hydrocarbon plays are being tested.
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APACHE THIRD-QUARTER 2013 EARNINGS RELEASE OPERATIONS SUPPLEMENT
Gulf of Mexico Deepwater
Third-quarter 2013 production in the Gulf of Mexico Deepwater was 10,098 Boe/d. In September, Apache began drilling the San Marcos Prospect utilizing the Ensco 8505 rig. Located in MC 983, the well is targeting middle Miocene sands in a three-way sub-salt closure. Apache has 10 Exploration Plans for new wells approved by the Federal Government allowing the region to stay out in front of contracted rigs.
GOM DW KEY STATS
Third-Quarter 2013 Q3 Production: 10,098 Boe/d Q3 Wells: 0 wells Q3 Operated Rigs: Avg
