UPDATE 3-Expenses, prices hit Apache's fourth-quarter profit

Thu Feb 14, 2013 4:27pm EST

* Fourth-quarter adjusted EPS $2.27 vs est. $2.30

* Costs higher than expected

* Apache shares fall 4.7 pct

* 2013 output growth seen at 3-5 percent (Adds company forecasts, CEO comments, closing stock prices)

By Anna Driver

Feb 14 (Reuters) - Apache Corp's fourth-quarter profit fell short of expectations as expenses rose on labor and maintenance costs, and the company's 2013 oil and natural gas production outlook also disappointed.

The results marked Apache's fourth consecutive earnings miss, and its shares fell nearly 5 percent on Thursday.

Apache and most other exploration and production companies are spending more to drill for more profitable oil and natural gas liquids (NGL) as heavy supplies weigh on natural gas prices.

Still, the Houston company said average oil prices fell nearly 4 percent in the quarter while NGL prices dropped 26 percent.

This year, the company said it expects spending to be nearly flat at $10.5 billion. Of that amount, about $4 billion is earmarked for drilling for crude oil in the United States in places like the Permian Basin in Texas, the company told analysts.

Apache ended 2012 producing more than 800,000 barrels of oil equivalent per day (boepd), driven by a 12 percent increase in North American oil production. But in the first quarter, Apache said output would lag the fourth quarter's level because of disruptions from a cyclone in Australia and maintenance in the Gulf of Mexico.

Output from the Permian Basin rose 18 percent, while output from the Anadarko basin shot up 37 percent last year, the company said.

"The production growth has gotten back on track. The question is, can they do that while maintaining their cost structure?" said Brian Youngberg, an energy company analyst at Edward Jones in St. Louis.

For the full year, Apache said it expects oil and gas output to rise by 3 to 5 percent, below its long-term growth forecast for 6 to 9 percent.

"There is no doubt that we have some properties that are declining, but are going to more than make up for that in the Permian and Anadarko basins this year," Apache CEO Steve Farris told analysts on a conference call.

He said the company also plans to sell up to $2 billion in assets this year, but declined to elaborate.

Wall Street analysts pointed to higher-than-expected lease operating expenses as one reason behind the company's profit miss. Factors affecting those expenses included higher North American labor costs as well as spending on maintenance and repairs, Apache told analysts.

Apache, which also drills for oil and gas in Canada, Egypt, Britain, North Sea, Australia and Argentina, raised its quarterly dividend 18 percent on Monday, citing strong cash-flow generating capacity of its properties.

Net income fell to $649 million, or $1.64 per share, in the fourth quarter, from $1.17 billion, or $2.98 per share, a year earlier. Adjusted profit was $2.27 per share. Analysts on average expected a profit of $2.30, according to Thomson Reuters I/B/E/S.

By contrast, smaller rival EOG Resources Inc reported a fourth-quarter profit excluding items that topped expectations on Wednesday. EOG is using railroads to ship its shale oil from the Bakken and Eagle Ford formations to the Gulf Coast, allowing the company to capture prices that are higher than those for West Texas Intermediate crude.

"In the fourth quarter our U.S. crude oil price realization was $10.52 over WTI, up from $5.45 in the third quarter," Mark Papa, EOG's chief executive officer, told analysts on a conference call.

Apache shares fell 4.7 percent to close at $80.33 on the New York Stock Exchange on Thursday. The stock has gained 7 percent so far this year, trailing the 14 percent rise in the broader Dow Jones U.S. Exploration and Production index.

EOG shares fell 0.2 percent to close at $133.33.

(Reporting by Anna Driver in Houston and Swetha Gopinath in Bangalore; editing by Joyjeet Das, Maureen Bavdek and Matthew Lewis)