ADAPTING TO THE OIL PRICE DECLINE

Transcription

1 ADAPTING TO THE OIL PRICE DECLINE SPE JANUARY MEETING

2 FORWARD-LOOKING STATEMENTS Certain statements in this presentation contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 including, without limitation, expectations, beliefs, plans and objectives regarding anticipated financial and operating results, asset divestitures, estimated reserves, drilling locations, capital expenditures, price estimates, typical well results and well profiles, type curve, and production and operating expense guidance included in this presentation. Any matters that are not historical facts are forward looking and, accordingly, involve estimates, assumptions, risks and uncertainties, including, without limitation, risks, uncertainties and other factors discussed in our most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent filed Current Reports on Form 8-K available on our website, and in our other public filings and press releases. These forward-looking statements are based on Apache Corporation s (Apache) current expectations, estimates and projections about the company, its industry, its management s beliefs and certain assumptions made by management. No assurance can be given that such expectations, estimates or projections will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this presentation, including, Apache s ability to meet its production targets, successfully manage its capital expenditures and to complete, test and produce the wells and prospects identified in this presentation, to successfully plan, secure necessary government approvals, finance, build and operate the necessary infrastructure, and to achieve its production and budget expectations on its projects. Whenever possible, these forward-looking statements are identified by words such as expects, believes, anticipates, projects,, guidance and similar phrases. Because such statements involve risks and uncertainties, Apache s actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Unless legally required, we assume no duty to update these statements as of any future date. However, you should review carefully reports and documents that Apache files periodically with the Securities and Exchange Commission. Cautionary Note to Investors: The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache may use certain terms in this presentation, such as resource, resource potential, net resource potential, potential resource, resource base, identified resources, potential net recoverable, potential reserves, unbooked resources, economic resources, net resources, undeveloped resource, net risked resources, inventory, and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, available from Apache at or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling SEC-0330 or from the SEC's website at 1

3 KEY MESSAGES Aggressively reduced activity and spending levels to align with falling price environment Strong balance sheet and liquidity, minimal nearterm debt maturities Realigned the organization and streamlined the portfolio and management team Focused on returns and strategic testing Remaining flexible and opportunistic 2

4 2015 ACCOMPLISHMENTS (1) Strategic initiatives Exited LNG and Australia upstream business Strengthened the balance sheet by $4.9 billion dollars (2) Attacked the cost structure at every level Implementing a multi-year, multi-scenario planning process Organizational optimization Multiple changes across multiple levels Closed Tulsa office and consolidated Houston offices Created technical centers of excellence Operational achievements Scaled back capital program by approximately 60% and reduced activity level for current environment Significantly improved capital efficiency and reduced LOE and G&A costs Exceeding 2015 production targets companywide 1. Through third quarter 2015, fourth quarter 2015 to be reported on Feb 25, Net debt reduced from $12 billion in first quarter 2015 to $7.1 billion at the end of the third quarter

5 REPOSITIONED FOR THE FUTURE Significant leadership, portfolio and capability changes over the last 2 years. Strategic Organizational Changes Unconventional resources team developed 2014 North American Update CEO succession & new CFO announced Organizational restructuring announced 2015 North Sea Update 1Q Q Q Q Q Q Q Q 2015 Activity drop Argentina asset sale completed Lucius and Heidelberg asset sales completed Strategic Portfolio Changes Anadarko Basin and South Louisiana asset sales completed LNG asset sales completed Australian upstream asset sale completed Additional nonupstream asset divestitures $10.5 billion of non-strategic assets sold, or announced to sell, since

6 GREATLY ENHANCED BALANCE SHEET (in billions) $14 $12 $10 $8 $6 $4 $2 28% $14,000 $12,000 $10,000 $4.9 billion reduction in net debt (1) $8,000 $6,000 $4,000 $2,000 Only $700 million of debt maturing through 2020 $3.5 billion of liquidity from undrawn revolver extended to June 2020 $0 1Q '15 3Q '15 $ Total Debt Cash Debt Maturity Schedule (5 Years) 1. Net debt reduced from $12 billion in first quarter 2015 to $7.1 billion at the end of the third quarter

7 MIRRORING ACTIVITY LEVEL TO FALLING PRICE ENVIRONMENT Rig Count 120 WTI Oil Price Apache International Rigs Apache North American Rigs Price per Bbl $ $100 $80 70% Capital reduction 3Q 15 from 3Q $ $40 $20 86 Rigs cut worldwide since September Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 $0 6

8 CONTINUING TO ATTACK THE COST STRUCTURE 0% Average Well Cost North America (1) Gross G&A Cash Cost (2) Lease Operating Expense Per BOE (3) -10% -20% -30% 30% 26% North American Capital Costs General and Administrative Expense 18% Lease Operating Expense 1. Includes a reduction of expenditures associated with drilling and completion costs from November 2014 to the third-quarter Includes a reduction of gross capitalized and expensed G&A costs from third-quarter 2014 to the third-quarter Includes a reduction in LOE expenses from the third-quarter 2014 to the third-quarter

9 STREAMLINED PORTFOLIO Well balanced portfolio with diversified opportunity set Extensive resource base in North America, anchored by Permian, will drive future growth Free cash flow generating assets with years of exploration and development in Egypt and North Sea 8

10 NORTH AMERICA OVERVIEW Large acreage positon across multiple oilprone plays: Permian, Eagle Ford, Woodford and Duvernay/Montney All key plays have economic drilling opportunities at $40 oil Relatively low base decline rate reduces capital required to replace production Focused on cost structure, strategic testing and acreage delineation Well-positioned to ramp drilling program and deliver strong rates of return Opportunistically acquiring low cost acreage in high potential areas where APA has a technical / competitive advantage 9

11 PERMIAN: THE PREMIER U.S. OIL BASIN Industry s 3 rd largest acreage position (3.2 MM gross) 3Q production of 170 Mboe/d, third largest in the Permian Relatively low decline rate of 22% reduces capital needed to replace production Stacked pay multiplies the opportunity set 10

12 DELAWARE BASIN: HIGH RETURNS SUB $40 WTI Reduced average well cost by 40% from $8 million projected on Nov Targeting <$5 million per well Expanding drilling inventory Successfully reducing water cuts through technology 11

13 MIDLAND BASIN: MULTIPLE STACKED PAYS Focused on core acreage - increasing average IP rates Reduced well cost 32% from $7.9 million projected in Nov Approximately 90% of wells drilled using 3-D seismic Expanding inventory through strategic testing of lower Spraberry and other zones Working field development plans to maximize flexibility and efficiency of future drilling ramp 12

14 CENTRAL BASIN PLATFORM / NW SHELF Legacy asset continues to deliver Asset Characteristics Advantage 76,400 Boe/d Diverse set of capital projects Provides flexibility in low, volatile price environment net avg. production through 3Q 2015 Low base decline rate Reduces maintenance capital spend Low operating cost, minimal infrastructure requirements High full-cycle program rates of return 13

15 CENTRAL BASIN PLATFORM / NW SHELF Diverse set of capital projects CBP/NW Shelf Tansil Yates Seven Rivers Vertical and Horizontal Drilling Secondary and Tertiary Oil Recovery Guadalupe Queen Grayburg San Andres Judkins McNight 17 producing formations Leonard Glorieta Upper Clearfork Tubb Lower Clearfork Wichita Albany 11 horizontal targets 15 vertical targets Water Flood Programs CO2 Flood Programs 20 mi APA Acreage Wolf. Pennsylvanian Miss. Wolfcamp Lime Cisco Canyon Strawn Atoka Barnett Mississippian Woodford Devonian Multiple decades of drilling opportunity at current pace >30% OOIP recovery from 40+ water flood programs and 7 CO2 flood programs Sil. Silurian Ordovician Montoya Simpson Ellenburger 14

16 CENTRAL BASIN PLATFORM / NW SHELF Low production base decline rates 60% 50% 40% 30% 20% 10% Annual Decline Rates 14% base decline 46% of total Permian production CBP / NW Shelf Permian Production (Boe/d) 0% 1st Year Shale Well Bakken US L48 Permian Actual Apache CBP/NW Shelf YTD Net Production 0 Third party research analysis (1) Low decline rate assets require significantly less maintenance capital to sustain production 1. Source: Bernstein equity research reports. 15

17 EAST TEXAS EAGLE FORD: UNLOCKING VALUE Delineation and completion optimization in Area A has enabled significant improvement in well performance Averaged 1 rig in second half of 2015 Further delineation needed in southern portion of acreage trend During 3Q brought 8 wells in Area A with an average 30-day production rate of 1,545 Boe/d. 16

18 WOODFORD Legacy acreage position and infrastructure availability leads to highly economic full-cycle returns Approximately 200,000 gross (50,000 net) acres Early stages of delineating operated acreage but have participated in 30+ non-operated wells Averaged 2 rigs in 2H

19 DUVERNAY AND MONTNEY Duvernay offers tremendous longer term growth potential Considering JV partner to develop Montney and reduce up front infrastructure cost to APA Near term, plan is for Canada to live within internally generated cash flow 18

20 INTERNATIONAL U.K. NORTH SEA EGYPT Most efficient and lowest cost operator 20+ year track record of success 12 year track record of strong returns at Forties Strong free cash flow generation Excellent reserve and production growth opportunities at Beryl Extending field lives through exploration and development drilling Multiple stacked pays Production sharing contract structure reduces exposure to low oil prices Brent-linked pricing, minimal infrastructure requirements and sub $10 per bbl LOE, yield strong full-cycle returns 19

21 NORTH SEA: PREMIUM ASSETS WITH STRONG FUTURE POTENTIAL Two primary areas, Forties and Beryl Generates free cash flow in low price environment Industry leading production efficiency, >90% Operating costs less than $15 per boe 10+ year drilling inventory Announced three major exploration discoveries in the Beryl area 20

22 EGYPT: FREE CASH FLOW MACHINE >$7 billion of free cash flow to APA over last 6 years Increased gross production 12% annually since 1996 Oil represented 60% of total production and 80% of total revenue in 3Q 15 Leading explorer in Egypt: drilled approximately 4x more new field wildcats than second largest peer over the last 10 years 600+ remaining exploration leads and prospects New discoveries at Ptah and Berenice generated peak production of 26,000+ Boe/d 21

23 SUMMARY Aligned activity and spending to lower for longer oil prices Greatly enhanced balance sheet Realigned the organization and streamlined portfolio Relentless focus on returns and net present value Aggressively reducing all facets of the cost structure Delivering strong production, raised 2015 guidance Plan to maintain flexibility and respond to material changes in price signals 22

24 APPENDIX

25 MBOE/D 2015 NORTH AMERICA ONSHORE GUIDANCE Region Production Guidance (YOY) Permian % Oil Midcontinent/ Gulf Coast Canada 44% Oil % Oil % Oil % - 2% ~2% Adjusted Production Previous 2015 Guidance* Adjusted production represents volumes related to 2014 Canada, South Texas, South Louisiana and Anadarko Basin sales. *Updated on 2Q earnings call on August 6, New 2015 Guidance

26 MBOE/D 2015 INTERNATIONAL + GOM GUIDANCE Region Production Guidance (YOY) Egypt Gross Egypt Net % Oil % Oil % Oil 69% Oil North Sea Gulf of Mexico 5% - 8% 10% - 12% Adjusted Production Previous 2015 Guidance** New 2015 Guidance Adjusted production represents volumes related to minority interest and tax barrels in Egypt of 73 MBoe/d, asset sales in Australia of 56 MBoe/d and asset sales in North Sea Scott and Telford field of 4 MBoe/d. **Provided on 2Q earnings call on August 6,

27 3Q 2015 NET DEBT RECONCILIATION $9,000 $8,000 $7,000 $6,726 $876 $164 $126 $94 $6 $29 $829 $7,122 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Net Debt 6/30/15 E&P and GTP Capex Other Leasehold & Property Acquisitions Dividends Changes in Working Capital Asset Sales Cash Flow From Cont Ops Net Debt 9/30/15 Note: Apache s sale of foreign assets and the repatriation of proceeds triggered U.S. income taxes payable of $560 million to be paid in the fourth quarter of Accordingly, net debt of $7.1 billion should be considered to be nearer $7.7 billion. 26

28 DELAWARE BASIN Lea Eddy Loving Reeves Pecos Bend 20 mi APA Acreage Winkler WAHA Ward Pecos 2015 Focus Areas Acres Planned 2H 15 Rigs Inventory 230,000 net 4 rigs >1,400 Hz locations Focusing primarily on Bone Spring and Wolfcamp Positive results from new interval tests Customizing completions to reduce water cuts Pecos Bend 17 wells completed in 3Q Avg 30-day IP rates ranging 724 1,466 Boe/d 27

29 MIDLAND BASIN FOCUS AREA Acres ~200,000 net Wildfire Azalea Midland Glasscock Planned 2H 15 Rigs Inventory 3 rigs > 2,900 locations Powell- Miller Upton Reagan Multiple landing zones Realizing 32% well cost reduction from 2014 Wildfire: 10 mi 2015 Focus Areas Three wells were drilled to total depth during 3Q and production results are expected during 4Q APA Acreage Currently completing 3 lower Spraberry wells in the Lynch Unit A 28

30 EAGLE FORD Robertson Brazos Acres Planned 2H 15 Rigs 288,000 net 1 rig Inventory (1) > 3,000 Hz locations Burleson Improving completion techniques Lee Washington Ferguson Crossing Grimes Advancing knowledge of different geologic subsettings Full 3D seismic coverage over most of the core acreage Fayette La Grange Austin Waller Focusing on Ferguson Crossing area Colorado APA Acreage (1) Locations based on 500 spacing. 29

31 EGYPT: TRACK RECORD OF LONG-TERM PRODUCTION GROWTH Gross Prod. Mboe/d Liquids (MBbl/d) Gas (MMcf/d) % 57% 30

32 EGYPT: STRONG FREE CASH FLOW In Millions $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ CAPEX Cash Flow $7+ Billion Free Cash Flow in Last 6 Years Note: Free cash flow equals cash flow from operations before changes in working capital minus CAPEX which includes E&D + GTP but excludes A&D and 2014 includes noncontrolling interest. 31

33 EGYPT: LEADING EXPLORER ONSHORE Wells Drilled % % New Field Wildcats by Operator (2004 2Q 2015) 55% Total Wells 44% Successes 50% 63% Apache A B C D E Note: Operators include BP, Dana Gas, ENI, Merlon and Shell. Success Rate 80% 70% 60% 50% 40% 30% 20% 10% 0% 32

34 EGYPT: WESTERN DESERT OFFERS MULTIPLE STACKED PAYS Productive Reservoirs Depth 3, potential pay zones Balanced portfolio of lower and higher risk targets Shallow bailout zones reduce dry hole risk on deeper exploratory targets 600+ explorations leads and prospects Exploration primarily targeting deeper Jurassic and Paleozoic 17,000 Current Exploration Focus 33

35 NORTH SEA: STRONG FREE CASH FLOW In Millions $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $ CAPEX Cash Flow ~$2 Billion Free Cash Flow in Last 5 Years Note: Free cash flow equals cash flow from operations before changes in working capital minus CAPEX which includes E&D + GTP but excludes A&D. 34

36 NORTH SEA: EXCEPTIONAL FIELD REVIVAL AT FORTIES MBD Gross Apache acquires Forties from BP Forties Field - BP Forties Field - Apache Satellite Fields Gross Production (MBOE/D) Net Proved Reserves (MMBOE) Projected Field Decommission Date At Acquisition (2003) (>200 produced) 2012 ~ Apache invested ~$1 billion in infrastructure from Well Count

37 NORTH SEA: BERYL AREA OPPORTUNITY Apache acquires Beryl from ExxonMobil Base Platform production Base Satellite production Added platform and satellite production Gross Production (MBOE/D) Net Proved Reserves (MMBOE) Projected Field Decommission Date At Acquisition (2012) (>25 Produced) 2021 ~2030 Paid $1.44 billion for Beryl field Significant drilling, reserve addition and field extension opportunities Well Count Apache invested ~$300 million in infrastructure from , only 9 wells drilled thus far 36