Feb 27 (Reuters) - Apache Corp rose nearly 10% on Thursday as the oil and gas producer reported a surprise profit for the quarter and forecast lower 2020 spending, with plans to shift capital away from its Alpine High project in the face of falling oil prices.
The company had bought the Alpine High field, situated in a remote corner of the Permian basin, during the oil price downturn of 2015 and 2016.
Since then, the asset has needed heavy investment in pipeline infrastructure, and delivers mostly natural gas at a time when prices for the fuel are at their lowest in more than two decades.
Apache had great hopes for Alpine High project when it was first announced, but a number of factors were problematic and results were disappointing on a few fronts, Chief Executive Officer John Christmann said on a post-earnings call.
“In terms of capital allocation, Alpine High will receive minimal to no funding, and we are shifting some capital from Permian oil projects to Egypt, which is better insulated from weak oil prices due to production sharing contracts,” Christmann added.
The Houston-based company, which has been shifting focus to oil-rich assets, plans to close its San Antonio, Texas office overseeing Alpine High and said it had no rigs drilling in the area at the end of 2019. (bit.ly/32z8Z1e)
“We had assumed one rig for 2020, but admit the announcement is fairly unsurprising given the ... price outlook”, Credit Suisse analyst Spiro Dounis said.
In its results announcement for the latest quarter, Apache took a charge of $2.7 billion, which included a non-cash impairment of $1.4 billion related to the Alpine High assets.
Apache said it plans 2020 capital expenditure between $1.6 billion and $1.9 billion, the mid-point of which is 26% lower than its 2019 capex.
The company, however, reported a surprise adjusted profit on Wednesday, as it benefited from higher output at its shale assets in the Permian basin, that helped counter lower natural gas prices.
Apache’s shares were up 8.6% at $26.53. (Editing by Devika Syamnath and Shounak Dasgupta)