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High-flying Apache to launch drilling at North Sea Forties Houston independent generates $1 billion-plus in 2003 profits, intends to launch 20-well drilling program Petroleum News
Apache, which for the first time in its nearly 50-year history collected over $1 billion in profit for a single year, is poised to launch an aggressive drilling program at the North Sea Forties field it acquired from BP last year in a $1.3 billion deal that also included properties on the Gulf of Mexico’s continental shelf.
Once the weather clears, Apache intends to launch a 20-well drilling program that could add up to 13,000 barrels per day of oil to current production of roughly 54,000 barrels per day, Steve Farris, Apache’s chief executive officer, said in a Jan. 29 conference call.
“This will drive capital spending much higher,” Farris said, adding that the effort would require between $250 million and $275 million in investment. The company spent about $60 million on the field last year, largely on platform upgrades.
Still, Farris was reluctant to speculate on just how much this year’s investment might increase production at the aged Forties field. Initial investment helped raise output to around 45,000 barrels per day on proved reserves of 147.6 million barrels.
“If anywhere it’s going to be hard to project, it’s in the North Sea,” he said. “Right now we are waiting on the weather. But each well will have the potential of increasing production and reserves.” Company had solid fourth quarter Meanwhile, Apache weighed in with another solid financial performance in the 2003 fourth-quarter and also managed to generate over $1 billion in profit in 2003, a first for the big Houston independent.
Lifted by a combination of strong commodity prices, acquisitions and success with the drill bit, Apache’s 2003 fourth-quarter profit rose 45 percent to $260 million or 80 cents per share, following a 2-1 stock split, compared to $179 million or 59 cents per share during the same period a year earlier. Adjusted for special items, Apache earned $284 million or 87 cents per share, beating analysts’ consensus by 3 cents.
Apache’s fourth-quarter results included an after-tax write down of $10.2 million or 3 cents per share, reflecting remaining costs associated with termination of operations in Poland. Results also included the effect of currency exchange rates on deferred tax balances, partially offset by restatement of Canadian deferred liabilities to reflect the country’s tax reduction.
“Strong commodity prices are only part of the story,” Farris said. He said Apache’s 2003 production compared to the previous year increased 22 percent and worldwide reserves rose 26 percent, while the company replaced 330 percent of its production at an enviable $6.07 per barrel of oil equivalent. Moreover, Apache reduced its year-end 2003 debt-to-capitalization ratio to 26 percent compared to 35 percent at year-end 2002.
Overall daily production averaged 441,000 barrels of oil equivalent in the 2003 fourth quarter, compared to 338,300 barrels for the same period a year earlier. Liquids alone averaged 231,400 barrels per day, while natural gas averaged 1.26 billion cubic feet per day, up 17 percent. However, overall production declined slightly from the 2003 third to the fourth quarters.
The largest jump in natural gas production during the fourth quarter versus the period a year earlier came in the United States, up 47 percent to 685.7 million cubic feet per day. Australian gas volumes rose 20.5 percent to 121.9 million cubic feet per day. Canadian gas production down, oil flat Canadian volumes decreased nearly 10 percent to 328.1 million cubic feet per day, while Egyptian production fell nearly 15 percent to 116.6 million cubic feet per day.
On the oil side, Apache’s fourth quarter production increased nearly 46 percent from the year earlier period to 71,982 bpd. Egyptian output was up about 8 percent to 47,000 bpd.
Canadian oil production during the final quarter of 2003 was fairly flat at 25,450 bpd, while output from Australia fell 13 percent to 26,553 bpd. In its first year on Apache’s books, the Forties field in the North Sea averaged 40,950 bpd. Production from Apache’s startup field in Bohai Bay averaged 7,943 bpd. Argentine production was flat at 557 bpd.
Apache said it also added 234 million barrels of proved reserves last year through exploration and production activities, representing “one of the company’s best drilling performances ever.” For one, production was finally launched from Apache’s Zhao Dong block in China. Another 267 million barrels of equivalent were added through acquisitions, most notably Apache’s acquisition of North Sea and Gulf of Mexico properties. At year-end 2003, Apache reported proved reserves of 1.7 billion barrels of oil equivalent.
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