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Apache Corporation’s Production Guidance and Key Strategies

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Apache’s production guidance for fiscal 2015

In its 3Q15 earnings, Apache Corporation (APA) raised its North American onshore production guidance range for fiscal 2015 to 307,000–309,000 barrels of oil equivalent per day (or boepd) from the previous guidance range of 305,000–308,000 boepd that it had provided in its 2Q15 earnings release. This represents a pro forma year-over-year growth of 2%.

For its international and offshore production, Apache has raised its guidance to 172,000–174,000 boepd, up from the previous guidance of 164,000–168,000 boepd that it had provided in its 2Q15 earnings release. This represents a pro forma year-over-year growth of 10%–12%.

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Key efforts by Apache in a low oil-price environment

Apache Corporation (APA) management noted that the company has been “mirroring activity levels to falling price environment,” as can be seen in the chart above. According to a presentation released on January 30, 2016, Apache has cut 86 rigs worldwide since September 2014.

Apart from reducing its rig counts, Apache has also been working on its cost structure. In the presentation, Apache noted that an aggressive reduction in the cost structure would be a prerequisite to being successful at lower oil prices. Toward this end, Apache had reduced its well cost in North America by 30% between November 2014 and 3Q15. It reduced its gross general and administrative cash costs by 26% between 3Q14–3Q15, and it reduced its lease operating expenses per boe by 18% between 3Q14–3Q15. Apache had also reduced its 2015 capital spending by ~65% compared to 2014.

Many oil and gas companies have slashed their 2015 capex in response to weakness in crude oil prices. ConocoPhillips (COP) and Anadarko Petroleum (APC) slashed their capex by ~33% each versus 2014. Marathon Oil (MRO) announced a capex reduction of ~40% versus 2014. All these companies make up ~9% of the Energy Select Sector SPDR ETF (XLE).

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