Apache Corporation Slashes Capital Spending as Natural Gas, NGL Prices Hamper Growth Plans

Researched by Industrial Info Resources (Sugar Land, Texas)--Apache Corporation (NYSE:APA) (Houston, Texas) reported stronger than expected revenues in fourth-quarter 2019, driven by record production for the company in the Permian Basin, but slashed its capital-spending outlook for 2020 by 26% as prices for natural gas and natural gas liquids (NGL) significantly dropped. Industrial Info is tracking more than $830 million in active projects from Apache, about $515 million of which is nearing or under construction.

Click on the image at right for a map of Apache's projects in the Permian Basin of Texas.

Apache expects to produce between 270 million and 285 million barrels of oil equivalent per day in 2020, compared with 280 million produced in 2019; between 97 million and 101 million barrels are expected to come from the Permian Basin, while between 133 million and 137 million barrels are expected to be produced internationally. The company expects to see between $1.6 billion and $1.9 billion in capital spending throughout 2020, about 55% of which go toward U.S. projects.

Impairments related to Apache's Alpine High complex, which is situated in the Permian Basin, accounted for much of a $2.7 billion writedown the company incurred for fourth-quarter 2019. "At Alpine High, results were disappointing on a few fronts," said John Christmann, the chief executive officer of Apache, in a quarterly earnings-related conference call. "In the second half of 2019, extended flow data from key spacing and landing zone tests indicated disappointing performance of our multi-well development pads. While these tests are not fully conclusive for the entirety of Alpine High, given the prevailing price environment, further testing is not warranted at this time. As a result, we dropped the remainder of our drilling rigs in the fourth quarter and chose to defer some previously planned completions."

It is unclear how the changing dynamics at Alpine High will affect a pair of gas-processing trains in the works: the $160 million Train IV and $160 million Train V additions at its Diamond Natural Gas Cryogenic Processing Plant in Balmorhea, Texas, which opened in May of last year. Each train would process 200 million standard cubic feet per day of natural gas, bringing the Diamond facility's full capacity to 1 billion standard cubic feet per day upon completion, which had been expected at the end of the year for both trains. For more information, see Industrial Info's project reports on Train IV and Train V.

The company also had proposed a series of compressor stations to support the Alpine High Gathering System, each valued at $5 million. These stations, still undergoing economic evaluation, would include:

• Station No. 8 in Balmorhea; see project report
• Station No. 9 in Balmorhea; see project report
• Station No. 10 in Toyah; see project report
• Station No. 11 in Toyah; see project report
• Station No. 12 in Saragosa; see project report
• Station No. 13 in Pecos; see project report
• Station No. 14 in Van Horn; see project report
• Station No. 15 in Van Horn; see project report

Internationally, Apache is upbeat about its prospects in the U.K. North Sea in the coming years. "Production in the North Sea increased significantly following seasonal platform maintenance turnarounds in the third quarter and first production from our discovery in November," Christmann said.

Click on the image at right for a map of Apache's projects in the North Sea.

Among the projects set to begin construction this year in the North Sea is the Seagull Offshore Subsea Installation Platform, which includes an estimated $91 million drilling program, an estimated $65 million of subsea installation, and an estimated $39 million pipeline tieback. Four wells are expected to be drilled. For more information, see Industrial Info's project reports on the drilling, subsea installation and tieback.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.