Fellow Shareholders, Despite the challenges of 2015, Apache delivered excellent operational results and strengthened the companyâ€™s financial foundation. Our strategy during the downturn is centered on our ability to adapt quickly to a changing environment. Solid Foundation
We enter 2016 with a solid foundation to weather a lowerfor-even-longer price environment.
We know we cannot control commodity prices nor predict when they will recover, so we have chosen to focus on what we can control: our capital spending, cost structure and portfolio. In 2015, we took decisive steps to position Apache to weather the downturn and build for longterm success. Today, the Apache asset base is streamlined and lends itself to disciplined and efficient strategy execution and capital allocation. 2015 Accomplishments We made strategic decisions to further streamline our portfolio, strengthen our financial position and aggressively drive down costs across the entire spectrum of our business. We prioritized financial prudence and a focus on returns first and production growth second. As a result, we reduced our capital spend by more than 60 percent year-over-year and still delivered annual pro forma production growth well ahead of our full-year guidance. These results speak to the quality of our assets, the hard work of our employees, our commitment to operational excellence and our focus on continuous improvement. Streamlining our portfolio In 2015, we continued the portfolio refinement that began in 2014. We completed the sale of our LNG assets, Australian upstream oil and gas assets and several non-core, midstream assets. Our resulting portfolio is highly focused on three principal areas: North America, the U.K. North Sea and Egypt. The diverse mix of conventional and unconventional opportunities across these areas offers economic balance during the current low oil price environment. Our substantial onshore acreage position in North America provides an abundant inventory of high-value growth opportunities. Our more conventional international assets generate consistent and strong cash flow from a large inventory of low-risk drilling opportunities with significant exploration potential for years to come. Mirroring activity levels to commodity prices Early in the year, we quickly scaled back our drilling and completion program in response to changing market conditions. We went from a peak worldwide rig count of 126 in the third quarter of 2014 to 60 rigs by the end of the first quarter of 2015 and only 34 rigs by mid-year. Our ability to adapt quickly allowed Apache to reach cash flow neutrality by the end of the second quarter. Despite a more than 60-percent drop in our capital investment program, we were able to increase our pro forma production by 6 percent in 2015. In fact, as the year progressed and Apache became more efficient, we raised our initial production targets on two occasions.