With over 1.1 million net acres under lease across Oklahoma, Kansas, and Texas, Apache (APA) is increasing its productivity for the latter half of 2012 and is on track for operating an average of 25 rigs and drilling 240 wells. Just as impressive is the company's $33.63 billion market cap, a dividend yield of .80%, and estimates of oil and gas production growing at double-digit rates over the next five years, reaching approximately 160,000 barrels of oil equivalent (BOE) per day by 2016. While all of this is impressive for investors, the icing on the cake is that fact that last month, the company discovered one of the world's largest finds: One well with shale-gas discovery in a massive field with estimates that it contains as much as 48 trillion cubic feet of recoverable natural gas. Obviously, this is a huge find and one that I believe will surely catapult Apache even further down the road to success, providing energy resources for consumers and great returns for investors for years to come. Based on the aggressive exploration by the company and its ramped-up drilling efforts, I believe that buying this company now will be an investment that the wise investor will never regret.
In the Granite Wash Field, Apache has completed 92 horizontal wells, with plans to have 79 additional wells completed by the end of 2012, with estimated recovery of 1.1 million BOE. With hopes of natural gas prices coming back to a respectable level, oil and gas companies continue exploration in this region, while keeping a balance with oil and liquid plays. This area is rich with resources, as competitors Devon Energy (DVN), which has roughly 64,000 net acres in this play, reports average production of 19,000 BOE by day, and QEP Resources (QEP) with 25,300 acres, estimates that it has 103 billion of cubic feet equivalents (Bcfe) of resource potential, are both taking advantage of this profitable play. This is just one of the plays that Apache is including in its recent second quarter report that its production is now at 774,000 barrels of oil equivalent per day.
Apache also recently announced that at the Bacchus Field in the United Kingdom sector of the North Sea, it has increased production to 12,900 barrels of oil per day. The company's first well, Bacchus South, began producing this past May, putting out approximately 6,000 barrels per day. The newest well, Bacchus West, is producing approximately 8,500 barrels of oil per day. In a statement released by Apache, Rodney J. Eichler, president and COO said, "Increased output in the North Sea stemming from our drilling successes at Bacchus and the Beryl Field are expected to make a significant contribution to Apache's second-half 2012 production growth."
In the Permian Basin, production was up quarter-over-quarter by 5%, putting Apache on track to deliver its long-term Permian production growth target of 13% per year. The company has been quickly expanding its presence in this play, increasing its rig count from five to 32, with plans to drill 760 wells in the Permian this year, compared to 263 in 2010. The company's total investment in this region has increased to $1.9 billion, from $0.4 billion in 2011. With 70% of the production being crude oil and natural gas liquids, the company is producing about 101 thousand barrels of oil equivalent per day in the basin. This type of momentum that Apache is riding puts the company ahead of Marathon Oil (MRO) in terms of assets and allows the company to be a stronger competitor to EOG Resources (EOG) than ever before. Apache remains strong in the Anadarko Basin, where production increased 47% placing the company in line with its target rate of growing by 24% per year through 2016.
The company is also showing aggressiveness in other areas as well. It recently opened a CNG public access fueling station in Lafayette, Louisiana. For Apache, this investment in the community by forming a partnership between both private and public entities enables the area to prosper by decreasing the operating costs of public transportation and government vehicles. Eichler commented, "The state of Louisiana is a leader in supporting increased use of natural gas. The addition of this CNG fueling station in Lafayette is a step toward building the infrastructure needed to fuel America's cars and trucks with natural gas, a cleaner-burning and abundant domestic resource." The CNG fueling station provides private industry, the government, as well as the public with an economic and environmentally friendly alternative to gasoline. That is why Apache chose the site of the station to be in proximity to a concentration of large public and private natural gas fleet vehicles. According to NGVAmerica, there are only 120,000 natural gas vehicles on the U.S. roads today, but vehicular natural gas nearly doubled between 2003 and 2009, and in 2010, natural gas displaced more than 350 million gasoline gallon equivalents. Apache has converted 274 vehicles to run on CNG and expects to have 80% of its 1,000-plus fleet in the U.S. converted by 2015.
Apache reported 2nd quarter 2012 earnings totaling $337 million or 2.07 per share. For the same period last year, Apache reported earnings of $1.24 billion, or $3.17 per diluted share, and had 2nd quarter 2012 revenues of $3.97 billion, and had revenues for the full year 2011 of $16.89 billion. Year on year, the company grew revenues 39.66% from $12.09 billion to $16.88 billion, while net income improved 51.19% from $3.03 billion to $4.58 billion. In addition, Apache increased its cash reserves by 120.15%, or $161.00 million, earning $9.95 billion from its operations for a Cash Flow Margin of 58.94%.
Apache is a winner for long-term growth and returns. The company has great leadership, is reaching targeted goals ahead of pace, and is finding success in the drilling of both existing, as well as new plays.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.