Apache deferring shale gas production at Alpine due to takeaway

By Luke Geiver | April 23, 2019

Apache Corp. is deferring natural gas production from its Alpine High play due to low gas prices at WAHA Hub. The reductions will amount to roughly 250 million cubic feet per day of gross production. Current gas prices at WAHA in Northern Pecos County, Texas, are roughly $3.38/mbtu.

According to Apache’s executive team, the move is meant to help cash flow in the near term. “As far back as two years ago, Apache foresaw the potential for gas takeaway constraints in the Permian Basin and initiated two significant mitigating actions,” said John Christmann, CEO and president.

One of the actions was to contract on the Kinder Morgan-operated Gulf Coast Express and Permian Highway pipeline projects. Apache set-up a long-term deal to move 1 billion cubic feet per day. Both pipelines will be in service either later this year or in 2020. “Second, to address the pricing risk prior to these pipes coming into service, we entered into a series of basis swaps on a significant portion of our expected Permian Basin gas production through the middle of 2019. These swaps significantly mitigate the impact of current WAHA pricing,” Christmann said.

Until the Gulf Coast pipeline is brought online, Apache anticipates wide price differentials in the Permian gas price market. “This is the proper approach from both an environmental and economic perspective relative to other industry practices such as flaring or selling associated gas at a negative or unprofitable price,” continued Christmann.   

Apache will address its deferral plan in a May 1 investor call. The rig count and completion plan has not been changed.