Photo: Apache CEO and president John J. Christmann IV.
HOUSTON — Apache Corporation has announced that its board of directors has approved a 2019 upstream capital budget of $2.4 billion. This represents a significant reduction from its previous 2019 investment plan, as well as from its actual upstream investment level in 2018. Despite a lower planned activity set, Apache is projecting 2019 total adjusted production for the full year will trend to the midpoint of its previous guidance range of 410 to 440 Mboed. This budget excludes the planned consolidated activities of Altus Midstream Company.
The company expects to generate strong fourth-quarter 2018 to fourth-quarter 2019 production increases of 6% to 10% on a total company-adjusted basis, 12% to 16% in the United States, and approximately 5% for Permian Basin oil. Over the same time period, international adjusted production is projected to be down slightly.
Assuming an average WTI oil price of $53/bbl and a Henry Hub natural gas price of $2.80/Mcf, the company’s 2019 upstream plan will be “cash flow neutral,” defined as cash flow from operations before working capital changes, minus upstream capital expenditures and dividend payments. Nearly half of Apache’s current oil production on an adjusted basis receives a significant premium to WTI prices. To the extent actual results, including asset sales, generate free cash flow, planned capital activity will not be increased until at least 50% of the free cash flow has been returned to shareholders through share repurchases, debt reduction or dividends.
“Our 2019 plan is designed to optimize value for Apache shareholders through long-term, returns-focused development of oil, natural gas and natural gas liquids (NGLs), while advancing certain high-impact exploration projects. Apache is committed to delivering this planned activity set and production outcome, while maintaining a strong returns focus, continuing our dividend payment and remaining cash flow neutral at plan prices. As we have demonstrated in the past, to the extent that commodity prices fall, we have the flexibility and intention to reduce our activity set to preserve returns and target cash flow neutrality,” said John J. Christmann IV, CEO and president of Apache Corporation.
“We believe Apache offers a very competitive investment proposition both within the E&P sector and relative to other sectors in the market. In a flat oil price environment, we believe we can deliver a combination of sustainable production and operating cash flow growth, strong returns, a stable dividend that currently yields more than 3%, and return at least 50% of any free cash flow to our shareholders. Additionally, Apache offers significant upside value potential through its current 100% ownership in Block 58 offshore Suriname, as well as its portfolio of unconventional exploration projects in the Lower 48,” said Christmann.
Since the beginning of 2015, Apache has paid out more than $1.5 billion in dividends to shareholders and reduced debt and future asset retirement obligations by approximately $4.2 billion. Additionally, the company initiated a share repurchase program during the second half of 2018, under which it repurchased 7.8 million shares at an average price of approximately $39/share through Dec. 31, 2018.
Apache will discuss the 2019 outlook and elements of its longer-term view in more detail on its fourth-quarter 2018 results conference call, scheduled for Feb. 28 at 10 a.m. Central time.
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