2nd UPDATE:Apache Swings To 1Q Loss, Production Drops;Shares Up
April 30 2009 - 4:20PM
Dow Jones News
Oil and gas producer Apache Corp. (APA) swung to a first-quarter
loss as it wrote down properties by another $1.98 billion amid the
plunge in commodity prices. It also said quarterly output dropped
2% versus a year ago.
Excluding writedowns, which are an admission that many of the
assets were no longer worth as much as once thought, the Houston
company reported quarterly earnings of $218 million, or 65 cents
per share, compared to earnings of $1 billion, or $2.99 per share,
in the same period last year. The latest quarter's write-down
follows a $3.6 billion revision in the fourth quarter.
Apache, the second-largest independent U.S. oil producer by
market value, substantially surpassed analyst expectations of 34
cents a share. Analysts attributed the surprising results to the
fact that Apache doesn't have its oil production hedged, which
allowed it to take full advantage of relatively stable oil prices
in the first quarter. Apache produces more oil than its peers.
Although prices of both commodities has fallen drastically from
their all-time highs last summer, oil prices held better than those
of natural gas in the first quarter.
Including writedowns, Apache swung to a net loss of $1.76
billion, or $5.25 a share, from year-earlier income of $1.02
billion, or $3.03 a share. Revenue plunged 49% to $1.63
billion.
Apache's shares were recently up $2.77, or 3.97%, to $72.60
Thursday afternoon as investors seemed to focus on the
higher-than-expected earnings.
Apache said its oil-equivalent production declined 2% from the
first quarter of 2008 and that it expects to come in at the lower
end of its production growth target of 6% to 14% due to lower
capital spending and a delay at the Van Gogh development offshore
Western Australia. A platform under construction in Singapore that
is supposed to be transferred to Australia caught fire earlier this
month.
Apache also said it agreed to acquire nine Permian Basin oil and
gas fields from Marathon Oil Corp. (MRO) for $187.4 million. Fadel
Gheit, an analyst with Oppenheimer & Co., said the transaction
was made at a fair price and it seems beneficial for both companies
but too small to make a dent in any of the companies' finances.
During a conference call to discuss the company's first-quarter
earnings, Apache Chief Executive Steve Farris said that the company
is on the lookout for assets to buy.
"We don't have anything in front of us but we are constantly
looking," Farris said.
Earlier this week, Farris said the company is in the market to
buy assets in areas where it already has operations, including the
Gulf of Mexico, onshore U.S. and Canada. Farris added that the
company prefers to acquire assets rather than companies.
The executive also said that Apache will continue to pressure
service costs lower to bring them in line with current oil and
natural gas prices.
"As long as we see these kinds of prices, costs will continue to
come down," Farris said.
Company executives said that the cost to drill a well in Western
Oklahoma have already fallen by at least 30% from the same time
last year.
-By Isabel Ordonez, Dow Jones Newswires; 713-547-9207;
isabel.ordonez@dowjones.com
(Mike Barris in New York and Jason Womack in Houston contributed
to this story)