UBS GLOBAL OIL AND GAS CONFERENCE MAY 23, 2017

Transcription

1 UBS GLOBAL OIL AND GAS CONFERENCE MAY 23, 2017

2 NOTICE TO INVESTORS Certain statements in this presentation contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 including, without limitation, expectations, beliefs, plans and objectives regarding anticipated financial and operating results, asset divestitures, estimated reserves, drilling locations, capital expenditures, price estimates, typical well results and well profiles, type curve, and production and operating expense guidance included in this presentation. 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, recently filed Quarterly Reports on Form 10-Q, recently filed Current Reports on Form 8-K available on our website, 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. 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 presentation, 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 presentation, to successfully plan, secure necessary government approvals, finance, build, and operate the necessary infrastructure, and to achieve its production and budget expectations on its projects. Whenever possible, these forward-looking statements are identified by words such as expects, believes, anticipates, projects, guidance, outlook, and similar phrases. Because such statements involve risks and uncertainties, Apache s actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. 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. 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 presentation, such as resource, resource potential, net resource potential, potential resource, resource base, identified resources, potential net recoverable, potential reserves, unbooked resources, economic resources, net resources, undeveloped resource, net risked resources, inventory, upside, 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, 2016, available from Apache at or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling SEC-0330 or from the SEC's website at Certain information may be provided in this presentation that includes financial measurements that are not required by, or presented in accordance with, generally accepted accounting principles (GAAP). These non-gaap measures should not be considered as alternatives to GAAP measures, such as net income or net cash provided by operating activities, and may be calculated differently from, and therefore may not be comparable to, similarly titled measures used at other companies. For a reconciliation to the most directly comparable GAAP financial measures, please refer to Apache s first quarter 2017 earnings release at None of the information contained in this document has been audited by any independent auditor. This presentation is prepared as a convenience for securities analysts and investors and may be useful as a reference tool. Apache may elect to modify the format or discontinue publication at any time, without notice to securities analysts or investors. 2

3 APACHE OVERVIEW Strategically diversified portfolio Top-tier Permian Basin position Strong free cash flow generating assets in Egypt and North Sea Focused on long-term, corporate-level returns Rigorous capital allocation process and disciplined spending approach Investment decisions based on fully-burdened, full-cycle economics Measured increase in drilling activity Positioned to deliver highly competitive per share growth rates Permian Basin / Alpine High driven production and cash flow growth Fund with internally generated cash and non-core asset sales/cash on hand 3

4 APACHE DIFFERENTIATORS AND CATALYSTS Growth Robust production growth projected in 2018 with minimal capital increase Momentum Midland Basin oil growth beginning in 3Q; transitioning to optimization at Alpine High Assurance Protected 2H17 cash flow with put option contracts for oil production Discipline Spent within cash flow* for four quarters in a row; $1.5 billion cash on hand at end of 1Q17 Optionality Upside optionality with Suriname exploration and Alpine High development * Cash flow from operations, before changes in working capital, exceeded capital expenditures 4

5 APACHE PRODUCTION OUTLOOK Poised to Deliver Strong, Returns-Focused Growth Q17A 2Q17E 3Q17E 4Q17E 4Q18E Note: Production measured in Mboe/d, adjusted for Egypt noncontrolling interest, tax barrels and divestitures. 5

6 PERMIAN BASIN 6

7 PERMIAN BASIN: APACHE S GROWTH ENGINE Midland Basin Central Basin Platform / NW Shelf Delaware Basin Acreage (1) ~443,000 net acres ~739,000 net acres ~392,000 net acres FY16 Production (% Oil/NGL/Gas) ~77 Mboe/d (47%/25%/28%) ~65 Mboe/d (57%/22%/21%) ~19 Mboe/d (57%/20%/23%) Highlights Multi-year premium drilling inventory within core acreage position Significant well performance improvement in 2016 Significant cash flow generation Leverage CO 2 and waterfloods to mitigate base decline rate Shallow horizontal potential 20+ years of inventory Alpine High infrastructure installation underway (1) Acreage as of March

8 REGIONAL PRODUCTION PROFILE Leverage to Permian is is Expanding 4Q16 4Q18E International 38% 36% Permian Midland/ Delaware Basins 21% CBP & Other Permian 15% International ~55% Permian Midland/ Delaware Basins Other North America 26% Other North America CBP & Other Permian 421 Mboe/d Mboe/d Note: Production adjusted for Egypt noncontrolling interest, tax barrels and divestitures.. (1) Other North America Includes Lower 48 (excluding Permian), Canada and Gulf of Mexico. 8

9 NORTH AMERICA PRODUCTION OUTLOOK Permian Driven Growth Q17A 2Q17E 3Q17E 4Q17E 4Q18E Note: Production measured in Mboe/d, adjusted for divestitures. Includes Permian Basin, MidContinent/Gulf Coast, Canada and Gulf of Mexico regions. 9

10 ALPINE HIGH 10

11 WHAT WE HAVE CONFIRMED AT ALPINE HIGH Alpine High is an over-pressured system Up to 5,000 hydrocarbon column that transitions from oil to dry gas with increasing depth Five geologic formations with multiple landing zones Highly economic wet gas play, with more than 3,000 locations Significantly more locations still being quantified across the play Excellent fully-burdened economics in source rock interval 11

12 Source Rock 3 rd Bone Springs / Wolfcamp SOURCE ROCK INTERVAL DIFFERENTIATES ALPINE HIGH High frequency, rapidly rising and falling sea level environment UNCONFORMITY PENNSYLVANIAN Tranquil marine environment, gradually rising worldwide sea level conditions BARNETT WOODFORD DEVONIAN ORGANIC SHALE PARASEQUENCE CARBONATE DEBRIS FLOW ORGANIC SHALE 3 rd Bone Springs + Wolfcamp Woodford + Barnett + Penn Higher variability with sweet spots Thick, consistent and contiguous deposition Oil and wet gas windows Oil, wet gas and dry gas windows Water wet rock Minimal in-situ water Indigenous shale and migrated hydrocarbons Indigenous, organic shale 12

13 ALPINE HIGH OIL SAMPLES Confirms Thermal Maturity Model 3 rd Bone Springs Wolfcamp Pennsylvanian Barnett Woodford 13

14 ALPINE HIGH: THREE RECENT TEST WELLS Disclosed with 1Q17 Earnings on 5/4/17 New Test Wells Previously Disclosed Chinook 101AH (Woodford target) REDWOOD Blackhawk 5H (Barnett target) MONT BLANC BLACKHAWK FOX STATE CHEYENNE SPANISH TRAIL ORTLER WEISSMIES King Hidalgo 3H (azimuth & lateral test) 14

15 NEW TEST WELL: CHINOOK 101AH Highest Oil Yield To Date in Woodford Woodford Well Comparison (Non-Optimized, Short Laterals) 24-Hour IP Rates Well Name Disclosure Date Treated Lateral Length Target Zone Unshrunk Gas (MMcf/d) Oil (bbls/d) Oil:Gas Ratio (bbls/mmcf) Depth Chinook 101AH May ,524 Woodford ,100 Blackhawk 1H Sept ,234 Woodford ,505 Fox State 1H Sept ,842 Woodford ,179 Mont Blanc 1H Sept ,306 Woodford ,065 New Test Well Previously Disclosed Chinook 101AH Highlights Highest oil yield to date for a Woodford target Mont Blanc 1H Blackhawk 1H Chinook 101AH Fox State 1H Over-pressured, flowing without artificial lift With expected refrigeration recovery yields, estimated 24-hour IP of ~2,500 boe ~51% liquids, 645 bbls/d of NGLs 54 gravity API, 1,300+ BTU gas 15

16 NEW TEST WELL: BLACKHAWK 5H Highest Oil Yield To Date in Barnett Barnett Well Comparison (Non-Optimized, Short Laterals) 24-Hour IP Rates Well Name Disclosure Date Treated Lateral Length Target Zone Unshrunk Gas (MMcf/d) Oil (bbls/d) Oil:Gas Ratio (bbls/mmcf) Depth Blackhawk 5H May ,525 Barnett ,760 Weissmies 5H Feb ,630 Barnett ,230 Mont Blanc 3H Sept ,502 Barnett ,409 Mont Blanc 3H New Test Well Previously Previously Disclosed Disclosed Blackhawk 5H Weissmies 5H Blackhawk 5H Highlights Highest oil yield to date for a Barnett target Well placed in a very thick interval, multiple landing zones likely in this area With expected refrigeration recovery yields, estimated 24-hour IP of ~1,800 boe 57% liquids, ~275 bbls/d of NGLs 50 gravity API, 1,300+ BTU gas 16

17 NEW TEST WELL: KING HIDALGO 3H Successful Azimuth Test King Hidalgo 9H (abbreviated lateral) King Hidalgo 3H (standard lateral length for test well) Disclosure Date Feb 2016 Disclosure Date May 2017 Lateral Length 3,388 Target Zone Middle Woodford Unshrunk Gas (MMcf/d) 3.4 Oil (bbls/d) 24 Oil:Gas Ratio (bbls/mmcf) 7 Depth 13,200 Optimized Azimuth Lateral Length 4,392 Target Zone Middle Woodford Unshrunk Gas (MMcf/d) 7.0 Oil (bbls/d) 72 Oil:Gas Ratio (bbls/mmcf) 7 Depth 12,950 New Test Well Previously Disclosed King Hidalgo 3H Highlights Over 2x rate achieved with optimized azimuth and 30% longer lateral Indicates favorable thermal maturity window for liquids and oil production over southern half of acreage King Hidalgo 3H 46º gravity API, 1,210 BTU gas King Hidalgo 9H 17

18 CURRENT FOCUS Transitioning to optimization phase Delineating all five stratigraphic zones within oil and wet gas windows Installing Midstream facilities (initial gas sales occurred May 3) Implementing product marketing strategy, contracting with end users Building long-term upstream and midstream development plans 18

19 INTERNATIONAL 19

20 INTERNATIONAL SUMMARY Strategic Position Within Apache s Portfolio Egypt and North Sea are an important part of Apache s diversified portfolio Cash-flow generators fueled by sustained, steady performance Deep inventory in producing onshore and offshore basins Running room provided by step-out exploration and development 20

21 APACHE EGYPT 4.1 Million Gross Acres Across Multiple Basins Faghur basin Matruh basin Alamein basin Shushan basin Gulf of Suez Abu Gharadig basin Gindi/Beni Suef Note: as of March 15,

22 2016 BID ROUND SUCCESS Expands Apache s Acreage Base by Nearly 40% Awarded two concessions comprising nearly 1.6 million acres Anticipate mid-2017 signature Favorable PSC terms underpin ability to pursue at current or lower prices Drill-ready inventory in multiple plays Proximity to Apache-operated production/transportation facilities NW Razzak South Alem El Shawish 22

23 APACHE NORTH SEA Multi-year Drilling Inventory to Sustain Production Operating two platform rigs at Forties and Beryl, respectively Recently signed two-year contract on Ocean Patriot semi-submersible rig with large dayrate reduction Callater subsea tieback facilities installed on location o o Drilling underway for the first production wells Project remains under budget and on schedule to deliver first production in 3Q17 23

24 INTERNATIONAL PRODUCTION OUTLOOK Strong Free Cash Flow Generating Assets Flat Production Profile Q17A 2Q17E 3Q17E 4Q17E 4Q18E Note: Production measured in Mboe/d, adjusted for Egypt noncontrolling interest and tax barrels. Includes North Sea and Egypt production. 24

25 CONCLUDING THOUGHTS Investing for long-term returns with highly competitive production and cash flow growth per share Conservative budget assumes $50/bbl oil, protected by 2H17 put options on oil production Sustained international cash flow drives strong Midland / Delaware Basin growth story Transition to optimization and development at Alpine High will drive significantly higher production rates Substantial incremental test data on the way 25

26 APPENDIX 26

27 BALANCED PORTFOLIO Free Cash Flow Generators Fund Growth Engine Montney & Duvernay Conventional Canada North America Anadarko Woodford SCOOP International UK North Sea Eagle Ford S. LA Minerals GoM Suriname Egypt Permian Growth Engine Positive Free Cash Flow Generator + Exploration Growth Cash Flow Future Potential 27

28 BUILDING MOMENTUM IN THE MIDLAND BASIN Midland Basin Activity Operations focused on pad drilling of the Wolfcamp and Spraberry shale formations Six primary rig lines and two frac crews Connell 48 pad (6 wells producing) 9-well pad in Azalea and 6-well pad in Powell online in 2Q17 Recent Well Results Brought online 6-well Connell 48 pad (winerack configuration) in Powell field Average 30-day IP of ~850 boe/d (79% oil) Average lateral length of ~5,025, resulting in average 30-day IP of 170 boe/d per 1,000 lateral Average D,C&E costs of $4.6 mm/well, ~13% less than originally planned Note: Initial production (IP) rates shown as maximum 30-day boe/d rates. Gas production shown as pre-processing. 28

29 APACHE S DIFFERENTIATED VIEW Southern Delaware Basin Historical Drilling Activity Key Alpine High Technical Parameters Perception Reality Structural History Uplifted & Complex Relatively Stable Paleo High Thermal Maturity Dry Gas Wet Gas & Oil Reservoir Quality High Clay Content Very Low Clay Content Apache Alpine High Acreage Alpine High received minimal focus from industry 118 wells penetrated the Barnett / Woodford Source: Texas Railroad Commission. 29

30 PALEOGEOGRAPHIC RECONSTRUCTION Woodford Time Same geologic age as Arkoma Woodford and SCOOP / STACK Similar depositional environment 30

31 Transgressive Interval EXTENSIVE LATERAL CONTINUITY IDEAL FOR A RESOURCE PLAY Well Logs Across Alpine High Source Interval 65 Miles Regional reservoir consistency and continuity Repeatable and predictable drilling target intervals Favorable mechanical stimulation barriers Barnett Formation Mississippian Lime Stimulation Barrier Woodford Formation Source: Generated from publicly available information. 31

32 Wet Gas TRANSGRESSIVE SOURCE INTERVAL TRANSGRESSIVE SOURCE INTERVAL Oil TRANSGRESSIVE PARASEQUENCES TRANSGRESSIVE PARASEQUENCES 4,000-5,000 OF STACKED POTENTIAL PAY MONT BLANC 1H SPANISH TRAIL 1H 20 Miles Delaware Basin Stratigraphy Brushy Canyon Penn Barnett/Miss Lime Woodford Devonian Oil Wet Gas 32

33 ALPINE HIGH World-Class Resource Requires Methodical Delineation 2017 Program Highly scientific and deliberate Designed to collect data for full-scale development (begins in 2018) Focused on long-term field optimization, not short-term results Maintains control and timing of midstream build, captures long-term infrastructure value Operational Constraints Unprecedented combination of vertical and areal extent Standardized well designs, using short laterals, are necessary to maximize learning Land retention requirements and infrastructure timing OBJECTIVE Maximize hydrocarbon recovery and net present value of resource in place 33

34 ALPINE HIGH DELINEATION Source Rock Present at Varying Depths Across Alpine High 8,000 Redwood Unit Mont Blanc Unit Weissmies Unit Hidalgo Unit 10,000 Barnett 48 API / 1,440 BTU Upper Woodford 54 API / 1,400 BTU Middle Woodford 57 API / 1,350 BTU Redwood Unit Mont Blanc Unit 13,000 14,000 Penn 1,000 BTU Barnett 980 BTU Woodford 970 BTU Barnett 53 API / 1,360 BTU Woodford 55 API / 1,170 BTU Barnett 44 API / 1,270 BTU Woodford 49 API / 1,210 BTU Weissmies Unit Wet Gas King Hidalgo Unit Source Rock Interval (~1,100-1,600 thick) Dry Gas 34

35 ALPINE HIGH SOURCE ROCK INTERVAL Woodford, Barnett and Pennsylvanian 8,500 Oil Apache is targeting a ~1,600 thick source rock interval at varying depths between ~8,500-13,500 10,500 Majority of source rock is situated within the wet gas and oil windows Increasing oil cut and BTU content Wet Gas Wet gas window produces 1,100-1,450 BTU gas plus oil Multiple landing zones identified within this interval 13,500 Dry Gas 35

36 FAVORABLE COMPARATIVE PARAMETERS Alpine High vs. Established Resource Plays Parameter Alpine High (Woodford/Barnett) SCOOP (Woodford) Marcellus (Wet Gas) Eagle Ford (Condensate) TOC (weight %) 4%-10% 4%-10% 1%-5% 1%-7% Primary Mineralogy Silicate Silicate Silicate Carbonate Clay Content 10%-20% 20%-35% 20%-35% 10%-40% Total Porosity 8%-12% 4%-10% 6%-11% 4%-11% Pressure (psi) 5,000-9,000 7,700-10,500 3,500-4,200 4,875-10,000 Thickness (ft) 550-1, Depth (ft) 10,000-13,000 11,000-15,000 5,000-8,000 11,000-14,000 36

37 APACHE SURINAME 1.8 Million Net Acres on Two Blocks Proprietary 3-D seismic surveys over both blocks 37

38 1Q 2017 OPERATING CASH MARGINS $60.00 Egypt North Sea Sea Permian Other NA NA $50.00 $51 / Boe $40.00 $30.00 $20.00 $10.00 $39 / Boe $6 / Boe $33 Per Boe $14 / Boe $37 Per Boe $33 / Boe $13 / Boe $20 Per Boe $24 / Boe $11 / Boe $13 Per Boe $0.00 Operating Cash Margin (1) Avg Realization Cash Operating Cost (1) Operating cash margins calculated as price realizations less lease operating expenses, gathering and transportation costs and taxes other than income. 38