Apache 3Q16 Earnings Call Notes

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Apache (APA) Q3 2016 Results
John Christmann

Alpine High

“Now I would like to spend a few minutes discussing our Alpine High play. The Alpine High is an immense resource and a transformational discovery for Apache. We have invested a significant amount of human and financial capital through two years of extensive geologic and geophysical work and reservoir and fluid analysis. This was accompanied by concept testing an initial round of verification wells, the results of which we disclosed in early September. We are now engaged in a methodical appraisal and delineation program to confirm the geographic and stratigraphic extent of the play and to formulate our long-term infrastructure plan. This work will continue for the next several quarters before transitioning to an active development program once gas processing and transportation infrastructure is in place.”

Egypt is doing the right things

“In regards to Egypt, Brian, having just gotten back from there the week before last, and my third trip over there, I’ve actually seen President Al-Sisi twice this year. I’ve got to give them a lot of credit. They’re on the right path. They’re doing the right things. They’re in the process of securing a loan from the IMF. This is all part of a process to go through and start to take some of the subsidies out and do the things to put the country onto the right track. So I actually feel very good about where things are. Our relationship is good. I think they understand how important Apache is. So we feel very good about that aspect of it. They’ve just got to go through a reset. And the good news is they’re taking this head on and they’re working on doing that.”

Capital plan depends on what price we’re going to use

“What I would say is Alpine is going to get its capital. We’re going to invest to sustain North Sea and Egypt. Permian is going to get a big chunk of its capital. And then how that pie changes is going to be a function of what price deck we’re comfortable running with and how much capital we pour. So we’ve seen a lot of volatility. We’ve gone from the low $50s to the mid-$40s. And so obviously every $5 of oil price and the movement of gas price means a lot to us in terms of that. So as we start out 2017, a lot of that’s just going to hinge on what price we’ve got we feel comfortable using.”

Stephen Riney

Egypt going through a tough time

“And then, just as a general rule, on a day-to-day basis, we generally hold a pretty minimal amount of Egyptian pounds at any one point in time. And just as an example, at September 30 we had a little over $50,000 worth of Egyptian pounds on hand. So the actual exposure to the Egyptian pound in a direct financial basis is pretty minimal. Of course, the more macro issue is that Egypt is going through a very difficult time. They’re doing all of the right things, but it’s going to be very difficult, and it’s going to be tough on the economy, and we obviously keep a very close eye on that.”