Kessler Topaz Meltzer & Check, LLP is Lead Counsel in a securities class action lawsuit (view complaint) on behalf of those who purchased or otherwise acquired Apache Corporation (“Apache”) (NASDAQ: APA) common stock between September 7, 2016 and March 13, 2020, inclusive (the “Class Period”). The action is pending in the United States District Court for the Southern District of Texas under Civil Action No. 21-cv-00575.
Apache is an oil exploration and production company whose single most important asset during the Class Period was an oil and gas field in the Texas panhandle called “Alpine High.” For three years, Defendants touted Alpine High as a “transformational discovery” and “world class resource play” with immense production capabilities, including “conservative” estimates of over three billion barrels of oil and significant amounts of “really rich gas.”1 Defendants supported their claims by highlighting examples of “strong well results” and “successful oil tests” that were purportedly representative of Alpine High’s “2,000 to more than 3,000 future drilling locations,” which would “deliver incredible value to Apache and its shareholders for many, many years to come.” Analysts and industry media lauded this “massive shale discovery,” emphasizing that Alpine High’s “compelling economics” represented Apache’s “largest catalyst opportunity” for the coming years and put Apache “back in the game” after a “rough time keeping up with competitors.” Fueled by Defendants’ assurances, Apache’s stock price soared, reaching a Class Period high of $69.00 on December 12, 2016. The Individual Defendants took full advantage, reaping more than $75 million in Alpine High-linked compensation during the Class Period.
Unbeknownst to investors, Defendants’ statements were false. In reality, Apache’s own production data and analyses of the Alpine High play never supported Defendants’ public representations. As Apache was ultimately forced to admit, Alpine High was virtually barren. Indeed, after three years of relentlessly touting Alpine High to investors, the “world class resource play” that was supposedly going to “transform” Apache produced less than 1% of the oil and gas that Defendants had represented to investors was recoverable. Alpine High was so devoid of oil and gas that Apache was forced to cease all drilling at the field in 2020, take a $3 billion write down, and slash its dividend by a staggering 90%. When the truth regarding Defendants’ fraud emerged, analysts and the nation’s leading financial publications excoriated Defendants, noting that the revelations “were in stark contrast to [Defendants’] past defense of Alpine High,” and Apache’s stock price was decimated, closing at a mere $4.46 on March 17, 2020—an astonishing decline of 93% from its high during the Class Period.
Significantly, Lead Plaintiffs’ independent investigation, which included a forensic analysis of data that Apache had intentionally misrepresented and concealed during the Class Period and interviews with dozens of former Apache employees, has confirmed that Defendants knew full well even before the Class Period began that Apache’s true data concerning Alpine High never supported Defendants’ public pronouncements about the economic viability of the play. Without support, and often flying in the face of Apache’s own contrary analyses and production numbers, Defendants recklessly gambled on Alpine High, and lied to investors about both the quality of the resources in the play and Apache’s ability to profitably extract them.
First, numerous former employees confirmed that Apache’s CEO, Defendant Christmann, and other senior officers of the Company were explicitly warned on three separate occasions prior to the start of the Class Period that the composition of the Alpine High area made it virtually impossible for the field to ever be a commercial success. For example, the leaders of Apache teams that conducted two thorough geologic studies of the Alpine High area in 2012 and 2014 independently corroborated that, after reviewing the data from these studies, Christmann, who at the time was Apache’s North American COO, concluded that the Alpine High area was “too gassy” to ever be viable—i.e., too heavy on unprofitable “dry” gas and too light on valuable oil and “wet” gas. Similarly, in numerous meetings, presentations and emails in the weeks and months leading up to the start of the Class Period in 2016, senior Apache geologists who were analyzing Alpine High made crystal clear to Christmann and other Company officers that they should not make any public representations concerning Alpine High’s production capabilities because Apache did not have data to back them up. Specifically, these executives explicitly warned senior management that Apache lacked months, if not years, of critical testing, basic analyses and fundamental well production data necessary to support any projections for Alpine High’s supposed capacity for oil and gas production—warnings that Defendants knowingly ignored when trumpeting the “transformational discovery” of Alpine High at the beginning of the Class Period.
Second, numerous former Apache employees independently corroborated that senior management took extraordinary steps to conceal Alpine High’s true, dismal results from investors, regulators and even other Apache executives. Indeed, Defendant Christmann implemented a “cone of silence” in which Alpine High data was segregated from Apache’s normal data storage and internal peer review practices, and only Christmann and a select few other Apache executives had access to critical Alpine High production and projections data. In addition, Apache intentionally obscured public information about Alpine High, including in deliberately misrepresented and serially delayed regulatory documents. Compliance personnel were “instructed” not to file well completion reports with the State of Texas, which would have triggered an obligation to report monthly production on standardized forms in a public database. Remarkably, in the first two years after the announcement of Alpine High, Apache did not file a single well completion report for any of the over 150 wells it drilled at Alpine High during that period, and thus avoided providing even the most basic information to the public about the performance of Alpine High wells. Former senior Apache employees, including the former Director of Petrophysics and Chief of Staff to Apache’s COO, explained that Defendants were so “worried about an objective assessment of Alpine High” that they refused to subject Alpine High to the Company’s standard internal peer reviews and risk analyses that applied to every other Apache oil or gas play, thereby “violat[ing] every step of the scientific method.” When executives spoke out, Defendants silenced or terminated them, with over a dozen Vice Presidents who raised concerns about Alpine High either run-off or terminated within the first eighteen months of the project’s commencement. As a result, multiple former employees confirmed that Defendants’ message regarding Alpine High was clear: “you either lined up or you are off the team.”
Third, Apache itself recognized that the play was not, and had never been, economically viable, and that Defendants’ wholly positive statements touting the play were not accurate. These conclusions were definitively confirmed by the results of a remarkable confidential internal review of Alpine High data—code-named “Project Neptune”—conducted more than nine months before the end of the Class Period. Specifically, in the summer of 2019, Apache executives became so concerned that the Company was concealing negative information about Alpine High that they pushed to finally subject the play’s data to Apache’s standard review and evaluation procedures. The team analyzed all production data from the entire life of Alpine High, and completed its review in September 2019. The findings—which were presented to Apache’s senior management, including Christmann at an in-person meeting in mid-October 2019—unequivocally concluded that Defendants never had a basis for their pronouncements and projections about the purportedly economically recoverable oil and gas at Alpine High. Indeed, the actual data was abysmal, and completely contradicted Defendants’ representations regarding thousands of drillable sites and copious amounts of oil and wet gas—and had been since drilling at Alpine High had begun. Moreover, the review team’s formal report showed that, given the limited and poor quality of the oil and gas resources at the field, it was an extraordinarily dubious proposition for Alpine High to ever be economically viable. Accordingly, Project Neptune confirmed that Apache’s own data did not support, had never supported, and in fact contradicted Defendants’ Class Period representations to the market concerning the number and viability of Alpine High’s drilling locations and the amount of oil and gas the field could yield.
Although Apache never disclosed the existence or results of Project Neptune to investors, the Alpine High house of cards soon began to collapse. In October 2019, just weeks after the results of Project Neptune were shared with Christmann and other Apache senior management, Steven Keenan, the Company’s “star” geologist who was credited with discovering Alpine High as a viable play, abruptly “resigned,” sending Apache shares down 5%. Shortly thereafter, Apache announced a massive $3 billion write down due to Alpine High, with Defendant Christmann acknowledging that “further testing [at Alpine High] is not warranted” and that the field would “receive minimal to no funding” going forward. Analysts and financial media explicitly criticized Defendants for their prior misrepresentations to the market concerning Alpine High, specifically highlighting that “Christmann’s comments were in stark contrast to his past defense of Alpine High” in which he “vehemently defend[ed] the play’s prospects for about three years.” In March 2020, the Company announced that it was forced to slash its vaunted dividend by a staggering 90%. Days later, with its balance sheet in tatters and facing crushing levels of debt, Apache’s stock price was cut nearly in half after analysts reported that Apache had the highest debt-to-equity ratio “among all large-cap independent oil producers.”
By the end of the Class Period, Apache’s stock price had declined over 93% from its Class Period high, wiping out $24 billion in shareholder value. Apache’s shareholders have been significantly harmed by Defendants’ fraud. This action seeks redress on behalf of these aggrieved shareholders.
If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP: James Maro, Esq. (484) 270-1453; toll-free at (844) 887-9500; or via e-mail at info@ktmc.com. If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.