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Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking database [Accessed on September 4, 2014] mmboe: million barrels of oil equivalent; F&D: Finding and Development *Peers include Anadarko Petroleum Corporation, Apache Corporation, Chesapeake Energy, Devon Energy, EOG Resources, Hess Corporation and Marathon Oil Corporation.
Apache Corporation set to become leading North American Exploration and Production (E&P) Company by Strengthening Upstream Operations in North America and its Position in Liquefied Natural Gas (LNG) Markets
Apache Corporation (Apache) increased its production in the North American region through an active drilling program in 2013 involving xxx.x rigs and the drilling of xxx.x wells. During 2013, the company drilled xxx.x net wells worldwide, of which xxx.x were in North America. It was the most active North American onshore driller in 2013, with xxx.x rigs in the Permian region and xxx.x rigs in the Anadarko basin.
Apache drilled or participated in the drilling of xxx.x gross wells in the Anadarko basin with xxx.x % success. Active drilling programs with a focus on oil-rich and liquid-rich gas in the Permian and Anadarko basins continues to provide momentum for the company’s US production growth. It plans to drill approximately xxx.x wells with xxx.x rigs in North America in 2014. The company’s global Exploration and Development (E&D) expenditure for 2013 amounted to US$ xxx.x billion. Of this total, Apache’s total E&D spending in North America alone accounted for xxx.x % of its worldwide E&D spending, while E&D spending in Canada increased by xxx.x % compared with 2012.
The company has continued to target oil- and liquids-rich gas plays across its acreage and engage in the drilling of more horizontal wells in the region. The company plans to invest US$ xxx.x billion of capital in E&D activities in North America.
Its crude oil and liquids production in North America increased xxx.x %, averaging xxx.x thousand barrels of oil equivalent per day (mboed) in 2013, compared with xxx.x mboed for 2012. The company expects liquid growth from the onshore North American region to amount to xxx.x – xxx.x % in 2014.
LNG Projects Expected to Strengthen Apache’s Market Position
Apache has partnered with Chevron Corporation to develop two world-class LNG projects in Australia and Canada. The company has two world-class upcoming LNG projects, which will strengthen its presence in LNG markets. One of these – the Wheatstone Project – is located in Australia, while the other – the Kitimat LNG project – is located in Canada.
The Wheatstone Project is located at Ashburton North Strategic Industrial Area, xxx.x kilometers (km) (xxx.x miles (mi)) west of Onslow, in Western Australia’s Pilbara region. The first phase of the Wheatstone Project consists of an offshore central processing platform, a xxx.x km (xxx.x mi) pipeline to shore, and two processing trains with a combined production capability of approximately xxx.x million tons of LNG per year.
The Kitimat Project is located at the Liard and Horn River basins in British Columbia (BC), Canada. Chevron Canada and Apache signed a 50/50 joint venture agreement for the construction of the Kitimat LNG project in December 2012. Phase 1 of the project will have a combined production capability of approximately 10 million tons of LNG per year. Both LNG projects are the most advanced of the proposed LNG projects in respective region and have the potential to be the first LNG projects of their size in both Canada and Australia.
Apache Corporation, Key Production Data, 2010–2013
Parameter Unit 2010 2011 2012 2013
Crude oil and liquids mmbbl xxx.x xxx.x xxx.x xxx.x
Natural gas bcf xxx.x xxx.x xxx.x xxx.x
Total production mmboe xxx.x xxx.x xxx.x xxx.x
Oil as percentage of total production
% xxx.x xxx.x xxx.x xxx.x
Production growth % xxx.x xxx.x xxx.x xxx.x
Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014] bcf: billion cubic feet; mmbbl: million barrels of oil
Apache Corporation, Key Cost, 2010–2013
Parameter Unit 2010 2011 2012 2013
F&D cost per boe, three-year
US$/boe xxx.x xxx.x xxx.x xxx.x
Reserve replacement cost per boe, three-year
US$/boe xxx.x xxx.x xxx.x xxx.x
Oil and gas finding cost per boe, three-year
US$/boe xxx.x xxx.x xxx.x xxx.x
Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014]
Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014] 1P: Proved; RHS: Right Hand Side
Apache Corporation, Key Reserves and Reserves Metrics, 2010–2013
Parameter Unit 2010 2011 2012 2013
1P crude oil reserves
bil bbl xxx.x xxx.x xxx.x xxx.x
1P natural gas reserves
tcf xxx.x xxx.x xxx.x xxx.x
1P total oil and gas reserves
bil boe xxx.x xxx.x xxx.x xxx.x
Oil as percentage of total reserves
% xxx.x xxx.x xxx.x xxx.x
Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014]
Apache Corporation, Result of Oil and Gas Operations, 2010–2013
Parameter Unit 2010 2011 2012 2013
Oil and gas revenue per boe
US$/boe xxx.x xxx.x xxx.x xxx.x
Lifting cost per boe, three-year
US$/boe xxx.x xxx.x xxx.x xxx.x
Net-back per boe, three-year
US$/boe xxx.x xxx.x xxx.x xxx.x
Recycle ratio, three-year
% xxx.x xxx.x xxx.x xxx.x
Source: GlobalData, Oil and Gas eTrack, Companies Operational and Financial Database [Accessed on September 4, 2014]
Apache Corporation, Key Reserves and Reserves Metrics, 2010–2013
024681012
0
1
2
3
4
2010 2011 2012 2013
Re
serv
es
(tcf
)
Re
se
rve
s(b
il b
oe
)
Proved crude oil reserves Proved total oil and gas reservesProved natural gas reserves
Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014]
Apache Corporation, Result of Oil and Gas Operations, 2010–2013
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
0
10
20
30
40
50
60
70
2010 2011 2012 2013
Rec
ycle
ratio
(X)
Oil a
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pera
tions
(U
S$/b
oe)
Oil and gas revenue per boe Lifting cost per boe, three-year avg.
Net-back per boe, three-year avg. Recycle ratio, three-year avg. Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014]
Table of Contents Table of Contents ............................................................................................................................... 6
1.1 List of Tables ...................................................................................................................... 10
1.2 List of Figures ..................................................................................................................... 12
2 Apache Corporation, Company Overview ................................................................................ 17
9.2 Operational and Financial Performance .............................................................................. 71
9.3 Key Financial and Operational Ratio ................................................................................... 77
10 Apache Corporation, Production and Reserves Trends ........................................................... 80
10.1 Total Oil and Gas, Reserves and Production ...................................................................... 80
10.1.1 Total Crude Oil and Natural Gas Production and Reserves Trend, 2009-2013 ............... 80
10.1.2 Total Crude Oil & Natural Gas Production and Reserves By Country/Region, 2009-2013 ....................................................................................................................................... 81
10.1.3 Total Crude Oil and Natural Gas Reserve Changes, 2009-2013 ..................................... 83
10.2 Crude Oil/Liquids Production and Reserve .......................................................................... 84
10.2.1 Crude Oil/Liquids Production and Reserve Trend, 2009-2013 ........................................ 84
10.2.2 Crude Oil Production and Reserves By Country/Region, 2009-2013 .............................. 85
Table 5: Apache Corporation, Reserve Replacement Ratio (%) and Finding and Development Costs Incurred (US$/boe), 2010–2013 .................................................................................................. 61
Table 11 Apache Corporation, Net Asset Value, 2014 .................................................................................... 69
Table 12: Apache Corporation, Peer Group Comparison, Operational and Financial Performance, 2013 ........ 71
Table 13: Apache Corporation, Peer Group Comparison, Total Reserves and Production (mmboe), 2013 ...... 75
Table 14: Apache Corporation, Peer Group Comparison, Financial and Operational Ratios, 2013 .................. 77
Table 15: Apache Corporation, Total Crude Oil and Natural Gas, Production and Reserves, mmboe, 2009-2013 ........................................................................................................................................... 80
Table 16: Apache Corporation, Total Crude Oil & Natural Gas Production and Reserves, By Country/Region, mmboe, 2009-2013 ........................................................................................... 82
Table 17: Apache Corporation, Total Crude Oil and Natural Gas Reserve Changes, mmboe, 2009-2013 ....... 83
Table 18: Apache Corporation, Crude Oil Production and Reserves Metrics, mmbbl, 2009-2013 .................... 85
Table 19: Apache Corporation, Crude Oil Production and Reserves, By Country/Region, mmbbl, 2009-2013 . 86
Table 27: Apache Corporation, Proved and Unproved Acquisition Costs, By Country/Region, US$ mil, 2009-2013 .................................................................................................................................. 99
Table 28: Apache Corporation, Exploration and Development Costs, By Country/Region, US$ mil, 2009-2013 ......................................................................................................................................... 102
Table 29: Apache Corporation, Reserves Replacement, Finding and Development Costs, Finding Cost and Proved Acquisition Costs Per boe, US$/boe, 2009-2013 .......................................................... 104
Table 30: Apache Corporation, Reserves Replacement, Finding and Development Costs, Finding Cost and Proved Acquisition Costs Per boe, US$/boe, By Country/Region, 2009-2013 ........................... 107
Table 31: Apache Corporation, Oil and Gas Production Replacement Ratio, %, 2009-2013 ......................... 109
Table 32: Apache Corporation, 3-Year Wt.Avg. Oil and Gas Production Replacement Ratio, By Country/Region, %, 2009-2013 ................................................................................................. 116
Table 34: Apache Corporation, Revenue and Expenses, By Country/Region, US$ mil, 2009-2013 ............... 126
Table 35: Apache Corporation, Oil and Gas Revenue and Expenses, US$/boe, 2009-2013 ......................... 129
Table 36: Apache Corporation, Oil and Gas Revenue and Expenses, US$/boe, By Country/Region, 2009-2013 ......................................................................................................................................... 135
Table 37: Apache Corporation, Oil and Gas Performance Metrics, 2009-2013 ............................................. 137
Table 38: Apache Corporation, Land Holdings (Developed and Undeveloped Acreage), Acres, 2009-2013 .. 139
Table 39: Apache Corporation, Land Holdings (Developed and Undeveloped Acreage), By Country/Region, Acres, 2009-2013 ...................................................................................................................... 143
Table 40: Apache Corporation, Producible Oil and Gas Wells, 2009-2013 .................................................... 145
Table 41: Apache Corporation, Producible Oil and Gas Wells, By Country/Region, 2009-2013..................... 152
Figure 12: Apache Corporation, Net Productive and Dry Exploratory and Development Wells, 2009–2013 ..... 37
Figure 13: Apache Corporation, Net Total Dry and Productive Exploratory Wells, 2009–2013 ........................ 38
Figure 14: Apache Corporation, Net Total Dry and Productive Development Wells, 2009–2013 ..................... 39
Figure 15: Apache Corporation, Net Total Oil and Gas Productive and Dry Exploratory Wells, by Region, 2009–2013 .................................................................................................................................. 40
Figure 16: Apache Corporation, Net Total Oil and Gas Productive and Dry Development Wells, by Region, 2009–2013 .................................................................................................................................. 41
Figure 17: Apache Corporation, Historical and Estimated Production (mmboe), 2011–2018 ........................... 42
Figure 18: Apache Corporation, Production Mix (%), 2011–2018.................................................................... 43
Figure 31: Apache Corporation, Reserve Replacement Ratio (%) and Finding and Development Costs Incurred (US$/boe), 2010–2013 .................................................................................................. 61
Figure 32: Apache Corporation and Peers, Relative Share Price Performance Index (%), September 2013–August 2014................................................................................................................................ 70
Figure 39: Apache Corporation, Total Crude Oil and Natural Gas, Production and Reserves, mmboe, 2009-2013 ........................................................................................................................................... 80
Figure 40: Apache Corporation, Total Oil & Gas Reserves, End of Period, By Country/Region, mmboe, 2009-2013 .................................................................................................................................. 81
Figure 41: Apache Corporation, Total Oil & Gas Production, By Country/Region, mmboe, 2009-2013 ............ 82
Figure 42: Apache Corporation, Total Crude Oil and Natural Gas Reserve Changes, mmboe, 2013 ............... 83
Figure 71: Apache Corporation, Depreciation, Depletion and Amortization From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ................................................................ 120
Figure 72: Apache Corporation, Income Tax Provision (Benefit) From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ........................................................................................ 121
Figure 73: Apache Corporation, Net Income/ Loss From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ........................................................................................ 122
Figure 74: Apache Corporation, Oil & Gas Revenue, By Country/Region, US$ mil, 2009-2013 ..................... 123
Figure 75: Apache Corporation, Profit (loss) Before Taxation From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ........................................................................................ 124
Figure 76: Apache Corporation, Production Costs, By Country/Region, US$ mil, 2009-2013 ........................ 125
Figure 77: Apache Corporation, Total Expenses From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 .................................................................................................................. 126
Figure 78: Apache Corporation, Oil and Gas Revenue and Expenses, US$/boe, 2009-2013 ........................ 129
Figure 79: Apache Corporation, Income Tax/(Benefit) per boe, By Country/Region, $/boe, 2009-2013 ......... 130
Figure 80: Apache Corporation, Lifting Cost per boe, By Country/Region, $/boe, 2009-2013 ........................ 131
Figure 81: Apache Corporation, Annual Net Income per boe, By Country/Region, $/boe, 2009-2013 ............ 132
Figure 82: Apache Corporation, Oil & Gas Revenue per boe, By Country/Region, $/boe, 2009-2013 ........... 133
Figure 83: Apache Corporation, Total DD&A per boe, By Country/Region, $/boe, 2009-2013 ....................... 134
2 Apache Corporation, Company Overview Apache Corporation (Apache) is a Texas-based independent oil and gas company involved in the exploration, exploitation, development and production of onshore and offshore oil and natural gas properties in five countries: the US, Canada, Egypt, Australia, and the UK North Sea. Its operations consist primarily of upstream activities, along with some exposure to midstream operations. As of December 31, 2013, Apache possessed proved (1P) reserves amounting to xxx.x billion barrels of oil (billion bbl) of crude, xxx.x million barrels of oil (mmbbl) of Natural Gas Liquids (NGL) and xxx.x trillion cubic feet (tcf) of natural gas.
The company’s 1P developed reserves totaled xxx.x billion barrels of oil equivalent (billion boe) as of December 31, 2013; while it’s estimated 1P undeveloped reserves totaled xxx.x mmboe. The production of liquids and natural gas amounted to xxx.x mmbbl and xxx.x billion cubic feet (bcf) respectively in 2013. Apache’s total net acreage stood at xxx.x million of acres on December 31, 2013. Approximately xxx.x % of the company’s global production and xxx.x % of its estimated 1P reserves for 2013 were based in the US. Its international assets are located in Egypt, Australia, and the UK North Sea. Production from these international assets accounted for xxx.x % of the company’s global production in 2013. As of December 31, 2013, xxx.x % of the company’s estimated 1P reserves were located outside of North America.
Apache’s acreage within the US was divided into five regions during 2013: Permian, Central, Gulf Coast Onshore, Gulf of Mexico Deepwater, and the Gulf of Mexico Shelf. In 2014, the Gulf of Mexico Shelf and Gulf of Mexico Deepwater regions have been combined to form the Gulf of Mexico region. The company had a net total of xxx.x million of acres in this region as of December 31, 2013.
Apache holds almost xxx.x million net acres across the provinces of British Columbia (BC), Alberta, and Saskatchewan in Canada, as of December 31, 2013. Production from the Canadian region, where the company focuses on oil- and liquids-rich gas areas, constituted approximately xxx.x % of its global production for the year. Apache is one of the largest acreage holders in Egypt’s Western Desert, with xxx.x million net acres in this region as of December 31, 2013. Production from this region amounted to a net total of xxx.x thousand barrels of oil per day (mbd) and xxx.x million cubic feet per day (mmcfd) of net natural gas in 2013.
The company’s operations in Australia are concentrated in offshore Western Australia in the Carnarvon, Exmouth and Browse basins. As of December 31, 2013, it possessed xxx.x million net acres in the region. Production from was Australia amounted to 19 mbd of oil and xxx.x mmcfd of natural gas in 2013, equivalent to xxx.x % of Apache’s global production. The company’s operations in the North Sea are located in the Forties field (Forties), Beryl, Nevis, Nevis South, Skene, and Buckland fields, and it also owns non-operated interest in the Maclure, Scott, and Telford fields. As of December 31, 2013, Apache has interests in approximately xxx.x thousand net acres in the UK North Sea. Production from this region in
2013 amounted to xxx.x mbd of oil and xxx.x mmcfd of natural gas, constituting xxx.x % of Apache’s global production. The following figure illustrates the company’s operations in various locations in 2014.
Apache’s total revenue registered growth between 2010 and 2012 at a Compound Annual Growth Rate (CAGR) of xxx.x %. However, the company’s revenue registered a Year-on-Year (YoY) decline of xxx.x % in 2013 compared with 2012, due to diminished production. The company’s revenue increased from US$ xxx.x billion in 2010 to US$ xxx.x billion in 2012, before declining to US$ xxx.x billion in 2013. Its net income increased from US$ xxx.x billion in 2010 to US$ xxx.x billion in 2011, and then declined to US$ xxx.x million in 2012, increasing once more to US$ xxx.x 3 billion in 2013. The decline of the company’s net income can be attributed to increased production costs and operating expenditure.
Figure 1: Apache Corporation, Financial and Operational Overview, 2010–2013
Source: GlobalData, Oil and Gas eTrack [Accessed on September 4, 2014] CFO: Cash Flow from Operations
Apache has been focusing upon the development and exploration of existing assets, and the tapping of new assets. The company’s capital expenditure (capex) fluctuated between 2010 and 2013. Its total capex amounted to US$ xxx.x billion in 2010, which declined to US$ xxx.x billion in 2011 before increasing to US$14.6 billion in 2012 and then declining once more to US$ xxx.x billion in 2013. A large share of the company’s capex was spent on development activities of upstream assets, which were acquired recently.
As of December 31, 2013, Apache’s total 1P reserves amounted to xxx.x billion boe, a decrease of xxx.x % from 2012 reserves of xxx.x billion boe. However, 1P reserves declined at a CAGR of xxx.x % between 2010 and 2013. The total reserves reported in 2013 amounted to xxx.x billion boe, consisting of xxx.x billion bbl of crude oil, xxx.x mmbbl of NGLs and xxx.x tcf of natural gas. Of the total reserves, xxx.x billion boe reserves were developed, equivalent to xxx.x %, and xxx.x mmboe reserves were undeveloped, equivalent to xxx.x %. Production volumes increased at a CAGR of xxx.x % between 2010 and 2013, and decreased by xxx.x % on a YoY basis from xxx.x mmboe in 2012 to xxx.x mmboe in 2013. This decline was due primarily to the sale of some of the company’s assets and its stakes in Egypt and the Gulf of Mexico.
Figure 2: Apache Corporation, Share Price Movement, September 2013–August 2014
3 Apache Corporation, Key Highlights 3.1 Strong Onshore Liquid Growth in North America
Apache was the most active North American onshore driller in 2013, operating an average of xxx.x rigs and drilling xxx.x wells. The company’s production from the Permian region of the US in 2013 increased by xxx.x % compared with 2012 as a result of an active drilling program whereby the company was operating xxx.x rigs during the year. Production from the central region of the US in 2013 increased by xxx.x % compared with 2012 as a result of an active drilling program whereby the company was operating xxx.x rigs in the Anadarko basin during the year where it drilled or participated in the drilling of 322 gross wells with xxx.x % success.
Active drilling programs focusing on oil- and liquid-rich gas in the Permian and Anadarko basins continue to provide momentum for Apache’s US production growth. During 2013, the company drilled xxx.x net wells worldwide, of which xxx.x was drilled in North America. The company plans to drill approximately xxx.x wells with the use of xxx.x rigs in North America in 2014. The following table provides details of the rigs that are to be operated by Apache in 2014 according to region.
Apache’s glApache global Exploration and Development (E&D) expenditure for 2013 amounted to US$ xxx.x billion, a xxx.x % increase over 2012. The company’s total E&D spending in North America alone was equivalent to xxx.x % of its global E&D spending, which was up by xxx.x % from 2012 in North America. The company has increased drilling activity in the Anadarko and Permian basins, where approximately half of its rigs are now drilling horizontal wells. The company’s E&D spending in Canada increased by xxx.x % compared with 2012. Apache has also continued to target oil- and liquids-rich gas plays across its acreage and is drilling more horizontal wells in this region. The company plans to invest US$ xxx.x billion in E&D in North America in 2014. The following figure illustrates the split of total North American E&D capex in 2014.
Table 1: Apache Corporation, Average Rigs and Wells Planned, North America, 2014
North America Average number of rigs Total number of wells
4 Apache Corporation, SWOT Analysis 4.1 Strengths Wide Geographic Presence with a Diversified Asset Portfolio
Apache’s upstream assets are geographically diverse; the company has oil and gas operations in five countries: the US, Canada, Egypt, Australia, and the UK North Sea, with xxx.x billion boe of 1P reserves as of the end of 2013. Of the total 1P reserves held by the company, xxx.x % are located in North America. This diversified asset portfolio has provided it with the opportunity to allocate investment towards strategic assets, which will have a relatively substantial impact on revenue growth. xxx.x % of Apache’s total 1P reserves are located in the US alone. The company’s production in 2013 consisted of xxx.x % liquids and xxx.x % natural gas and its overall 1P reserves at the end of 2013 consisted of xxx.x % liquids and xxx.x % natural gas, supporting its balanced product mix.
The company’s acreage, both offshore and onshore, is distributed across several major producing geographical areas. The majority of its acreage – xxx.x % , is in North America, and Apache’s drilling activity is focused on its North America onshore assets, primarily in the Permian and Anadarko basins. These assets recorded liquids growth of xxx.x % during 2013. The company’s North American assets contributed approximately xxx.x % of its global production and xxx.x % of its oil and gas production revenue in 2013.
Apache is one of the largest acreage holders in Egypt’s Western Desert. On December 31, 2013, the company possessed xxx.x million gross acres, with xxx.x mbd of net oil production and xxx.x mmcfd of net natural gas production in 2013. Its operations in Australia are concentrated in offshore Western Australia, in the Carnarvon, Exmouth and Browse basins.
As of September 2014, Apache has approximately xxx.x million gross acres in offshore Western Australia through xxx.x exploration permits, xxx.x production licenses, and nine retention leases. xxx.x % of the company’s acreage is undeveloped. Production from this region amounted to xxx.x mbd of oil and xxx.x mmcfd of natural gas in 2013, equivalent to xxx.x % of Apache’s global production. The company’s total 1P reserves in the UK North Sea accounted for xxx.x % of year-end 1P reserves.
As of September 2014, Apache possesses interest in approximately xxx.x million gross acres in the UK North Sea. Production from this region in 2013 amounted to xxx.x bd and xxx.x mmcfd, equivalent to xxx.x % of Apache’s global production. The company’s diversified resource base includes conventional oil and gas plays, LNG and unconventional resources. In order to fit with the changing operational structure, the company segmented its operations into segments for upstream, refining and chemicals, and marketing activities.
Its operations are spread across multiple geographical areas and it is involved in different types of resources. This diversified exposure has provided the company with a competitive edge over its peers.
Strong Exploration and Development Activities to Enhance Resource Base
Apache intensified its E&D activities between 2009 and 2013. In 2013, it drilled xxx.x net exploration wells, xxx.x of which proved to be dry, and xxx.x net development wells, of which xxx.x wells were dry. The company’s combined 1P undeveloped oil and gas reserves declined by around xxx.x mmboe in 2013 from 870 mmboe of 1P undeveloped reserves in 2012.
Figure 10: Apache Corporation, Exploration Drilling Success Ratio (%), 2009–2013
Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking –[Accessed on September 4, 2014]
4.2 Weaknesses Political Unrest In Egypt
The political unrest in Egypt could have an adverse impact upon Apache’s operations in the country. Hosni Mubarak, the former Egyptian president, stepped down in February 2011, and the Egyptian Supreme Council of the Armed Forces took power later in June 2012. Mohamed Morsi of the Muslim Brotherhood’s Freedom and Justice Party was elected as Egypt’s new president, before being removed from power in July 2013. Egypt’s Chief Justice, Adly Mansour, was announced as acting president of a temporary government, while presidential elections were to be held by mid-April 2014. Abdel Fattah al-Sisi was officially confirmed as Egypt's next president on June 3, 2014, when he won the presidential election.
The deterioration of political and economic conditions, such as changes in laws or regulations, export restrictions, expropriation of company assets, resource nationalization, or other relevant policies of the new Egyptian government could have serious effects on Apache’s operations and business activities in the country. The forced renegotiation or modification of its existing contracts with Egyptian General Petroleum Corporation could
adversely affect its business, financial condition and the results of its operations. The company’s operations in Egypt accounted for xxx.x % of its production in 2013, and the region also accounted for xxx.x % of its total estimated 1P reserves. xxx.x % of its estimated discounted future net cash flows and xxx.x % of its net capitalized oil and gas property in 2013 was attributable to Egypt, including Sinopec’s one-third non-controlling interest.
Dependence on Third Parties for the Marketing of Crude Oil and Natural Gas
Apache is primarily dependent upon third parties to transport its oil and natural gas production. The company’s ability to market its oil and natural gas production depends upon the availability and capacity of gathering systems, pipelines and other transportation facilities. Transportation space on the gathering systems and pipelines that Apache uses is occasionally limited or unavailable due to repairs, outages caused by accidents, or other events. Above all, these facilities are being utilized by other companies with priority transportation agreements. Apache has experienced production curtailments resulting from capacity restraints, the offsetting of fracturing stimulation operations, and the short-term closure of certain pipelines for maintenance purposes. These factors could affect the company’s revenue, which in turn could adversely affect its ability to produce and market oil and natural gas.
4.3 Opportunities Substantial Exploration and Development Potential
Apache is one of the leading net undeveloped acreage holders in its peer group. At the end of 2013, the company held an interest in xxx.x million net acres, consisting of xxx.x million undeveloped acres, and xxx.x million developed acres. It possesses xxx.x million gross acres of liquid hydrocarbons acreage in the US as of December 31, 2013 xxx.x of which is undeveloped. At present, the company has xxx.x million gross acres offshore Western Australia through xxx.x exploration permits, xxx.x production licenses and nine retention leases. Approximately xxx.x % of Apache’s acreage in this region is undeveloped and the company continues to actively pursue additional acreage opportunities in this region.
In Egypt, the company had xxx.x million gross acres at the end of 2013, of which three million gross undeveloped acres had expired as of January 2014. Of the remaining acreage, xxx.x % is undeveloped, providing considerable E&D opportunities for the future. In 2013, the company made significant exploration discoveries in Egypt, Australia, the UK North Sea and the US. The company’s upcoming ventures are Alaska’s Cook Inlet and Suriname near its core operations in the UK sector of the North Sea.
Apache has leased approximately xxx.x acres onshore, in tidal areas and offshore in the Cook Inlet Basin, Alaska, US for E&D. The company signed a production sharing agreement with Staatsolie Maatschappij Suriname, the national oil company of Republic of Suriname, for Block 53, covering xxx.x offshore acres (xxx.x km2). It has been adding new reserves to its portfolio through investment in various countries in order to increase its
5 Apache Corporation, Exploration, Development and Production Overview
Apache’s E&P activities are based in five countries: the US, Canada, Egypt, Australia, and the UK North Sea. The company’s US region was the largest producing region in 2013, followed by Egypt. Approximately xxx.x % of its global production and xxx.x % of its estimated 1P reserves were based in the US in 2013. As of December 31 of that year, Apache possessed total estimated 1P reserves amounting to xxx.x billion bbl of crude oil, xxx.x mmbbl of NGLs, and xxx.x tcf of natural gas. The company’s 1P developed reserves totaled xxx.x billion boe and its estimated 1P undeveloped reserves totaled xxx.x mmboe, equivalent to a combined xxx.x % share of global total 1P reserves as of December 31, 2013. Apache reported overall production of xxx.x mmboe in 2013, representing an annual decrease of around xxx.x % over the xxx.x mmboe of production recorded in 2012. The following figure illustrates Apache’s exploration, development and exploitation areas worldwide.
5.1 Exploration and Development Profile In 2013, Apache drilled xxx.x net wells, consisting of xxx.x net development wells and xxx.x net exploratory wells. The number of net productive exploratory and development wells
7 Apache Corporation, Forecast Production and Financial Statements
Apache’s production and financial projections have been calculated using information that is publicly available. GlobalData has used a forecast period of five years for its analysis. The following table provides Apache’s historic and estimated production between 2011 and 2018.
Table 6: Apache Corporation, Historical and Forecast Production, 2011–2018
Production spilt Actual Projected annual forecast
2011 2012 2013 2014 2015 2016 2017 2018
Crude oil and NGL production (mmboe) xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x
Natural gas production (bcf) xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x
GlobalData’s price deck is divided into strong, base and weak cases for forecasting. Company-specific differentials have been applied to its projected crude oil and natural gas prices. The following table shows GlobalData’s price deck between 2014 and 2018.
Source: GlobalData; Apache, 2012; Apache, 2013 DD&A: Depreciation, Depletion and Amortization; EBITDAX: Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization and Exploration; EBT: Earnings Before Tax; EPS: Earnings Per Share; G&A: General and Administrative; PAT: Profit After Tax
8 Apache Corporation, Valuation 8.1 Net Asset Value Methodology
Apache’s operations have been valued using the Net Asset Value (NAV) methodology. The company’s operations yielded an equity value of US$xx.x billion, and an Enterprise Value (EV) of US$ xx.x billion. GlobalData’s base case valuation is US$ xx.x per share, implying that the company’s stock is trading at a discount of xx.x %, based on the current share price of US$ xx.x per share, as of September 30, 2014. The following principles have directed GlobalData’s valuations:
Apache has been valued using the sum-of-parts valuation methodology.
Apache’s 1P reserve base has been calculated using the Present Value discounted at xx.x % (PV10) method.
Apache’s undeveloped acreages have been calculated using the recent US$-per-acreage multiples in GlobalData’s database (www.oilandgasetrack.com).
The price deck is divided into strong, base and weak cases, to evaluate Apache Corporation’s performance.
Future development costs have been taken from Apache’s standardized PV10 values, which are available in filings from the US Securities and Exchange Commission. GlobalData has assumed that the development cost will be spent over the coming eight years.
The operating cost for independent E&P companies consists of lifting costs and related G&A expenditure.
GlobalData has assumed a nominal discount rate of around xx.x %.
The following table provides a detailed calculation of the NAV methodology used for Apache.
Apache (2012). Annual Report 2012. Apache Corporation. Available from: http://www.apachecorp.com/Resources/Upload/file/investors/Apache_AR_2012.pdf
Apache (2013). Annual Report 2013. Apache Corporation. Available from: http://www.apachecorp.com/Resources/Upload/file/investors/Apache_AR_2013.pdf
Apache (2014a). Investor Presentation. Apache Corporation. Available from: http://investor.apachecorp.com/common/download/download.cfm?companyid=APA&fileid=779405&filekey=059aa9c1-2be6-46ba-b5f3-ebca27b2b5cf&filename=Apache_Barclays_20140903.pdf
Apache (2014b). Investor Presentation. Apache Corporation. Available from: http://investor.apachecorp.com/common/download/download.cfm?companyid=APA&fileid=760163&filekey=6f153a16-ce75-4612-85b6-10743e946acb&filename=Apache_UBS_20140520.pdf
Apache (2014c). Operation. Apache Corporation. Available from: http://www.apachecorp.com/Operations/Canada/Kitimat_Project/index.aspx
Chevron (2014). Operation; Chevron Australia. Available from: http://www.chevronaustralia.com/sfimages/default-source/default-album/wheatstone-project.jpg?sfvrsn=0
Google Finance (2014). Summary. Google. Available from: http://www.google.com/finance?q=NYSE%3ATOT&ei=ZW1zUrHpK4iwkgW_igE
Yahoo Finance (2014). Historical Prices. Yahoo. Available from: http://in.finance.yahoo.com/q/hp?s=FP.PA&a=00&b=1&c=2014&d=11&e=31&f=2014&g=d [Accessed on January 3, 2014]
15.3 Research Methodology GlobalData’s dedicated research and analysis teams consist of experienced professionals with advanced statistical expertise and marketing, market research and consulting backgrounds in the energy industry.
GlobalData adheres to the codes of practice of the Market Research Society (www.mrs.org.uk) and Strategic and Competitive Intelligence Professionals (www.scip.org).
All GlobalData databases are continuously updated and revised.
Coverage
The objective of updating GlobalData’s coverage is to ensure that it represents the most up-to-date vision of the industry possible.
Changes to the industry taxonomy are built on the basis of extensive research of company, association and competitor sources.
Company coverage is based on three key factors: market capitalization; revenues; and media attention and innovation and market potential.
An exhaustive search of 56 member exchanges is conducted and companies are prioritized on the basis of their market capitalization.
The estimated revenues of all major companies, including private and governmental, are gathered and used to prioritize coverage.
Companies that are making the news or that are of particular interest due to their innovative approach are prioritized.
GlobalData aims to cover all major news events and deals in the energy industry, updated on a daily basis.
Secondary Research
The research process begins with extensive secondary research using internal and external sources to gather qualitative and quantitative information relating to each market.
The secondary research sources that are typically referred to include, but are not limited to:
Company websites, annual reports, financial reports, broker reports, investor presentations and SEC filings
Industry trade journals and other technical literature
Internal proprietary and external databases
National government documents, statistical databases and market reports
News articles, press releases and web-casts specific to the companies operating in the market
Primary Research
GlobalData conducts hundreds of primary interviews each year with industry participants and commentators in order to validate its data and analysis. A typical research interview fulfills the following functions:
Provides first-hand information on market size, market trends, growth trends, competitive landscape and future outlook.
Helps to validate and strengthen secondary research findings
Further develops the analysis team’s expertise and market understanding
15.4 Disclaimer All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means; electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData.