GOLDMAN SACHS GLOBAL ENERGY CONFERENCE JANUARY 9, 2019

Transcription

1 GOLDMAN SACHS GLOBAL ENERGY CONFERENCE JANUARY 9,

2 FORWARD-LOOKING STATEMENTS 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, will, 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, 2017 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 third quarter 2018 earnings release and third quarter 2018 Financial & Operational Supplement at None of the information contained in this document has been audited by any independent auditor. This presentation is prepared asa convenience for securities analysts and investors and may be useful asa reference tool. Apache may elect to modify the format or discontinue publication at any time, without notice to securities analysts or investors. 2

3 TABLE OF CONTENTS Apache Review & 2019 Playbook Portfolio Overview Permian Basin Alpine High / Altus Midstream International Guidance Appendix 3

4 APACHE REVIEW BALANCED, RETURNS-FOCUSED PORTFOLIO DISCIPLINED FINANCIAL APPROACH On track to achieve long-term, sustainable double-digit ROCE Top-tier Permian Basin position delivering strong returns & exceeding production targets Robust free-cash-flow generating assets in Egypt & North Sea Differential exploration opportunities (Lower 48 & Suriname) Strong balance sheet, stable dividend with attractive yield, no equity dilution Altus Midstream formed to fund Alpine High midstream buildout Returning capital to shareholders CASH FLOW DRIVERS Production growth in U.S. / sustained production internationally Alpine High cryo installation to drive liquids and margin uplift in 2019 Material exposure to Brent crude oil pricing Strong momentum in North Sea with Garten start-up in 4Q 18 4

5 2019 PLAYBOOK Continue to execute Returns-focused capital allocation: growth is an outcome, not an objective Continuous improvement through technology Control costs Plan proactively and maintain capital flexibility Prepared to budget at +/- $50 WTI Adjust program quickly in response to lower oil price scenarios Proven track record of capital discipline Target cash flow neutrality, inclusive of dividend Advance Alpine High development, Suriname and Lower 48 exploration 5

6 PORTFOLIO OVERVIEW 6

7 PERMIAN BASIN Stable to lower rig count in 2019 Efficiencies driving shorter cycle times and lower costs Expanding inventory with strategic testing Production & Rig Count Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18E MM Net Acres in the Permian Basin Permian Oil (Mbo/d) Remaining Permian (Mboe/d) Avg. Rigs Note: 4Q18 Permian estimated production issued on 11/1/2018 7

8 ALPINE HIGH: TRANSITIONING TO FULL-FIELD DEVELOPMENT Apache s methodical approach to developing Alpine High and Beyond Formulation of concept, concept testing and confirmation + Areal and vertical delineation = Transition to full field development Optimized spacing, patterns & completions Drilling efficiencies Lifting cost efficiencies Significant water handling facilities in place Midstream entity in place Focus on reducing costs, increasing efficiency and maximizing recovery 8

9 ALPINE HIGH PLAY EVOLUTION September 2016 November (1) Rig Count Cum. Wells Drilled at year-end Cum. Wells on Production Net Production (Mboe/d) at year-end Nm ~ Location Count 2,000 3,000+ 5,000+ Ongoing Testing Confirmed Landing Zones Altus Midstream 2 13 Ongoing Testing Rich gas processing capacity: 380 MMcf/d Rich gas processing capacity: ~1,380 MMcf/d Nm Lean treating & compression: 400 MMcf/d Lean treating & compression: 480 MMcf/d Initial cryo under construction Five cryo plants at year end (1) November 2018 actuals and 2020 estimates originally published on November 12, estimates subject to revision with new guidance. 9

10 SIGNIFICANT INDUSTRY ACTIVITY INCREASE FOLLOWING ALPINE HIGH ANNOUNCEMENT September 2016 December 2018 WARD CULBERSON REEVES PECOS JEFF DAVIS 20 Miles Drilled/ Drilling Count: Count: Current Permit Count: Total well count: Miles Miles BREWSTER APA Operated Rig PRESIDIO Competitor Permit Wells Competitor Wells Drilled/Drilling Apache Acreage Outline Source: Drilling Info. 10

11 ALTUS MIDSTREAM: TRANSACTION OVERVIEW Newly Formed Pure Play Permian Basin Midstream Company Transaction closed November 9, 2018 (Ticker Symbol: ALTM) Publicly traded C-Corp with 325MM shares outstanding (79% owned by Apache) ~$625MM in cash and zero debt, as of October 1 effective date Future EBITDA ~ 50% Gathering & Processing and 50% pipeline ownership 11

12 ALTUS MIDSTREAM: BENEFITS OF TRANSACTION TO APACHE Demonstrates Value APA s 79% equity ownership valued at > $2 billion Equity position to benefit from long-term Alpine High growth plan Maintain control of future Alpine High midstream buildout Funds Future Midstream Investment Estimated Altus Midstream gathering and processing investment: ~$180 MM in 4Q 2018 / $320 MM in 2019 / $330 MM in 2020 Planned JV pipeline investment of ~$1.5 - $1.8 billion Lower cost of capital Enhances Capital Optionality Share repurchases / debt retirement / incremental investments 12

13 ALTUS MIDSTREAM: GATHERING & PROCESSING ASSETS Pipeline Map Rich Gas Processing: 380 MMcf/d of capacity in service Lean Gas Treating / Compression: 400 MMcf/d of capacity in service Gathering Pipelines: ~125 miles in service Current Asset Highlights Primarily inch pipe Residue Pipelines / Market Connections: ~55 miles in service with 3 market connections (Comanche Trail, El Paso Line 1600 and Trans- Pecos Pipeline) Key Additions Expected by YE Bcf/d of cryo processing capacity 80 MMcf/d of lean gas treating and compression capacity > 80 miles of gathering pipeline 1 additional market connection expected to be in service (Roadrunner) (1) Acreage footprint depicted on map is as of July 1,

14 Crude NGLs Nat Gas ALTUS MIDSTREAM: PERMIAN PIPELINE ASSETS Pipelines Expected in Service by YE 2020 Altus owns equity in one Permian pipeline project and options on four other projects 15% (1) of KMI s Gulf Coast Express (GCX) 33% (2) of KMI s Permian Highway (PHP) 33% of EPD s Shin Oak 50% of Salt Creek NGL 15% of EPIC Crude Estimated ~$1.5 - $1.8 billion total investment in all five pipeline projects No promote paid above construction cost for any JV pipeline project Very attractive projects for Altus : ~7x build multiple of EBITDA, on average (1) GCX option exercised in December Altus may have the option to acquire an additional 1% interest in GCX subject to certain conditions precedent, including having less than 30% equity in PHP following the exercise of the PHP option. (2) Subject to reduction in the event that other options to acquire equity in Permian Highway held by third parties are exercised. Altus ownership expected to be no less than ~27%. 14

15 EGYPT Preparing for Future Growth Country s largest oil producer; stable gross production Averaged 12 rigs in 3Q 18 High-density 3-D seismic program across 4 basins Apache Egypt Acreage: ~6.2 million acres 2.6 million acres; ~ 38% complete (as of 11/1/18) State-of-the-art technology provides improved fault definition and enhanced deep imaging Production (Mboe/d) Brent Crude ($/Bbl) Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q New concessions expand acreage position by more than 50% over past 18 months Adjusted Production Gross Production Brent Crude Price 15

16 NORTH SEA High Margins, High Returns, Free Cash Flow Strong leverage to premium Brent crude pricing Apache North Sea Acreage Best-in-class operator 3 rigs operating (2 platform, 1 semi-submersible) Improving base oil production profile at Forties with water flood management programs Production additions at Callater & Garten will drive significant uptick in 4Q 18 volumes North Sea Production (Mboe/d) Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 16

17 SURINAME: HIGH IMPACT OIL EXPLORATION Massive acreage blocks near proven oil province Block 58 seismic processing complete, identifying and ranking prospects Spudding exploration well on Block 58 in 2019 Block 58 Block MM acres 0.87 MM acres 17

18 GUIDANCE (ISSUED 11/1/2018) 18

19 ADJUSTED PRODUCTION OUTLOOK 2018 FY & Quarterly Production Guidance (Mboe/d) Issued: 11/1/2018 TOTAL COMPANY PERMIAN FY18E 1Q18A 2Q18A 3Q18A 4Q18E 262 U.S FY18E 1Q18A 2Q18A 3Q18A 4Q18E PERMIAN OIL FY18E 1Q18A 2Q18A 3Q18A 4Q18E FY18E 1Q18A 2Q18A 3Q18A 4Q18E INTERNATIONAL ALPINE HIGH FY18E 1Q18A 2Q18A 3Q18A 4Q18E FY18E 1Q18A 2Q18A 3Q18A 4Q18E Note: Total Company and International excludes production attributable to Egypt tax barrels and noncontrolling interest. 19

20 ADJUSTED PRODUCTION OUTLOOK Outlook (Mboe/d) Multi-Year Outlook Issued in Feb 18 (Updated on 11/1/2018) TOTAL COMPANY PERMIAN A 2018E 2019E 2020E 2017A 2018E 2019E 2020E 206 U.S ALPINE HIGH A 2018E 2019E 2020E 2017A 2018E 2019E 2020E INTERNATIONAL A 2018E 2019E 2020E Note: Total Company and International excludes production attributable to Egypt tax barrels and noncontrolling interest. 20

21 APPENDIX 21

22 ALPINE HIGH: DISTINCT SOURCE ROCK AND PARASEQUENCE INTERVALS Source Rock Parasequences High frequency, rapidly rising and falling sea level environment 3 rd BONE SPRINGS WOLFCAMP UNCONFORMITY PENNSYLVANIAN Tranquil marine environment, gradually rising worldwide sea level conditions BARNETT WOODFORD DEVONIAN ORGANIC SHALE PARASEQUENCE CARBONATE DEBRIS FLOW ORGANIC SHALE Woodford + Barnett + Penn Thick, laterally continuous deposition Oil, wet gas and dry gas windows Minimal in-situ water Indigenous, organic shale 3 rd Bone Springs + Wolfcamp Higher variability with sweet spots Oil and wet gas windows Water wet rock Indigenous shale and migrated hydrocarbons 22

23 ALPINE HIGH: STRUCTURAL CROSS SECTION NORTHERN FLANK CREST SOUTHERN FLANK Evaporites 7,500 Transgressive Parasequences 8,500 OIL 9,500 10,500??? Transgressive Source Interval 11,500 WET GAS ,500 Devonian High Stand 13, DRY GAS ~60 miles Note Vertical and horizontal scales are not equivalent. 23

24 ALPINE HIGH: GEOLOGY OF THE SOUTHERN DELAWARE BASIN IMMATURE South West Alpine High North East 5,000 Evaporites 10,000 OIL Bone Springs / Wolfcamp Penn / Barnett / Woodford Bone Springs / Wolfcamp WET GAS 15,000 20,000 25,000 DRY GAS Alpine High: Stable shelf (Paleo high) Prospective section in the wet gas and oil window Thermal maturation controlled by depth of burial Low clay content and low ductility 30,000 15% CLAY CONTENT 40% 24

25 ALPINE HIGH: ATTRACTIVE RICH GAS ECONOMICS Representative fully burdened economics for rich gas wells in a development scenario (4,400 lateral) Typical Well EUR (Bcfe) 9-15 Well Cost ($MM) $4 - $6 Product Mix % Oil 3% - 15% % NGL 51% - 56% Fully Burdened $65 WTI / $3.00 HH BTAX NPV-10 ($MM) $7 - $9 BTAX IRR % 50% - 100% Fully Burdened $50 WTI / $2.50 HH BTAX NPV-10 ($MM) $4 - $6 BTAX IRR % 29% - 66% Single Well Economic Assumptions: Prices: $65 WTI / $3.00 Henry Hub / NGL($/GAL) C2: $0.28, C3: $0.83, C4: $0.94, C5: $1.42 $50 WTI / $2.50 Henry Hub / NGL($/GAL) C2: $0.28, C3: $0.75, C4: $0.90, C5: $1.22 Waha basis / Transport to US Gulf Coast markets = $0.50/MMbtu; midstream fee = $0.87/Mcf Upper Range Well EUR (Bcfe) Well Cost ($MM) $4 - $6 Product Mix % Oil 0% - 8% % NGL 41% - 54% Fully Burdened $65 WTI / $3.00 HH BTAX NPV-10 ($MM) $6 - $13 BTAX IRR % 78% - 300% Fully Burdened $50 WTI / $2.50 HH BTAX NPV-10 ($MM) $3 - $9 BTAX IRR % 38% - 158% Crude basis: $2.25 NGL yields and midstream fees assume cryogenic processing Economics include overhead, workover, abandonment and E&P facility burdens Note: EUR, well cost & product mix issued in October 2017 / Economic assumptions issued in August

26 ALPINE HIGH: PREMIUM CAPITAL EFFICIENCY Top-tier recycle ratios highlight ability to generate cash and re-invest Typical Well Upper Range Well $/BOE $62.75 OIL % recycle ratio $ % recycle ratio 15 $24.33 NGL $ $2.84 GAS $ Revenue Opex Cash Margin F&D - Revenue Opex Cash Margin F&D Highly prolific wells and low costs result in impressive recycle ratios Assumptions: Prices: $65 WTI; $3.00 Henry Hub; Waha basis ($0.50); NGL($/GAL) C2: $0.28, C3: $0.83, C4: $0.94, C5+: $1.42 Opex includes LOE, Gathering, Transportation & Processing, and Production taxes Note: Issued in August 2018 F&D reflects drilling, completion, and equipping Recycle Ratio: Cash Margin/F&D 26

27 ALPINE HIGH: BLACKFOOT PATTERN & SPACING TEST (NOT TO SCALE) Drilled & Completing WELLBORES COLORED BY BATCH PAD 27

28 PERMIAN BASIN GAS POSITIONING Production Flow Risk Price Exposure Uncommitted Production 12% Firm Transport 9% Contracts / Dedicated Sales 79% Uncommitted Production 20% Firm Transport 21% Contracts / Dedicated Sales 59% EP Perm / Waha Index 65% Firm Transport 8% Basis Hedges 20% Other Basin 7% EP Perm / Waha Index 60% Firm Transport 21% Basis Hedges 15% Other Basin 4% Firm transport and other basin-based contracts generally access Gulf Coast Pricing Waha basis hedges average approximately $0.51 per MMBtu for 4Q

29 PERMIAN BASIN OIL POSITIONING Production Flow Risk Price Exposure Basis Hedges 4% Term Sales 52% West Texas Sour 29% Diversified Evergreen Sales 19% Term Sales 49% West Texas Sour 26% Diversified Evergreen Sales 25% GC/Cushing Based 38% Midland Based 58% Basis Hedges 24% GC/Cushing Based 14% Midland Based 62% Term sales backed by customers firm transport West Texas Sour less subject to oversupply and takeaway capacity constraints than WTI Diversified evergreen sales represent agreements with multiple buyers across multiple systems (1) Contracts provide various options for higher of Gulf Coast/Cushing/Midland pricing In 3Q, added 12,000 bbls/d WTI Midland basis swaps for Q Q (1) Consists of approximately 22 contracts with 10 counterparties of varying term lengths; subject to cancellation, but only with a minimum of 30 days notice. 29

30 A LEADER IN ESG ENGAGEMENT AND SUSTAINABILITY REPORTING DISCLOSING THE FACTS 1 tco2e/mboe = metric tons of carbon dioxide equivalent per thousands of barrels of oil equivalent 2 The 2016 value was revised based on updated data 3 Bbls/Boe = barrels of water withdrawn per barrel of oil equivalent produced 4 Workforce TRIR (Total Recordable Incident Rate) includes Apache employees at all levels and contractors 5 Total Recordable Incident Rate is calculated by multiplying total number of recordable injuries by 200,000 hours and then dividing by total person-hours worked The 2017 Disclosing the Facts questionnaire focused on the issue of methane emissions while previous questionnaires covered the following topics: toxic chemicals, water and waste management, air emissions, community impacts, and management and accountability. 30

31 GLOSSARY OF REFERENCED TERMS Capital Investment Budget: Includes exploration and production capital, gathering, transmission, and processing capital, capitalized general and administrative expenses, capitalized interest and asset retirement obligations settled. Excludes non-cash asset retirement additions and revisions and noncontrolling interest CROIC (Cash Return On Invested Capital): Calculated with the numerator as cash flow from operations before changes in working capital, excluding noncontrolling interest, with financing costs added back; and the denominator as average debt plus average Apache shareholders equity Net Debt: Total debt (long-term and short-term) less cash and cash equivalents ROCE (Return on Capital Employed): Calculated with the numerator as adjusted earnings plus financing costs and taxes (excluding Egypt taxes); and the denominator as average debt plus average Apache shareholders equity In addition to the terms above, a list of commonly used definitions and abbreviations can be found in Apache s form 10-K for the year ended December 31,