Sign in

    APA Corp (US) (APA)

    Business Description

    APA Corporation is an independent energy company focused on the exploration, development, and production of natural gas, crude oil, and natural gas liquids (NGLs) through its upstream business operations in the U.S., Egypt, and the North Sea . The company also engages in exploration and appraisal activities in Suriname and holds interests in Uruguay and other international locations . APA generates revenue from oil, natural gas, and NGLs through customer contracts, with prices based on market-indexed rates adjusted for various factors . In Egypt, APA operates under production-sharing contracts, assuming exploration and production costs in exchange for a share of the production .

    1. U.S. Operations - Engages in the exploration, development, and production of natural gas, crude oil, and NGLs within the United States.
    2. Egypt Operations - Conducts exploration, development, and production activities under production-sharing contracts, bearing costs in exchange for a share of the production.
    3. North Sea Operations - Involves the exploration, development, and production of natural gas, crude oil, and NGLs in the North Sea region.
    4. Exploration and Appraisal - Focuses on exploration and appraisal activities in Suriname, with additional interests in Uruguay and other international locations.

    Q3 2024 Summary

    Initial Price$29.75July 1, 2024
    Final Price$25.66October 1, 2024
    Price Change$-4.09
    % Change-13.75%

    What went well

    • Potential for Increased Gas Production and Cash Flow in Egypt: APA has reached an agreement to increase the contractual natural gas price on incremental volumes in Egypt, making gas exploration and development economically competitive with oil. They have added one rig focused on gas exploration, tapping into significant underexplored gas potential with existing infrastructure in place. This could lead to increased gas production and enhanced free cash flow. ,
    • Significant Cost Reductions and Synergies from Callon Acquisition: APA has effectively integrated the Callon assets and is achieving cost synergies beyond initial expectations. They have eliminated the full Callon G&A cost and are targeting a 10% to 15% reduction in per unit LOE, G&A, GPT, and interest costs in 2025. This enhances operational efficiency and free cash flow generation. ,
    • Ability to Sustain Production with Lower Capital Expenditure in the Permian: APA plans to sustain Permian oil production at around 130,000 barrels per day with a reduced rig count of 8 rigs (down from 9), reflecting operational efficiencies and cost-effectiveness. Despite a softer oil price environment, they are focused on maintaining production volumes while generating free cash flow. ,

    What went wrong

    • APA faces significant asset retirement obligations (AROs) in the North Sea totaling $1.2 billion after-tax, with approximately half to be incurred by 2030, which could strain cash flows and impact financial flexibility.
    • Production in the North Sea is set to cease by December 31, 2029, due to new emissions regulations and the impact of the Energy Profits Levy, potentially reducing future revenues.
    • Gas production in the Caser field in Egypt is on decline, and it is uncertain if new programs can offset this decline, which may affect APA's overall production and revenues in Egypt.

    Q&A Summary

    1. Egypt Gas Program Impact
      Q: How will the Egypt gas agreement affect cash flow?
      A: The new gas price agreement in Egypt allows us to earn higher prices on incremental gas volumes, aligning gas exploration economics with oil. We can't disclose specifics yet, but you'll see the benefits in future results, and we'll provide more details in February.

    2. North Sea ARO and Cash Flow
      Q: What's the impact of North Sea decommissioning on cash flow?
      A: We have a net liability of $1.2 billion for North Sea asset retirement obligations. About 50% of this will be spent by 2030, starting with less than $100 million annually, increasing over time. This spend won't show up as capital but will affect free cash flow.

    3. Cash Return Timing
      Q: Is the lower cash return this quarter just timing?
      A: Yes, it's a timing issue. We had material things in the works that limited market activities, but we remain committed to our cash return strategy.

    4. Cost Reductions and Synergies
      Q: How are you achieving lower costs and synergies?
      A: We're realizing significant cost reductions from the Callon acquisition, exceeding the $90 million G&A synergy target. We've cut almost $1 million per well in well costs through supply chain efficiencies.

    5. Sustaining Production with Fewer Rigs
      Q: Can you sustain production with reduced rig count?
      A: Yes, we plan to sustain Permian oil production at around 130,000 barrels per day with 8 rigs, down from 9. In Egypt, 12 rigs (11 oil, 1 gas) will broadly sustain production.

    6. Permian Gas Pricing Outlook
      Q: What's the outlook for Permian gas pricing?
      A: Current price extremes are due to temporary pipeline maintenance. We expect improvements as maintenance concludes, and with additional takeaway capacity like Matterhorn coming online.

    7. Portfolio Strategy and Growth
      Q: Do you need another asset given North Sea decline?
      A: Our portfolio is strong with the Permian and Egypt as core assets, and Suriname production starting in 2028 adds significant growth. We're also exploring in Alaska.

    8. Suriname Development
      Q: What's the key takeaway from the Suriname project?
      A: The Suriname project is real and progressing, with visibility to volumes in 2028. The slide illustrates the development, including the FPSO placement and future tiebacks.

    9. Alaska Exploration Outlook
      Q: How is the regulatory outlook in Alaska?
      A: Our activities are on state lands, minimizing federal regulatory hurdles. We're excited about the upcoming exploration well spudding early next year.

    10. Gas Marketing Benefits
      Q: Will gas marketing benefits continue next year?
      A: It depends on Waha gas prices and spreads to the Gulf Coast. Volatility can create significant opportunities, as seen this year when prices went negative, enhancing our margins.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDQ1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Egypt7227088057943,029734746754
    - Oil486512633612,2415881,0211,007
    - Natural Gas8951896829757157
    - Natural Gas Liquids120103133124480131152153
    North Sea3522784192891,338238267137
    U.S.6956668558023,0189791,1881,167
    Total Production Revenues1,7691,6522,0791,8857,3851,9512,2012,058
    Total Revenues2,0081,7962,3082,1678,2791,9512,5432,531
    Revenue by Geography - in Millions of USDQ1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States6956668558023,0187761,5301,640
    - Oil2822353482081,073187--
    - Natural Gas6039667223742--
    - Natural Gas Liquids10459289--
    Egypt7227088057943,029734746754
    North Sea3522784192891,338238267137
    Total Revenue2,0081,7962,3082,1678,2791,9512,5432,531
    KPIs - MetricQ1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Average Crude Oil Price Realization78.3776.3886.1581.36-80.6582.2878.06
    Average Natural Gas Price Realization3.222.393.122.92-2.471.771.43
    Average NGL Price Realization24.8418.6922.2620.70-26.2021.6821.29
    Worldwide Oil Production197,185198,831207,800414,000-200,083253,649256,306
    Worldwide Natural Gas Production838824.8820.1--786.6835.6786.9
    Worldwide NGL Production57,35862,63267,80069,014-57,97980,50080,017
    Daily BOE Production from U.S. Assets201,580212,786225,639228,671-214,050303,416300,709
    Capitalized Exploratory Well Costs528547541586-587621611

    Executive Team

    NamePositionStart DateShort Bio
    John J. Christmann IVChief Executive Officer2024John J. Christmann IV has been with APA since 1997 and has served as CEO since 2024. He previously held roles such as CEO and President from 2015 to 2023, and EVP and COO for North America .
    Stephen J. RineyPresident and Chief Financial Officer2024Stephen J. Riney was appointed as President and CFO in January 2024. He served as EVP since February 2015 and CFO since March 2015. Before APA, he was CFO for BP Exploration and Production .
    D. Clay BretchesExecutive Vice President, Operations2020D. Clay Bretches became EVP of Operations on January 1, 2020. He was previously SVP of U.S. Midstream Operations and CEO and President of Altus Midstream Company, a subsidiary of APA .
    Tracey K. HendersonExecutive Vice President, Exploration2023Tracey K. Henderson was appointed EVP of Exploration in January 2023. She was SVP of Exploration from April 2021 and previously worked at Kosmos Energy as Chief Exploration Officer .
    Rebecca A. HoytSenior Vice President, Chief Accounting Officer2014Rebecca A. Hoyt was appointed SVP, Chief Accounting Officer, and Controller in August 2014. She has been with APA since 1993 and was previously an audit manager at Arthur Andersen LLP .
    P. Anthony LannieExecutive Vice President and General Counsel2009P. Anthony Lannie became EVP and General Counsel in August 2009. He was previously SVP and General Counsel since May 2004 and VP and General Counsel since March 2003 .
    Mark D. MaddoxExecutive Vice President, Administration2023Mark D. Maddox was appointed EVP of Administration in January 2023. He served as SVP of Administration from April 2020 and held roles such as SVP of Supply Chain and CIO starting in June 2019 .
    Matthew R. BobBoard Member2024Matthew R. Bob was elected to the Board on April 1, 2024. He has extensive experience in U.S. onshore oil and gas companies and served as an independent director and board chair at Callon Petroleum Company .
    Anya WeavingBoard Member2024Anya Weaving joined the Board in April 2024. She has a background in investment banking, having served as Vice Chair and Managing Director in Global Natural Resources at Bank of America Merrill Lynch .
    Kenneth M. FisherBoard Member2024Kenneth M. Fisher was appointed to the Board on October 24, 2024. He serves on the Audit and Cybersecurity Committees and was previously EVP and CFO of ChampionX Corporation .

    Questions to Ask Management

    1. "With the third quarter showing a reduced percentage of free cash flow returned to shareholders due to timing issues with disposals, how do you plan to ensure consistent cash returns in the future, and what steps are you taking to mitigate such timing risks?"

    2. "In integrating Callon, have you identified areas where their operational practices outperformed yours, and how are you leveraging those insights to enhance your own operations, particularly in terms of cost efficiencies and well performance?"

    3. "Given the late-stage life cycle of your North Sea assets and the anticipated production declines, how do you plan to offset this reduction in free cash flow, and are you considering any strategic acquisitions or developments to maintain overall company growth?"

    4. "With the significant curtailment of production due to weak Waha gas prices affecting your fourth-quarter U.S. production by 20,000 to 25,000 BOE, what are your strategies to manage commodity price volatility and minimize its impact on your overall production and financial performance?"

    5. "As the GranMorgu project in Suriname is not expected to contribute to production until 2028, how are you addressing the potential gap in production growth over the next few years, and what measures are in place to mitigate risks associated with this long-term offshore development?"

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateFourth quarter of 2021 Third quarter of 2022
    End Date/DurationN/AN/A
    Total additional amount40 million shares 40 million shares
    Remaining authorization39.3 million shares 39.3 million shares
    DetailsN/AN/A

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024
    • Guidance:
      1. Capital Budget: Increased to $2.75 billion.
      2. Production Guidance:
        • U.S. Production: Impact of 20,000 to 25,000 BOE due to frac activity deferrals and planned production curtailments.
        • North Sea Production: Down approximately 20% year-over-year in 2025.
      3. Rig Count: 8-rig program in the Permian Basin and 12-rig program in Egypt in 2025.
      4. 2025 Capital Budget: $2.2 billion to $2.3 billion for the U.S., Egypt, and North Sea, plus $200 million for Suriname and $100 million for exploration in Alaska.
      5. Cost Reductions: Targeting significant reductions in 2025 .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024, Q4 2024, and FY 2024
    • Guidance:
      1. U.S. Oil Production: Increased guidance to 150,000 barrels per day for Q4.
      2. Capital Expenditure (CapEx): Original guidance of $2.7 billion may trend down.
      3. Gas Curtailments: 90 million cubic feet per day in the Permian, affecting 7,500 barrels per day of NGLs.
      4. Income from Third-Party Oil and Gas: Increased to $350 million.
      5. U.S. Tax Accruals: $95 million for the year.
      6. Egypt Production: Expected to remain flat.
      7. North Sea Production: Unchanged full-year guidance, with a Q3 decrease and Q4 rebound.
      8. Free Cash Flow: Anticipated substantial increase in the second half .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024
    • Guidance:
      1. Gas and NGL Production Curtailment: 50 million cubic feet per day of gas and 5,000 barrels per day of NGLs.
      2. Income from Third-Party Oil and Gas: $230 million for the year.
      3. U.S. Oil Production: 152,000 barrels per day in Q4, 11% growth from Q2.
      4. Permian Basin: 73% of total production in Q2, 75% of Upstream capital for the year.
      5. U.S. Oil Production Weighting: Increase to 46% in Q2.
      6. Shareholder Returns: At least 60% of free cash flow.
      7. Cost Synergies from Callon Acquisition: Increased to $225 million.
      8. Debt Reduction Priorities: Focus on term loan and revolver.
      9. G&A Run Rate: $110 million per quarter by year-end.
      10. Alternative Minimum Tax (AMT): Costs in the second half .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Capital Investment: Less than $2 billion, including $100 million for exploration and $50 million for Suriname.
      2. Production:
        • U.S. Oil Production: More than 10% increase in Q4 2024.
        • Permian Basin: Robust growth to offset North Sea declines.
        • Egypt: Flat adjusted production.
        • North Sea: 20% decrease due to reduced investment and maintenance.
      3. Cheniere Gas Sales Contract: $100 million cash flow.
      4. Decommissioning Costs: $60 million in the Gulf of Mexico.
      5. Operational Synergies: $55 million from Callon acquisition, $95 million in G&A and financing synergies.
      6. Free Cash Flow: At least 60% returned to shareholders .