Apache to slash 2016 budget by more than half, prioritise Egypt and North Sea operations
Oil and gas producer Apache Corporation cut its 2016 capital budget by more than half on Thursday and said output would dip as it weathers a 70 percent slide in crude prices.
The company plans to spend $1.4 billion-$1.8 billion in 2016, down more than 60 percent from last year’s levels and 80 percent from 2014 outlays. It said it would adjust the budget more if prices change as it seeks to maintain cashflow neutrality.
It is to be split in roughly equal portions between maintenance, development and exploration. Its North Sea operations are to get 30%, the largest share of any of the company’s regional operations. Offshore Egypt is also to be a priority.
The decision runs counter to fears that the North Sea is seen by the industry worldwide as a relatively expensive and unattractive oil and gas basin in which to invest.
Apache’s North Sea assets produce at below the average cost for the region, an average of $16 per barrel of oil by the end of 2015. That is more than its Egyptian and North American assets, but so is the UK cash margin, at $33 per barrel last year.
Reduced spending on new wells will trim output by 7-11 percent from 2015 proforma production.
Apache now forecasts total proforma production for this year of 433,000-453,000 barrels of oil equivalent per day (boepd), excluding minority interest in Egypt and tax barrels.
“In 2016, we plan to be cash flow neutral after dividends and believe this can be achieved at $35 oil with minimal non-core, non-producing asset sales,” Chief Executive John Christmann said in a statement. “Our target is for net debt at the end of 2016 to be unchanged or lower than it was at the end of 2015.”
The Houston-based independent reported a quarterly loss on Thursday that, while wider than a year ago, was smaller than analysts’ expectations thanks to sharply lower costs.
The net loss attributable to Apache’s common shareholders widened to $7.21 billion, or $19.07 per share, in the fourth quarter ended Dec. 31 from $4.81 billion, or $12.78 per share, a year earlier.
Excluding writedowns and impairment charges of $5.9 billion, the company had a loss of 6 cents a share, much smaller than the average analyst estimate of 48 cents, according to Thomson Reuters I/B/E/S.
Total revenue more than halved to $1.26 billion.
During the year, the company completed $6.2 billion of asset sales, mainly for LNG stakes, and reduced its debt load by $3.2 billion.
Apache said it has no debt due this year or next year, and only $700 million maturing through 2020. The company’s undrawn $3.5 billion revolving loan was extended to June 2020.
(Source: Reuters & BBC)