More On Apache -- February 8, 2019

Over at SeekingAlpha -- see also this link about Apache, earlier.

Subdued Permian oil growth indicates that a large portion of its domestic upstream growth is likely to be represented by natural gas and natural gas liquids, which is consistent with past trends. In Q3 2018, Apache’s Permian production rose by 38% year over year to 222,000 BOE/d while its oil output rose by just 16% during that period. During that quarter, Apache's Permian production mix was 41% oil, 21% NGLs, and 38% natural gas.

Keep in mind that international output declines may be represented more so by crude oil than natural gas, particularly as its North Sea and Egyptian operations are primarily oil producers (crude represented 63% of its Egyptian output and 84% of its North Sea output in Q3 2018).

It will be interesting to see how Apache’s Alpine High strategy turns out over the long haul. By November 2018, the firm was pumping 55,000 BOE/d out of the area with eight rigs actively developing the play, up from a minimal amount of output in late-2016. Apache had drilled 180 wells and placed 125 wells online in the Alpine High area as of November 2018, giving it a large enough slate of well data to gauge how economical developing the region will actually be (in theory, expected well returns are strong enough to justify stepping up the pace of its development activity). Major midstream investments are being made to support this growth trajectory.

Generally speaking, the most lucrative parts of unconventional liquids-oriented plays (such as the Eagle Ford, Bakken, Permian, SCOOP, STACK, Powder River Basin, DJ Basin and others) are the most liquids-rich regions within those plays, regions that can bring wells online with high oil, condensate, and natural gas liquids cuts. Domestic natural gas prices in America have been and continue to be very low, a paradigm that is unlikely to change anytime soon. So unless these gassier wells can achieve the kind of performance seen at the Marcellus or Haynesville gas plays in terms of estimated ultimate recovery rates, it will be up to Apache to make sure it can maximize its natural gas liquids and condensate output as best it can from its Alpine High drilling inventory.

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