Oil and natural gas producer Apache Corp. (APA) achieved record production in the third quarter - but the 19% boost in output couldn't stem a decline in profits from lower energy prices and a slight miss in analyst expectations.

Apache third-quarter profit fell 63%, while production grew in the company's operations in Australia, Egypt and the North Sea. The Houston company also highlighted the results from its first well in the Granite Wash, a natural gas field in Texas and Oklahoma, which initially produced 17 million cubic feet of natural gas a day, which would put it among the most prolific onshore natural gas wells.

The company plans to put additional rigs to work in the field and drill 20 wells there in 2010. It is also increasing drilling activity in the Horn River Basin, a natural gas field in northeast British Columbia.

"Drilling and completion innovations continue to unlock new opportunities and the Granite Wash is a great example of that," Steven Farris, chairman and chief executive of Apache, said during a conference call with investors.

The planned uptick in drilling represents a change from earlier in the year, when producers like Apache were pulling back on drilling activity as commodity prices plunged. The company also increased its capital spending this year from 3.5 billion to 4.1 billion.

Phil Weiss, an analyst with Argus Research Co., said that Apache has been able increase activity by locking in prices on future production.

"It is certainly a company that is growing production and they have good control of costs," Weiss said.

Apache reported earnings of $442 million, or $1.30 a share, down from $1.19 billion, or $3.52 a share, a year earlier. Excluding items such as a deferred-tax impact, income fell to $1.58 a share from $3.19 a share.

Revenue dropped 31% to $2.33 billion.

Analysts surveyed by Thomson Reuters expected earnings of $1.61 a share on revenue of $2.24 billion.

Production jumped 3.4% from the second quarter and 19% from a year earlier. Apache said it was the first time production surpassed 600,000 barrels of oil equivalent daily. Prices for both oil and gas were well below those a year earlier, but per-barrel oil prices jumped 12% from the second quarter. Gas prices, though, fell 0.6% from the second quarter.

Farris said the company would enter 2010 with strong momentum, including two development projects in Australia that could boost output by 40,000 barrels of oil per day.

Shares of Apache closed 3.45% higher at $97.09. The stock is up 30% this year.

-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com

-(John Kell contributed to this article)