Apache to Cut North American Spending 25% as Oil Price FallsBradley Olson
Apache Corp., the producer that embraced a breakup after pressure from Jana Partners LLC, plans to reduce spending in North America by 25 percent next year as falling oil prices make drilling prospects less profitable on the continent.
The Houston-based company follows producers including ConocoPhillips that plan to cut budgets and relocate rigs into profitable regions as prices fell four consecutive months to $74.52 a barrel today. That will allow them to boost production even as they spend less.
Apache, which is seeking to sell or spin off international assets from Egypt to Australia to focus on the U.S. and Canada, will spend $4 billion on wells, the company said today in a statement. That’s down from $5.4 billion the company outlined in February for 2014. Adjusted for asset sales, Apache expects production growth of 8 to 12 percent a year for the next five years.
“While these goals appear achievable, the company’s recent track record will result in some skepticism until they execute better,” Brian Youngberg, an analyst with Edward Jones in St. Louis, said today in an e-mail. “The company has some work to do and execution is the key.”
Apache, which has fallen 25 percent in the past three years, rose 3 percent to $74.24 at the close in New York, the biggest one-day gain in a month.
“We have made great progress in strategically positioning our North American onshore portfolio for high growth and high returns,” G. Steven Farris, chairman and chief executive officer of the company, said in the statement.
Apache moved to break up its businesses to boost sagging returns after activist hedge fund Jana Partners built a $1 billion stake in the company and pushed Farris to focus exclusively on opportunities in North America.
The company today announced two separate deals to sell 205,000 net acres in Louisiana, Oklahoma and Texas for a combined $1.4 billion. Both transactions are expected to close during the fourth quarter, the company said in the statement. The buyers weren’t disclosed. The acreage produces mostly natural gas.
Apache will use the proceeds to fund its 2014 purchases of drilling leases, Farris said in the statement.
Oil collapsed into a bear market as the U.S. pumps at the fastest rate in more than three decades amid signs of weakening demand.