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Apache nearly doubles Forties production Took over North Sea field from BP two years ago; oil output has climbed to 70,000 bpd since; field producing better than expected By Ray Tyson Petroleum News Houston Correspondent
U.S.-based exploration and production independent Apache has nearly doubled oil production from the aging Forties field in the U.K. North Sea since taking over operations from BP some two years ago.
Moreover, in addition to producing better than initially expected, the Forties probably has more remaining recoverable oil than Apache thought when it purchased the field from BP in the spring of 2003.
“The capacity of the reservoir is much better than we ever anticipated,” Steve Farris, Apache’s chief executive officer, noted in the company’s April conference call on 2005 first-quarter earnings.
As reflected in Apache’s record quarterly profit of $559 million or $1.67 per share, up 62 percent from $345 million or $1.05 per share a year earlier, production from the Forties field has become a major contributor to the company’s balance sheet, accounting for roughly 25 percent of Apache’s worldwide oil production in the 2005 first quarter. Production limited by infrastructure Apache now believes the reservoir’s ability to produce more oil is limited only by the field’s infrastructure, which is undergoing a major upgrade to further improve field output, with most of the remaining work expected to be completed by this year’s fourth quarter.
Apache invested $370 million on field improvements in 2004 and said it expects to spend about the same this year. About 550 Apache employees are working on various offshore platforms that support Forties production.
“I’m in a hurry to get the work done,” Farris said.
Forties output during the 2005 first quarter averaged 61,870 barrels per day, up dramatically from an average 44,299 barrels per day during the previous year’s first quarter. But production jumped to an average 70,000 barrels per day in April, and during one week in April production exceeded 80,000 b/d, Apache said. Challenge to limit production downside during renovations “Quite frankly the field is now capable of producing volumes much greater than what we have averaged over any one quarter thus far,” Farris said. “Our real challenge is to limit the (production) downside while we complete the major renovations projects that we have underway.”
Apache would not discuss how much more oil the company expects to produce on a daily basis after platform work is completed, or how much additional oil it can recover from the Forties reservoir over the long term.
“We don’t project production reserves, but I would say that the field’s productive capacity is probably more limited by infrastructure … than by geology,” said Tony Lentini, Apache’s vice president of public and international affairs. Forties field dubbed Prudhoe Bay of North Sea The Forties, sometimes referred to as the Prudhoe Bay of the North Sea, was the first and largest field discovered in the U.K. sector of the North Sea. During its peak in the late 1970s, the field produced around 500,000 barrels per day. It had declined to about 45,000 barrels per day by the time Apache acquired the field from BP for $630 million, as part of a larger $1.3 billion deal that also included BP properties on the Gulf of Mexico’s continental shelf.
At the time Apache purchased the Forties, the field had remaining recoverable proved reserves of about 147.6 million barrels of oil equivalent. That compared to around 2.5 billion barrels produced under BP’s ownership.
Despite the huge decline in production over the years, “there is probably more recoverable oil than first thought, and we are drilling to develop that, in addition to making infrastructure improvements,” Lentini said. Apache picked up 14 blocks near Forties Since the BP acquisition, Apache has picked up 14 exploration blocks located largely north and east of the Forties. The company has three new 3-D seismic surveys in the area and plans to drill several exploration wells near the Forties this year.
“The Forties is already a major contributor to Apache production, but we want to increase our presence and production in the UK North Sea overall,” Lentini said. Overall Apache production up Overall, Apache production during the 2005 first quarter averaged 462,000 barrels of oil equivalent per day, up 7 percent from the first quarter of 2004 and up slightly from last year’s fourth quarter. For this year’s first quarter, that equates to 240,543 barrels of oil per day, up 10.5 percent from the year-ago period, and to 1.259 billion cubic feet of natural gas per day, up nearly 4 percent from the same period last year.
Based on combined oil and gas production, Apache increased output in the 2005 first quarter in nearly every country in which it operates except Australia, where oil production plummeted 32 percent to15,976 barrels per day and gas production fell 4 percent to 113.7 million cubic feet per day.
“Australia oil production is really the only weak spot in our 2005 production portfolio,” Farris said, explaining that “we kind of got our drilling program backwards,” meaning Apache had emphasized exploration over development. “We’ve now changed that,” he said. Production up in U.S., down in Canada In the United States, Apache managed to increase oil production 9.4 percent to 73,630 barrels per day in the 2005 first quarter, despite having about 5,700 barrels of oil per day shut in due to Hurricane Ivan, which swept through the Gulf of Mexico last year causing widespread damage to offshore facilities. Apache’s U.S. natural gas production was flat at 637.8 million cubic feet per day compared to last year’s first quarter.
In Canada, Apache’s oil production fell nearly 8 percent to 23,277 barrels per day in the 2005 first quarter versus the year ago period, but the oil decline was offset by a strong performance on the natural gas side, up 10.4 percent to 346.7 million cubic feet per day. China, Egypt, Argentina output up In Egypt, Apache’s oil production during the 2005 first quarter increased 11 percent from the year-ago period to 54,579 barrels per day, while natural gas during the same period last year jumped more than 20 percent to 155.3 million barrels per day.
Apache’s China oil production in the 2005 first quarter increased a strong 41 percent versus the year-ago period to 10,507 barrels per day. The company produces no gas in China.
In Argentina, Apache’s oil production increased 27.5 percent to 704 barrels per day in the 2005 first quarter versus the year-ago period, while natural gas output declined 32.6 percent to 3.473 million cubic feet per day.
Although the company draws little natural gas production from the oil-rich Forties field in the U.K. North Sea, it did manage to increase gas output during the 2005 first quarter by nearly 40 percent to 2.178 million cubic feet per day.
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