New York — Apache intends to step up its exploration and development plans off the coast of Suriname, as its operations and activity in the US Permian Basin remain scaled back through the end of this year, the company said Nov. 5.
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"We completed operations on our third successful exploration test in Block 58, Kwaskwasi [offshore Suriname], which is our best well in the basin thus far. We are currently working with our partner [Total SE] on an appraisal plan, which will be submitted before year-end," Apache President and CEO John Christmann said during the company's Nov. 5 earnings call.
Christmann said Apache started drilling a fourth exploration well, Keskesi, in mid-September, and has selected its fifth, Bonboni, which will be situated in the north-central portion of Block 58.
With a focus on Suriname, the Houston-based independent oil and gas producer will continue to keep activity in the Permian at a minimum.
Apache returned most of its shut-in volumes at Alpine High in the Permian in July, which underpinned an uptick in its natural gas and NGL volumes compared to the second quarter. But the Alpine High play, which was once supposed to be the centerpiece of Apache's operations, will still see minimal funding for the remainder of this year.
Apache's average oil volumes declined by 11,000 b/d, or 12%, from the second quarter due to the suspension of its Permian drilling and completion activity in April, and to a series of intermittent shut-ins in the Southern Midland Basin to assess optimal well spacing. The company said it also opted to leave 4,000 b/d of oil shut-in during the quarter from the Central Basin platform, most of which will not resume production until prices strengthen.
Since service costs in the Permian are down significantly, Apache has retained two frack crews to begin completing its backlog of drilled but uncompleted, or DUC, wells, Christmann said.
"We are mindful of price volatility and will take a flexible approach to the flowback timing of these wells. We do not envision a sustained drilling program in the Permian, but will monitor oil prices and service costs for the appropriate time to do so," Christmann said. "Let me be really clear: if NYMEX [crude oil] futures are materially below $40 [per barrel], we are prepared to reduce capital accordingly."
Apache reduced its full-year 2020 capital spending outlook to $1 billion since its upstream capital investment in the third quarter was significantly below guidance.
"In terms of production trajectory next year, our DUC completion program should stabilize Permian oil volumes at a level consistent with fourth-quarter 2020 levels while Egypt and the North Sea will likely see modest declines," Christmann said.
The company's total third-quarter output averaged 393,529 boe/d, compared to 391,400 boe/d a year ago.
Apache reported an adjusted third-quarter loss of $59 million, or 16 cents per share, compared to the adjusted loss of $108 million, or 29 cents per share, in the third quarter of 2019. The S&P Capital IQ consensus normalized earnings estimate for the quarter was a loss of 39 cents per share.