Apache at Sanford Bernstein Conference

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Analyst concern: Permian is a black box for APA

[Analyst question]

“Talk a little about the Permian, some people see it as a bit of a black box, whereas other operators might be focused on a key zone or a key county, you are kind of everywhere. How do we get an understanding of what you like best in the Permian, what’s working, how do you allocate capital out there?”

Apache answer, allocate to highest ROR

“we have got a tremendous acreage position and the way we allocate capital is based on the highest rate of return on projects we can find in each one of those basins.”

Costs of drilling are contained, partially because of company initiatives

“our cost pressure we are seeing, honestly we are seeing a little cost pressure on the rig side. On terms of the completion side which is at least 65% of the cost, actually we continued to bring costs down. Now that’s not necessarily costs haven’t gone up, it is the way that you go about recompleting wells. We self source of all our sand, we self source all our chemicals. So the only thing that you are really bringing out is hosepipe. And the faster you can do that we measure time in minutes, not in days. So the faster you can do that it’s lower that cost a bit.”

Feel like they have two really good assets in the North Sea

“Our runtime in North Sea on our platforms was 92%. The industry average was 60%. That says something about our people, but it also says something about the assets that we have. We have two of the best assets from the North Sea and Forties in barrels.”

Look at the business in terms of EUR vs. cost

“It’s EUR versus cost…it’s not just which ones are the best on the EURs that’s ones from the rate of return standpoint. And that’s basically how we look at our business.”

Can’t see natural gas getting above 4.50, even with LNG

“this morning with $4.47, I can’t see that really changing. Lot of people think that if we get all this LNG offshore, I think – they think it will change. We can plan awful lot of LNG and still supply gas to North America, $4.50 or thereabout.”

Very bullish on oil

“Oil is a world market. I mean, I am very bullish on oil. And I say the same thing today as I said three or four years ago. If you look at the world, I think in 2008, we were using 83 million barrels a day and everybody goes that’s we are using 93 million barrels today or thereabouts. And if you look at the cost that were putting all these barrels on a bookstore, I can’t never say never, because we could see so many thought overall for three or four months, but we are going to see long-term pressure, higher pressure on oil prices in my opinion.”