Apache plans to stay afloat by slashing rig counts

Apache joins league of E&P companies reducing capex and drilling (Part 3 of 6)

(Continued from Part 2)

Apache’s plans

During the 4Q14 earnings call, Apache Corporation’s (APA) president and chief executive officer, John Christmann, said that “our portfolio is well positioned to weather the low oil price storm. . . . We have therefore acted quickly and decisively regarding the things we can control: our activity levels and cost structure.”

Echoing this sentiment, the company announced it will slash its rig counts from 91 rigs operated in the third quarter to 27 rigs by the end of February. Another oil and gas company, SandRidge Energy Inc. (SD), also announced a similar move recently.

Both Apache and SandRidge make up ~2.4 % of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Region-wise rigs in operation

• Permian Basin. In 2014, Apache operated ~40 rigs in the Permian Basin. It plans to operate approximately ten to 12 rigs in the region during 2015. Of these, approximately five will be in the Midland Basin and four in the Delaware Basin. Two rigs will be “drilling high rate of return vertical and horizontal wells on the Central Basin.”

• Central Region. The company operated approximately 28 rigs in the Central Region during 2014 and plans to operate approximately two to three rigs in 2015. The majority of the rigs will be in the Canyon Lime.

• Eagle Ford. The company’s rig count at Eagle Ford peaked at 12 in December and is slated to come down to four by the end of February. For the whole year, the company operated ~9 rigs. Apache plans to operate one to two rigs at Eagle Ford in 2015 and will be willing to ramp back up quickly if oil prices recover.

Christmann noted, “I’m highly confident that when oil prices begin to recover and stabilize at higher levels, we will efficiently ramp up our drilling programs in the Permian, Eagle Ford and Canyon Lime to deliver top tier production and cash flow growth.”

Apache also slashed its capex (capital expenditures) spending like other upstream companies such as ConocoPhillips (COP) and EOG Resources (EOG).

In the next part of this series, we’ll look at Apache Corporation’s (APA) capex spending plans for 2015.

Continue to Part 4

Browse this series on Market Realist:

• Part 1 - Apache’s adjusted 4Q14 earnings beat analysts’ estimates

• Part 2 - Apache’s operational performance up at Permian and Eagle Ford

• Part 4 - Apache’s plan: Cut capex spending a whopping 60% in 2015