Apache Executive Insights: Guidance and Targets

On Thursday, Apache Corporation (NYSE:APA) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Production Guidance

Arun Jayaram – Credit Suisse: I wanted to talk firstly just trying to set the baseline, where guidance is set on the production side. I know you’ve had some asset sales late in the year that maybe impacted Q1 in terms of growth. I just wanted to better understand what the baseline of the 7% to 13% growth is based on?

A Closer Look: Apache Earnings Cheat Sheet>>

G. Steven Farris – Chairman and CEO: During the year staying stable basically. I think, you heard it pretty much throughout the presentation.

Arun Jayaram – Credit Suisse: So, we’re basically just taking your 2011 growth backing off…

G. Steven Farris – Chairman and CEO: About 11,000 barrels of oil equivalent growth.

Arun Jayaram – Credit Suisse: Steve, I just wanted to see, if you could talk about your confidence perhaps in the middle part of the range. You’re starting off a little bit of a lower starting point. Just give us a sense of your confidence to reach perhaps the middle point of that range?

G. Steven Farris – Chairman and CEO: Let me put it this way, I feel very comfortable, we’re going to be ahead of the low end of that range.

Arun Jayaram – Credit Suisse: What do you think would you have to see to get to that middle part of the range in terms of your overall portfolio?

G. Steven Farris – Chairman and CEO: Well, the results that we’re going to have in the second quarter are going to be important obviously. As you move out, the wells you drill in the first two quarters are really what set the stage for your overall production growth. So, I’m hopeful we show some added growth in second quarter and certainly in the first quarter and third quarter. We’ve got very active drilling programs going on right now, and that’s most active we’ve been in some time in North America.

Arun Jayaram – Credit Suisse: One quick question in terms of Egypt. The gas price – I just want to get a little bit of color around the decline in the gas prices. Do you know next year contractually the gas price goes down just because of an expiration of a contract, but just wanted to talk – if you could talk about that quarterly swing in existing gas prices?

Rodney J. Eichler – President and COO: Yes. This quarter we had an adjustment in the gas price, there was some gas that was booked at that old gas price that wasn’t passed, so you saw a reduction in gas price to make up for that error last quarter. So, it was a one-time quarter deal, that’s all.

Growth Target

Doug Leggate – Bank of America Merrill Lynch: If I could try a quick follow-up on the growth question, Steve, when you say year-over-year we’ve obviously had the Beryl acquisition and the Cordillera acquisition, so is the growth target an organic growth target or a total growth target?

G. Steven Farris – Chairman and CEO: It’s a total growth target.

Doug Leggate – Bank of America Merrill Lynch: Okay. I just wanted to clarify that. Getting into the details a little bit, can we talk about the outlook for Australia this year, because obviously with Coniston scheduled to come on stream, I guess, in a year or so time, there’s still I guess some debate over what you’re going to do with the FPSO down there, so could you give us an idea as to what the expected downtime will be?

G. Steven Farris – Chairman and CEO: Yeah, Rod?

Rodney J. Eichler – President and COO: Yeah, we have a combined Coniston, Ningaloo Vision which is the name of the FPSO rectification project, which is sort of looking both at the subsea development in tandem with the repairs and modification needed in both. So, the work will – excuse me, for significant servicing work in early part of 2013, I forget the exact amount of days that this thing will be out of service, before returning to the field later that year to be able to commence production over the combined and Coniston and Van Gogh, but I’m sure Patrick can get back with you that number after the call.

Doug Leggate – Bank of America Merrill Lynch: So the downtime is next year, not 2012?

G. Steven Farris – Chairman and CEO: That’s correct.

Doug Leggate – Bank of America Merrill Lynch: So final one from me, Steve again just wanted to get by to you just again unfortunately it still comes up as an issue, an overhang in terms of the uncertainty over there. One issue I wanted to get some clarity on is the risk of devaluation of the Egyptian currency how would that affect your business and I’ll leave it at that?

G. Steven Farris – Chairman and CEO: Well, Rod, might want to jump in there too. In terms of, we get paid in U.S. dollars, in fact, we export the biggest bulk of our crude production, and that’s based on dollars and the gas sales to EGPC are based on U.S. dollar equivalent. So, we really shouldn’t have any impact based on the dollar side other than maybe a little higher ops cost just because they are paid in Egyptian pounds. Egyptian workers are paid in Egyptian pounds.