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Could Apache Achieve Free Cash Flow Neutrality Next Year?

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APA’s cash flows

In 3Q17, Apache (APA) reported CFO (cash flow from operations) of $554 million, which was ~15% lower than its CFO in 3Q16.

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Apache’s free cash flow

APA’s FCF (free cash flow), which refers to CFO minus capital expenditure or capex, was about -$144 million in 3Q17.

Stating that the price movements have gotten “constructive” of late, APA’s management noted in the 3Q17 earnings conference call that it could possibly see a price now where the company could be free cash flow neutral next year.

While APA’s international operations continue to generate strong free cash flow across the company, APA’s Alpine High play is also expected to provide high returns and free cash flows for decades to come.

Apache’s capex this year

Apache’s (APA) capex forecast is $3.1 billion for 2017, which is ~60.0% higher than its 2016 capex. It plans to spend 44.0% of its 2017 capex at the Midland Basin and the Delaware Basin. The total Permian Basin investment is expected to represent 63.0% of APA’s total 2017 spending.

In the 3Q17 earnings conference, APA management noted that it would base its 2018 plan on the conservative side of current strip prices. Capital spending in 2019 is expected to be lower than in 2018 and 2017 but should be similar in terms of the significant chunk of the budget being allocated to the Permian Basin.

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