Apache Corporation (APA) Misled Shareholders About the Viability of its Alpine High Resource Play
On September 7, 2016, Apache announced the discovery of a new resource play in the Permian Basin called Alpine High that was rich in oil and gas reserves. Apache touted the discovery as providing a “large inventory of repeatable, high-value drilling opportunities” and reinforced these sentiments throughout 2016, 2017 and 2018. Notably, the Company’s quarterly financial results for 2018 were positive, with Apache CEO John J. Christmann IV stating that “2018 will be a year in which Apache differentiates itself operationally, particularly in the Permian Basin.” On August 1, 2018, Christmann highlighted “another great quarter” as it exceeded guidance and raised the 2018 outlook. However, these statements were materially false and misleading and failed to disclose material adverse facts about Apache’s business operations. Specifically, Apache failed to disclose that it used unrealistic assumptions regarding the amount and composition of available oil and gas in Alphine High, and that it did not have the proper infrastructure in place to safely and/or economically drill and/or transport those resources even if they existed in the amounts purported. These statements artificially inflated the value of the Company’s operations in the Permian Basin.
The lack of Alpine High’s viability emerged through a series of disclosures between April 2019 and March 2020, which resulted in a significant decline in the price of Apache’s stock. By March 13, 2020, Apache’s stock was trading at just $4.46.