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AC

APA Corp (APA)·Q1 2025 Earnings Summary

Executive Summary

  • APA delivered a clean beat: adjusted EPS of $1.06 vs consensus $0.82, and total revenue of $2.64B vs $2.20B; adjusted EBITDAX was $1.49B. Strength came from Permian drilling efficiencies, Egypt gas outperformance, and profitable gas marketing activity . Estimates are from S&P Global.*
  • Capital discipline accelerated: 2025 development capital cut by $150M and exploration reduced by $25M, while maintaining U.S. oil production guidance at 125–127 kbpd and lowering Permian rig count to 6 by end-Q2 .
  • Cost-savings trajectory raised: in-year savings increased to $130M (from $60M) and the year-end 2025 run-rate target doubled to $225M, driven chiefly by ~$800K per-well Permian drilling cost reductions and overhead initiatives .
  • Portfolio streamlining and deleveraging: announced $608M sale of New Mexico assets with proceeds earmarked primarily for debt reduction; dividend maintained at $0.25/share .
  • Exploration optionality improved: Sockeye-2 Alaska well flowed ~2,700 bbl/d unstimulated, confirming superior reservoir quality and derisking broader prospectivity on APA’s 325k-acre position—potential medium-term catalyst as appraisal progresses .

What Went Well and What Went Wrong

What Went Well

  • Permian efficiency gains cut well costs by ~$800K per well; management expects to hold U.S. oil volumes flat with ~6 rigs, reducing capital intensity and protecting FCF in a volatile price environment .
  • Egypt gas program outperformed: realized gas price was $3.19 in Q1, above guidance; management raised the trajectory with Q2 ~$3.40 and Q4 ~$3.80, supporting margin resilience .
  • Alaska Sockeye-2 success: 25 ft net pay, ~20% porosity, 100–125 md permeability; 2,700 bbl/d unstimulated flow supports high-quality reservoir and improves optionality without near-term capital strain .

What Went Wrong

  • LOE pressures: inflationary costs in compression and water disposal slowed near-term LOE savings; more meaningful reductions expected later in 2025 and into 2026 .
  • U.S. gas/NGL curtailments: APA curtailed ~8 MMcf/d of gas and ~500 bbl/d of NGLs in Q1 due to weak/negative Waha pricing (not contemplated in prior guidance) .
  • Egypt gross oil volumes: continued slight decline expected through 2025; Q1 decline was somewhat more than “slight” due to downtime, though condensate-rich gas and waterflood programs mitigate oil declines .

Financial Results

Income Statement Summary

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$2,531 $2,712 $2,636
GAAP Diluted EPS ($)$(0.60) $0.96 $0.96
Adjusted EPS ($)$1.00 $0.79 $1.06

Margins (computed from company-reported figures)

MetricQ3 2024Q4 2024Q1 2025
Adjusted EBITDAX Margin (%)61.5% 57.2% 56.4%
Net Income Margin (%)(8.8)% 13.1% 13.2%

Note: EBITDAX margin = Adjusted EBITDAX / Total Revenues using company-reported figures and .

Actual vs S&P Global Consensus – Q1 2025

MetricQ1 2025 ActualQ1 2025 ConsensusDelta vs Consensus
Revenue ($USD Billions)$2.636 $2.196*+$0.440; bold beat
Primary EPS ($)$1.06 $0.821*+$0.239; bold beat
EBITDA ($USD Billions)$1.421*$1.349*+$0.072; beat

Values with asterisk retrieved from S&P Global.

Production by Geography (BOE/day)

RegionQ3 2024Q4 2024Q1 2025
United States300,709 313,227 298,319
Egypt141,742 139,947 139,041
North Sea25,029 35,134 31,618
Total467,480 488,308 468,978
Total excl. NCI420,199 441,618 422,595

KPIs and Cash Metrics

Metric ($USD Millions)Q3 2024Q4 2024Q1 2025
Net Cash from Operating Activities$1,339 $1,036 $1,096
Free Cash Flow$219 $420 $126
Adjusted EBITDAX$1,557 $1,550 $1,485
Upstream Capital Investment (incl. NCI – Egypt)$759 $650 $766
Net Debt$6,308 $5,419 $5,301

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Development Capital (Permian+Egypt)FY 2025$2.2–$2.3B Reduced by $150M Lowered
Exploration CapitalFY 2025$100M $75M Lowered
U.S. Oil ProductionFY 2025125–127 kbpd 125–127 kbpd Maintained
Permian Rig Count2025 cadence~8 rigs Reducing to 6 rigs by end-Q2 Lowered
Egypt Realized Gas PriceFY 2025$3.40–$3.50/Mcf (full-year prior guide) Q2 ~$3.40 → Q4 ~$3.80 trajectory Raised trajectory
Third-Party Marketing IncomeFY 2025Not disclosed$575M (incl. basis hedges) Raised
Dividend per ShareQ2 2025$0.25 (Q4 maintained) $0.25 declared (Aug 22 payable) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Permian efficiency & cost savingsIntegration of Callon; non-core divestiture; set stage for lower per-unit costs Target $350M run-rate savings by YE 2027; 8 rigs plan ~$800K per-well savings; reduce to 6 rigs; in-year savings $130M; YE25 run-rate $225M Improving
Egypt gas pricing & volumesNew gas price agreement signed; gas focus emerging 12 rigs planned; slight adjusted volume growth Q1 realized $3.19 (above guide); Q4 expected ~$3.80; ~1/3 of rigs gas-focused Strengthening
Suriname (GranMorgu)FID announced (220 kbpd project) $200M 2025 dev capital allocation Some accelerated spend; still foundational to 2028 first oil On track
Alaska explorationNot highlighted$100M exploration budget includes Alaska Sockeye-2 flow-test success (2,700 bbl/d); superior reservoir quality Positive
Gas marketing & basis hedgesProfitable gas trading; Cheniere contract contribution —Basis swaps on ~2/3 capacity; ~ $450M locked; guidance $575M Elevated
LOE managementPost-synergy cost outlook improving LOE targeted in cost initiatives Compression/water disposal inflation; LOE savings more back-half loaded Challenged near-term
Balance sheet & capitalNet debt reduced; IG rating achieved Debt ~$6B; cash $625M; disciplined returns $608M NM sale proceeds to debt reduction Deleveraging

Management Commentary

  • “We delivered strong first quarter results with in-line production and lower capital investment relative to guidance… Capital came in below guidance largely due to significant improvements in drilling performance.” – CEO John Christmann .
  • “We have captured an impressive $800,000 in cost savings per well in the Permian… slim hole drilling, modifying casing designs and fit-for-purpose directional tools have considerably shortened drilling durations.” – President/CFO Steve Riney .
  • “We intend to allocate most of the proceeds from this divestiture toward debt reduction… a full exit from New Mexico, allowing us to focus solely on the Texas side of the basin.” – CEO John Christmann .
  • “The Sockeye-2 well… averaged 2,700 barrels of oil per day… the flow test indicates significantly higher reservoir quality compared to similar topset discoveries to the west.” – APA press release .

Q&A Highlights

  • Cost-savings cadence: Management lifted in-year savings to $130M and YE25 run-rate to $225M, with potential for the longer-term $350M target to rise as efficiencies accrue; majority of savings now coming from capital (Permian) .
  • Permian rig program: Confidence to hold 125–127 kbpd with 6 rigs (down from 8), anticipating further efficiency gains into 2026 .
  • Alaska optionality and funding: High-quality Sockeye-2 reservoir derisks the play; Suriname’s timing precedes any meaningful Alaska capital, reducing funding stress; appraisal strategy will be measured .
  • LOE roadmap: Near-term inflation in compression and water disposal; plan includes commercial renegotiations, workflow simplification, and route optimization; more progress expected later in 2025/2026 .
  • Capital breakevens and shareholder returns: With $350M run-rate savings, APA can fund base program and dividend at ~$50 WTI; buybacks remain opportunistic given deleveraging from asset sale .

Estimates Context

  • Q1 2025 beat: Adjusted EPS $1.06 vs $0.82 consensus; revenue $2.64B vs $2.20B; EBITDA $1.42B vs $1.35B; beats driven by Permian well-cost reductions, stronger Egypt gas realizations, and locked-in basis spreads supporting marketing income . Consensus figures from S&P Global.*
  • Near-term estimates likely rise for EBITDA and EPS on reduced development capital, higher marketing income ($575M guide), and upward trajectory in Egypt gas price realizations .

Values with asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • Bold beat on Q1 revenue/EPS with improving capital efficiency; Permian rig count reduction with flat oil volumes is a major structural positive for FCF .
  • Cost-savings acceleration (in-year $130M; YE25 run-rate $225M) should lower breakevens and enhance resilience through commodity cycles .
  • Egypt gas pricing and volume trajectory supports margin stability, with Q4 realized gas expected near ~$3.80/Mcf; marketing basis hedges lock-in substantial 2025 income .
  • Portfolio high-grading continues: $608M New Mexico sale simplifies Permian footprint and aids deleveraging; dividend maintained .
  • Exploration catalysts: Alaska Sockeye-2 flow test confirms superior reservoir quality; Suriname development remains on track for 2028 first oil .
  • Watch near-term LOE pressures (compression/water); savings likely back-half weighted; expect incremental clarity on Permian inventory density as costs fall .
  • Trading stance: Positive skew on execution/cost trajectory and gas marketing income; oil price downside mitigated by gas-focused Egypt program and portfolio flexibility; monitor WTI in low-50s as potential trigger for deeper activity cuts .