Apache 1Q16 Earnings Call Notes

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Apache (APA) John J. Christmann on Q1 2016 Results

Targeting cash flow neutrality at $35 oil

“Apache is targeting cash flow neutrality in 2016 under our current budget, which assumes flat $35 oil and $2.35 gas.”

Well costs are down 45-60% from 2014

” in key areas of North America where Apache was actively drilling, our average drilled and completed well costs were down approximately 45% in the first quarter compared to average 2014 levels. Notably in the Delaware Basin, our most recent well costs are now down approximately 60%.”

Ready to increase our capital program

“Recent improvements in oil prices are encouraging. We are now looking for a sustainably improved pricing structure that would generate the cash flow visibility for us to confidently increase our capital program. The potential timing and magnitude of this increase is the topic of significant planning and discussion right now at Apache and with our board.”

Well prepared to ramp up activity

“Apache has maintained the organizational capacity and personnel to operate a significantly higher number of rigs and we are well prepared to ramp-up activity when appropriate. ”

We’re going to want to see some cash flow accrue before we start putting things back to work

“If you go back a year ago, everybody started ramping up and adding rigs quickly and expecting prices to hold. And unfortunately, those that outspent significantly in anticipation of what I’ll call visibility into more flat, longer sustainable price environment, ended up having to go back to the debt markets or the equity markets, that sort of thing. So I mean we’re going to be cautious. We’re going to be very thoughtful and disciplined. And like I said, we’re going to want to see some cash flow accrue before we start putting things back to work.”

Stephen J. Riney – Chief Financial Officer & Executive Vice President

We will increase capital spending if oil stays at these levels

“if the current oil price environment prevails, it’s more likely that we will maintain or even increase drilling and completion activity from current levels, which would result in increased capital spending.”

Things are starting to look pretty darn attractive

“At this point, the environment’s getting much better. I mean, we like the direction on the cost, we like the direction on the oil price, so I think we’re at a point where things are starting to look pretty darn attractive. But right now, our best hit is we haven’t committed to a lot of rigs or a big program at this point. So it’s one of those things we will be discussing as we start to look at plans, but at this point, we’re not quite where I would feel good about locking in a scenario.”