apache corporation company intelligence report,2014 · 4 apache corporation, swot analysis.....28...

Apache Corporation, Company Intelligence Report 1 © GlobalData. This report is a licensed product and is not to be copied, reproduced, shared or resold in any form.

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REFERENCE CODE GDGE0679V | PUBLICATION DATE SEPTEMBER 2014

APACHE CORPORATION, COMPANY INTELLIGENCE REPORT


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Executive Summary

Apache Corporation, Key Valuation Metrics, 2013

Stock exchange NYSE

Stock symbol APA

Current price for class a share (US$ per share) as of July 31, 2014

xxx.x

Target price for class a share (US$ per share) xxx.x

2013 revenue (US$ bil) xxx.x

Market capitalization of class a (US$ bil) as of July 31, 2014

xxx.x

Estimated EV (US$ bil) xxx.x

52-week high/low (US$ per share) xxx.x

Source: GlobalData; Google Finance, 2014 EV: Enterprise Value

Apache Corporation vs. Peer Group, Operational Performance, 2013

Parameters Total Peer average*

Proved reserves (bil boe) xxx.x xxx.x

Oil/gas (%) in total proved reserves xxx.x xxx.x

Total production (mmboe) xxx.x xxx.x

Lifting cost (US$ per boe), three-year xxx.x xxx.x

Net-back (US$ per boe), three-year xxx.x xxx.x

Recycle ratio, three-year xxx.x xxx.x

Oil and gas F&D cost per boe, three-year xxx.x xxx.x

Proved acquisition cost (US$ mil), annual xxx.x xxx.x

Reserve replacement cost (US$ per boe), annual

xxx.x xxx.x

Reserve life index xxx.x xxx.x

Development costs (US$ bil) xxx.x xxx.x

Acquisition costs (US$ bil) xxx.x xxx.x

Total net developed and undeveloped acreage (mil)

xxx.x xxx.x

Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking database [Accessed on September 4, 2014] mmboe: million barrels of oil equivalent; F&D: Finding and Development *Peers include Anadarko Petroleum Corporation, Apache Corporation, Chesapeake Energy, Devon Energy, EOG Resources, Hess Corporation and Marathon Oil Corporation.

Apache Corporation set to become leading North American Exploration and Production (E&P) Company by Strengthening Upstream Operations in North America and its Position in Liquefied Natural Gas (LNG) Markets

Apache Corporation (Apache) increased its production in the North American region through an active drilling program in 2013 involving xxx.x rigs and the drilling of xxx.x wells. During 2013, the company drilled xxx.x net wells worldwide, of which xxx.x were in North America. It was the most active North American onshore driller in 2013, with xxx.x rigs in the Permian region and xxx.x rigs in the Anadarko basin.

Apache drilled or participated in the drilling of xxx.x gross wells in the Anadarko basin with xxx.x % success. Active drilling programs with a focus on oil-rich and liquid-rich gas in the Permian and Anadarko basins continues to provide momentum for the company’s US production growth. It plans to drill approximately xxx.x wells with xxx.x rigs in North America in 2014. The company’s global Exploration and Development (E&D) expenditure for 2013 amounted to US$ xxx.x billion. Of this total, Apache’s total E&D spending in North America alone accounted for xxx.x % of its worldwide E&D spending, while E&D spending in Canada increased by xxx.x % compared with 2012.

The company has continued to target oil- and liquids-rich gas plays across its acreage and engage in the drilling of more horizontal wells in the region. The company plans to invest US$ xxx.x billion of capital in E&D activities in North America.



Executive Summary

Its crude oil and liquids production in North America increased xxx.x %, averaging xxx.x thousand barrels of oil equivalent per day (mboed) in 2013, compared with xxx.x mboed for 2012. The company expects liquid growth from the onshore North American region to amount to xxx.x – xxx.x % in 2014.

LNG Projects Expected to Strengthen Apache’s Market Position

Apache has partnered with Chevron Corporation to develop two world-class LNG projects in Australia and Canada. The company has two world-class upcoming LNG projects, which will strengthen its presence in LNG markets. One of these – the Wheatstone Project – is located in Australia, while the other – the Kitimat LNG project – is located in Canada.

The Wheatstone Project is located at Ashburton North Strategic Industrial Area, xxx.x kilometers (km) (xxx.x miles (mi)) west of Onslow, in Western Australia’s Pilbara region. The first phase of the Wheatstone Project consists of an offshore central processing platform, a xxx.x km (xxx.x mi) pipeline to shore, and two processing trains with a combined production capability of approximately xxx.x million tons of LNG per year.

The Kitimat Project is located at the Liard and Horn River basins in British Columbia (BC), Canada. Chevron Canada and Apache signed a 50/50 joint venture agreement for the construction of the Kitimat LNG project in December 2012. Phase 1 of the project will have a combined production capability of approximately 10 million tons of LNG per year. Both LNG projects are the most advanced of the proposed LNG projects in respective region and have the potential to be the first LNG projects of their size in both Canada and Australia.


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Executive Summary

Apache Corporation, Key Production Data, 2010–2013

Parameter Unit 2010 2011 2012 2013

Crude oil and liquids mmbbl xxx.x xxx.x xxx.x xxx.x

Natural gas bcf xxx.x xxx.x xxx.x xxx.x

Total production mmboe xxx.x xxx.x xxx.x xxx.x

Oil as percentage of total production

% xxx.x xxx.x xxx.x xxx.x

Production growth % xxx.x xxx.x xxx.x xxx.x

Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014] bcf: billion cubic feet; mmbbl: million barrels of oil

Apache Corporation, Key Cost, 2010–2013

Parameter Unit 2010 2011 2012 2013

F&D cost per boe, three-year

US$/boe xxx.x xxx.x xxx.x xxx.x

Reserve replacement cost per boe, three-year


Oil and gas finding cost per boe, three-year


Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014]

Apache Corporation, Key Valuation Metrics, 2010–2013

Parameter Unit 2010 2011 2012 2013

EV/reserves US$/boe xxx.x xxx.x xxx.x xxx.x

EV/production US$/boe xxx.x xxx.x xxx.x xxx.x

EV/DACF X xxx.x xxx.x xxx.x xxx.x

EV/EBITDA X xxx.x xxx.x xxx.x xxx.x


DACF: Debt-Adjusted Cash Flow; EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization

Apache Corporation, Key Production Data, 2010–2013

Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014] RHS: Right Hand Side

Apache Corporation, Key Cost (US$/boe), 2010–2013

0102030405060

2010 2011 2012 2013

Cos

t (U

S$/b

oe)

F&D cost, three-year avg.Reserve replacement cost, three-year avg.Oil and gas finding cost, three-year avg.


Apache Corporation, Key Valuation Metrics, 2010–2013

02468101214161820

0123456789

2010 2011 2012 2013

Valu

e (U

S$/

boe)

Mul

tiple

(X)

EV/DACF EV/EBITDA EV/1P reserves

Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014] 1P: Proved; RHS: Right Hand Side



Executive Summary

Apache Corporation, Key Reserves and Reserves Metrics, 2010–2013

Parameter Unit 2010 2011 2012 2013

1P crude oil reserves

bil bbl xxx.x xxx.x xxx.x xxx.x

1P natural gas reserves

tcf xxx.x xxx.x xxx.x xxx.x

1P total oil and gas reserves

bil boe xxx.x xxx.x xxx.x xxx.x

Oil as percentage of total reserves



Apache Corporation, Result of Oil and Gas Operations, 2010–2013

Parameter Unit 2010 2011 2012 2013

Oil and gas revenue per boe


Lifting cost per boe, three-year


Net-back per boe, three-year


Recycle ratio, three-year


Source: GlobalData, Oil and Gas eTrack, Companies Operational and Financial Database [Accessed on September 4, 2014]

Apache Corporation, Key Reserves and Reserves Metrics, 2010–2013

024681012

0

1

2

3

4

2010 2011 2012 2013

Re

serv

es

(tcf

)

Re

se

rve

s(b

il b

oe

)

Proved crude oil reserves Proved total oil and gas reservesProved natural gas reserves


Apache Corporation, Result of Oil and Gas Operations, 2010–2013

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

0

10

20

30

40

50

60

70

2010 2011 2012 2013

Rec

ycle

ratio

(X)

Oil a

nd g

as o

pera

tions

(U

S$/b

oe)

Oil and gas revenue per boe Lifting cost per boe, three-year avg.

Net-back per boe, three-year avg. Recycle ratio, three-year avg. Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking [Accessed on September 4, 2014]


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Table of Contents

Table of Contents Table of Contents ............................................................................................................................... 6

1.1 List of Tables ...................................................................................................................... 10

1.2 List of Figures ..................................................................................................................... 12

2 Apache Corporation, Company Overview ................................................................................ 17

3 Apache Corporation, Key Highlights ........................................................................................ 21

3.1 Strong Onshore Liquid Growth in North America ................................................................. 21

3.2 Strong Lineup of Upcoming World-Class Liquefied Natural Gas Projects ............................ 23

3.3 Major Operator in Permian Basin with Large Production Base ............................................ 25

4 Apache Corporation, SWOT Analysis ...................................................................................... 28

4.1 Strengths ............................................................................................................................ 28

Wide Geographic Presence with a Diversified Asset Portfolio .................................................... 28

Strong Exploration and Development Activities to Enhance Resource Base .............................. 30

4.2 Weaknesses ....................................................................................................................... 33

Political Unrest In Egypt ............................................................................................................. 33

Dependence on Third Parties for the Marketing of Crude Oil and Natural Gas ........................... 34

4.3 Opportunities ...................................................................................................................... 34

Substantial Exploration and Development Potential ................................................................... 34

4.4 Threats................................................................................................................................ 35

Highly Volatile Commodity Prices ............................................................................................... 35

Severe Weather Conditions ........................................................................................................ 35

5 Apache Corporation, Exploration, Development and Production Overview .............................. 36

5.1 Exploration and Development Profile .................................................................................. 36

5.2 Production Profile ................................................................................................................ 41

5.3 Asset Profile ........................................................................................................................ 44

North America ............................................................................................................................ 44

Apache’s International Assets .................................................................................................... 51


6 Capital Expenditure ................................................................................................................. 57

6.1 Costs Incurred..................................................................................................................... 58

7 Apache Corporation, Forecast Production and Financial Statements ...................................... 62

7.1 Income Statement (2011–2018) .......................................................................................... 63

7.2 Balance Sheet (2011–2018)................................................................................................ 65

7.3 Cash Flow Statement (2011–2018) ..................................................................................... 67

8 Apache Corporation, Valuation ................................................................................................ 68

8.1 Net Asset Value Methodology ............................................................................................. 68

9 Apache Corporation, Peer Comparison ................................................................................... 70

9.1 Share Price Performance .................................................................................................... 70

9.2 Operational and Financial Performance .............................................................................. 71

9.3 Key Financial and Operational Ratio ................................................................................... 77

10 Apache Corporation, Production and Reserves Trends ........................................................... 80

10.1 Total Oil and Gas, Reserves and Production ...................................................................... 80

10.1.1 Total Crude Oil and Natural Gas Production and Reserves Trend, 2009-2013 ............... 80

10.1.2 Total Crude Oil & Natural Gas Production and Reserves By Country/Region, 2009-2013 ....................................................................................................................................... 81

10.1.3 Total Crude Oil and Natural Gas Reserve Changes, 2009-2013 ..................................... 83

10.2 Crude Oil/Liquids Production and Reserve .......................................................................... 84

10.2.1 Crude Oil/Liquids Production and Reserve Trend, 2009-2013 ........................................ 84

10.2.2 Crude Oil Production and Reserves By Country/Region, 2009-2013 .............................. 85

10.2.3 Crude Oil/Liquids Reserve Changes, 2009-2013 ............................................................ 87

10.3 Natural Gas Production and Reserve .................................................................................. 88

10.3.1 Natural Gas Production and Reserve Trend, 2009-2013................................................. 88

10.3.2 Natural Gas Production and Reserves, By Country/Region, 2009-2013 ......................... 89

10.3.3 Natural Gas Reserve Changes, 2009-2013 .................................................................... 91

10.4 Total Crude Oil and Natural Gas Reserves Life Index ......................................................... 92

10.4.1 Total Crude Oil and Natural Gas Reserves Life Index, 2009-2013 .................................. 92


10.4.2 Total Crude Oil and Natural Gas Reserves Life Index, By Country/Region, 2009-2013 .. 93

11 Apache Corporation, E&P Costs Trends ................................................................................. 97

11.1 Allocation of the Upstream Capital Expenditure .................................................................. 97

11.1.1 Upstream Capital Expenditure, 2009-2013 ..................................................................... 97

11.1.2 Acquisition Costs By Country/Region, 2009-2013 ........................................................... 98

11.1.3 Exploration and Development Costs, By Country/Region, 2009-2013........................... 101

11.2 Oil and Gas Cost Per boe, US$/boe .................................................................................. 104

11.2.1 Oil and Gas Cost Per boe, US$/boe, 2009-2013 .......................................................... 104

11.2.2 Oil and Gas Cost Per boe, US$/boe, By Country/Region, 2009-2013 ........................... 106

12 Apache Corporation, Reserve Replacement Ratio ................................................................ 109

12.1 Oil and Gas Production Replacement Ratio ...................................................................... 109

12.1.1 Oil and Gas Production Replacement Ratio, 2009-2013 ............................................... 109

12.1.2 Oil and Gas Production Replacement Ratio, By Country/Region, 2009-2013 ............... 111

13 Apache Corporation, Results of Oil & Gas Operations Trend ................................................ 119

13.1 Oil and Gas Revenue and Expenses ................................................................................ 119

13.1.1 Oil and Gas Revenue and Expenses, 2009-2013 ......................................................... 119

13.1.2 Oil and Gas Revenue and Expenses, By Country/Region, 2009-2013 .......................... 120

13.2 Oil and Gas Revenue and Expenses, Per boe .................................................................. 129

13.2.1 Oil and Gas Revenue and Expenses, By boe, 2009-2013 ............................................ 129

13.2.2 Oil and Gas Revenue and Expenses Per boe, By Country/Region, 2009-2013 ............ 130

13.2.3 Oil and Gas Performance Metrics ................................................................................. 137

14 Apache Corporation, Land Holdings and Well Data ............................................................... 139

14.1 Developed and Undeveloped Acreage .............................................................................. 139

14.1.1 Gross and Net Developed and Undeveloped Acreage, 2009-2013 ............................... 139

14.1.2 Gross and Net Developed and Undeveloped Acreage, By Country/Region, 2009-2013 140

14.2 Well Statistics.................................................................................................................... 145

14.2.1 Producible Oil and Gas Well, 2009-2013 ...................................................................... 145


14.2.2 Producible Oil and Gas Well, By Country/Region, 2009-2013 ....................................... 146

14.2.3 Exploration and Development Wells Drilled, 2009-2013................................................ 155

14.2.4 Exploration and Development Wells Drilled, By Country/Region, 2009-2013 ................ 156

15 Appendix ............................................................................................................................... 160

15.1 Abbreviations .................................................................................................................... 160

15.2 Sources............................................................................................................................. 162

15.3 Research Methodology ..................................................................................................... 163

Coverage ................................................................................................................................. 163

Secondary Research ................................................................................................................ 163

Primary Research .................................................................................................................... 164

15.4 Disclaimer ......................................................................................................................... 164


1.1 List of Tables Table 1: Apache Corporation, Average Rigs and Wells Planned, North America, 2014 ................................... 21

Table 2: Apache Corporation, Total Proved Reserves, Production and Acreage, 2011–2013 ......................... 30

Table 3: Apache Corporation, Total Oil and Gas Production Forecast, 2011–2018 ......................................... 43

Table 4: Apache Corporation, Costs Incurred (US$ mil), 2009–2013 .............................................................. 59

Table 5: Apache Corporation, Reserve Replacement Ratio (%) and Finding and Development Costs Incurred (US$/boe), 2010–2013 .................................................................................................. 61

Table 6: Apache Corporation, Historical and Forecast Production, 2011–2018 ............................................... 62

Table 7: GlobalData, Price Forecasts, 2014–2018 ......................................................................................... 62

Table 8: Apache Corporation, Income Statement (US$ mil), 2011–2018 ........................................................ 63

Table 9: Apache Corporation, Balance Sheet (US$ mil), 2011–2018 .............................................................. 65

Table 10: Apache Corporation, Cash Flow Statement (US$ mil), 2011–2018 ................................................. 67

Table 11 Apache Corporation, Net Asset Value, 2014 .................................................................................... 69

Table 12: Apache Corporation, Peer Group Comparison, Operational and Financial Performance, 2013 ........ 71

Table 13: Apache Corporation, Peer Group Comparison, Total Reserves and Production (mmboe), 2013 ...... 75

Table 14: Apache Corporation, Peer Group Comparison, Financial and Operational Ratios, 2013 .................. 77

Table 15: Apache Corporation, Total Crude Oil and Natural Gas, Production and Reserves, mmboe, 2009-2013 ........................................................................................................................................... 80

Table 16: Apache Corporation, Total Crude Oil & Natural Gas Production and Reserves, By Country/Region, mmboe, 2009-2013 ........................................................................................... 82

Table 17: Apache Corporation, Total Crude Oil and Natural Gas Reserve Changes, mmboe, 2009-2013 ....... 83

Table 18: Apache Corporation, Crude Oil Production and Reserves Metrics, mmbbl, 2009-2013 .................... 85

Table 19: Apache Corporation, Crude Oil Production and Reserves, By Country/Region, mmbbl, 2009-2013 . 86

Table 20: Apache Corporation, Crude Oil Reserve Changes, mmbbl, 2009-2013 .......................................... 87

Table 21: Apache Corporation, Natural Gas Production and Reserves Metrics, bcf, 2009-2013...................... 89


Table 22: Apache Corporation, Natural Gas Production and Reserves, By Country/Region, bcf, 2009-2013 ... 90

Table 23: Apache Corporation, Natural Gas Reserve Changes, bcf, 2009-2013 ............................................. 91

Table 24: Apache Corporation, Oil and Gas Reserves Life Index, Years, 2009-2013 ...................................... 92

Table 25: Apache Corporation, Oil and Gas Reserves Life Index, By Country/Region, Years, 2009-2013 ....... 95

Table 26: Apache Corporation, Upstream Capital Expenditure, US$ mil, 2009-2013 ...................................... 97

Table 27: Apache Corporation, Proved and Unproved Acquisition Costs, By Country/Region, US$ mil, 2009-2013 .................................................................................................................................. 99

Table 28: Apache Corporation, Exploration and Development Costs, By Country/Region, US$ mil, 2009-2013 ......................................................................................................................................... 102

Table 29: Apache Corporation, Reserves Replacement, Finding and Development Costs, Finding Cost and Proved Acquisition Costs Per boe, US$/boe, 2009-2013 .......................................................... 104

Table 30: Apache Corporation, Reserves Replacement, Finding and Development Costs, Finding Cost and Proved Acquisition Costs Per boe, US$/boe, By Country/Region, 2009-2013 ........................... 107

Table 31: Apache Corporation, Oil and Gas Production Replacement Ratio, %, 2009-2013 ......................... 109

Table 32: Apache Corporation, 3-Year Wt.Avg. Oil and Gas Production Replacement Ratio, By Country/Region, %, 2009-2013 ................................................................................................. 116

Table 33: Apache Corporation, Revenue and Expenses, US$ mil, 2009-2013 .............................................. 119

Table 34: Apache Corporation, Revenue and Expenses, By Country/Region, US$ mil, 2009-2013 ............... 126

Table 35: Apache Corporation, Oil and Gas Revenue and Expenses, US$/boe, 2009-2013 ......................... 129

Table 36: Apache Corporation, Oil and Gas Revenue and Expenses, US$/boe, By Country/Region, 2009-2013 ......................................................................................................................................... 135

Table 37: Apache Corporation, Oil and Gas Performance Metrics, 2009-2013 ............................................. 137

Table 38: Apache Corporation, Land Holdings (Developed and Undeveloped Acreage), Acres, 2009-2013 .. 139

Table 39: Apache Corporation, Land Holdings (Developed and Undeveloped Acreage), By Country/Region, Acres, 2009-2013 ...................................................................................................................... 143

Table 40: Apache Corporation, Producible Oil and Gas Wells, 2009-2013 .................................................... 145

Table 41: Apache Corporation, Producible Oil and Gas Wells, By Country/Region, 2009-2013..................... 152


Table 42: Apache Corporation, Exploratory and Developed Wells, 2009-2013 ............................................. 155

Table 43: Apache Corporation, Exploratory and Developed Wells, By Country/Region, 2009-2013 .............. 156

1.2 List of Figures Figure 1: Apache Corporation, Financial and Operational Overview, 2010–2013 ............................................ 18

Figure 2: Apache Corporation, Share Price Movement, September 2013–August 2014 .................................. 19

Figure 3: Apache Corporation, Total E&D Capital Expenditure (US$ billion), North America, 2014 ................. 22

Figure 4: Apache Corporation, Wheatstone Project Location, Australia, 2014 ................................................. 24

Figure 5: Apache Corporation, Kitimat Project Location, Canada, 2014 .......................................................... 25

Figure 6: Apache Corporation, Average Number of Operated Rigs, Permian Basin, US, 2010–Q2 2014 ........ 26

Figure 7: Apache Corporation, Total Production (mboed), Permian Basin, US, 2010–Q2 2014 ....................... 27

Figure 8: Apache Corporation, Proved Reserves, Production and Acreage, by Region, 2011–2013 ............... 29

Figure 9: Apache Corporation, Net Productive and Dry Exploratory and Development Wells, 2009–2013 ....... 32

Figure 10: Apache Corporation, Exploration Drilling Success Ratio (%), 2009–2013 ...................................... 33

Figure 11: Apache Corporation, Operational Map, 2014 ................................................................................. 36

Figure 12: Apache Corporation, Net Productive and Dry Exploratory and Development Wells, 2009–2013 ..... 37

Figure 13: Apache Corporation, Net Total Dry and Productive Exploratory Wells, 2009–2013 ........................ 38

Figure 14: Apache Corporation, Net Total Dry and Productive Development Wells, 2009–2013 ..................... 39

Figure 15: Apache Corporation, Net Total Oil and Gas Productive and Dry Exploratory Wells, by Region, 2009–2013 .................................................................................................................................. 40

Figure 16: Apache Corporation, Net Total Oil and Gas Productive and Dry Development Wells, by Region, 2009–2013 .................................................................................................................................. 41

Figure 17: Apache Corporation, Historical and Estimated Production (mmboe), 2011–2018 ........................... 42

Figure 18: Apache Corporation, Production Mix (%), 2011–2018.................................................................... 43

Figure 19: Apache Corporation, Operational Map, US, 2014 .......................................................................... 44

Figure 20: Apache Corporation, Operational Map, Permian Region, US, 2014 ............................................... 46


Figure 21: Apache Corporation, Operational Map, Central Region, US, 2014 ................................................. 47

Figure 22: Apache Corporation, Operational Map, Texas, Gulf Coast Region, US, 2014 ................................ 49

Figure 23: Apache Corporation, Operational Map, Canada, 2014 ................................................................... 51

Figure 24: Apache Corporation, Operational Map, Egypt, 2014 ...................................................................... 53

Figure 25: Apache Corporation, Operational Map, Australia, 2014 ................................................................. 55

Figure 26: Apache Corporation, Operational Map, UK North Sea, 2014.......................................................... 56

Figure 27: Apache Corporation, Total Capital Expenditure (US$ mil), 2009–2013 .......................................... 57

Figure 28: Apache Corporation, E&D Capital Expenditure (US$ bil), by Region, 2011–2013 .......................... 58

Figure 29: Apache Corporation, Costs Incurred (US$ mil), 2009–2013 ........................................................... 59

Figure 30: Apache Corporation, Costs Incurred (US$ bil), by Region, 2011–2012 .......................................... 60

Figure 31: Apache Corporation, Reserve Replacement Ratio (%) and Finding and Development Costs Incurred (US$/boe), 2010–2013 .................................................................................................. 61

Figure 32: Apache Corporation and Peers, Relative Share Price Performance Index (%), September 2013–August 2014................................................................................................................................ 70

Figure 33: Apache Corporation, Financial Parameters, 2010–2013 ................................................................ 72

Figure 34: Apache Corporation and Peer Group, Financial Parameters, 2013 ................................................ 73

Figure 35: Apache Corporation and Peer Group, F&D Cost and Reserve Replacement Comparison, 2013 .... 74

Figure 36: Apache Corporation, Peer Group Comparison, Total Reserves and Production (mmboe), 2013 .... 75

Figure 37: Apache Corporation and Peer Group, Reserve Life Index (Years), 2013........................................ 76

Figure 38: Apache Corporation, Peer Group Comparison, Valuation Ratios, 2013 .......................................... 79

Figure 39: Apache Corporation, Total Crude Oil and Natural Gas, Production and Reserves, mmboe, 2009-2013 ........................................................................................................................................... 80

Figure 40: Apache Corporation, Total Oil & Gas Reserves, End of Period, By Country/Region, mmboe, 2009-2013 .................................................................................................................................. 81

Figure 41: Apache Corporation, Total Oil & Gas Production, By Country/Region, mmboe, 2009-2013 ............ 82

Figure 42: Apache Corporation, Total Crude Oil and Natural Gas Reserve Changes, mmboe, 2013 ............... 83


Figure 43: Apache Corporation, Crude Oil Production and Reserves Metrics, mmbbl, 2009-2013................... 84

Figure 44: Apache Corporation, Oil Reserves, End of Period, By Country/Region, mmbbl, 2009-2013 ........... 85

Figure 45: Apache Corporation, Oil Production, By Country/Region, mmbbl, 2009-2013 ................................ 86

Figure 46: Apache Corporation, Crude Oil Reserve Changes, mmbbl, 2013 .................................................. 87

Figure 47: Apache Corporation, Natural Gas Production and Reserves Metrics, bcf, 2009-2013 .................... 88

Figure 48: Apache Corporation, Gas Reserves, End of Period, By Country/Region, bcf, 2009-2013 ............... 89

Figure 49: Apache Corporation, Gas Production, By Country/Region, bcf, 2009-2013 .................................... 90

Figure 50: Apache Corporation, Natural Gas Reserve Changes, bcf, 2013 ..................................................... 91

Figure 51: Apache Corporation, Oil and Gas Reserves Life Index, Years, 2009-2013 ..................................... 92

Figure 52: Apache Corporation, Gas Reserve Life Index, By Country/Region, Years, 2009-2013 ................... 93

Figure 53: Apache Corporation, Oil & Gas Reserve Life Index, By Country/Region, Years, 2009-2013 ........... 94

Figure 54: Apache Corporation, Oil Reserve Life Index, By Country/Region, Years, 2009-2013 ..................... 95

Figure 55: Apache Corporation, Upstream Capital Expenditure, US$ mil, 2009-2013 ..................................... 97

Figure 56: Apache Corporation, Proved Acquisition Costs, By Country/Region, US$ mil, 2009-2013 .............. 98

Figure 57: Apache Corporation, Unproved Acquisition Costs, By Country/Region, US$ mil, 2009-2013 .......... 99

Figure 58: Apache Corporation, Development Costs, By Country/Region, US$ mil, 2009-2013 .................... 101

Figure 59: Apache Corporation, Exploration Costs, By Country/Region, US$ mil, 2009-2013 ....................... 102

Figure 60: Apache Corporation, 3-Year Wt.Avg., Reserves Replacement, Finding and Development Costs, Finding Cost and Proved Acquisition Costs Per boe, US$/boe, 2009-2013 ............................... 104

Figure 61: Apache Corporation, Oil & Gas Finding Cost per boe, 3-Year Average, By Country/Region, $/Boe, 2009-2013 ..................................................................................................................... 106

Figure 62: Apache Corporation, Reserve Replacement Cost per boe, 3-Year Average, By Country/Region, $/boe, 2009-2013 ...................................................................................................................... 107

Figure 63: Apache Corporation, 3-Year Wt.Avg., Oil and Gas Production Replacement Ratio, %, 2009-2013109

Figure 64: Apache Corporation, 3-Year Wt. Avg. Gas F&D Production Replacement, By Country/Region, %, 2009-2013 ................................................................................................................................ 111


Figure 65: Apache Corporation, 3-Year Wt. Avg. Gas RRC Production Replacement, By Country/Region, %, 2009-2013 ........................................................................................................................... 112

Figure 66: Apache Corporation, 3-Year Wt. Avg. Oil & Gas F&D Production Replacement, By Country/Region, %, 2009-2013 ................................................................................................. 113

Figure 67: Apache Corporation, 3-Year Wt. Avg. Oil & Gas RRC Production Replacement, By Country/Region, %, 2009-2013 ................................................................................................. 114

Figure 68: Apache Corporation, 3-Year Wt. Avg. Oil F&D Production Replacement, By Country/Region, %, 2009-2013 ................................................................................................................................ 115

Figure 69: Apache Corporation, 3-Year Wt. Avg. Oil RRC Production Replacement, By Country/Region, %, 2009-2013 ................................................................................................................................ 116

Figure 70: Apache Corporation, Revenue and Expenses, US$ mil, 2009-2013 ............................................. 119

Figure 71: Apache Corporation, Depreciation, Depletion and Amortization From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ................................................................ 120

Figure 72: Apache Corporation, Income Tax Provision (Benefit) From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ........................................................................................ 121

Figure 73: Apache Corporation, Net Income/ Loss From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ........................................................................................ 122

Figure 74: Apache Corporation, Oil & Gas Revenue, By Country/Region, US$ mil, 2009-2013 ..................... 123

Figure 75: Apache Corporation, Profit (loss) Before Taxation From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 ........................................................................................ 124

Figure 76: Apache Corporation, Production Costs, By Country/Region, US$ mil, 2009-2013 ........................ 125

Figure 77: Apache Corporation, Total Expenses From Upstream Oil & Gas Operations, By Country/Region, US$ mil, 2009-2013 .................................................................................................................. 126

Figure 78: Apache Corporation, Oil and Gas Revenue and Expenses, US$/boe, 2009-2013 ........................ 129

Figure 79: Apache Corporation, Income Tax/(Benefit) per boe, By Country/Region, $/boe, 2009-2013 ......... 130

Figure 80: Apache Corporation, Lifting Cost per boe, By Country/Region, $/boe, 2009-2013 ........................ 131

Figure 81: Apache Corporation, Annual Net Income per boe, By Country/Region, $/boe, 2009-2013 ............ 132

Figure 82: Apache Corporation, Oil & Gas Revenue per boe, By Country/Region, $/boe, 2009-2013 ........... 133

Figure 83: Apache Corporation, Total DD&A per boe, By Country/Region, $/boe, 2009-2013 ....................... 134


Figure 84: Apache Corporation, Total Revenue per boe, By Country/Region, $/boe, 2009-2013................... 135

Figure 85: Apache Corporation, Oil and Gas Performance Metrics, 2009-2013 ............................................ 137

Figure 86: Apache Corporation, Land Holdings (Developed and Undeveloped Acreage), Acres, 2009-2013 . 139

Figure 87: Apache Corporation, Total Gross Undeveloped Acreage, By Country/Region, Acres, 2009-2013 140

Figure 88: Apache Corporation, Total Net Undeveloped Acreage, By Country/Region, Acres, 2009-2013 .... 141

Figure 89: Apache Corporation, Total Gross Developed Acreage, By Country/Region, Acres, 2009-2013 .... 142

Figure 90: Apache Corporation, Total Net Developed Acreage, By Country/Region, Acres, 2009-2013 ........ 143

Figure 91: Apache Corporation, Producible Oil and Gas Wells, 2009-2013 .................................................. 145

Figure 92: Apache Corporation, Gross Productive Gas Wells, By Country/Region, Number, 2009-2013 ....... 146

Figure 93: Apache Corporation, Gross Productive Oil & Gas Wells, By Country/Region, Number, 2009-2013147

Figure 94: Apache Corporation, Gross Productive Oil Wells, By Country/Region, Number, 2009-2013 ......... 148

Figure 95: Apache Corporation, Net/Gross Oil & Gas Ratio, By Country/Region, %, 2009-2013 ................... 149

Figure 96: Apache Corporation, Net Productive Gas Wells, By Country/Region, Number, 2009-2013 ........... 150

Figure 97: Apache Corporation, Net Productive Oil & Gas Wells, By Country/Region, Number, 2009-2013 .. 151

Figure 98: Apache Corporation, Net Productive Oil Wells, By Country/Region, Number, 2009-2013 ............. 152

Figure 99: Apache Corporation, Exploratory and Developed Wells, 2009-2013 ............................................ 155



Apache Corporation, Company Overview

2 Apache Corporation, Company Overview Apache Corporation (Apache) is a Texas-based independent oil and gas company involved in the exploration, exploitation, development and production of onshore and offshore oil and natural gas properties in five countries: the US, Canada, Egypt, Australia, and the UK North Sea. Its operations consist primarily of upstream activities, along with some exposure to midstream operations. As of December 31, 2013, Apache possessed proved (1P) reserves amounting to xxx.x billion barrels of oil (billion bbl) of crude, xxx.x million barrels of oil (mmbbl) of Natural Gas Liquids (NGL) and xxx.x trillion cubic feet (tcf) of natural gas.

The company’s 1P developed reserves totaled xxx.x billion barrels of oil equivalent (billion boe) as of December 31, 2013; while it’s estimated 1P undeveloped reserves totaled xxx.x mmboe. The production of liquids and natural gas amounted to xxx.x mmbbl and xxx.x billion cubic feet (bcf) respectively in 2013. Apache’s total net acreage stood at xxx.x million of acres on December 31, 2013. Approximately xxx.x % of the company’s global production and xxx.x % of its estimated 1P reserves for 2013 were based in the US. Its international assets are located in Egypt, Australia, and the UK North Sea. Production from these international assets accounted for xxx.x % of the company’s global production in 2013. As of December 31, 2013, xxx.x % of the company’s estimated 1P reserves were located outside of North America.

Apache’s acreage within the US was divided into five regions during 2013: Permian, Central, Gulf Coast Onshore, Gulf of Mexico Deepwater, and the Gulf of Mexico Shelf. In 2014, the Gulf of Mexico Shelf and Gulf of Mexico Deepwater regions have been combined to form the Gulf of Mexico region. The company had a net total of xxx.x million of acres in this region as of December 31, 2013.

Apache holds almost xxx.x million net acres across the provinces of British Columbia (BC), Alberta, and Saskatchewan in Canada, as of December 31, 2013. Production from the Canadian region, where the company focuses on oil- and liquids-rich gas areas, constituted approximately xxx.x % of its global production for the year. Apache is one of the largest acreage holders in Egypt’s Western Desert, with xxx.x million net acres in this region as of December 31, 2013. Production from this region amounted to a net total of xxx.x thousand barrels of oil per day (mbd) and xxx.x million cubic feet per day (mmcfd) of net natural gas in 2013.

The company’s operations in Australia are concentrated in offshore Western Australia in the Carnarvon, Exmouth and Browse basins. As of December 31, 2013, it possessed xxx.x million net acres in the region. Production from was Australia amounted to 19 mbd of oil and xxx.x mmcfd of natural gas in 2013, equivalent to xxx.x % of Apache’s global production. The company’s operations in the North Sea are located in the Forties field (Forties), Beryl, Nevis, Nevis South, Skene, and Buckland fields, and it also owns non-operated interest in the Maclure, Scott, and Telford fields. As of December 31, 2013, Apache has interests in approximately xxx.x thousand net acres in the UK North Sea. Production from this region in




2013 amounted to xxx.x mbd of oil and xxx.x mmcfd of natural gas, constituting xxx.x % of Apache’s global production. The following figure illustrates the company’s operations in various locations in 2014.

Apache’s total revenue registered growth between 2010 and 2012 at a Compound Annual Growth Rate (CAGR) of xxx.x %. However, the company’s revenue registered a Year-on-Year (YoY) decline of xxx.x % in 2013 compared with 2012, due to diminished production. The company’s revenue increased from US$ xxx.x billion in 2010 to US$ xxx.x billion in 2012, before declining to US$ xxx.x billion in 2013. Its net income increased from US$ xxx.x billion in 2010 to US$ xxx.x billion in 2011, and then declined to US$ xxx.x million in 2012, increasing once more to US$ xxx.x 3 billion in 2013. The decline of the company’s net income can be attributed to increased production costs and operating expenditure.

Figure 1: Apache Corporation, Financial and Operational Overview, 2010–2013

Source: GlobalData, Oil and Gas eTrack [Accessed on September 4, 2014] CFO: Cash Flow from Operations




Apache has been focusing upon the development and exploration of existing assets, and the tapping of new assets. The company’s capital expenditure (capex) fluctuated between 2010 and 2013. Its total capex amounted to US$ xxx.x billion in 2010, which declined to US$ xxx.x billion in 2011 before increasing to US$14.6 billion in 2012 and then declining once more to US$ xxx.x billion in 2013. A large share of the company’s capex was spent on development activities of upstream assets, which were acquired recently.

As of December 31, 2013, Apache’s total 1P reserves amounted to xxx.x billion boe, a decrease of xxx.x % from 2012 reserves of xxx.x billion boe. However, 1P reserves declined at a CAGR of xxx.x % between 2010 and 2013. The total reserves reported in 2013 amounted to xxx.x billion boe, consisting of xxx.x billion bbl of crude oil, xxx.x mmbbl of NGLs and xxx.x tcf of natural gas. Of the total reserves, xxx.x billion boe reserves were developed, equivalent to xxx.x %, and xxx.x mmboe reserves were undeveloped, equivalent to xxx.x %. Production volumes increased at a CAGR of xxx.x % between 2010 and 2013, and decreased by xxx.x % on a YoY basis from xxx.x mmboe in 2012 to xxx.x mmboe in 2013. This decline was due primarily to the sale of some of the company’s assets and its stakes in Egypt and the Gulf of Mexico.

Figure 2: Apache Corporation, Share Price Movement, September 2013–August 2014

Source: GlobalData; Yahoo Finance, 2014



Apache Corporation, Key Highlights

3 Apache Corporation, Key Highlights 3.1 Strong Onshore Liquid Growth in North America

Apache was the most active North American onshore driller in 2013, operating an average of xxx.x rigs and drilling xxx.x wells. The company’s production from the Permian region of the US in 2013 increased by xxx.x % compared with 2012 as a result of an active drilling program whereby the company was operating xxx.x rigs during the year. Production from the central region of the US in 2013 increased by xxx.x % compared with 2012 as a result of an active drilling program whereby the company was operating xxx.x rigs in the Anadarko basin during the year where it drilled or participated in the drilling of 322 gross wells with xxx.x % success.

Active drilling programs focusing on oil- and liquid-rich gas in the Permian and Anadarko basins continue to provide momentum for Apache’s US production growth. During 2013, the company drilled xxx.x net wells worldwide, of which xxx.x was drilled in North America. The company plans to drill approximately xxx.x wells with the use of xxx.x rigs in North America in 2014. The following table provides details of the rigs that are to be operated by Apache in 2014 according to region.

Apache’s glApache global Exploration and Development (E&D) expenditure for 2013 amounted to US$ xxx.x billion, a xxx.x % increase over 2012. The company’s total E&D spending in North America alone was equivalent to xxx.x % of its global E&D spending, which was up by xxx.x % from 2012 in North America. The company has increased drilling activity in the Anadarko and Permian basins, where approximately half of its rigs are now drilling horizontal wells. The company’s E&D spending in Canada increased by xxx.x % compared with 2012. Apache has also continued to target oil- and liquids-rich gas plays across its acreage and is drilling more horizontal wells in this region. The company plans to invest US$ xxx.x billion in E&D in North America in 2014. The following figure illustrates the split of total North American E&D capex in 2014.

Table 1: Apache Corporation, Average Rigs and Wells Planned, North America, 2014

North America Average number of rigs Total number of wells

Permian xxx.x xxx.x

Central xxx.x xxx.x

Gulf Coast onshore xxx.x xxx.x

Canada xxx.x xxx.x

Total xxx.x xxx.x

Source: GlobalData; Apache, 2014b



Apache Corporation, SWOT Analysis

4 Apache Corporation, SWOT Analysis 4.1 Strengths Wide Geographic Presence with a Diversified Asset Portfolio

Apache’s upstream assets are geographically diverse; the company has oil and gas operations in five countries: the US, Canada, Egypt, Australia, and the UK North Sea, with xxx.x billion boe of 1P reserves as of the end of 2013. Of the total 1P reserves held by the company, xxx.x % are located in North America. This diversified asset portfolio has provided it with the opportunity to allocate investment towards strategic assets, which will have a relatively substantial impact on revenue growth. xxx.x % of Apache’s total 1P reserves are located in the US alone. The company’s production in 2013 consisted of xxx.x % liquids and xxx.x % natural gas and its overall 1P reserves at the end of 2013 consisted of xxx.x % liquids and xxx.x % natural gas, supporting its balanced product mix.

The company’s acreage, both offshore and onshore, is distributed across several major producing geographical areas. The majority of its acreage – xxx.x % , is in North America, and Apache’s drilling activity is focused on its North America onshore assets, primarily in the Permian and Anadarko basins. These assets recorded liquids growth of xxx.x % during 2013. The company’s North American assets contributed approximately xxx.x % of its global production and xxx.x % of its oil and gas production revenue in 2013.

Apache is one of the largest acreage holders in Egypt’s Western Desert. On December 31, 2013, the company possessed xxx.x million gross acres, with xxx.x mbd of net oil production and xxx.x mmcfd of net natural gas production in 2013. Its operations in Australia are concentrated in offshore Western Australia, in the Carnarvon, Exmouth and Browse basins.

As of September 2014, Apache has approximately xxx.x million gross acres in offshore Western Australia through xxx.x exploration permits, xxx.x production licenses, and nine retention leases. xxx.x % of the company’s acreage is undeveloped. Production from this region amounted to xxx.x mbd of oil and xxx.x mmcfd of natural gas in 2013, equivalent to xxx.x % of Apache’s global production. The company’s total 1P reserves in the UK North Sea accounted for xxx.x % of year-end 1P reserves.

As of September 2014, Apache possesses interest in approximately xxx.x million gross acres in the UK North Sea. Production from this region in 2013 amounted to xxx.x bd and xxx.x mmcfd, equivalent to xxx.x % of Apache’s global production. The company’s diversified resource base includes conventional oil and gas plays, LNG and unconventional resources. In order to fit with the changing operational structure, the company segmented its operations into segments for upstream, refining and chemicals, and marketing activities.

Its operations are spread across multiple geographical areas and it is involved in different types of resources. This diversified exposure has provided the company with a competitive edge over its peers.




Figure 8: Apache Corporation, Proved Reserves, Production and Acreage, by Region, 2011–2013

Source: GlobalData; Apache, 2011; Apache, 2012; Apache, 2013




Table 2: Apache Corporation, Total Proved Reserves, Production and Acreage, 2011–2013

Geography Parameter 2011 2012 2013

US

Total oil and gas reserves (mmboe) xxx.x xxx.x xxx.x

Production (mmboe) xxx.x xxx.x xxx.x

Acreage (million) xxx.x xxx.x xxx.x

Canada




Egypt




Australia




North Sea




Argentina




Source: GlobalData; Apache, 2011; Apache, 2012; Apache, 2013

Strong Exploration and Development Activities to Enhance Resource Base

Apache intensified its E&D activities between 2009 and 2013. In 2013, it drilled xxx.x net exploration wells, xxx.x of which proved to be dry, and xxx.x net development wells, of which xxx.x wells were dry. The company’s combined 1P undeveloped oil and gas reserves declined by around xxx.x mmboe in 2013 from 870 mmboe of 1P undeveloped reserves in 2012.




Figure 10: Apache Corporation, Exploration Drilling Success Ratio (%), 2009–2013

Source: GlobalData, Oil and Gas eTrack, Advanced Company Operational and Financial Benchmarking –[Accessed on September 4, 2014]

4.2 Weaknesses Political Unrest In Egypt

The political unrest in Egypt could have an adverse impact upon Apache’s operations in the country. Hosni Mubarak, the former Egyptian president, stepped down in February 2011, and the Egyptian Supreme Council of the Armed Forces took power later in June 2012. Mohamed Morsi of the Muslim Brotherhood’s Freedom and Justice Party was elected as Egypt’s new president, before being removed from power in July 2013. Egypt’s Chief Justice, Adly Mansour, was announced as acting president of a temporary government, while presidential elections were to be held by mid-April 2014. Abdel Fattah al-Sisi was officially confirmed as Egypt's next president on June 3, 2014, when he won the presidential election.

The deterioration of political and economic conditions, such as changes in laws or regulations, export restrictions, expropriation of company assets, resource nationalization, or other relevant policies of the new Egyptian government could have serious effects on Apache’s operations and business activities in the country. The forced renegotiation or modification of its existing contracts with Egyptian General Petroleum Corporation could




adversely affect its business, financial condition and the results of its operations. The company’s operations in Egypt accounted for xxx.x % of its production in 2013, and the region also accounted for xxx.x % of its total estimated 1P reserves. xxx.x % of its estimated discounted future net cash flows and xxx.x % of its net capitalized oil and gas property in 2013 was attributable to Egypt, including Sinopec’s one-third non-controlling interest.

Dependence on Third Parties for the Marketing of Crude Oil and Natural Gas

Apache is primarily dependent upon third parties to transport its oil and natural gas production. The company’s ability to market its oil and natural gas production depends upon the availability and capacity of gathering systems, pipelines and other transportation facilities. Transportation space on the gathering systems and pipelines that Apache uses is occasionally limited or unavailable due to repairs, outages caused by accidents, or other events. Above all, these facilities are being utilized by other companies with priority transportation agreements. Apache has experienced production curtailments resulting from capacity restraints, the offsetting of fracturing stimulation operations, and the short-term closure of certain pipelines for maintenance purposes. These factors could affect the company’s revenue, which in turn could adversely affect its ability to produce and market oil and natural gas.

4.3 Opportunities Substantial Exploration and Development Potential

Apache is one of the leading net undeveloped acreage holders in its peer group. At the end of 2013, the company held an interest in xxx.x million net acres, consisting of xxx.x million undeveloped acres, and xxx.x million developed acres. It possesses xxx.x million gross acres of liquid hydrocarbons acreage in the US as of December 31, 2013 xxx.x of which is undeveloped. At present, the company has xxx.x million gross acres offshore Western Australia through xxx.x exploration permits, xxx.x production licenses and nine retention leases. Approximately xxx.x % of Apache’s acreage in this region is undeveloped and the company continues to actively pursue additional acreage opportunities in this region.

In Egypt, the company had xxx.x million gross acres at the end of 2013, of which three million gross undeveloped acres had expired as of January 2014. Of the remaining acreage, xxx.x % is undeveloped, providing considerable E&D opportunities for the future. In 2013, the company made significant exploration discoveries in Egypt, Australia, the UK North Sea and the US. The company’s upcoming ventures are Alaska’s Cook Inlet and Suriname near its core operations in the UK sector of the North Sea.

Apache has leased approximately xxx.x acres onshore, in tidal areas and offshore in the Cook Inlet Basin, Alaska, US for E&D. The company signed a production sharing agreement with Staatsolie Maatschappij Suriname, the national oil company of Republic of Suriname, for Block 53, covering xxx.x offshore acres (xxx.x km2). It has been adding new reserves to its portfolio through investment in various countries in order to increase its



Apache Corporation, E&D and Production Overview

5 Apache Corporation, Exploration, Development and Production Overview

Apache’s E&P activities are based in five countries: the US, Canada, Egypt, Australia, and the UK North Sea. The company’s US region was the largest producing region in 2013, followed by Egypt. Approximately xxx.x % of its global production and xxx.x % of its estimated 1P reserves were based in the US in 2013. As of December 31 of that year, Apache possessed total estimated 1P reserves amounting to xxx.x billion bbl of crude oil, xxx.x mmbbl of NGLs, and xxx.x tcf of natural gas. The company’s 1P developed reserves totaled xxx.x billion boe and its estimated 1P undeveloped reserves totaled xxx.x mmboe, equivalent to a combined xxx.x % share of global total 1P reserves as of December 31, 2013. Apache reported overall production of xxx.x mmboe in 2013, representing an annual decrease of around xxx.x % over the xxx.x mmboe of production recorded in 2012. The following figure illustrates Apache’s exploration, development and exploitation areas worldwide.

Figure 11: Apache Corporation, Operational Map, 2014

Source: Apache, 2014a

5.1 Exploration and Development Profile In 2013, Apache drilled xxx.x net wells, consisting of xxx.x net development wells and xxx.x net exploratory wells. The number of net productive exploratory and development wells



Apache Corporation, Valuation

7 Apache Corporation, Forecast Production and Financial Statements

Apache’s production and financial projections have been calculated using information that is publicly available. GlobalData has used a forecast period of five years for its analysis. The following table provides Apache’s historic and estimated production between 2011 and 2018.

Table 6: Apache Corporation, Historical and Forecast Production, 2011–2018

Production spilt Actual Projected annual forecast

2011 2012 2013 2014 2015 2016 2017 2018

Crude oil and NGL production (mmboe) xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Natural gas production (bcf) xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Overall geographical production (mmboe) xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Source: GlobalData; Apache, 2012; Apache, 2013

GlobalData’s price deck is divided into strong, base and weak cases for forecasting. Company-specific differentials have been applied to its projected crude oil and natural gas prices. The following table shows GlobalData’s price deck between 2014 and 2018.

Table 7: GlobalData, Price Forecasts, 2014–2018

Crude oil price (US$/bbl) 2014 2015 2016 2017 2018

Strong case xxx.x xxx.x xxx.x xxx.x xxx.x

Base case xxx.x xxx.x xxx.x xxx.x xxx.x

Weak case xxx.x xxx.x xxx.x xxx.x xxx.x

Natural gas price (US$/mcf) 2014 2015 2016 2017 2018

Strong case xxx.x xxx.x xxx.x xxx.x xxx.x

Base case xxx.x xxx.x xxx.x xxx.x xxx.x

Weak case xxx.x xxx.x xxx.x xxx.x xxx.x




Source: GlobalData mcf: thousand cubic feet Note: GlobalData has considered base case prices for crude oil and natural gas.

NYMEX prices are considered for crude oil and Henry Hub prices are considered for natural gas

7.1 Income Statement (2011–2018)

Table 8: Apache Corporation, Income Statement (US$ mil), 2011–2018

2011 2012 2013 2014 2015 2016 2017 2018

Natural gas and oil revenue

xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Net other revenue


Total revenue xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Production costs xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

G&A expense xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

EBITDAX xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

(Gain) loss on divestitures


Asset retirement xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

EBITDA xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

DD&A expense xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Operating income (EBIT)


Other non-operating incomes or expenses


Net interest expense


Earnings before income tax


Income tax xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Current income tax


Deferred income tax





Total income tax xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Tax rate (%) xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Percentage of total taxes deferred (%)


Current tax rate (%)


Profit after tax xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Preferred dividends


Minority interest xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Reported net income to common


Recurring net income to common


Weighted average shares outstanding


Fully diluted shares outstanding


Basic EPS xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Dilutive EPS xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Common dividends


Dividend payout ratio (%)


Dividend per share


Source: GlobalData; Apache, 2012; Apache, 2013 DD&A: Depreciation, Depletion and Amortization; EBITDAX: Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization and Exploration; EBT: Earnings Before Tax; EPS: Earnings Per Share; G&A: General and Administrative; PAT: Profit After Tax




7.2 Balance Sheet (2011–2018)

Table 9: Apache Corporation, Balance Sheet (US$ mil), 2011–2018

2011 2012 2013 2014 2015 2016 2017 2018

Cash and cash equivalents xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Accounts receivable xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Inventories xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Prepaid expenses xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Other current assets xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

PP&E, net xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Other non-current assets xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Total assets xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Accounts payable xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Other current liabilities (non-debt) xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Current portion of long-term debt xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Short-term debt xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Long-term debt xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Deferred and other income taxes xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Asset retirement xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Other non-current liabilities xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Total liabilities xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Common stock xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Additional paid in-capital xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Preferred stock xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Treasury stock xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Retained earnings xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Accumulated Loss/Other xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x




Total shareholders' equity xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Non-controlling interest xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Total equity xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Total liabilities and shareholders' equity xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Source: GlobalData; Apache, 2012; Apache, 2013




7.3 Cash Flow Statement (2011–2018)

Table 10: Apache Corporation, Cash Flow Statement (US$ mil), 2011–2018

2011 2012 2013 2014 2015 2016 2017 2018

Net income xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

DD&A xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Deferred taxes xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Minority interest xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Change in working capital xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Other operating xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Cash from operations xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Capex xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Asset acquisitions xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Asset sales xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Other investing xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Cash from investing xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Additions to (reductions in) long-term debt xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Additions to (reductions in) short-term debt xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Common and preferred dividends xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Treasury stock repurchases xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Other xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Cash from financing xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Total increase/decrease of cash xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x xxx.x

Source: GlobalData; Apache, 2012; Apache, 2013 PP&E: Property, Plant and Equipment




8 Apache Corporation, Valuation 8.1 Net Asset Value Methodology

Apache’s operations have been valued using the Net Asset Value (NAV) methodology. The company’s operations yielded an equity value of US$xx.x billion, and an Enterprise Value (EV) of US$ xx.x billion. GlobalData’s base case valuation is US$ xx.x per share, implying that the company’s stock is trading at a discount of xx.x %, based on the current share price of US$ xx.x per share, as of September 30, 2014. The following principles have directed GlobalData’s valuations:

Apache has been valued using the sum-of-parts valuation methodology.

Apache’s 1P reserve base has been calculated using the Present Value discounted at xx.x % (PV10) method.

Apache’s undeveloped acreages have been calculated using the recent US$-per-acreage multiples in GlobalData’s database (www.oilandgasetrack.com).

The price deck is divided into strong, base and weak cases, to evaluate Apache Corporation’s performance.

Future development costs have been taken from Apache’s standardized PV10 values, which are available in filings from the US Securities and Exchange Commission. GlobalData has assumed that the development cost will be spent over the coming eight years.

The operating cost for independent E&P companies consists of lifting costs and related G&A expenditure.

GlobalData has assumed a nominal discount rate of around xx.x %.

The following table provides a detailed calculation of the NAV methodology used for Apache.




Table 11 Apache Corporation, Net Asset Value, 2014 Total value (US$ mil) US$/share

Net present value xxx.x xxx.x

Prospective acreage xxx.x xxx.x

Total E&P value xxx.x xxx.x

Total EV xxx.x xxx.x

Long-term debt xxx.x xxx.x

Net debt xxx.x xxx.x

Equity value xxx.x xxx.x

Source: GlobalData



Appendix

15 Appendix 15.1 Abbreviations

1P : Proved

BC : British Columbia

bcf : billion cubic feet

bil : billion

boe : barrels of oil equivalent

boed : barrels of oil equivalent per day

CAGR : Compound Annual Growth Rate

capex : capital expenditure

CFO : Cash Flow from Operations

DACF : Debt-Adjusted Cash Flow

DD&A : Depreciation, Depletion and Amortization

E&D : Exploration and Development

E&P : Exploration and Production

EBIT : Earnings Before Interest and Tax

EBITDA : Earnings before Interest, Tax, Depreciation and Amortization

EDITDAX: Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization and Exploration

EBT : Earnings Before Tax

EPS : Earnings Per Share

EV : Enterprise Value

F&D : Finding and Development

FPSO : Floating Production, Storage and Offloading

G&A : General and Administrative

KUFPEC: Kuwait Foreign Petroleum Exploration Company

LNG : Liquefied Natural Gas

mbd : thousand barrels of oil per day

mboed : thousand barrels of oil equivalent per day



Appendix

mcf : thousand cubic feet

mil : million

mmbbl : million barrels of oil

mmboe : million barrels of oil equivalent

mmcfd : million cubic feet per day

NAV : Net Asset Value

NGL : Natural Gas Liquids

NYSE : New York Stock Exchange

PAT : Profit After Tax

PP&E : Property Plant and Equipment

PSA : Production Sharing Agreement

PV10 : Present Value discounted at 10%

RHS : Right Hand Side

YPF : Yacimientos Petrolíferos Fiscales

YoY : Year-On-Year



Appendix

15.2 Sources Apache (2011). Annual Report 2011. Apache Corporation. Available from:

http://www.apachecorp.com/Resources/Upload/file/investors/Apache_AR_2011.pdf

Apache (2012). Annual Report 2012. Apache Corporation. Available from: http://www.apachecorp.com/Resources/Upload/file/investors/Apache_AR_2012.pdf

Apache (2013). Annual Report 2013. Apache Corporation. Available from: http://www.apachecorp.com/Resources/Upload/file/investors/Apache_AR_2013.pdf

Apache (2014a). Investor Presentation. Apache Corporation. Available from: http://investor.apachecorp.com/common/download/download.cfm?companyid=APA&fileid=779405&filekey=059aa9c1-2be6-46ba-b5f3-ebca27b2b5cf&filename=Apache_Barclays_20140903.pdf

Apache (2014b). Investor Presentation. Apache Corporation. Available from: http://investor.apachecorp.com/common/download/download.cfm?companyid=APA&fileid=760163&filekey=6f153a16-ce75-4612-85b6-10743e946acb&filename=Apache_UBS_20140520.pdf

Apache (2014c). Operation. Apache Corporation. Available from: http://www.apachecorp.com/Operations/Canada/Kitimat_Project/index.aspx

Chevron (2014). Operation; Chevron Australia. Available from: http://www.chevronaustralia.com/sfimages/default-source/default-album/wheatstone-project.jpg?sfvrsn=0

Google Finance (2014). Summary. Google. Available from: http://www.google.com/finance?q=NYSE%3ATOT&ei=ZW1zUrHpK4iwkgW_igE

Yahoo Finance (2014). Historical Prices. Yahoo. Available from: http://in.finance.yahoo.com/q/hp?s=FP.PA&a=00&b=1&c=2014&d=11&e=31&f=2014&g=d [Accessed on January 3, 2014]

163 © GlobalData. This report is a licensed product and is not to be copied, reproduced, shared or resold in any form.

Appendix

15.3 Research Methodology GlobalData’s dedicated research and analysis teams consist of experienced professionals with advanced statistical expertise and marketing, market research and consulting backgrounds in the energy industry.

GlobalData adheres to the codes of practice of the Market Research Society (www.mrs.org.uk) and Strategic and Competitive Intelligence Professionals (www.scip.org).

All GlobalData databases are continuously updated and revised.

Coverage

The objective of updating GlobalData’s coverage is to ensure that it represents the most up-to-date vision of the industry possible.

Changes to the industry taxonomy are built on the basis of extensive research of company, association and competitor sources.

Company coverage is based on three key factors: market capitalization; revenues; and media attention and innovation and market potential.

An exhaustive search of 56 member exchanges is conducted and companies are prioritized on the basis of their market capitalization.

The estimated revenues of all major companies, including private and governmental, are gathered and used to prioritize coverage.

Companies that are making the news or that are of particular interest due to their innovative approach are prioritized.

GlobalData aims to cover all major news events and deals in the energy industry, updated on a daily basis.

Secondary Research

The research process begins with extensive secondary research using internal and external sources to gather qualitative and quantitative information relating to each market.

The secondary research sources that are typically referred to include, but are not limited to:

Company websites, annual reports, financial reports, broker reports, investor presentations and SEC filings

Industry trade journals and other technical literature

Internal proprietary and external databases

National government documents, statistical databases and market reports

164 © GlobalData. This report is a licensed product and is not to be copied, reproduced, shared or resold in any form.

Appendix

News articles, press releases and web-casts specific to the companies operating in the market

Primary Research

GlobalData conducts hundreds of primary interviews each year with industry participants and commentators in order to validate its data and analysis. A typical research interview fulfills the following functions:

Provides first-hand information on market size, market trends, growth trends, competitive landscape and future outlook.

Helps to validate and strengthen secondary research findings

Further develops the analysis team’s expertise and market understanding

15.4 Disclaimer All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means; electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData.

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