QUOTE AND NEWS
TheStreet.com  Oct 15  Comment 
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. aTheStreet Ratings quantitative algorithm...
Market Intelligence Center  Oct 15  Comment 
With bearish technical indicators and a 3 STARS (out of 5) hold ranking from Standard & Poor’s, Apache Corp (APA) could be an attractive play for investors according to MarketIntelligenceCenter.com's patented option-trade picking algorithms. A...
OilVoice  Oct 15  Comment 
Apache Corporation NYSE Nasdaq APA announce that Alfonso Leon executive vice president and chief financial officer has resigned to pursue other opportunities. Leon39s departure is not related
StreetInsider.com  Oct 14  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Management+Changes/Apache+Corporation+%28APA%29+CFO+Leon+Resigns/9909990.html for the full story.
Jutia Group  Oct 14  Comment 
[PR Newswire] - HOUSTON, Oct. 14, 2014 /PRNewswire/ -- Apache Corporation (NYSE, Nasdaq: APA) today announced that Alfonso Leon, executive vice president and chief financial officer, has resigned to pursue other opportunities. ... Read more on...
newratings.com  Oct 13  Comment 
WASHINGTON (dpa-AFX) - Apache Corporation (APA) Tuesday said its Chief Financial Officer Alfonso Leon has resigned to pursue other opportunities. The oil and natural gas producer has appointed Executive Vice President Anthony Lannie as interim...
Market Intelligence Center  Oct 9  Comment 
Apache Corp (APA) is a good candidate for a covered call at the $87.50 level. The Jan. '15 call at that price should fetch a credit of about $3.55, which means the entire position has a net debit of about $81.88. This trade has 2.96% downside...
The Hindu Business Line  Oct 9  Comment 
The tax authorities of India and Japan will soon ink a bilateral advance pricing agreement in respect of a Japanese company, Revenue Secretary Shaktikanta Das has said. This will give a...
Market Intelligence Center  Oct 6  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center are highlighting two trades on Apache Corp (APA) today after it closed at $86.95 on Friday. For more conservative investors, look...
StreetInsider.com  Oct 1  Comment 
* Enterprise Products Partners (NYSE: EPD) has acquired the general partner and related incentive distribution rights, 15,899,802 common units and 38,899,802 subordinated units in Oiltanking Partners L.P. (NYSE: OILT) held by Oiltanking Holding...




 

Apache Corp. (NYSE:APA) is an independent energy company that engages in the exploration, development, and production of natural gas, crude oil, and natural gas liquids.[1] In recent years, Apache’s portfolio of exploration and production interests has grown through strategic acquisitions across the globe.[2] Apaches exploration and production operations are located in the Gulf Coast, Central regions in the U.S., Canada, Egypt, the North Sea, Australia, and Argentina. In total, Apache’s acreage positions are 39 million gross acres across the globe.[3]


Company Overview

The steep decline in oil and gas prices coupled with the global financial crisis that began in 2007 pushed Apache to focus on maintaining cash flow and cutting costs in order to build the company’s financial flexibility. Apache's business segments are divided by geographical region. For Apache, diversification in terms of geography and energy products has been a key strategy. For the same year, crude oil and liquids provided half of the company’s production more than half of the company's revenue.[4]

The United States

Apache’s U.S. interests are divided into a Gulf Coast region and a Central region. The Gulf Coast region covers areas on and offshore of Louisiana and Texas. In 2009, operations in the Gulf Coast produced about 20% of the company’s worldwide production and accounted for 13% of estimated proved reserves.[5] The Central region pertains to interests in Anadarko Basin, The East Texas Basin, and the Permian Basin. The Central region provides 27% of proved reserves and has grown from approximately 3,000 in 2000 wells to over 10,000 by 2010.[6] For drilling, recompletion projects, development projects, equipment upgrades, production enhancement projects, seismic acquisition and abandonment activities, Apache plans to invest $1.4 billion in its Gulf interests and $375 to $400 million in its Central region interests.[7]

Canada

Apache has approximately 4.4 million net acres across provinces of British Columbia, Alberta, and Saskatchewan.[8] In total, interests in Apache’s Canada region provided 22% of proved reserves in 2009.[9] In this region, Apache has expanded its natural gas and liquid natural gas operations through joint ventures with energy companies like Horn River resources, Corridor resources, and Kitimat LNG Incorporated.[10]

Egypt

Apache is the largest producer of liquid hydrocarbons and natural gas in the Western Desert and the third largest producer in all of Egypt.[11] Production in the region contributed 30% of 2009 revenue and 26% of total production. 13% of Apache’s proved reserves in 2009 came from interests located in Egypt.[12] Apache’s capital expenditure budget for 2010 is approximately $1.0 billion to $1.1 billion.[13]

As of January 27, Apache's operations and oil and gas production remain unaffected by current events in Egypt. [14] However, instability caused by protesters and security forces have the potential of disrupting Apache's operations in the region, which represented almost a third of 2009 revenues. Instability caused by government changes also has the potential of affecting operations. [15]

Australia

Apache holds 4.3 million net acres in 31 exploration permits, 14 production licenses and three retention leases located across Australia.[16] Although production from the region accounted for only 7% of total production in 2009, equivalent production rose 40% year-over-year.[17] Apache has well-developed growth strategies for projects in the Carnarvon Basin and other regions in Australia. In 2010, the company began production at two large oil development projects called Van Gogh and Pyrenees. Peak production from the Van Gogh and Pyrenees discoveries is projected to reach a combined 40,000 barrels per day net to Apache.[18] Capex budget is expected to be $1.1 billion to $1.2 billion in 2010.[19]

In September 2010, Apache and BHP Billiton (BHP) announced a $1.5 billion development project for gas fields off the coast of Western Australia.[20] The project is designed to develop four offshore wells to produce for an onshore processing plant with daily processing capacity of 200 million cubic feet.[21] Apache plans to invest about $430 million to take a 28.57% interest in the project.[22]

In October 2010, Apache announced an agreement with a subsidiary of Chevron and Tokyo Electric Power Company regarding the sale of LNGs from a project in Western Australia.[23] Chevron and TEPCO own the project in Western Australia, and agreed in December 2009 to deliver 3.1 million tons of annum of LNG for up to 20 year. Along with Kufpec, the Apache subsidiary plans to provide 25% of the LNG. [24]

In January 2011, Apache reported that shutdowns in the Van Gogh oil field due to cyclone-related downtimes should be completed during the beginning of Feburary.[25] Much of Apache's operations in Western Australia are susceptible to shutdowns and damages resulting from seasonal storms.[26]

North Sea

Apache entered the North Sea after acquiring a 97% working interest in the Forties field in 2003.[27] In 2009, production from the North Seas region totaled 22.4 MMBoe, which was 11% of total worldwide production.[28] Approximately 99% of production was oil.[29] Proved reserves account for 7% of total reserves in 2009. Capital expenditures are budgeted to be between $625 million to $675 million for 2010. [30]

Argentina

Apache has expanded its operations in Argentina through acquisitions. In 2009, the region produced 16.6 MMboe from 29.6 net wells.[31] Through capital projects and development, Apache added an estimated 14.4 MMboe in reserves and brought regional reserves to 119.0 MMboe, which is approximately 5% of Apache’s worldwide total.[32]

Chile

In November 2007, Apache was awarded exploration rights on two blocks comprising approximately one million net acres on the Chilean side of Tierra del Fuego, which is adjacent to a portion of its Argentina operations.[33] From 2007 to 2010, Apache received approval to begin testing, exploring, and producing from its Chilean interests.[34] This segment may serve as a source of significant future revenues, as Apache has just begun exploring and producing oil from this segment.

Trends and Forces

Oil Majors Develop Response System for Deepwater Oil Spills

In an effort to respond to criticism from members of Congress and to reassure the public after the Deepwater Horizon rig disaster, some of the oil majors have come together to prepare for deepwater oil spills.[35] In July 2010 Exxon Mobil (XOM), Chevron Corporation (CVX), CONOCOPHILLIPS (COP) and Royal Dutch Shell (RDS'A) agreed to pool $1 billion to establish a new company, which would be tasked to respond to offshore oil spills at up to 10,000 feet underwater. Apache Deepwater LLC, a subsidiary of Apache (APA), subsequently joined on March 16, 2011.[36] The company would deploy equipment that could arrive within days and be operational in weeks of a spill.[35]

The company would be a nonprofit organization called the Marine Well Containment Company and would operate the response system that would be used for any spills.[35] The response system would use underwater equipment designed to seal busted wells and have the ability to separate oil from gas and bring it to the surface where the gas would be burned off and oil would be stored in containers. The equipment should be useful in depths up to 10,000 feet.[35] Currently, the system has capacity to contain up to 60,000 barrels per day of fluid in up to 8,000 feet of water, with plans to expand to 100,000 barrels per day in up to 10,000 feet by 2012.[36]

The establishment of the company is an effort for the oil majors to demonstrate that plans are in place to minimize any potential damage of deepwater drilling. All four companies rely significantly on offshore drilling, while Shell and Chevron have significant operations in the Gulf of Mexico. All companies will participate, however ExxonMobil will lead the effort.[35]

Apache's aggressive acquisitions strategy

During the first half of 2010, Apache struck three major energy deals designed to expand the company's core production assets. From the acquisitions, Apache increased its assets in North America, the Gulf, and Egypt, which were all area that provided a large percentage of Apache's production and reserves numbers in 2009.[37] To pay for these acquisitions, the company plans to principally use debt instruments and equity sales.[38] Many analysts are concerned that Apache's aggressive expansion into these areas has the potential of over-extending the company's debt load and diluting its earnings per share for the remainder of 2010.[39] The acquisitions are described below:

Apache's Mature Extraction Strategy Requires High Oil Prices to Be Successful

Apache's expansion strategy involves buying up mature properties from larger oil companies and drying them out. This involves the use of complicated, expensive technologies that allow old wells to be more fully depleted and new wells to be drilled where the terrain was too difficult before. In the current high-price environment, Apache can make a killing by extracting from these more difficult wells, especially if it can keep its costs as low as possible (primarily by buying the properties at lower rates because they are mature). If oil and gas prices fall, however, the company's margins would fall significantly.

Apache's Growth is Rife with Political Risk

With 70% of its reserves in the dying North American region, Apache's growth is strongly dependent on its ability to obtain new international reserves. The company's strategy of buying reserves that larger oil companies do not want to continue to drill means that current international markets, many of which are situated in politically unstable regions that are either rife with terrorism or have high risk of asset nationalization, are going to end up as part of Apache's holdings in the future. This makes the company's growth very sensitive to international political currents.

Competition

Apache's main competitors lie in the independent oil and gas sector, since the major oil companies like Exxon Mobil and BP are too large and diverse to fairly be called "competition". Among Apache's independent competitors are Anadarko Petroleum, Cabot Oil & Gas, Comstock Resources, and EnCana. Anadarko Petroleum is by far the largest of these, and about the same size as Apache, producing 25,000 less barrels of oil and three hundred million more cubic feet of gas. Comstock Resources is the smallest of Apache's competitors, and is betting on deepwater exploration to deliver in the future. Cabot Oil & Gas has natural gas in 97% of its reserves[40]), but is focused only on onshore North American development, possibly limiting its growth potential. Of these competitors, EnCana is the largest producer of natural gas, though Canadian regulations and a dependence on the exchange rate for short-run margins health makes it more vulnerable to macroeconomic conditions than Apache.

Notes

  1. Apache Corp. 2009 10-K form
  2. Apache Corp. 2009 10-K form
  3. Apache Corp. 2009 10-K form
  4. Apache Corp. 2009 10-K form
  5. Apache Corp. 2009 10-K form
  6. Apache Corp. 2009 10-K form
  7. Apache Corp. 2009 10-K form
  8. Apache Corp. 2009 10-K form
  9. Apache Corp. 2009 10-K form
  10. Apache Corp. 2009 10-K form
  11. Apache Corp. 2009 10-K form
  12. Apache Corp. 2009 10-K form
  13. Apache Corp. 2009 10-K form
  14. Bloomberg.com:Apache’s Production in Egypt Unaffected by Protests, January 2010
  15. Bloomberg.com:Apache’s Production in Egypt Unaffected by Protests, January 2010
  16. Apache Corp. 2009 10-K form
  17. Apache Corp. 2009 10-K form
  18. Apache Corp. 2009 10-K form
  19. Apache Corp. 2009 10-K form
  20. businessweek.com: Apache, BHP to develop Australian gas field, September 2010
  21. businessweek.com: Apache, BHP to develop Australian gas field, September 2010
  22. businessweek.com: Apache, BHP to develop Australian gas field, September 2010
  23. [http://www.prnewswire.com/news-releases/apache-announces-agreement-with-chevron-and-tokyo-electric-regarding-lng-sales-from-wheatstone-project-in-western-australia-104698534.html Prnewswire: Apache Announces Agreement With Chevron and Tokyo Electric Regarding LNG Sales From Wheatstone Project in Western Australia October, 2010]
  24. [http://www.prnewswire.com/news-releases/apache-announces-agreement-with-chevron-and-tokyo-electric-regarding-lng-sales-from-wheatstone-project-in-western-australia-104698534.html Prnewswire: Apache Announces Agreement With Chevron and Tokyo Electric Regarding LNG Sales From Wheatstone Project in Western Australia October, 2010]
  25. Apache Press Releases: Apache Australia operations update, January 2011
  26. Apache Press Releases: Apache Australia operations update, January 2011
  27. Apache Corp. 2009 10-K form
  28. Apache Corp. 2009 10-K form
  29. Apache Corp. 2009 10-K form
  30. Apache Corp. 2009 10-K form
  31. Apache Corp. 2009 10-K form
  32. Apache Corp. 2009 10-K form
  33. Apache Corp. 2009 10-K form
  34. Apache Corp. 2009 10-K form
  35. 35.0 35.1 35.2 35.3 35.4 Kahn, Chris "Big Oil Plans Rapid Response To Future Spills" TheStreet.com, July 21, 2010
  36. 36.0 36.1 MWCC Welcomes Apache
  37. WSJ: Apache's $7 Bln Deal With BP Seen As Paying Off In The Long Run, July 2010
  38. WSJ: Apache's $7 Bln Deal With BP Seen As Paying Off In The Long Run, July 2010
  39. WSJ: Apache's $7 Bln Deal With BP Seen As Paying Off In The Long Run, July 2010
  40. Reuters, Cabot Oil & Gas Corp, http://stocks.us.reuters.com/stocks/fullDescription.asp?rpc=66&symbol=COG


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