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Apache Corporation revises capex down, sells assets

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Apache Corporation’s 2015 capex plans

We’ve seen the effect of lower crude oil prices on North American energy companies’ capex (capital expenditures) budgets and productions for 2015. We’ve also looked at Continental Resources’ capex plans for 2015. In this article, we’ll discuss Apache Corporation’s (APA) capex and production plans.

Apache Corporation is an oil and gas exploration and production company with operations in the United States and other international locations. Apache Corporation has a significant presence in the Eagle Ford and the Permian shales in Texas. Other energy producers in the Permian and Eagle Ford include Laredo Petroleum (LPI), Chevron Corporation (CVX), and CONSOL Energy (CNX). All of these are components of the Energy Select Sector SPDR ETF (XLE).

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Apache Corporation (APA) now plans to spend $4.0 billion on North American onshore exploration and production in 2015. Approximately 85% of its 2015 drilling budget has been allocated to nine North American shale plays. At the beginning of 2014, Apache had planned to spend a total of ~$4.7 billion for exploration and production in North America. In 2015, it plans to cut its capex budget by ~15% compared to 2014.

After adjusting for the asset sales, Apache projects 12% to 16% higher liquids production onshore in North America. On a compounded annual growth basis, Apache’s projected five-year onshore North American liquids production growth rate is 12% to 16%.

3Q14 charge

The impact of lower oil prices is already visible in Apache Corporation’s (APA) performance. In 3Q14, it recorded a $1.0 billion after-tax asset impairment charge of its oil and gas properties, which was driven by lower oil and natural gas liquids price realizations and the previously announced deep water sale.

More asset sales

On November 20, 2014, Apache Corporation (APA) announced the sale of its oil and gas assets in Louisiana and in the Anadarko Basin. Approximately 62% and 83% of the production from Louisiana and Anadarko is natural gas and natural gas liquids (or NGL), respectively. The recent Louisiana and Anadarko Basin asset sales are a continuation of Apache’s asset portfolio rebalancing. In the last 18 months, Apache Corporation divested properties worth $10 billion.

In the next part of this series, we’ll discuss ConocoPhillips’ (COP) and EOG Resources’ (EOG) preliminary 2015 outlook. You may also read Market Realist’s article on Apache Corporation’s $1.4 billion asset sales and 2015 outlook.

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