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TRANSCRIPT
SHARE FAIR 2014
APACHE NORTH SEA
5th November 2014
Certain statements in this presentation may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 including, without limitation, expectations, beliefs, plans and objectives regarding production and exploration activities. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions, risks and uncertainties, including, without limitation, risks, uncertainties and other factors discussed in our most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K available on our website, http://www.apachecorp.com/, and in our other public filings and press releases. These forward-looking statements are based on Apache Corporation’s (Apache) current expectations, estimates and projections about the company, its industry, its management’s beliefs and certain assumptions made by management. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these “forward-looking statements” are identified by words such as “expects,” “believes,” “anticipates” and similar phrases.
Because such statements involve risks and uncertainties, Apache’s actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. Unless legally required, we assume no duty to update these statements as of any future date. However, you should review carefully reports and documents that Apache files periodically with the Securities and Exchange Commission.
Cautionary Note to Investors: The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache uses certain terms in this presentation, such as “BO resource,” “BO Potential” and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. “BO Resource,” “BO Potential” and other such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and amendments thereto, available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov
FORWARD-LOOKING STATEMENTS
APACHE NORTH SEA OVERVIEW
Most Efficient Operator
Top Tier North Sea Assets
Proven Ability to Extend Field Life
Additional Upside in Exploration
NORTH SEA – OPERATIONAL FOOTPRINT
Third Largest Oil Producer in the UK North Sea
10 Operated and 4 Non-Op Fields
8 Operated and 2 Non-Op Platforms
SAGE Pipeline and Gas Plant
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AB AA Z Y X W V U T S R Q P O N M L K J I H G F E D C B A
UKCS Companies
Industry Average 2011 = 7.70
Industry Average 2012 = 5.10
Industry Average 2013 = 5.57
Apache Performance, 2013
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HSE PERFORMANCE
Oil & Gas UK published health and safety statistics for UKCS Operating companies.
Apache is top quartile in terms of UKCS Safety Performance for Reportable Occurrences.This performance is mirrored for Personal Safety.
Source – Deloitte 2013 Top 20 UK Oil and Gas Producers; APA from 10-K
MBOE/D
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TOP UK OIL & GAS PRODUCERS (2013 NET)
Third largest oil producer
Production Efficiency data was provided by the Production Efficiency Task Force, a task force of the UK government policy advisory group PILOT.
Apache at ~90% efficiency vs. operator average of ~60%
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Total Number of Operators
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APACHE “BEST IN CLASS” ACROSS THE UK
#1 in UK North Sea production efficiency in 2012 and 2013
Continuous improvements since 2003 acquisition
Apache has been in the top quartile since 2008
Line chart tracing Apache’s performance compared to all other UKCS operators
2013 2014 (est) 2015 (est)
Average POB Offshore 1,113 1,054 1,200
Annual Spend $1.3 bn $1.5 bn $1.7 bn
Active Drill strings 5 7 8
Tonnage transported 151,000 187,000 190,000
Dedicated Helicopters 4 5 5
NORTH SEA BUSINESS IN NUMBERS
DRILLING OVERVIEW
FORTIES:
2 – 3 drill strings in operation across the Forties assets throughout 2015.
Expecting to drill 10 – 12 wells, which will be a mixture of sidetracks from existing wells and wells from surface.
It is also expected that 10 – 14 workovers (ESP pumps etc.) will be completed.
BERYLS:
Current plan shows long term 2 string programme throughout 2015 in the Beryl field – one on Beryl Alpha and one on Beryl Bravo.
Both Alpha and Bravo expected to drill a mixture of new wells and workovers.
Beryl Alpha has potential for future rig upgrades.
PLATFORM DRILLING
MODUs:
Rig share with Shell for the hire of the Ocean Patriot – Apache contracted for 18 months of the initial 3 year term. (On hire to Apache Oct 2014)
Rig share with TAQA for the hire of the WilPhoenix – Apache contracted for 24 months of the initial 3 year term. (On hire to Apache early 2015)
The current workscope across both MODU’s includes the following:
New subsea production wells in existing fields, tied in to existing infrastructure
Sidetracks from existing wells
E&A wells in the Beryl Area and Central North Sea
Abandonments of subsea production wells
JACK-UP:
Ongoing HDJU contract for the Rowan Gorilla VII currently supporting FASP drilling.
MOBILE RIGS
PLATFORM DRILLING:
Significant number of major service contracts have been tendered in 2014, or are currently at ITT stage.
Forward workplan is updated on a quarterly basis with potential tendering activity in 2015 including, but not limited to, the following services:
Platform Drilling Services
Liner Hanger
Sand Control Services
Casing and Tubing Running Services
Permanent Downhole Gauges and Services
MOBILES:
All major service contracts tendered and now awarded.
Ongoing ad-hoc minor requirements may arise over contract duration.
DRILLING – CONTRACTING REQUIREMENTS
PROJECTS OVERVIEW
FORTIES:
Flowlines for drill wells
Alpha modifications for Aviat
Alpha slot recovery
Bravo and Delta lifeboat, davit and winch upgrades
Bravo Switchboard upgrade
Bravo and Delta 110V distribution upgrades
Charlie PA/GA upgrade
New Delta switchroom for future ESPs
Delta sandwash package
TOPSIDES PROJECTS – ONGOING / UPCOMING
Note that some of the above scopes will be managed through Petrofac Facilities Management - Apache’s EPC Contractor.
BERYL:
Flowlines for drill wells
New Alpha switchroom for future ESPs
Prep for Alpha 2016 major shutdown
Alpha gas export metering upgrades
Alpha crude transfer piping upgrade
Bravo Delta V control system upgrade
Bravo Crane upgrades
TOPSIDES PROJECTS – ONGOING / UPCOMING
Note that some of the above scopes will be managed through Petrofac Facilities Management - Apache’s EPC Contractor.
SAGE:
New liquid nitrogen storage and distribution facilities
Atlantic and Cromarty prep for demolition
TOPSIDES PROJECTS – ONGOING / UPCOMING
Note that some of the above scopes will be managed through Petrofac Facilities Management - Apache’s EPC Contractor.
SUBSEA PROJECTS ONGOING
BERYL:
BKA
Ness Nevis
Pig Receiver works at St Fergus
Maersk Leadon decommissioning
FORTIES:
Aviat – detailed design
FA – Slot recovery
Bacchus Well 4
Bacchus Well 1 water conversion
L4S
L4N
NTPBG2
NESS NEVIS – PLANNED 2015
L4S – Tie-in April 2015
NTP – Tie-in July 2015
L4N – Tie-in October 2015
BG2– Tie-in Summer 2015
NESS NEVIS INFILL TARGETS & INFRASTRUCTURE – 2016+
2 targets 2016
2 targets 2017
Up to 4 targets 2018
NNANCSL III/IVNCLNT
NCL INWB3LSWNSN
NSH WestNSPLP7LW3 water injectorNSBN
Replace 3 slot Distribution Unit
with 8 slot Distribution Unit
New Production
Line – 9.2km
New Distribution Unit
New Controls Umbilical - 8km
New WI & GL line OR New Production Line – 8km
New Power/ Sig Cable – 2km
New Distribution Unit
AVIAT GAS SUBSEA TIE-BACK
OUTLINE:
2 well tie-back via a 4 slot manifold to Forties Alpha using a 23km 8” steel flowline and umbilical
First Gas Q2 2016
FEED Complete
ECONOMICS:
P50 case recoverable reserves 55Bscf
Field life 15 years
BENEFITS:
Provides Forties with a fuel supply that allows for production sustainability and growth
Aviat is under Apache control, therefore no tariffs or interface with other operators
PROJECTS – CONTRACT REQUIREMENTS
TOPSIDES PROJECTS:
A number of projects are to be carried out in 2015 with procurement activities expected to commence in Q4 2014
Flowlines (engineering and procurement)
Beryl Alpha Area 3 conversion to Switchroom
Beryl Alpha UPS upgrades
Beryl Alpha subsea manifold piping upgrade
Forties Charlie lube oil coolers
Forties Charlie PA/GA upgrade
Forties Delta Package 7 partial conversion to Switchroom
SUBSEA PROJECTS:
Ness-Nevis Infill – Procurement of Flowline for 2016 (Long Lead Item, to be tendered in Jan 2015);
Ness-Nevis Infill – Procurement of Flowline Jumpers and Controls (long lead items, to be tendered before the end of 2014)
Aviat - Provision of Fabrication Services: Pipeline End Manifold (PLEM) / Tie-in Spools. (to be tendered Nov, 2014)
MAINTENANCE & INTEGRITY – CONTRACT REQUIREMENTS
MAINTENANCE SERVICES TO BE CONDUCTED IN 2014 / 2015:
Q1 - 2015 : Offshore Module and TR Doors - Supply, Maintenance and Repair
Q2 - 2015 : Fixed Lifting Equipment - Inspection and Certification
Q2 - 2015 : Hydraulic Services – Flushing, testing and repair
SPECIALISED MAINTENANCE SUPPORT REQUIREMENTS:
Production and Deep Gas Lift Gas Compressors – Maintenance and overhaul and provision of Engineering and experienced Offshore resources
Equipment LSA Decontamination – Onshore UK
Electrical Motor – Supply and repairs
Valves – Provision of new and or repaired Control, choke and block valves
Diesel Systems – Audit, Managing and testing
INTEGRITY TENDERS TO BE CONDUCTED IN 2014/2015 :
Q4 - 2014 : Pipe, Fittings and Flanges (incl studbolts, gaskets)
Q1 - 2015 : Pipeline and Process Services
CHALLENGES
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CHALLENGE: HOW TO DO MORE WITH LESS
Rising OPEX Costs are not sustainable
DRILLING CHALLENGES
COST CONTROL:
As targets become smaller and smaller, control of cost is essential to ensure operation is commercially viable.
ABANDONMENT WELLS:
Sourcing alternative, non-rig based, abandonment technology.
CUTTINGS AND HANDLING:
Issues with OBM cuttings handling and disposal in addition to concerns around high-ROP drilling.
EQUIPMENT:
Longer lead times for critical equipment, with the added complexity of mixing old technology with new equipment e.g. wellheads, downhole gauges, tubing hangars, tubing spools etc.
PROJECTS CHALLENGES
Not technical challenges but behavioural issues…
Leadership
Sense of Urgency
Devolved Decision Making
Responsibility, Accountability and Authority
Best Answers Win
Respect, Integrity and Trust
MAINTENANCE KEY CHALLENGES:
Maintaining healthcare of Top Tier equipment
Combating Equipment Obsolesence
Cost containment
Identifying new and more efficient working methods
Working with OEMs and other specialist contractors Apache is striving to meet these challenges and thereby maximise Production Efficiency.
MAINTENANCE CHALLENGES
INTEGRITY CHALLENGES
INTEGRITY KEY CHALLENGES:
Use of advanced NDT screening tools
Greater coverage and sufficient accuracy to reduce the need for reliance on standard NDTtechniques
Pipework with known corrosion defects(e.g. pipework in diesel legs)
Requirement for internal liners/barriers
Large volume of underdeck work to be carried out in near future
Scaffolding is costly and inefficient
Requirement for quick and suitable access platforms
CONTACTS AND PURCHASING
INDUSTRY ENGAGEMENT
Access to wider and diverse supplier markets
Participation in Regional Share Fairs (Norwich, Newcastle)
Membership of Energy North
Industry collaboration
Active participation in Oil & Gas UK
Supply Chain Forum
Cost Efficiency Task Group
Production Efficiency Task Group
LOGIC Standard Contracts Committee
Members of:
Subsea UK
Society of Underwater Technology (SUT)
IMCA
APM
Supply Chain Code of Practice
Attained ‘gold standard’ compliance with the SCCoP for 3 consecutive years
SUPPLY CHAIN – CONTRACTS AND PURCHASING
FIRST POINT ASSESSMENT LTD (FPAL):
Apache uses FPAL as it’s ‘vendor database’to identify potential suppliers.
Registration with FPAL is a prerequisite fordoing business with Apache.
CONTRACT PHILOSOPHY:
Preference for longer term agreements, typically 3 years with ext options.
Consolidation of workscopes into single agreements combining multiple asset requirements.
CONTRACTOR SELECTION:
Competitive pricing and ability to deliver value
Technical Capability including Innovation, Enterprise and proven Expertise
Evidence of Safety, Health and Environment culture, focus and performance
Alignment with Apache Business Conduct standards and Ethics
Financial Stability and Integrity
SUPPLY CHAIN – KEY CONTACTS
ARCHER Platform Drilling Services
ASCO UK LTD Shorebase and Logistics Services
BAKER HUGHES LTD Wireline and E-Line Services
BAKER HUGHES LTDProduction Chemicals and Services
BAKER HUGHES LTD Directional Drilling, LWD, MWD,
BILFINGER SALAMIS Fabric Maintenance Svs-Beryl
BRITISH AMERICAN OFFSHORE LTD
Rowan Gorilla VII HDJU
CALEDONIAN PETROLEUM SERVICES
Construction and Fabrication Services
CAN (OFFSHORE) LTDTopsides Inspection and Integrity Support
ENERMECH LTDCrane operations andmaintenance
ENTIER LTD Catering and Hotel services
EXPRO NORTH SEA LTD Well Services
HALLIBURTON Directional Drilling, LWD and MWD, Cementing
HARKLAND ISS / EMAS Subsea Installation
PETROFAC FACILITIES MANAGEMENT LTD
Onshore Engineering and Offshore Construction Services
SCHLUMBERGER OFFSHORE SERVICES
Cementing services - Forties
SCHLUMBERGER OFFSHORE SERVICES
Wireline and E-Line Services
SCHLUMBERGER OILFIELD UK PLC
ESP systems
SCORE (EUROPE) LTD PSV Maintenance Services
STORK TECHNICAL SVSFabric maintenance services –Forties and SAGE
TIER 1 KEY CONTRACTORS
On an ongoing basis Apache reviews its contract and tendering requirements for the next 15 months.
The intent of this is to ensure that Apache can plan and properly manage its’ contract and tendering activity.
Apache is also signed up to PILOT Forward Workplan, a web based information sharing website to provide up to date information on business opportunities with Apache for the Supply Chain: www.fpal.com and click on ‘Forward Workplan’
FORWARD PLANNING
Q&A