Apache Corporation reported that high crude oil and natural gas prices fueled record quarterly net income of $1.4 billion or $4.28 per diluted common share, a 128-percent increase from $632 million or $1.89 per share in the prior-year period.
Second-quarter cash from operations before changes in operating assets and liabilities totaled $2.3 billion, compared with $1.5 billion in the prior-year period, and surpassed the record of $1.9 billion set in the fourth quarter of 2007.
Second-quarter production declined 3.6 percent from the prior-year period and 1 percent from the first quarter to 551,600 barrels of oil equivalent (boe) per day. The decline is primarily the result of an explosion that disrupted operations at the gas processing and transportation hub at Varanus Island in Australia as well as a strike at a refinery in Scotland that shut in production from all of the fields on the Forties Pipeline System, including Apache's Forties Field.
"The second quarter was highlighted by record financial results, continued exploration success, and sustained progress in delivering our pipeline of development projects," said G. Steven Farris, Apache's president and chief executive officer. "Despite the challenges we faced during the quarter, we remain positive about the long-term outlook. Driven by successful drilling programs and seven development projects that are expected to add 135,000 boe per day to worldwide net production over the next four years, we are confident Apache is entering a period of accelerating production growth in 2009-2012."
Drilling highlights included:
The Geauxpher discovery in the deepwater Gulf of Mexico has estimated proved and probable reserves of 100 billion cubic feet. Apache has a 40 percent working interest in the field;
The Heqet-2 well in Egypt tested 2,100 barrels per day from a depth of more than 14,000 feet;
The Umbarka-174 well in Egypt tested 4,300 barrels per day;
In Canada, two Ootla shale wells drilled by Apache's partner EnCana added further support to the current estimated potential of 9-16 trillion cubic feet net to Apache, and
Five wells drilled in the Forties Field in the North Sea during the first half of 2008 averaged an aggregate of 8,900 barrels per day in the second quarter. Apache has a 97 percent working interest in the Forties Field.
In Egypt, Apache expects to commence production through the Salam gas plant expansion in October. The gas plant project -- one element of Apache's development pipeline -- is forecasted to contribute additional net production of 100 million cubic feet (MMcf) of gas and 5,000 barrels of condensate per day by the end of the year.
"At Varanus Island, we will resume partial gas sales over the next few days," Farris said. "The initial rate is expected to be 110 MMcf per day; later in August, we expect production to increase to 220 MMcf per day.
"We want to assure the citizens of Western Australia that Apache understands the hardship that they have experienced and that fully restoring production is our highest priority," Farris said.
"We are confident that Apache will overcome the temporary setbacks in Australia and the North Sea and will register its 29th annual production increase in the last 30 years," Farris said.
During the second quarter, Apache received an average of $110.32 per barrel of oil -- up 72 percent from the prior-year period - and $8.09 per thousand cubic feet (Mcf) of gas, up 47 percent.