Apache’s Diversified Production Helped It Maintain Robust Volumes



Geographically balanced production

Despite a significant reduction in capital expenditure in 2015, Apache has raised its production guidance. From a recent upward revision of North American production by 2%, Apache’s pro forma total production guidance for 2015 has increased to 172,000 to 174,000. This is a significant year-over-year growth of ~12%.

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Diversified production mix

Apache operated 28 rigs in total during the whole third quarter. 12 of the rigs were in North America, 10 were in Egypt, and 6 were in the North Sea. However, in the previous quarter, 34 rigs were operational. Year-to-date production from the Permian Basin region, which accounts for more than half of Apache’s total onshore North American production, improved more than 7% from the prior-year period. The increase in production was achieved despite a 45% fall in exploration and development capital spending in the first nine months of 2015 compared to the prior-year period.

On October 30, 2015, Apache announced five significant wells in the North Sea, which include three substantial exploration findings and two notable development wells.

To deal with the commodity (GSG) price drop, several upstream oil and gas players, particularly from North America, reduced their capital expenditures. In order to gain more from every dollar invested, companies are increasing their production volumes, as per barrel realized prices have fallen substantially. The more the supply increases, the more it will disturb the balance with crude demand, which will result in sustained weak energy prices.

Apache (APA) makes up 1.6% of the Energy Sector ETF (XLE). Apache’s peers include Devon Energy (DVN) and Hess (HES), which each account for 1.5% of XLE’s portfolio.


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