Apache Corporation CEO: Less Focused On Oil Recovery Shape

Apache Corporation APA new CEO John Christmann was interviewed by CNBC recently for the first time ever. In the interview, Christmann talked about why drilling could still be profitable with oil trading at $50 and how he managed to reduce the capex of the company while keeping production flat.

Drilling At $50

On his comments regarding drilling in the Permian Basin being economically feasible when oil trades at $50, Christmann said, "It's not that we don't have economic inventory, it's just separating the cash flow."

He explained, "Our cash flow has been reduced significantly from right last year when oil prices were at $100 to where it is today, but we have lots of economic oils and we have really moved quickly to adjust our cost structure."

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Reducing Capex

Christmann was asked how he managed to reduce capex significantly while keeping production flat. He replied, "First of all we do not have a lot of leases that we need to keep [...] We also do not have a lot of long-term contracts. So, our best hedge was to be able to reduce our activity and our cost structure, which we have gotten to work on aggressively so that's the reason being."

He continued, "And then when you look at our portfolio, we have got a lot of conventional assets in the Permians and water floods, co2 floods, which helps our decline rates. So, it's actually a little bit less than some of the pure unconventional players."

Outlook For Oil

"Well, number one: everybody agrees there will be a recovery," Christmann said. "I have been less focused on what is the shape of the recovery, if it's V or U or elongated U. We've been working on let's get our cost structure down, lets market to where we are today and then we are in a position to ramp up at the time of the recovery."