Apache Earnings Call Insights: Marketing Assets and Production Growth

Apache Corporation (NYSE:APA) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Marketing Assets

Arun Jayaram – Credit Suisse: Steve understanding that you are not probably going to provide a lot of details, but I do want to maybe see if you could give us maybe some broad thoughts as you look to rebalance the portfolio obviously you announced the Shell. But from here, will the portfolio look pretty similar to what you have today, I mean are you thinking of more smaller types of transactions down the road or could we see something pretty meaningful where, you really reduced the size of the organization to increase your leverage to the U.S. onshore properties which are growing pretty sharply. So just trying to get your thoughts on from here what the scale of the asset sales could look like?

G. Steven Farris – Chairman and CEO: I think we said during our first quarter earnings call we had a robust list of assets that we were in a process of marketing which we still do. We have multiple processes going on at the same time. The end results of this and I have said it before, but the end results of this is we want assets that can grow, or we want assets that can generate cash to fund that growth. If you think about where that portfolio would lead you, it would lead you more towards North American onshore. The other thing we’ve said and I made a comment about being in Egypt and it was business as usual. I’d go around Cairo for three days and it was very quiet and business as usual, but we also recognized that we need to find a way to validate the value of Egypt for our shareholders and we continue to work on that also.

Arun Jayaram – Credit Suisse: Steve, just to follow-up may be on the North Sea you commented on you had a little bit of maintenance related downtime, can you give us maybe some thoughts on how the back half of the year could look like in terms of production? I know that the third quarter, you generally see some turnarounds and things like that, but just maybe some comments on the North Sea?

G. Steven Farris – Chairman and CEO: The North Sea does go through. We had some unplanned downtime in the second quarter. We have some planned downtime in the third quarter. We have a turnaround scheduled. Our production will be down a little bit from the second quarter and then our expectation for the fourth quarter is to be considerably stronger than the rest of the quarters of the year.

Production Growth

Pearce Hammond, Jr. – Simmons & Co.: Steve, how should we think about total Company production growth following divestiture of the Gulf of Mexico shelf? In the past we’ve talked about kind of total Company production growth of 3% to 5% and of course, that included the shelf. So, how should we think about that moving forward?

G. Steven Farris – Chairman and CEO: That’s a very good question and really when we come out of the other side of this, but depending on how much we get done this year, we still have a large portfolio or a pretty robust portfolio of things we’d like to divest of. When we get through with it, what you will see is by its nature, that our North American onshore will become a bigger part of our portfolio. So, we’d expect our future growth to be stronger than our 3% to 5%.

Pearce Hammond, Jr. – Simmons & Co.: Then my follow-up is, just a little bit on – how do you feel like you’re progressing right now on the Wolfcamp currently, and do you think there’s an upward bias to the 350 million boe resource potential figure which you put out last year at the analyst day, because it looks like you’ve got some attractive acreage over in Upton County and a little bit in Midland County and Martin County as well, where some of the other operators have had some good wells?

G. Steven Farris – Chairman and CEO: I’m going to let Rod, talk about the details, and I think one would say and for the most part, we had a presentation back in June of 2012, where we did some type curves. For the most part, we’ve exceeded those type curves. In the Wolfcamp, in the Deadwood area in the Cline et cetera, but as Rod pointed out, we have six rigs running. We continue to be very active there, right.

Rodney J. Eichler – President and COO: We have, of the 45 rigs currently operating in the Permian, we have – about 20 of those rigs are operating in the southern half of the Midland Basin. A big concentration in Deadwood and Barnhart where we have a strong acreage concentration, which I talked about, but we have a lot of other blocks of acreage in Midland County area and, some other operators had mentioned some results just in the last day or two, we have acreage in the immediate vicinities of that, we have two wells that are currently drilling or testing, they’re offsetting some of those results that were just recently announced and we have great expectations to continue the success on the Wolfcamp. We are targeting two different landing zones, in the Safford Middle Wolfcamp across the area.

G. Steven Farris – Chairman and CEO: I think to answer your question in broad terms, you will probably see our resource potential in the Wolfcamp from what we put on June of 2012, we’re going to have an Analyst Day later this year probably in the fourth quarter. But I think you’ll see those resource potentials in the Wolfcamp go up from where it was.

A Closer Look: Apache Earnings Cheat Sheet>>

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