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Commodity Prices Dampened Apache’s Revenue in 3Q15

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Nov. 24 2015, Updated 12:05 a.m. ET

Breaking down revenues

Apache posted a lower revenue figure than what Wall Street analysts had expected. Adjusted revenue for the third quarter came in at $1.5 billion compared to $3.7 billion for the year-ago period. This decline was mainly a result of a crude oil revenue loss of $1.3 billion in 3Q14. Natural gas revenues also posted a 31% fall totaling $309 million from the third quarter of 2014.

Crude oil (USO) revenues for the first nine months of 2015 stood at $4.1 billion, $3.9 billion lower than the corresponding period last year. Crude oil revenues were primarily driven by a 49% decrease in average realized prices. Natural gas revenues for the first nine months of 2015 totaled $0.9 billion, down 40% compared to 3Q14.

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Capital expenditure

Apache strategically adjusted its capital spending to commodity price volatility in 2015. Capital expenditure before capitalized interest and non-controlling interest decreased 70% in the third quarter to $762 million in the comparable 2014 periods. While considering the nine-month period ending September 30, 2015, capital expenditure was reduced by 58%, totaling $2.9 billion. In terms of operational costs, Apache (APA) averaged $9.33 per boe on a year-to-date basis, which is 12% lower than the same period in 2014.

Increased production with reduced capital expenditure using supply chain efficiencies has indeed shown Apache’s capital competence. Many pure-play energy producers like Pioneer Natural Resources (PXD) and Marathon Oil (MRO) improved their capital efficiency in this low commodity price environment.

In 2Q15 Apache generated a cash flow that significantly exceeded capital expenses, but the company failed to maintain the surplus in the third quarter due to the continued commodity price fall.

Largest oil and gas producer in Egypt

Apache became the largest oil and gas producer in Egypt on a gross operated basis in the third quarter. The highest production levels were achieved despite a 35% reduction in capital spending in the region in comparison to 2014. Apache accounts for 1.8% of the Exploration and Production ETF (XOP).

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