Page 12 - Euroil Week 13 2020

EurOil PROJECTS & COMPANIES EurOil
Apache calls in letters of credit to cover North Sea decomm fees
UK
Apache was already hurting before the recent price collapse.
HOUSTON-BASED Apache Group has announced it will call in letters of credit (l/cs) worth $650mn to guarantee its decommission- ing payments in the UK North Sea.
The company recently announced it would slash its 2020 capital expenditure by around 37% in order to shore up its cash amid the oil market downturn. The producer is heavily invested in the US shale industry, where many operators are now struggling to break even following the sharp decline in prices.
Ratings agency Standard and Poor’s (S&P) said on March 26 it had downgraded Apache’s credit rating from BBB to BB+, with a negative outlook. In a statement on March 27, Apache said while the credit ratings serve “a valuable purpose,” it does not expect any impact on its “financial position, liquidity or business strategy.”
The company said it had a $2bn sub-limit for l/cs – guarantees from banks that a company is able to make payments – which could “easily accommodate the North Sea asset retirement obligation postings.”
Apache noted it had taken “aggressive actions” to shield its balance sheet and cash flow from the market turmoil, including a 54%
year-on-year reduction in upstream capital spending, representing a cut of $1.3bn. It has also cut its annual dividend by 90%, or $340mn, and aims to reduce its operating costs by $150mn. In addition, it has added significant near-term oil price hedges to protect cash flow.
The producer added it had a credit facility of $4bn up until 2024, provided by 18 banks. The downgrading from S&P will only “result in slight increase in borrowing cost on bank credit facil- ity,” it told investors in a presentation.
“Apache has ample liquidity and a very man- ageable bond maturity profile for the next five years,” CFO Stephen Riney said in a statement. “Together, these actions put us closer to a path for cash flow neutrality in the current price environment.”
Apache has been working in the UK North Sea since 2003, when it bought a 97% interest in the Forties oilfield. It went on to acquire more assets, including Beryl, from ExxonMobil, in 2011. The UK accounted for 12% of its produc- tion in 2018.
Apache was already hurting before the recent price collapse, booking a $3bn loss in the fourth quarter because of a $2.7bn charge on its assets.™
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w w w . N E W S B A S E . c o m Week 13 02•April•2020