RAYMOND JAMES 40 TH INSTITUTIONAL INVESTORS CONFERENCE DAVID PURSELL, EVP, PLANNING, RESERVES & FUNDAMENTALS MARCH 4, 2019

Transcription

1 RAYMOND JAMES 40 TH INSTITUTIONAL INVESTORS CONFERENCE DAVID PURSELL, EVP, PLANNING, RESERVES & FUNDAMENTALS MARCH 4, 2019

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, 2018 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 fourth quarter and year-end 2018 earnings release and fourth quarter and year-end 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 Delivering Value 2018 Highlights & 2019 Budget Portfolio Overview Closing Thoughts Appendix 3

4 FRAMEWORK FOR LONG-TERM VALUE CREATION BALANCED PORTFOLIO APPROACH Capital Allocation Focused on Maintaining Free Cash Flow Generators and Developing Long-Term Growth Optionality SUSTAINABLE PRODUCTION GROWTH Growing Permian Oil and Developing Alpine High Rich Gas FREE CASH FLOW GENERATION Focusing on Capital Discipline for Growth Within Cash Flow OPERATIONAL FLEXIBILITY Actively Manage Capital Program to Reflect Commodity Price Environment RETURN OF CAPITAL Plan to Return 50%+ of Any Free Cash Flow (Share & Debt Repurchases, Dividends) Long-Term, Returns-Focused Development and Shareholder Value 4

5 2018 HIGHLIGHTS Strong Financial Performance & Execution RETURN TO INVESTORS Exceeded 2018 CROIC (1) target of 18% Repurchased $305 million of common stock; first buybacks since 2014 Decreased total debt balance by $281 million SUSTAINABLE PRODUCTION GROWTH Delivered 13% adjusted production growth Improved Permian well productivity & reduced completions costs Achieved first oil at Garten (North Sea) less than 8 months after discovery BALANCED PORTFOLIO Formed Altus Midstream Company (ALTM) to fund Alpine High midstream investment High grading & increasing Permian inventory Expanding opportunity set in Egypt with acreage awards and advanced 3-D seismic Mapped numerous large drill ready prospects on Block 58 in Suriname ~25% Returned 18% Growth of 2018 Cash Flow from Ops YoY Permian U.S. Int l 36% / 64% Cash Flow from Ops (1) Please see appendix for a glossary of terms that defines Apache s calculation for Cash Return on Invested Capital (CROIC) 5

6 2019 CAPITAL BUDGET & ACTIVITY ~$3.4 Billion 10% 1Q-19 Guide of $625MM ~29% United States Average 12 Rigs ~$2.4 Billion Drill 85 wells at Alpine High focused primarily on rich gas development Drill 55 wells in Midland and 42 wells in other Delaware 70% 75% International Egypt: Avg. 7-8 rigs Drill 40 development wells / 30 exploration wells Focus on new acreage and areas with new 3-D seismic 20% 25% North Sea: Operate 2 platform rigs and one floating rig Drill 11 wells in the Beryl area and 6 wells at Forties International Upstream U.S. Upstream Midstream Suriname: 1 exploration well Sustained Production Note: 2019 capital excludes Altus Midstream capital. International includes Egypt (excluding noncontrolling interest), North Sea and Suriname. 6

7 Delivering Value 2018 Highlights & 2019 Budget Portfolio Overview Closing Thoughts Appendix 7

8 4Q 2018 GLOBAL PORTFOLIO Balanced Portfolio Aligns Returns Focus & Strategic Objectives UNITED STATES 283,464 BOE/D Reported Production 18 Avg Rigs GLOBAL 482,298 BOE/D Reported Production 31 Avg Rigs INTERNATIONAL 198,834 BOE/D Reported Production 13 Avg Rigs UK North Sea Egypt United States Suriname 8

9 PERMIAN OIL PRODUCTION & RIG COUNT Delivering Growth More Efficiently Q 14 4Q'14 4Q 15 4Q'15 4Q 16 4Q'16 4Q 17 4Q'17 4Q 18 4Q'18 4Q 19E 4Q'19E CBP/NW Shelf Midland/Delaware (1) Avg. Rigs 10 0 Have Now Exceeded 4Q 14 Production Peak on Significantly Less Rigs (1) Avg. rigs are net of Alpine High rigs 9

10 MIDLAND AND DELAWARE BASIN Driving Performance for Permian Basin Growth Southern Midland Basin production efficiency increased 12% on a per lateral foot basis from 2016 to 2018 New completion designs in Midland led to cost savings of $450,000 per well Alpine High well costs declined ~25% per lateral foot in 2018 Key Focus Areas Consistent, high-return program in Central Delaware over the last three years Central Delaware Southern Midland Basin PERMIAN TOTAL PRODUCTION MBOE/D Alpine High Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 10

11 ALPINE HIGH Rich Gas Development Underway Formulation and confirmation of concept Areal and vertical delineation Optimization and transition to full field development Focused Near-Term Development and Setting Up the Long-Term and Beyond Seismic acquisition & processing Acreage acquisition Exploration drilling High graded acreage position Commenced infrastructure buildout Extensive geologic and stratigraphic delineation Multi-well pads Spacing, patterns & completions tests Investment in water handling facilities Cryo site preparation and installation Altus Midstream transaction Volume ramp in rich gas Economies of scale drive lifting cost efficiencies Leverage water handling infrastructure Margin uplift from cryo processing expected to commence 2H 2019 Preparing the Southern Flank source interval for rich gas and oil development 11

12 EGYPT Laying Foundation for Potential Growth 3-D seismic data acquisition over more than 1.25 million acres Identified approximately 40 new leads thus far Drilling commenced using new data in the West Kalabsha area Apache Egypt Acreage: ~6.2 million acres First discovery well in recently awarded East Bahariya concession amendment achieved IP rate of 2,200 BOPD on Feb. 10, 2019 Qasr West discovery to partially offset decline rate of legacy Qasr gas field Production (Mboe/d) Brent Crude ($/Bbl) Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Adjusted Production Gross Production Brent Crude Price 12

13 NORTH SEA High Margins, High Returns, Free Cash Flow Sustaining North Sea production Apache North Sea Acreage Water flood management at Forties successfully mitigating decline Successes at Callater & Garten drive higher production Cumulative production at Garten exceeds 1 million barrels of oil and 1.3 Bcf of gas NET PRODUCTION MBOE/D Second Garten well expected to spud 2H 2019 Identified two analog prospects Storr discovery tie-in expected 2H Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 13

14 SURINAME: HIGH-IMPACT OIL EXPLORATION Block 58 is a 1.4 MM acre block on trend with a proven oil system 100% Apache owned 3-D seismic surveys & processing completed Multiple plays with more than 50 significant prospects mapped to date Commencing exploration program on Block 58 in 2019 Ranger Stabroek Area Exxon Discoveries Guyana Offshore Pacora Hammerhead Liza Snoek Payara Tilapia Pluma Longtail Turbot Haimara Block MM Acres APA WI: 100% Suriname Offshore Block MM Acres* APA WI: 45% *Gross acres 14

15 BRENT STRIP Christmas Contango Brent Forward Curve ($/bbl)/ January 2019 to January 2024 Source: Apache EF, Bloomberg 15

16 THE REST OF THE C S: BUTANES, C5+ Blending Components are Fighting RBOB Relative Price Gains Indexed to January 2016 / January 2016 to January to 2019 Ethane +124% 2016 to 2019 Propane +96% 2016 to 2019 WTI +56% 2016 to 2019 Nat Gasol +51% 2016 to 2019 Butanes +51% Y-Grade Composite is up 73% since the January 2016 hydrocarbon lows, outperforming WTI thanks to tightening ethane and propane fundamentals. Source: Liquidity Partners, CME, Apache EF 16

17 FRAMEWORK FOR LONG-TERM VALUE CREATION BALANCED PORTFOLIO APPROACH Capital Allocation Focused on Maintaining Free Cash Flow Generators and Developing Long-Term Growth Optionality SUSTAINABLE PRODUCTION GROWTH Growing Permian Oil and Developing Alpine High Rich Gas FREE CASH FLOW GENERATION Focusing on Capital Discipline for Growth Within Cash Flow OPERATIONAL FLEXIBILITY Actively Manage Capital Program to Reflect Commodity Price Environment RETURN OF CAPITAL Plan to Return 50%+ of Any Free Cash Flow (Share & Debt Repurchases, Dividends) Long-Term, Returns-Focused Development and Shareholder Value 17

18 Delivering Value 2018 Highlights & 2019 Budget Portfolio Overview Closing Thoughts Appendix 18

19 2019 CASH FLOW PRIORITIES Cash flow Generated Above Plan Pricing Return to Investors Increase Activity Build Cash Minimum 50% to investors Cash flow at Plan Pricing ($53/bbl) Cash Flow at ~$45/bbl Cash Flow Maintenance Capital Current Dividend Growth Capital Exploration Free Cash Flow Maintain 4Q 18 production level and current dividend at approximately $45/bbl WTI Achieve 2019 production growth targets within cash flow at plan pricing (1) Plan to return 50%+ of any free cash flow to investors (1) See p. 22 for 2019 Commodity Price & Differential Assumptions 19

20 NORTH SEA Garten Update Announced discovery in March 2018 (APA 100% WI) Garten-1 Well Brought online in December, now producing from 3 commingled zones Cumulative production of nearly 1 million barrels of oil & 1 Bcf of gas to date Currently producing over 12 Mbo/d and 15 MMcf/d of gas Garten-1 Four fault blocks, four producing zones: assessing development options Additional prospects on trend 1 km 20

21 Diffs Benchmarks 2019 CAPITAL BUDGET PRICE ASSUMPTIONS 2019E WTI $53.00 Brent $61.00 NYMEX Henry Hub $2.80 NBP Gas $7.00 NGLs 50% of WTI before T&F fees WTI Midland ($2.50) Waha ($1.30) Permian ($1.30) 21

22 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. 22

23 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 23

24 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. 24

25 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% 25

26 ALPINE HIGH: BLACKFOOT PATTERN & SPACING TEST (NOT TO SCALE) Drilled & Completing WELLBORES COLORED BY BATCH PAD 26

27 ALTUS MIDSTREAM: OVERVIEW Publicly traded C-Corp with 325MM shares outstanding (79% owned by Apache) ~$2.7 Billion market cap / ~$625MM in cash and zero debt, as of October 1 effective date Pure Play Permian Basin Company With Diversified G&P and Pipeline Assets Facilitates three stream product takeaway from Permian to premium Gulf Coast markets Apache maintains control of future Alpine High midstream buildout 27

28 Crude NGLs Nat Gas ALTUS MIDSTREAM: PERMIAN PIPELINE ASSETS Pipelines Expected in Service by YE 2020 Altus owns or has the option to participate in five joint venture pipeline projects 16% (1) of KMI s GCX (Exercised) 27% of KMI s Permian Highway (Option) 33% of EPD s Shin Oak (Option) Katy Market Access 50% of Salt Creek NGL (Option) STX / Aqua Dulce Market Access USGC Pipeline / LNG Market Access 15% of EPIC Crude (Exercised) (2) Altus expects to fund a total of ~$1.7 billion of capital in JV pipeline projects No promote paid above construction cost Very attractive projects for Altus (~7x build multiple of EBITDA, on average) (1) Includes the option to acquire an additional 1% interest in GCX subject to certain conditions precedent, including the exercise of the PHP option. (2) Altus exercised its equity option for 15% interest in EPIC Crude Pipeline, but the transaction has not closed as of March 4,

29 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. 29

30 GLOSSARY OF REFERENCED TERMS Upstream Capital Investment: Includes exploration, development, gathering, transmission, and processing capital, capitalized overhead, and settled asset retirement obligations, and excludes capitalized interest, non-cash asset retirement additions and revisions, and Egypt noncontrolling interest, in each case associated with Apache s upstream business. CROIC (Cash Return On Invested Capital): Calculated with the numerator as cash flow from operations before changes in working capital, excluding Egypt 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. Free Cash Flow: Excess cash flow from operations before working capital changes after upstream capital investment, distributions to noncontrolling interest and dividend payments. The impacts of ALTM are excluded from this definition, as future development of the ALTM midstream assets is expected to be separately funded by ALTM. Cash Flow Neutrality: Free Cash Flow equal to zero. 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,