One on One with Susie Gharib

One on One With Roger Plank, CFO, Apache

SUSIE GHARIB: And shares of Apache Corp slipped $0.19 to $68.52 and that`s despite news of solid quarterly earnings. Like the big oil companies reporting today, this oil and gas producer posted a 23 percent jump in second quarter profits, $2.17 a share, $0.18 better than estimates. Earlier today I talked with Apache`s chief financial officer Roger Plank and I asked him how much of the earnings boost was from the company`s performance or those high oil prices.

ROGER PLANK, CHIEF FINANCIAL OFFICER, APACHE: Well, it`s really a combination of both. Obviously oil prices at record levels are making a significant difference, particularly to a company like Apache where we believe in a balanced approach to our product mix. A lot of our competitors are much more gas weighted. And because we are not price clairvoyant, we deliberately made a decision to have a balanced mix. So just to give you an indication, 48 percent of our production during the quarter was oil or liquids and yet two-thirds of our revenue came from oil. So that, the mix and the record pricing of oil has a lot to do with our strong results. But the other thing I would say is that our production is up significantly. In fact, we`re on our way to production growth of 10 to 15 percent for the year which will make this the 21st -- I don`t know -- 25th or so year out of 26 consecutive years where we have had production growth, so obviously growth is a big part of it.

GHARIB: What is driving that growth? Ten to 15 percent for this year is a large number. What is driving that?

PLANK: Well, it is a combination of things. We`re going to grow our production through the drill bit in this year as we did last year. And we`ve also got a portfolio of regions around the world. We`re basically in six different countries and we`re experiencing growth in most all of those. So we`re very active drillers. We`re driving production up with the results through the drill bit. And then this year we have made so far $1.7 billion of acquisitions that will also bring production. But because those were completed in the first half, the real impact will be fully seen in the second half.

GHARIB: Let`s talk a little bit about those acquisitions. One of them was from British Petroleum, BP. You bought their Gulf of Mexico property. Some of the oil analysts I talked to said that the Gulf of Mexico isn`t a strong growth area, not to mention the hurricane risk aspect of it. What growth opportunities do you see there?

PLANK: Well, that is very interesting. And I think it says something about our company. The Gulf of Mexico is a bit out of favor with investors on Wall Street these days, which frankly from a long-term standpoint suits us fine because we`re seeing companies up and leave it which means that we`ve got less competition there. And in the end, I think that is going to benefit us. There is no question that some of the things that they`re talking about in terms of it being difficult to grow and it also being visited by hurricanes from time to time make it a challenging area. But because we do have the portfolio of production and countries that we`re involved in, that is a risk we think we can take. What attracts us to it is for one, we get paid for those risks every day. Our average price of natural gas in the Gulf of Mexico is about $1 per MCF or thousand cubic feet, more than what you experience really in the rest of North America. And in our production that amounts to about $150 million a year, so that is a risk worth taking.

GHARIB: We`ll have to leave it there. Thank you so much. We appreciate you coming to the program, Roger Plank.

PLANK: Thank you, Susie.