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Apache Announces 2019 Capital Budget and Production Outlook

11/02/2019

 

  • Establishes 2019 upstream capital budget of $2.4 billion, 70 to 75 percent of which will be allocated within the United States
  • Expects full-year 2019 total adjusted production to trend to the midpoint of previously disclosed guidance range of 410,000 to 440,000 barrels of oil equivalent (BOE) per day
  • Projects 6 to 10 percent total adjusted production growth, 12 to 16 percent U.S. production growth, and 5 percent Permian oil growth from fourth-quarter 2018 to the fourth-quarter 2019
  • Targets cash-flow neutrality, inclusive of dividend, at an assumed WTI oil price of $53 per barrel
  • Plans to return 50 percent or more of any free cash flow generated to shareholders

Apache Corporation has approved a 2019 upstream capital budget1 of $2.4 billion. This represents a significant reduction from its previous 2019 investment plan, as well as from its actual upstream investment level in 2018. Despite a lower planned activity set, Apache is projecting 2019 total adjusted production2 for the full year will trend to the midpoint of its previous guidance range of 410 to 440 thousand barrels of oil equivalent (BOE) per day. This budget excludes the planned consolidated activities of Altus Midstream Company.

The company expects to generate strong fourth-quarter 2018 to fourth-quarter 2019 production increases of 6 to 10 percent on a total company-adjusted basis, 12 to 16 percent in the United States, and approximately 5 percent for Permian Basin oil. Over the same time period, international adjusted production is projected to be down slightly.

Assuming an average WTI oil price of $53 per barrel and a Henry Hub natural gas price of $2.80 per thousand cubic feet (Mcf), the company’s 2019 upstream plan will be “cash flow neutral,” defined as cash flow from operations before working capital changes, minus upstream capital expenditures and dividend payments. Nearly half of Apache’s current oil production on an adjusted basis receives a significant premium to WTI prices. To the extent actual results, including asset sales, generate free cash flow, planned capital activity will not be increased until at least 50 percent of the free cash flow has been returned to shareholders through share repurchases, debt reduction or dividends.

“Our 2019 plan is designed to optimize value for Apache shareholders through long-term, returns-focused development of oil, natural gas and natural gas liquids (NGLs), while advancing certain high-impact exploration projects. Apache is committed to delivering this planned activity set and production outcome, while maintaining a strong returns focus, continuing our dividend payment and remaining cash flow neutral at plan prices. As we have demonstrated in the past, to the extent that commodity prices fall, we have the flexibility and intention to reduce our activity set to preserve returns and target cash flow neutrality,” said John J. Christmann IV, CEO and president of Apache Corporation.

“We believe Apache offers a very competitive investment proposition both within the E&P sector and relative to other sectors in the market. In a flat oil price environment, we believe we can deliver a combination of sustainable production and operating cash flow growth, strong returns, a stable dividend that currently yields more than 3 percent, and return at least 50 percent of any free cash flow to our shareholders. Additionally, Apache offers significant upside value potential through its current 100 percent ownership in Block 58 offshore Suriname, as well as its portfolio of unconventional exploration projects in the Lower 48,” said Christmann.

Since the beginning of 2015, Apache has paid out more than $1.5 billion in dividends to shareholders and reduced debt and future asset retirement obligations by approximately $4.2 billion. Additionally, the company initiated a share repurchase program during the second half of 2018, under which it repurchased 7.8 million shares at an average price of approximately $39 per share through Dec. 31, 2018.

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