• 2 minutes Rational analysis of CV19 from Harvard Medical School
  • 4 minutes While U.S. Pipelines Are Under Siege, China Streamlines Its Oil and Gas Network
  • 7 minutes Renewables Overtake Coal, But Lag Far Behind Oil And Natural Gas
  • 7 hours Tesla Begins Construction Of World’s Largest Energy Storage Facility
  • 5 hours Joe Biden the "Archie Bunker" of the left selects Kamala Harris for VP . . . . . . Does she help the campaign ?
  • 3 hours Will any journalist have the balls to ask Kamala if she supports Wall Street "Carried Interest" Tax Loophole
  • 1 day Trump Hands Putin Major Geopolitical Victory
  • 6 hours America Could Go Fully Electric Right Now
  • 11 mins Buying votes is cool now.
  • 1 day Those Nasty White People and Camping Racism
  • 5 hours In 1,267 days, Trump has made 20,055 false or misleading claims
  • 17 hours .
  • 14 hours The Truth about Chinese and Indian Engineering
  • 16 hours Brent above $45. Holding breath for $50??
  • 23 hours COVID&life and Vicious Circle: "Working From Home Is Not Panacea For Virus"
  • 16 hours The World is Facing a Solar Panel Waste Problem
  • 2 days Oil Tanker Runs Aground in Mauritius - Oil Spill
  • 2 days China wields coronavirus to nationalize American-owned carmaker
U.S. Offshore Wind Industry To See Explosive Growth

U.S. Offshore Wind Industry To See Explosive Growth

Offshore wind has the potential…

How COVID-19 Completely Disrupted Car Markets

How COVID-19 Completely Disrupted Car Markets

The Covid-19 pandemic has upended…

Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

More Info

Premium Content

Apache Compensates For Poor Earnings With A Major Oil Discovery

Last year, shale driller Apache Corp. (NYSE: APA) made waves after it sacked one of the most iconic CEOs in the shale patch, Steven Keenan. Keenan was reportedly shown the door after disappointing early results at Apache’s Suriname offshore field adjacent to Exxon Mobil Corp.’s (NYSE: XOM) historic discovery. Keenan is a shale expert who was handpicked by Apache’s management in 2014 to replicate his shale exploits at EOG Resources Inc. (NYSE: EOG) in the Eagle Ford. But maybe Apache acted in haste back then, and a mea culpa is now in order.

APA was up 17.3% on Thursday’s session and another 14.3% in aftermarket trading despite posting weak Q2 earnings (that still beat expectations) after the company announced a major oil discovery at its 1.4-million-acre offshore Suriname tract.


Source: CNN Money

Major Discovery

Apache said it had made a world-class discovery at the Kwaskwasi-1 well located in the prolific Guyana-Suriname Basin, where it encountered 278 meters (912 feet) of net oil and volatile oil/gas condensate pay.

The samples taken indicate that the API oil gravities are between 34 and 43 degrees. 

Related: Ocasio-Cortez Could Deal A Fatal Blow To U.S. Oil Pipelines

“We are thrilled with the results from the Kwaskwasi-1 exploration well. This is the best well we’ve drilled in the basin to date, with the highest net pay in the best quality reservoirs,” Apache CEO and President, John J. Christmann, gushed. “While we have a lot more work to do, a discovery of this quality and magnitude merits a pace of evaluation that enables the option of accelerated first production.”

Last year, Bank of America Merrill Lynch touted the Suriname prospect as a potential game-changer for Apache:

“Suriname has the potential to reset the investment case,” Merrill Lynch’s veteran oil-industry analyst Doug Leggate said.

The major discovery has proven a big bonus for Apache’s shareholders who have been glossing over the company’s weak Q2 results.

Apache reported Q2 revenue of $752M, down 53.0% Y/Y, but that was $43.4M better than Wall Street’s expectations. GAAP net loss of $386 million or $1.02 per diluted common share missed by $0.05 while non-GAAP net loss of $281 million or $0.74 per share beat by $0.28.

As expected, production volumes were markedly lower than during the prior quarter: Crude oil volume slipped 7% to 221.3K bbl/day, natural gas production was down 8% to 850.3K Mcf/day while natural gas liquids output climbed 12% to 72.4K bbl/day. Apache said that its average realized oil price (including hedges) plunged 60% to $25.77/bbl, natural gas liquids fell 42% to $8.28/bbl, and natural gas climbed 19% to $1.68/Mcf.

Related: The World Is Facing A Solar Panel Waste Problem

Perhaps the only positive highlight in that earnings report was that the company’s production (including noncontrolling interests) of 435M boe/day surpassed Wall Street’s consensus of 417.3 Mboe/day. It also looked rather better than the lineup of dismal earnings from others in the shale patch. 

Capital Discipline

While many investors will be focussing on the Suriname hit, others will probably be just as thrilled at Apache’s continuing capital discipline.

Apache was among the first shale companies to undertake deep spending cuts after oil prices crashed in March. Apache lowered 2020 capex to $1B-$1.2B from its previous guidance of $1.6B-$1.9B. But it did not stop there: The company also cut the dividend by 90% to $0.025/share from $0.25. Apache has revealed that its 2020 capex is tracking towards the lower end of its guidance.

Its capital-light structure appears to be paying off.

During the earnings call, Apache’s management said that the company would be running cash flow positive as long as WTI prices remain above $30/barrel (current WTI is $40.14). Further, the company said it would use any excess cash to pay down its debt. 

However, should prices hit $50 or more, Apache said it would undertake very measured capex increases with the first column of that incremental free cash flow returned to investors, maybe through a dividend increase or share buybacks.

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News