Consistent Profitable Growth - Apache Corporation

180 Pages·2013·3.3 MB·English

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Our Mission Apache’s Website: www.apachecorp.com
Apache’s website provides a large quantity of additional company
and financial data, including:
Grow a profitable global exploration and
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production company in a safe and environmentally
worldwide operations: www.apachecorp.com/Operations
responsible manner for the long-term benefit of (cid:260)(cid:341) (cid:2)(cid:27)(cid:29)(cid:37)(cid:33)(cid:44)(cid:41)(cid:47)(cid:40)(cid:30)(cid:341)(cid:41)(cid:40)(cid:341)(cid:1)(cid:42)(cid:27)(cid:29)(cid:34)(cid:31)(cid:269)(cid:45)(cid:341)(cid:39)(cid:35)(cid:45)(cid:45)(cid:35)(cid:41)(cid:40)(cid:341)(cid:27)(cid:40)(cid:30)(cid:341)(cid:48)(cid:27)(cid:38)(cid:47)(cid:31)(cid:45)(cid:255)(cid:341)(cid:33)(cid:41)(cid:48)(cid:31)(cid:44)(cid:40)(cid:27)(cid:40)(cid:29)(cid:31)(cid:255)(cid:341)
management and history: www.apachecorp.com/About
our shareholders
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Core Values (cid:260)(cid:341) (cid:12)(cid:35)(cid:40)(cid:37)(cid:45)(cid:341)(cid:46)(cid:41)(cid:341)(cid:29)(cid:41)(cid:39)(cid:42)(cid:27)(cid:40)(cid:51)(cid:341)(cid:48)(cid:35)(cid:30)(cid:31)(cid:41)(cid:341)(cid:42)(cid:44)(cid:31)(cid:45)(cid:31)(cid:40)(cid:46)(cid:27)(cid:46)(cid:35)(cid:41)(cid:40)(cid:45)(cid:256)(cid:341)(cid:49)(cid:49)(cid:49)(cid:254)(cid:27)(cid:42)(cid:27)(cid:29)(cid:34)(cid:31)(cid:29)(cid:41)(cid:44)(cid:42)(cid:254)(cid:29)(cid:41)(cid:39)(cid:279)(cid:22)(cid:35)(cid:30)(cid:31)(cid:41)(cid:45)(cid:341)
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Since 1954, Apache has built a team unified by Apache’s Social Media Sites
our values, our commitment to building shareholder (cid:260)(cid:341) (cid:6)(cid:27)(cid:29)(cid:31)(cid:28)(cid:41)(cid:41)(cid:37)(cid:256)(cid:341)(cid:34)(cid:46)(cid:46)(cid:42)(cid:45)(cid:256)(cid:279)(cid:279)(cid:49)(cid:49)(cid:49)(cid:254)(cid:32)(cid:27)(cid:29)(cid:31)(cid:28)(cid:41)(cid:41)(cid:37)(cid:254)(cid:29)(cid:41)(cid:39)(cid:279)(cid:1)(cid:42)(cid:27)(cid:29)(cid:34)(cid:31)(cid:3)(cid:41)(cid:44)(cid:42)(cid:41)(cid:44)(cid:27)(cid:46)(cid:35)(cid:41)(cid:40)(cid:341)
(cid:260)(cid:341) (cid:12)(cid:35)(cid:40)(cid:37)(cid:31)(cid:30)(cid:9)(cid:40)(cid:256)(cid:341)(cid:34)(cid:46)(cid:46)(cid:42)(cid:256)(cid:279)(cid:279)(cid:49)(cid:49)(cid:49)(cid:254)(cid:38)(cid:35)(cid:40)(cid:37)(cid:31)(cid:30)(cid:35)(cid:40)(cid:254)(cid:29)(cid:41)(cid:39)(cid:279)(cid:29)(cid:41)(cid:39)(cid:42)(cid:27)(cid:40)(cid:51)(cid:279)(cid:27)(cid:42)(cid:27)(cid:29)(cid:34)(cid:31)(cid:276)(cid:29)(cid:41)(cid:44)(cid:42)(cid:41)(cid:44)(cid:27)(cid:46)(cid:35)(cid:41)(cid:40)(cid:341)
value, and our culture, which empowers every (cid:260)(cid:341) (cid:20)(cid:49)(cid:35)(cid:46)(cid:46)(cid:31)(cid:44)(cid:256)(cid:341)(cid:34)(cid:46)(cid:46)(cid:42)(cid:45)(cid:256)(cid:279)(cid:279)(cid:46)(cid:49)(cid:35)(cid:46)(cid:46)(cid:31)(cid:44)(cid:254)(cid:29)(cid:41)(cid:39)(cid:279)(cid:27)(cid:42)(cid:27)(cid:29)(cid:34)(cid:31)(cid:29)(cid:41)(cid:44)(cid:42)(cid:341)
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employee to make decisions and achieve the
Apache’s 2012 Sustainability Report
company’s goals. Our global team is brought
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together by a sense of ownership and the our efforts to promote socially responsible business practices while
growing a profitable global exploration and production company for the
knowledge that best answers win. Our core
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values are: commitment to the environment, health and safety, and community
in our search for new and productive ways to enrich the lives of our
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please go to http://www.apachecorp.com/Sustainability/index.aspx
(cid:260)(cid:341)(cid:6)(cid:41)(cid:45)(cid:46)(cid:31)(cid:44)(cid:341)(cid:27)(cid:341)contrarian spirit;
Media and Other Stakeholder Inquiries
(cid:260)(cid:341)(cid:9)(cid:40)(cid:48)(cid:31)(cid:45)(cid:46)(cid:341)(cid:35)(cid:40)(cid:341)(cid:41)(cid:47)(cid:44)(cid:341)(cid:33)(cid:44)(cid:31)(cid:27)(cid:46)(cid:31)(cid:45)(cid:46)(cid:341)(cid:27)(cid:45)(cid:45)(cid:31)(cid:46)(cid:256)(cid:341)our people; (cid:13)(cid:31)(cid:39)(cid:28)(cid:31)(cid:44)(cid:45)(cid:341)(cid:41)(cid:32)(cid:341)(cid:46)(cid:34)(cid:31)(cid:341)(cid:39)(cid:31)(cid:30)(cid:35)(cid:27)(cid:341)(cid:27)(cid:40)(cid:30)(cid:341)(cid:41)(cid:46)(cid:34)(cid:31)(cid:44)(cid:341)(cid:31)(cid:50)(cid:46)(cid:31)(cid:44)(cid:40)(cid:27)(cid:38)(cid:341)(cid:45)(cid:46)(cid:27)(cid:37)(cid:31)(cid:34)(cid:41)(cid:38)(cid:30)(cid:31)(cid:44)(cid:45)(cid:341)(cid:27)(cid:44)(cid:31)(cid:341)(cid:49)(cid:31)(cid:38)(cid:29)(cid:41)(cid:39)(cid:31)(cid:341)
(cid:260)(cid:341)(cid:5)(cid:50)(cid:42)(cid:31)(cid:29)(cid:46)(cid:341)top performance and innovation; (cid:46)(cid:41)(cid:341)(cid:29)(cid:41)(cid:40)(cid:46)(cid:27)(cid:29)(cid:46)(cid:341)(cid:1)(cid:42)(cid:27)(cid:29)(cid:34)(cid:31)(cid:269)(cid:45)(cid:341)(cid:16)(cid:47)(cid:28)(cid:38)(cid:35)(cid:29)(cid:341)(cid:261)(cid:341)(cid:9)(cid:40)(cid:46)(cid:31)(cid:44)(cid:40)(cid:27)(cid:46)(cid:35)(cid:41)(cid:40)(cid:27)(cid:38)(cid:341)(cid:1)(cid:241)(cid:27)(cid:35)(cid:44)(cid:45)(cid:341)(cid:41)(cid:242)(cid:29)(cid:31)(cid:341)(cid:32)(cid:41)(cid:44)(cid:341)(cid:35)(cid:40)(cid:43)(cid:47)(cid:35)(cid:44)(cid:35)(cid:31)(cid:45)(cid:341)(cid:41)(cid:44)(cid:341)
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(cid:260)(cid:341)(cid:20)(cid:44)(cid:31)(cid:27)(cid:46)(cid:341)(cid:41)(cid:47)(cid:44)(cid:341)(cid:45)(cid:46)(cid:27)(cid:37)(cid:31)(cid:34)(cid:41)(cid:38)(cid:30)(cid:31)(cid:44)(cid:45)(cid:341)(cid:49)(cid:35)(cid:46)(cid:34)(cid:341)respect and dignity; via email or a phone call to one of the persons below.
(cid:260)(cid:341)Safety is not negotiable and will not (cid:13)(cid:5)(cid:4)(cid:9)(cid:1)(cid:341)(cid:18)(cid:5)(cid:12)(cid:1)(cid:20)(cid:9)(cid:15)(cid:14)(cid:19)(cid:341)(cid:5)(cid:13)(cid:1)(cid:9)(cid:12)(cid:256)(cid:341)(cid:39)(cid:31)(cid:30)(cid:35)(cid:27)(cid:288)(cid:27)(cid:42)(cid:27)(cid:29)(cid:34)(cid:31)(cid:29)(cid:41)(cid:44)(cid:42)(cid:254)(cid:29)(cid:41)(cid:39)
be compromised;
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environmental responsibility seriously; and (cid:2)(cid:35)(cid:38)(cid:38)(cid:341)(cid:13)(cid:35)(cid:40)(cid:46)(cid:52)(cid:255)(cid:341)(cid:4)(cid:35)(cid:44)(cid:31)(cid:29)(cid:46)(cid:41)(cid:44)(cid:255)(cid:341)(cid:16)(cid:47)(cid:28)(cid:38)(cid:35)(cid:29)(cid:341)(cid:261)(cid:341)(cid:9)(cid:40)(cid:46)(cid:31)(cid:44)(cid:40)(cid:27)(cid:46)(cid:35)(cid:41)(cid:40)(cid:27)(cid:38)(cid:341)(cid:1)(cid:241)(cid:27)(cid:35)(cid:44)(cid:45)(cid:256)(cid:341)(cid:312)(cid:245)(cid:341)(cid:251)(cid:245)(cid:247)(cid:341)(cid:246)(cid:253)(cid:250)(cid:341)(cid:251)(cid:246)(cid:251)(cid:250)
(cid:260)(cid:341)(cid:3)(cid:41)(cid:40)(cid:30)(cid:47)(cid:29)(cid:46)(cid:341)(cid:41)(cid:47)(cid:44)(cid:341)(cid:28)(cid:47)(cid:45)(cid:35)(cid:40)(cid:31)(cid:45)(cid:45)(cid:341)(cid:49)(cid:35)(cid:46)(cid:34)(cid:341)honesty and integrity. (cid:16)(cid:27)(cid:46)(cid:44)(cid:35)(cid:29)(cid:37)(cid:341)(cid:3)(cid:27)(cid:45)(cid:45)(cid:35)(cid:30)(cid:51)(cid:255)(cid:341)(cid:4)(cid:35)(cid:44)(cid:31)(cid:29)(cid:46)(cid:41)(cid:44)(cid:255)(cid:341)(cid:16)(cid:47)(cid:28)(cid:38)(cid:35)(cid:29)(cid:341)(cid:1)(cid:241)(cid:27)(cid:35)(cid:44)(cid:45)(cid:256)(cid:341)(cid:312)(cid:245)(cid:341)(cid:251)(cid:245)(cid:247)(cid:341)(cid:246)(cid:253)(cid:250)(cid:341)(cid:250)(cid:245)(cid:244)(cid:244)
How
we’re going to do it (cid:10)(cid:41)(cid:34)(cid:40)(cid:341)(cid:18)(cid:41)(cid:42)(cid:31)(cid:44)(cid:255)(cid:341)(cid:13)(cid:27)(cid:40)(cid:27)(cid:33)(cid:31)(cid:44)(cid:255)(cid:341)(cid:16)(cid:47)(cid:28)(cid:38)(cid:35)(cid:29)(cid:341)(cid:1)(cid:241)(cid:27)(cid:35)(cid:44)(cid:45)(cid:256)(cid:341)(cid:312)(cid:245)(cid:341)(cid:246)(cid:252)(cid:245)(cid:341)(cid:247)(cid:244)(cid:246)(cid:341)(cid:246)(cid:250)(cid:248)(cid:250)
DRILLING TODAY FOR
NEAR-TERM GROWTH
Key Components of
Our Growth Plans:
Infill development drilling, extension
wells and near-field prospects, and
horizontal completions provide more
predictable, repeatable and low-risk
growth opportunities from year to
On the cover: year. Apache has a deep backlog of
Apache drilled a record number of wells during these targets in its portfolio.
(cid:246)(cid:244)(cid:245)(cid:246)(cid:341)(cid:27)(cid:40)(cid:30)(cid:341)(cid:35)(cid:45)(cid:341)(cid:41)(cid:40)(cid:341)(cid:42)(cid:27)(cid:29)(cid:31)(cid:341)(cid:46)(cid:41)(cid:341)(cid:31)(cid:50)(cid:29)(cid:31)(cid:31)(cid:30)(cid:341)(cid:46)(cid:34)(cid:27)(cid:46)(cid:341)(cid:27)(cid:29)(cid:46)(cid:35)(cid:48)(cid:35)(cid:46)(cid:51)(cid:341)
(cid:38)(cid:31)(cid:48)(cid:31)(cid:38)(cid:341)(cid:35)(cid:40)(cid:341)(cid:246)(cid:244)(cid:245)(cid:247)(cid:254)
(cid:4)(cid:5)(cid:19)(cid:9)(cid:7)(cid:14)(cid:256)(cid:341)(cid:19)(cid:1)(cid:22)(cid:1)(cid:7)(cid:5)(cid:341)(cid:2)(cid:18)(cid:1)(cid:14)(cid:4)(cid:19)(cid:255)(cid:341)(cid:8)(cid:15)(cid:21)(cid:19)(cid:20)(cid:15)(cid:14)(cid:255)(cid:341)(cid:20)(cid:24)
Drilling activities are looking up.
Apache drilled 1,150 net new wells
during 2012 with a success rate of
95 percent. Our portfolio includes
opportunities in nearly every play
type: conventional, unconventional,
onshore and offshore, both in
domestic and international basins.
From drill-ready targets to world-class,
multi-well developments, Apache’s
growth prospects have never been
more robust. We are well positioned
to deliver near- and long-term
profitable growth.
Future growth through saFe, sustainable relentless Focus
mid- to long-term and sound operations on improvement
developments
Apache built project execution We are committed to finding The ability to optimize operations
expertise through complex onshore sustainable answers to the has long been a hallmark of Apache.
and offshore developments. We are environmental, health and safety In 2012, over 2,100 ideas were
leveraging this experience to deliver challenges of our business as implemented by field-level employees
world-class facilities in Australia, we build shareholder value. We through our unique AIM UP program,
Canada, Egypt and the UK North Sea. proactively pursue ideas to improve resulting in an estimated 12-month
New ventures exploration provides safety, reduce the footprint of value impact exceeding $535 million.
additional growth opportunities. our operations and support the
communities where we work and live.
Consistent Profitable Growth
Performance Highlights
(dollars in millions, except per share data)
Year Ended December 31 2012 2011 2010
FINANCIAL HIGHLIGHTS
Revenues $ 17,078 $ 16,888 $ 12,092
Income (loss) Attributable to Common Stock 1,925 4,508 3,000
Diluted Net Income (loss) per Common Share 4.92 11.47 8.46
Adjusted Earnings* 3,767 4,651 3,172
Adjusted Earnings per Common Share* 9.48 11.83 8.94
Cash from Operations Before Changes in Operating Assets and Liabilities:*
Net Cash Provided by Operating Activities 8,504 9,953 6,726
Changes in Operating Assets and Liabilities 1,741 281 642
Cash from Operations Before Changes in Operating Assets and Liabilities $ 10,245 $ 10,234 $ 7,368
Total Assets $ 60,737 $ 52,051 $ 43,425
Long-Term Debt 11,355 6,785 8,095
Shareholders’ Equity 31,331 28,993 24,377
Cash Dividends paid per Common Share 0.66 0.60 0.60
OPERATIONAL HIGHLIGHTS
Total Capital Expenditures $ 14,608 $ 11,793 $ 18,230
(including acquisitions, gas gathering, transmission and
processing facilities, and capitalized interest)
Natural Gas Production (MMcf/d) 2,293 2,262 1,889
Oil and NGL Production (Mbbls/d) 396 371 343
Proved Reserves (MMboe) 2,852 2,990 2,953
*Non-GAAP Financial Measure:
This annual report discusses Apache’s cash from operations before changes in operating assets and liabilities. Management believes the information
is useful for investors because it is used internally and widely accepted by those following the oil and gas industry as a financial indicator of a company’s
ability to generate cash to internally fund exploration and development activities, fund dividend programs, and service debt. It is also used by research
analysts to value and compare oil and gas exploration and production companies, and is frequently included in published research when providing
investment recommendations. Cash from operations before changes in operating assets and liabilities, therefore, is an additional measure of
liquidity, but is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating,
investing, or financing activities.
This annual report also discusses Apache’s Adjusted Earnings, which exclude certain items that management believes affect the comparability of
operating results and are meaningful for the following reasons: Management uses Adjusted Earnings to evaluate the company’s operational trends
and performance relative to other oil and gas producing companies; management believes this presentation may be useful to investors who follow
the practice of some industry analysts who adjust reported company earnings for items that may obscure underlying fundamentals and trends;
and the reconciling items are the types of items management believes are frequently excluded by analysts when evaluating the operating trends
and comparability of the company’s results. For a reconciliation of adjusted earnings to income attributable to common stock, the most directly
comparable GAAP financial measure, please see “Non-GAAP Measures” in Item 7 of the attached Form 10-K.
Cautionary Note to Investors:
The United States Securities and Exchange Commission (“SEC”) permits oil and gas companies, in their filings with the SEC, to disclose only
proved, probable, and possible reserves that meet the SEC’s definitions for such terms. Apache may use certain terms in this annual report, such
as “resource,” “resource potential,” potential reserves, and other similar terms that the SEC guidelines strictly prohibit Apache from including in
filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical
improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and
should not be relied upon. Investors are urged to consider carefully the disclosure in Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2012, available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas 77056
(Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.
Forward-Looking Statements:
Certain statements in this annual report contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities and Exchange Act of 1934. Whenever possible, these “forward-looking statements” are identified by words such
as “expects,” “believes,” “anticipates,” “projects,” and similar phrases. Any matters that are not historical facts are forward-looking and, accordingly,
involve estimates, assumptions, risks and uncertainties, including, without limitation, risks, uncertainties and other factors discussed in our most
recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K available on our website,
http://www.apachecorp.com/, and in our other public filings and press releases. These forward-looking statements are based on Apache Corporation’s
(Apache) current expectations, estimates and projections about the company, its industry, its management’s beliefs and certain assumptions
made by management. Because such statements involve risks and uncertainties, no assurance can be given that such expectations, estimates
or projections will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated
results or other expectations expressed in this annual report, including, Apache’s ability to meet its production targets, successfully manage
its capital expenditures and to complete, test and produce the wells and prospects identified in this annual report; to successfully plan, secure
necessary government approvals, finance, build and operate the necessary infrastructure and LNG plants; and to achieve its production and budget
expectations on its projects. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements,
which speak only as of the date hereof. Unless legally required, we assume no duty to update these statements as of any future date. However, you
should review carefully reports and documents that Apache files periodically with the Securities and Exchange Commission.
2 2012 Annual Report
Fellow
Shareholders,
left to right,
RODNEY J. EICHLER
President and Chief Operating Officer
G. STEVEN FARRIS
Chairman and Chief Executive Officer
ROGER B. PLANK
President and Chief Corporate Officer
Apache posted another year of progress in 2012 and is positioned
to continue to deliver consistent, long-term, profitable growth.
Our strategy to build a global, diversified portfolio of oil and gas
properties – with a focus on high-value, high rate-of-return activities –
again delivered a substantial financial and operating performance.
779,000 boe
Significant highlights for the year include:
per day
• Achieved record production for the fourth consecutive year – 779,000 barrels of oil
equivalent (boe) per day. Record daily production averaged in 2012; the
• Delivered cash from operations before changes in operating assets and liabilities* company’s compound annual growth rate from
of $10.2 billion for the second consecutive year. 1992–2012 is approximately 12 percent
• Replaced 156 percent of the year’s production through discoveries, extensions and
acquisitions, excluding negative revisions associated primarily with low Canadian 2.9 billion boe
gas prices.
• Firmly established the Permian and Anadarko basins as U.S. growth engines, adding Year-end 2012 estimated proved reserves;
312,000 acres in Oklahoma and the Texas Panhandle and accelerating drilling activities replacing 156 percent of the preceding
in these areas. 12 month’s production through discoveries,
• Expanded our opportunity set and increased production in our UK North Sea region extensions and acquisitions
to 75,000 boe per day, as discoveries and newly acquired properties were brought
onstream under Apache operatorship. $10.2 billion
• Announced a second LNG partnership with Chevron in December 2012 at the proposed
Kitimat project in western Canada. We hold a 50-percent working interest in Kitimat Cash flow exceeded $10 billion dollars for the
LNG, where estimated gross production from a single train totals in excess of 700 MMcf second consecutive year*
per day.
• Generated record annual revenues of $17.1 billion.
We are fiscally strong and have an extensive inventory of near-term and future
development projects, prospects and exploration ventures that will contribute to
our profitable growth over the next five-plus years. Apache is opportunity rich, and a
challenge we face is balancing capital allocation to generate near-term growth with
investments to fund future developments while maintaining our historical fiscal discipline.
Our pipeline of mid- to long-term projects has the potential to produce billions of dollars
in excess cash flow, serving as cornerstones for continuing growth.
* Cash from operations before changes in operating assets and liabilities is a non-GAAP measure.
Please see reconciliation on page 2. 3
Consistent Profitable Growth
Fellow Shareholders,
67,000
continued
locations
Technically identified drilling locations on
Apache’s Permian Basin and Anadarko Basin
properties onshore North America
Highlights from 2012 – Global Progress
Since mid-year 2010, Apache has enhanced our asset base in every core area by
completing seven major oil and gas acquisitions and through targeted acreage purchases.
This past year, we accelerated our drilling activities on newly added properties with a
focus on oil and liquids production in North America.
• Oil and natural gas liquids production in the United States increased 18 percent from
the prior year, with significant contributions from numerous Permian and Anadarko
basin plays.
• Apache had 111 rotary rigs operating worldwide in drilling or completion activities at
year-end 2012, a 29-percent increase compared to the same period in the prior year.
• International gas assets delivered more value, with natural gas price realizations up
13 percent for the year to $4.15 per Mcf, topping our North American gas realizations The Permian and
for the first time since 1995. International gas production increased 10 percent to
839 MMcf per day, boosting our earnings throughout the year. Anadarko basins
• In Australia, we commenced production from our Reindeer gas field and Devil Creek
processing plant, the first new gas processing hub in Western Australia in more than provide multiple
15 years.
ways to win:
Near-Term Growth: Focus on North America
thick, oily and
The United States remains the world’s highest demand market for hydrocarbon products.
While the domestic oil and gas industry is considered mature, technology has revitalized
liquids-rich,
the industry, reversing a multi-decade decline in domestic oil production. Apache is at the
forefront of this resurgence, and our 2013 drilling program is designed to accelerate value
stacked-pay
realization from our expanded property base.
Apache conducted extensive field studies across all of our properties in the Anadarko drilling targets,
and Permian basins during 2012. This initiative identified more than 67,000 prospective
well locations and 9.2 billion boe in resource potential. Drilling activity steadily increased with added
throughout the year, with the number of operated rigs in our Central Region increasing
from seven to 25. In the Permian Basin, we’ve ramped up from an average of five rigs upside potential
operating in 2010 to 32 rigs in 2012, with an increasing percentage of wells being drilled
for more prolific horizontal completions. through down-
Both regions provide multiple ways to win: thick, oily and liquids-rich, stacked-pay drilling spacing, step-out
targets provide attractive economics with reduced geologic risk. Additional upside
potential exists through down-spacing, step-out and horizontal opportunities. While and horizontal
we’re not currently targeting any dry gas-bearing zones, we know they’re there, offering
a valuable option when natural gas prices ultimately recover. opportunities.
A similar field analysis is under way in Canada, and our inventory of drilling locations
in North America is expected to more than double once these studies are complete.
This type of rigorous examination of our properties also will be undertaken across our
international assets.
Creating the Future: Developing Legacy Assets
Apache’s portfolio has evolved since 2010, reinforcing our ability to achieve the
longstanding objective of consistent, profitable growth. Whether in frontier regions
not yet fully explored or in projects requiring greater capital and longer cycle times for
infrastructure development, our property base offers the potential for long-life, legacy
assets that can provide robust cash flow year after year.
4 2012 Annual Report
+18 Key 2012
percent statistics
Year-over-year increase in Revenue Average Market
Apache’s U.S. crude oil and $17.1 Billion Prices
natural gas liquids production Adjusted Earnings* Brent: $112/bbl
in 2012 $3.8 Billion WTI: $94/bbl
HH Gas: $2.83/Mcf
• During 2014, our Coniston and Balnaves oil projects are projected to commence
production. These two floating production and storage facilities will be based offshore
Western Australia, adding an estimated 30,000 boe per day in initial gross production
when fully online.
• North Sea expansion is under way with the installation of a new satellite platform at
Forties. This will add 18 new drilling slots to more fully recover Forties’ oil reserves, 2012 Production
which currently realize premium pricing on the world market. n International Gas
18%
• Development of our Julimar and Brunello fields offshore Western Australia continues
n North America Gas
with initial production scheduled to coincide with startup of two trains at Wheatstone
31%
LNG, a Chevron-operated joint venture projected to come online at year-end 2016. n International
Apache’s net daily production from these fields will be an estimated 140 MMcf of Liquids 27%
natural gas and 3,250 barrels of oil. n North America
• Our new ventures initiatives accumulated attractive land positions in several new Liquids 24%
plays. Early identification and capture of these opportunities enabled Apache to build
Diversity Mitigates Volatility
advantageous acreage holdings at a relatively low cost, such as the Vaca Muerta
Apache’s balanced portfolio helps to
shale oil play in Argentina and the Cook Inlet in Alaska. shield the company from price volatility,
• Kitimat LNG is intended as a means for Apache to monetize an estimated 50 Tcf such as North America natural gas during
natural gas resource at prices linked to crude oil. The new joint venture plays to the past year. In 2012, 81 percent of the
each partner’s strengths, with Apache operating the upstream assets and Chevron company’s revenues came from liquids
overseeing the LNG marketing, plant and pipeline. production, which represented 51 percent
of the company’s production.
We constantly examine the commercial potential of our properties to ensure that we
focus capital spending on the most attractive opportunities. This also allows us to
identify those assets that may have more value with a partner or other operator. To high
grade our portfolio and further strengthen our balance sheet, we are targeting $2 billion
in divestitures this year.
Looking Ahead: Balancing Growth, Risks, Rewards
Apache enters 2013 with production at 800,000 barrels of oil equivalent a day. Estimated
proved reserves at year-end approached 3 billion barrels of oil equivalent. In this report,
we highlight near-term drilling opportunities that can increase production this year and
planned developments that can provide future growth. We recognize that sustainable
growth must occur while operating in a safe and environmentally responsible manner,
focusing on returns, growth and costs.
Apache’s unique culture has fostered AIM UP (Apache Improvement Method through
Understanding Performance), a program that encourages suggestions from our field
personnel to increase production and reduce costs. Reducing the decline rate in our
base properties better sustains future production growth.
G. STEVEN FARRIS
Our position in Egypt was a significant factor in our stock performance last year. Media
Chairman and Chief Executive Officer
coverage of the political transitions there continues to cause investor concern. We
have met regularly with elected and appointed officials in Egypt, who have signaled that
business will proceed as it has in the past. Our production and drilling operations continue
without interruption. In the year ahead, we plan to stay the course in Egypt, monitoring
the situation closely. ROGER B. PLANK
President and Chief Corporate Officer
Apache’s portfolio strategy has long been driven to balance our oil and gas production
mix, a goal other E&P companies strive for today. Financial discipline has been and
continues to be a hallmark of our strategy. Apache is your company, and we thank you
for your continued support. Based on the company’s solid financial position, strong cash
generating capacity and our confidence in the ability to continue to execute, Apache’s
RODNEY J. EICHLER
Board of Directors again increased the common dividend, marking a one-third increase President and Chief Operating Officer
over the last two years. The Apache workforce has never been more talented, more
committed, better trained and equipped to deliver on our growth plans. February 27, 2013
* Adjusted Earnings is a non-GAAP measure.
Please see note on page 2. 5
Consistent Profitable Growth
UK NORTH SEA
10% of production and 6% of
Apache at a Glance total estimated proved reserves
with 111 net producing oil and
gas wells
CANADA
16% of production
and 19% of total
estimated proved
reserves with
UNITED STATES 8,741 net producing
40% of production oil and gas wells
and 50% of total
estimated proved
reserves with 12,341
net producing oil and
gas wells
AUSTRALIA
ARGENTINA 8% of production and
6% of production and 3% of total 12% of total estimated
estimated proved reserves with proved reserves with
EGYPT
780 net producing oil and gas wells 33 net producing oil
20% of production and
and gas wells
10% of total estimated
proved reserves with
1,011 net producing oil
and gas wells
OPERATIONS A A
N LI
TI A
N R
E T
G S
R U
A A
Apache drilled a record number of wells during 2012 HIGHLIGHTS 2012 HIGHLIGHTS
2012, building momentum into the year ahead.
• Drilled 28 gross wells with • Drilled 15 gross
Your company achieved several new milestones, 100% success rate offshore wells, including
including: average daily production for the year of • Achieved record daily 10 exploratory and
production with substantial appraisal tests
779,000 boe and a quarterly production record volumes (73 MMcf/d) at • Brought the Reindeer
higher priced Gas Plus levels field and Devil Creek gas
of 800,000 boe per day. Approximately 51 percent
plant online
of the company’s production in 2012 was oil and • Exploration success with
Tallaganda gas discovery
natural gas liquids.
LOOKING AHEAD LOOKING AHEAD
• Participate in up to • Plan to drill 16 gross wells
20 gross wells during 2013, during 2013, including
operating 16 six exploration wells
• Focus on Gas Plus drilling • Initial production of
programs and Vaca Muerta the partner-operated
exploration Macedon gas field and
processing plant
• Continue development
of Julimar/Wheatstone
LNG, Coniston and Balnaves
oil fields, Varanus gas
compression project
6 2012 Annual Report
2012 production & acreage
ArGenTInA eGYPT
NATURAL GAS PRODUCTION NATURAL GAS PRODUCTION
213,464 Mcf/day 353,738 Mcf/day
NGL AND OIL PRODUCTION NGL AND OIL PRODUCTION
12,749 Bbls/day 99,756 Bbls/day
PROVED RESERVES PROVED RESERVES
101,801 Mboe 273,283 Mboe
GROSS ACREAGE GROSS ACREAGE
(developed and undeveloped) (developed and undeveloped)
4,403,489 9,735,410
Worldwide Reserves Worldwide Production
AusTrAlIA uK norTH seA MMboe Mboe per day
NATURAL GAS PRODUCTION NATURAL GAS PRODUCTION
214,013 Mcf/day 57,457 Mcf/day
N2G8L,8 A8N4D OBIbL lPsR/OdDaUyCTION N6G5L,3 A1N0D B ObILl sP/RdOaDyUCTION 1,657 1,937 2,117 2,313 2,446 2,401 2,367 2,953 2,990 2,852 417 448 455 501 561 534 583 658 748 779
PROVED RESERVES PROVED RESERVES
342,206 Mboe 169,190 Mboe
GROSS ACREAGE GROSS ACREAGE
(developed and undeveloped) (developed and undeveloped)
7,938,505 723,090
cAnADA unITeD sTATes
NATURAL GAS PRODUCTION NATURAL GAS PRODUCTION
600,680 Mcf/day 854,099 Mcf/day
NGL AND OIL PRODUCTION NGL AND OIL PRODUCTION
22,088 Bbls/day 167,650 Bbls/day
PROVED RESERVES PROVED RESERVES
540,913 Mboe 1,424,286 Mboe
GROSS ACREAGE GROSS ACREAGE 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
(developed and undeveloped) (developed and undeveloped)
6,937,575 12,321,297
A T A s
D P e e
A Y s T
cAn eG orTH D sTA
n e
uK nIT
u
2012 HIGHLIGHTS 2012 HIGHLIGHTS 2012 HIGHLIGHTS 2012 HIGHLIGHTS
• Production averaged • Averaged 25 rigs during • Record daily production • Record production from
122,000 boe per day the year averaged 75,000 boe per day Permian, Central and
• Advanced several oil plays • Drilled 198 gross net wells, • Awarded 12 new licenses, Gulf Coast regions
in the Viking, Glauconite and including 51 exploration tests operating 11 • Transitioned to more liquids
Sparky formations • Development lease • Commenced seismic survey production – up 18% from
turnaround time decreased over Beryl and nearby fields prior year
to a low of 34 days versus • Commissioned and
nine months the prior year upgraded facilities to remove
production bottlenecks
LOOKING AHEAD LOOKING AHEAD LOOKING AHEAD LOOKING AHEAD
• Plan to drill up to 150 gross • Plan to drill up to • Participate in 27 gross wells, • Expand application of
wells during 2013 270 gross wells, including up from 21 during 2012 horizontal drilling
• Continue transition to oil 60 exploratory tests • Commission Forties Alpha • Exploration tests in existing
and liquids-rich plays • Focus on Bahariya, Satellite platform and new operating regions
• Test horizontal exploitation Abu Roash, Jurassic and • Commence new seismic • Apply new seismic
in new plays AEB targets survey over Forties and technologies offshore
• Work with partner to advance • Further test application Bacchus fields to reveal undiscovered
Kitimat LNG to FID of horizontal drilling in resources
selected zones
7
Consistent Profitable Growth
Apache discovered the Canyon Wash oil play
at Bivins Ranch in the Texas Panhandle.
more predictable,
near-term growth
Apache has built a deep backlog of • The Anadarko Basin has become our
low-risk, predictable drilling targets fastest-growing area. Production in
to maintain and grow production. 2012, which includes an acquisition
Our inventory of near-term prospects completed in April, increased
provides a diverse set of growth 37 percent over the prior year. In
opportunities. In most areas, wells 2012 we drilled 101 net wells – all but
can be connected to existing four horizontally – with a 99 percent
infrastructure quickly, building success rate.
momentum for higher production.
• Apache drilled 196 net wells in Egypt
Of the 1,150 net wells drilled by Apache during 2012, including 51 exploration
last year, more than half were in the tests, achieving an 88 percent
proven regions of the Permian and success rate. With 7.9 million
Anadarko basins in North America. undeveloped acres, the company
Our ongoing developments in Egypt has a rich opportunity set for further
and the Gulf of Mexico Shelf and growth and development.
onshore regions also provide a steady
• By operating over 600 platforms and
number of ready-to-drill locations.
lease blocks in shallower waters of
• In the oil-rich Permian Basin, the Gulf of Mexico, Apache shortens
Apache drilled 605 net wells last the cycle time from discovery to
year with a 99 percent success production. High-rate wells provide
rate. Year-over-year production robust cash flow for investment here
increased 18 percent, and 72 percent and in other areas.
comprised more valuable oil and
• Apache holds 1.4 million gross acres
natural gas liquids.
in the onshore Gulf Coast, which
delivers highly profitable wells by
applying the latest technology to
find new resources in proven basins.
8 2012 Annual Report