Apache's Maule Comes Online - Analyst Blog

Apache Corporation (APA) announced the commencement of its Maule field production at approximately 11,750 barrels of oil per day (BOE/d) and also stated its intention to proceed with the development of the Bacchus oil field, located in the Central North Sea.

Maule Field, located in the United Kingdom sector of the North Sea, is beginning production about eight months after its discovery in October 2009. Houston, Texas-based Apache holds the entire working interest in the field and is planning a second well. The U.K. incentive scheme, designed to encourage development of smaller fields in the North Sea, as well as the existing infrastructure within the Forties Field, were the catalysts for the initiation of production at Maule.

Apache also has plans for three horizontal subsea wells that will join Forties Alpha via a pipeline bundle. The Bacchus oil field, with estimated reserves of 18 million barrels of oil equivalent (MMBOE), is operated by Apache with a 70% working interest, partnered by Royal Dutch Shell (RDS.A) with 20% and Endeavour Energy with the rest. The U.K. government approved the development of Apache’s Bacchus oil field and the first oil production from the project is expected in mid-2011.

In 2009, the North Sea region produced 22.4 MMBOE or approximately 11% of the company’s total worldwide production and comprised 7% of Apache’s year-end estimated proved reserves. We believe that the commencement of production at Maule Field will enable the company to meet its production growth target of 5%–10% for 2010.

We remain positive on Apache given its solid production growth outlook, strong financial health and diversified asset base. However, as Apache is an independent exploration and production company, we believe its results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Hence, we remain Neutral on the stock.