Apache Corp. (NYSE:APA) Q4 2015 Earnings Conference Call - Preliminary Transcript
Feb 25, 2016 • 02:00 pm ET
of the portfolio, we have taken other decisive actions to position Apache for an extended low price environment, which included aligning our capital spending with cash flows, attacking the cost structure, continuing to high-grade and build an inventory of attractive opportunities that will deliver strong returns under a low oil price environment.
And strengthening our financial position and liquidity. While we have made tremendous progress, we are not yet finished with these efforts. We streamlined our portfolio, exiting Argentina, Australia, much of the Gulf of Mexico and two world scale LNG projects.
We are now focused on three principal areas, a substantial onshore North American acreage position with an abundant inventory of high-value growth opportunities, anchored by our extensive Permian footprint, and sustainable free cash flow generators in our higher cash margin North Sea and Egypt businesses, each with many years of low risk drilling opportunities and significant exploration potential still ahead.
In the current low oil price environment, our more conventional international assets continue to generate strong cash flows and better rates of return than many of our operations in North America. In the North Sea, we are uniquely positioned. We have two large-scale hydrocarbon accumulations in Forties and Beryl, available high-quality platform and pipeline infrastructure and per unit cash operating costs that are one-half the industry average.
These advantages make tiebacks to existing infrastructure very economic even at current oil prices. In Egypt, we benefit from the cost recovery aspect of our production-sharing contracts such that they help to mitigate the impact of declining oil prices on our cash flows. Our international positions clearly differentiate our portfolio, play to Apache's long-standing strengths and remain economically attractive in this low oil price environment.
A year ago, Apache took more decisive action in many of our peers and reduced activity levels in pursuit of cash flow neutrality. We anticipated the lower-for-longer oil price scenario and recognized the importance of protecting value through more disciplined investment. Accordingly, we reduced capital by more than 60% in 2015 from 2014 levels.
And focused on bringing cost into alignment with the current oil price environment. Specifically, this time last year on our fourth quarter 2014 conference call, I stated that quote; We would consider using our balance sheet only to capitalize on lower acreage cost and other potential opportunities that may occur, rather than to drill wells and chase production in a depressed and volatile oil price environment.
We stuck to that view throughout 2015 and continue to do so today one year later. At the same time, we instituted an even more rigorous capital allocation process through which we continually monitor the delivery of the capital programs and reallocate capital as value maximization demands.
Motivated by the deteriorating oil price environment and a goal to achieve cash flow neutrality, we attacked our cost structure in 2015 with a thorough review of G&A, LOE and capital costs. Specifically, we rationalized our entire organizational structure, eliminating layers of management and consolidating office locations.