Anadarko Petroleum Corporation (APC)

[Timothy Smith]

Apache's expansive geographic diversity and liquids rich composition makes it unique amongst the large E&P companies. Nearly all of Apache's CAPEX is being dedicated to oil rich plays, which makes tremendous economic sense with oil trading at 30 times the price of North American natural gas. Over 40% of Apache's North American oil production comes from the Gulf Coast regions where average crude price realizations currently reflect over a 20% premium to WTI pricing. Over 50% of Apache's production is liquids, enabling the company to generate solid profits, despite the depression-like conditions in the natural gas market.

Although production of 774,000 barrels of oil equivalent (BOE) per day was actually up from 748,519 YoY, lower realized prices in both oil and natural gas has been causing most E&P firms to post declines in earnings from the prior year's period. On a global basis Apache received an average of $97.66 per barrel of oil, down from $106.31 year over year. Fortunately for the company 73% of crude oil production was Brent Crude allowing the company to realize better prices than in North America. North American natural gas price realizations fell 35% YoY to $3.17 per thousand cubic feet (MCF), and the company's international regions saw prices rise 8% to $4.08 per MCF. International gas production rose 100 million cubic feet per day from the prior-year period and represented 37% of Apache's total gas volumes.

In the Permian Basin the company is now operating 36 rigs up from 26 at the end of 2011, and in the Andarko Basin Apache has 24 rigs up from 7 at year end. Production in the Permian Basin was up 5% sequentially or 23% on an annualized basis, and the company believes that it remains on target to grow production on this play by 13% per year. Production in the Permian Basin is about 72% liquids with about three quarters of that being crude oil. Growth was even faster in the Andarko Basin, where production increased 47% sequentially, including volumes from the Cordillera Energy Partners III acquisition that closed April 30. Apache believes that the company remains on target to grow production by 24% per year through 2016.

In Apache's Wolfcamp Shale play four horizontal wells have produced more than 190,000 barrels of oil equivalent since March 19th. Currently the company is operating three rigs on this play, and the company has drilled five additional wells which are completed, or are expected to be completed very soon.