8-K
APA Corp (APA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 2022
APA CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-40144 | 86-1430562 |
|---|---|---|
| (State or other jurisdiction<br> <br>of incorporation) | (Commission<br> <br>File Number) | (IRS Employer<br> <br>Identification No.) |
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (713) 296-6000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange<br>on which registered |
|---|---|---|
| Common Stock, $0.625 par value | APA | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
The information in this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of Section 18, and shall not be incorporated by reference in any filing under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing.
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On August 3, 2022, APA Corporation issued a press release announcing financial and operating results for the fiscal quarter ended June 30, 2022. The full text of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release of APA Corporation dated August 3, 2022. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| APA CORPORATION | ||
|---|---|---|
| Date: August 4, 2022 | By: | /s/ Rebecca A. Hoyt |
| Rebecca A. Hoyt | ||
| Senior Vice President, Chief Accounting Officer, and Controller<br>(Principal Accounting Officer) |
EX-99.1
Exhibit 99.1
NEWS RELEASE
APA Corporation Announces Second-Quarter 2022
Financial and Operational Results
Key Takeaways
| • | Reported production of 385,000 barrels of oil equivalent (BOE) per day; adjusted production, which excludesEgypt noncontrolling interest and tax barrels, was 305,000 BOE per day; |
|---|---|
| • | Generated net cash from operating activities of $1.535 billion, adjusted EBITDAX of$1.957 billion, and quarterly free cash flow of $814 million, more than double the same period in the prior year; |
| --- | --- |
| • | Repurchased 7 million shares of APA common stock during the quarter at an average price of$41.59 per share, followed by an additional 6.9 million shares repurchased in July at an average price of $33.87 per share; |
| --- | --- |
| • | Performed flow tests offshore Suriname at the Krabdagu discovery well; |
| --- | --- |
| • | Increased gross oil production in Egypt and continued significant emissions reductions in the Western Desert;and |
| --- | --- |
| • | Acquired properties within company’s active development area of the Texas Delaware Basin. <br> |
| --- | --- |
HOUSTON, August 3, 2022 – APA Corporation (Nasdaq: APA) today announced its financial and operational results for the second-quarter 2022.
APA reported net income attributable to common stock of $926 million, or $2.71 per diluted share. When adjusted for items that impact the comparability of results, most notably a $129 million release of tax valuation allowance, APA’s second-quarter earnings were $811 million, or $2.37 per diluted share. Net cash provided by operating activities was $1.535 billion, and adjusted EBITDAX was $1.957 billion. The company generated $814 million in free cash flow during the quarter.
“APA delivered strong second-quarter results on a number of fronts. Our diversified, unhedged portfolio benefitted from high prices across all three product streams, and we managed our largest spending categories – capital investment, operating costs, and general & administrative – very well despite an overall challenging supply chain and cost environment,” said John J. Christmann IV, APA’s CEO and president.
Second-Quarter Summary
Second-quarter reported production was 385,000 BOE per day, and adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 305,000 BOE per day. APA’s second-quarter upstream capital investment was $428 million, slightly lower than anticipated.
| APA | CORPORATION ANNOUNCES SECOND-QUARTER 2022 FINANCIAL AND OPERATIONAL RESULTS |
|---|
In the U.S., the company added a third rig in the Permian Basin, which is now drilling at Alpine High. Internationally, the company increased gross oil production in Egypt by more than 7,000 BOE per day from the first quarter and achieved a 92% drilling success rate. In the North Sea, maintenance turnaround at the Forties Field was delivered safely and on-budget, and total depth was reached on the Garten-3 well at Beryl, which is expected to deliver a substantial volume increase in the second half of the year.
Two flow tests were completed offshore Suriname on the Krabdagu discovery well and further appraisal is being planned. Exploration prospects on Block 58 (Dikkop) and Block 53 (Baja) are currently being drilled, with results expected in the coming months.
Across the portfolio, the company has numerous projects underway to reduce emissions and deliver on aggressive near- and medium-term goals for emissions reductions. Excellent progress was achieved during the quarter on this front, particularly in Egypt where the completion of several projects put the company on track to achieve its 2022 goal of reducing upstream routine flaring in-country by more than 40% by yearend.
Also, during the quarter, the company entered into a transaction to acquire properties in the Texas Delaware Basin (primarily in Loving and Reeves counties) near existing operations. The acquired properties have a combination of producing wells, wells in the process of drilling and completion, and an inventory of undrilled locations. The acquisition also brings immediate access to a high-quality drilling rig and experienced crew for ongoing development. The company expects production will average 12,000 to 14,000 BOE per day for the remaining five months of the year. The purchase price was $505 million, and the transaction closed on July 29 for a total cost of $555 million, after including post-effective date adjustments to date.
Capital Return to Shareholders and DebtReduction Progress
Under APA’s capital return framework, the company repurchased 7.0 million shares of common stock during the quarter at an average price of $41.59 per share. Subsequent to the quarter end, in July, APA repurchased 6.9 million shares at an average price of $33.87. Since the inception of its buyback program in October 2021 through the end of July 2022, APA has repurchased 52.3 million shares at an average price of $31.19 per share.
PAGE 2 of 13
| APA | CORPORATION ANNOUNCES SECOND-QUARTER 2022 FINANCIAL AND OPERATIONAL RESULTS |
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On June 30, 2022, net debt was $5 billion, down from $6.7 billion at year-end 2021. In July, the company accessed its revolving credit facility to execute the Texas Delaware Basin acquisition.
Capital and Production Guidance
APA’s full-year capital investment guidance, excluding acquisitions, is unchanged at $1.725 billion. Lease Operating Expense has been increased $50 million to $1.470 billion, which primarily reflects higher fuel costs throughout our operations.
The company is reducing its 2022 adjusted production guidance by approximately 2%, which reflects the net effect of several items, including: the impact of high oil prices on PSC volumes in Egypt, timing delays in the expected well completion schedule in Egypt and the Permian, mixed results from its Austin Chalk delineation program, minor divestitures, and the addition of five months of production from the Texas Delaware Basin acquisition.
Looking Ahead
Christmann concluded, “If recent strip prices hold, we expect to generate approximately $3 billion of free cash flow in 2022, and by yearend, at least $1.8 billion of this capital will be returned to shareholders through dividends and share buybacks. Through July, we have returned just under 50% of this amount.”
“Looking to the back half of the year, our production will increase as the drilling program in Egypt reaches 15 rigs and efficiency levels improve, the rate of well completions increases in the Permian Basin, summer maintenance turnarounds conclude, and the Garten-3 well commences production in the North Sea.”
Conference Call
APA will host a conference call to discuss its second-quarter 2022 results at 10 a.m. Central time, Thursday, August 4. The conference call will be webcast from APA’s website at www.apacorp.com. Following the conference call, a replay will be available for one year on the “Investors” page of the company’s website.
PAGE 3 of 13
| APA | CORPORATION ANNOUNCES SECOND-QUARTER 2022 FINANCIAL AND OPERATIONAL RESULTS |
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About APA
APA Corporation owns consolidated subsidiaries that explore for and produce oil and natural gas in the United States, Egypt and the United Kingdom and that explore for oil and natural gas offshore Suriname and the Dominican Republic. APA posts announcements, operational updates, investor information and press releases on its website, www.apacorp.com. Additional details regarding Suriname, ESG performance and other investor-related topics are posted at investor.apacorp.com.
Additional Information
Additional information follows, including reconciliations of adjusted earnings, adjusted EBITDAX, upstream capital investment, net debt, cash flows from operations before changes in operating assets and liabilities and free cash flow (non-GAAP financial measures) to GAAP measures and information regarding adjusted production. APA’s quarterly supplement is available at http://www.apacorp.com/financialdata.
Non-GAAP Financial Measures
APA’s financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial information. It is management’s intent to provide non-GAAP financial information to enhance understanding of our consolidated financial information as prepared in accordance with GAAP. Adjusted earnings, adjusted EBITDAX, upstream capital investment*,* net debt, cash flows from operations before changes in operating assets and liabilities and free cash flow are non-GAAP measures. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.
PAGE 4 of 13
| APA | CORPORATION ANNOUNCES SECOND-QUARTER 2022 FINANCIAL AND OPERATIONAL RESULTS |
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Forward-Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “continues,” “could,” “estimates,” “expects,” “guidance,” “may,” “might,” “outlook,” “possibly,” “potential,” “projects,” “prospects,” “should,” “will,” “would,” and similar references to future periods, but the absence of these words does not mean that a statement is not forward-looking. These statements include, but are not limited to, statements about future plans, expectations, and objectives for operations, including statements about our capital plans, drilling plans, production expectations, asset sales, and monetizations. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations. See “Risk Factors” in APA’s Form 10-K for the year ended December 31, 2021, and in our quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission for a discussion of risk factors that affect our business. Any forward-looking statement made in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. APA and its subsidiaries undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future development or otherwise, except as may be required by law.
Cautionary Note to Investors
The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC’s definitions for such terms. APA may use certain terms in this news release, such as “resources,” “potential resources,” “resource potential,” “estimated net reserves,” “recoverable reserves,” and other similar terms that the SEC guidelines strictly prohibit APA from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality, and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in APA’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2021 available from APA at www.apacorp.com or by writing APA at: 2000 Post Oak Blvd., Suite 100, Houston, TX 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.
PAGE 5 of 13
| APA | CORPORATION ANNOUNCES SECOND-QUARTER 2022 FINANCIAL AND OPERATIONAL RESULTS |
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Contacts
Investor: (281) 302-2286 Gary Clark
Media: (713) 296-7189 Castlen Kennedy
Website: www.apacorp.com
PAGE 6 of 13
APA CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions, except per share data)
| For the Quarter Ended<br>June 30, | For the Six Months EndedJune 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| REVENUES AND OTHER: | ||||||||||||
| Oil, natural gas, and natural gas liquids production revenues | ||||||||||||
| Oil revenues | $ | 1,863 | $ | 1,141 | $ | 3,580 | $ | 2,132 | ||||
| Natural gas revenues | 433 | 226 | 813 | 538 | ||||||||
| Natural gas liquids revenues | 229 | 147 | 452 | 275 | ||||||||
| 2,525 | 1,514 | 4,845 | 2,945 | |||||||||
| Purchased oil and gas sales | 522 | 242 | 871 | 682 | ||||||||
| Total revenues | 3,047 | 1,756 | 5,716 | 3,627 | ||||||||
| Derivative instrument gain (loss), net | (32 | ) | (113 | ) | (94 | ) | 45 | |||||
| Gain (loss) on divestitures, net | (27 | ) | 65 | 1,149 | 67 | |||||||
| Other, net | 64 | 74 | 109 | 135 | ||||||||
| 3,052 | 1,782 | 6,880 | 3,874 | |||||||||
| OPERATING EXPENSES: | ||||||||||||
| Lease operating expenses | 359 | 311 | 703 | 575 | ||||||||
| Gathering, processing, and transmission | 94 | 61 | 175 | 119 | ||||||||
| Purchased oil and gas costs | 528 | 262 | 879 | 756 | ||||||||
| Taxes other than income | 78 | 51 | 148 | 95 | ||||||||
| Exploration | 56 | 26 | 98 | 75 | ||||||||
| General and administrative | 89 | 86 | 245 | 169 | ||||||||
| Transaction, reorganization, and separation | 3 | 4 | 17 | 4 | ||||||||
| Depreciation, depletion, and amortization: | ||||||||||||
| Oil and gas property and equipment | 269 | 322 | 547 | 634 | ||||||||
| Other assets | 9 | 29 | 22 | 59 | ||||||||
| Asset retirement obligation accretion | 29 | 28 | 58 | 56 | ||||||||
| Financing costs, net | 76 | 107 | 228 | 217 | ||||||||
| 1,590 | 1,287 | 3,120 | 2,759 | |||||||||
| NET INCOME BEFORE INCOME TAXES | 1,462 | 495 | 3,760 | 1,115 | ||||||||
| Current income tax provision | 415 | 131 | 807 | 280 | ||||||||
| Deferred income tax benefit | (20 | ) | (44 | ) | (60 | ) | (23 | ) | ||||
| NET INCOME INCLUDING NONCONTROLLING INTERESTS | 1,067 | 408 | 3,013 | 858 | ||||||||
| Net income attributable to noncontrolling interest—Egypt | 141 | 41 | 260 | 83 | ||||||||
| Net income attributable to noncontrolling interest—Altus | — | 27 | 14 | 28 | ||||||||
| Net income (loss) attributable to Altus Preferred Unit limited partners | — | 24 | (70 | ) | 43 | |||||||
| NET INCOME ATTRIBUTABLE TO COMMON STOCK | $ | 926 | $ | 316 | $ | 2,809 | $ | 704 | ||||
| NET INCOME PER COMMON SHARE: | ||||||||||||
| Basic | $ | 2.72 | $ | 0.83 | $ | 8.18 | $ | 1.86 | ||||
| Diluted | $ | 2.71 | $ | 0.82 | $ | 8.15 | $ | 1.86 | ||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: | ||||||||||||
| Basic | 341 | 378 | 344 | 378 | ||||||||
| Diluted | 342 | 379 | 344 | 379 | ||||||||
| DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.125 | $ | 0.025 | $ | 0.25 | 0.05 |
PAGE 7 of 13
APA CORPORATION
PRODUCTION INFORMATION
| For the Quarter Ended | % Change | For the Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2022 | March 31,2022 | June 30,2021 | 2Q22 to1Q22 | 2Q22 to2Q21 | June 30,2022 | June 30,2021 | ||||||||||
| OIL VOLUME—Barrels per day | ||||||||||||||||
| United States | 64,759 | 69,636 | 82,852 | -7 | % | -22 | % | 67,184 | 75,313 | |||||||
| Egypt ^(1, 2)^ | 85,502 | 85,018 | 71,182 | 1 | % | 20 | % | 85,261 | 71,673 | |||||||
| North Sea | 32,493 | 35,242 | 31,992 | -8 | % | 2 | % | 33,860 | 37,726 | |||||||
| International ^(1)^ | 117,995 | 120,260 | 103,174 | -2 | % | 14 | % | 119,121 | 109,399 | |||||||
| Total ^(1)^ | 182,754 | 189,896 | 186,026 | -4 | % | -2 | % | 186,305 | 184,712 | |||||||
| NATURAL GAS VOLUME—Mcf per day | ||||||||||||||||
| United States | 457,459 | 477,637 | 541,088 | -4 | % | -15 | % | 467,493 | 524,396 | |||||||
| Egypt ^(1, 2)^ | 346,424 | 386,577 | 256,262 | -10 | % | 35 | % | 366,390 | 267,145 | |||||||
| North Sea | 42,802 | 38,466 | 36,769 | 11 | % | 16 | % | 40,645 | 43,268 | |||||||
| International ^(1)^ | 389,226 | 425,043 | 293,031 | -8 | % | 33 | % | 407,035 | 310,413 | |||||||
| Total ^(1)^ | 846,685 | 902,680 | 834,119 | -6 | % | 2 | % | 874,528 | 834,809 | |||||||
| NGL VOLUME—Barrels per day | ||||||||||||||||
| United States | 59,267 | 61,711 | 68,492 | -4 | % | -13 | % | 60,482 | 63,183 | |||||||
| Egypt ^(1, 2)^ | 297 | 491 | 553 | -40 | % | -46 | % | 394 | 568 | |||||||
| North Sea | 1,195 | 1,498 | 1,095 | -20 | % | 9 | % | 1,345 | 1,231 | |||||||
| International ^(1)^ | 1,492 | 1,989 | 1,648 | -25 | % | -9 | % | 1,739 | 1,799 | |||||||
| Total ^(1)^ | 60,759 | 63,700 | 70,140 | -5 | % | -13 | % | 62,221 | 64,982 | |||||||
| BOE per day | ||||||||||||||||
| United States | 200,269 | 210,953 | 241,525 | -5 | % | -17 | % | 205,582 | 225,895 | |||||||
| Egypt ^(1, 2)^ | 143,536 | 149,938 | 114,445 | -4 | % | 25 | % | 146,720 | 116,765 | |||||||
| North Sea | 40,822 | 43,151 | 39,216 | -5 | % | 4 | % | 41,979 | 46,169 | |||||||
| International ^(1)^ | 184,358 | 193,089 | 153,661 | -5 | % | 20 | % | 188,699 | 162,934 | |||||||
| Total ^(1)^ | 384,627 | 404,042 | 395,186 | -5 | % | -3 | % | 394,281 | 388,829 | |||||||
| Total excluding noncontrolling interests | 336,756 | 354,089 | 356,981 | -5 | % | -6 | % | 345,375 | 349,844 | |||||||
| ^(1)^ Includes net production<br>volumes attributed to our noncontrolling partner in Egypt below: | ||||||||||||||||
| Oil (b/d) | 28,516 | 28,328 | 23,759 | 28,423 | 23,923 | |||||||||||
| Gas (Mcf/d) | 115,534 | 128,764 | 85,574 | 122,112 | 89,235 | |||||||||||
| NGL (b/d) | 99 | 164 | 184 | 131 | 189 | |||||||||||
| BOE per day | 47,871 | 49,953 | 38,205 | -4 | % | 25 | % | 48,906 | 38,985 | |||||||
| ^(2)^ Egypt Gross Production | ||||||||||||||||
| Oil (b/d) | 141,432 | 134,397 | 135,494 | 137,934 | 135,408 | |||||||||||
| Gas (Mcf/d) | 555,694 | 597,812 | 578,380 | 576,637 | 590,756 | |||||||||||
| NGL (b/d) | 464 | 735 | 866 | 599 | 881 | |||||||||||
| BOE per day | 234,512 | 234,767 | 232,757 | 0 | % | 1 | % | 234,639 | 234,748 |
PAGE 8 of 13
APA CORPORATION
ADJUSTED PRODUCTION INFORMATION
Adjusted production excludes certain items that management believes affect the comparability of operating results for the periods presented. Adjusted production excludes production attributable to 1) noncontrolling interest in Egypt and 2) Egypt tax barrels. Management uses adjusted production to evaluate the company’s operational trends and performance and believes it is useful to investors and other third parties.
| For the Quarter Ended | % Change | For the Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2022 | March 31,2022 | June 30,2021 | 2Q22 to1Q22 | 2Q22 to2Q21 | June 30,2022 | June 30,2021 | ||||||||||
| OIL VOLUME —Barrels per day | ||||||||||||||||
| United States | 64,759 | 69,636 | 82,852 | -7 | % | -22 | % | 67,184 | 75,313 | |||||||
| Egypt | 37,934 | 38,784 | 36,753 | -2 | % | 3 | % | 38,357 | 36,886 | |||||||
| North Sea | 32,493 | 35,242 | 31,992 | -8 | % | 2 | % | 33,860 | 37,726 | |||||||
| International | 70,427 | 74,026 | 68,745 | -5 | % | 2 | % | 72,217 | 74,612 | |||||||
| Total | 135,186 | 143,662 | 151,597 | -6 | % | -11 | % | 139,401 | 149,925 | |||||||
| NATURAL GAS VOLUME—Mcf per day | ||||||||||||||||
| United States | 457,459 | 477,637 | 541,088 | -4 | % | -15 | % | 467,493 | 524,396 | |||||||
| Egypt | 152,775 | 175,509 | 144,712 | -13 | % | 6 | % | 164,079 | 148,870 | |||||||
| North Sea | 42,802 | 38,466 | 36,769 | 11 | % | 16 | % | 40,645 | 43,268 | |||||||
| International | 195,577 | 213,975 | 181,481 | -9 | % | 8 | % | 204,724 | 192,138 | |||||||
| Total | 653,036 | 691,612 | 722,569 | -6 | % | -10 | % | 672,217 | 716,534 | |||||||
| NGL VOLUME—Barrels per day | ||||||||||||||||
| United States | 59,267 | 61,711 | 68,492 | -4 | % | -13 | % | 60,482 | 63,183 | |||||||
| Egypt | 133 | 225 | 300 | -41 | % | -56 | % | 179 | 305 | |||||||
| North Sea | 1,195 | 1,498 | 1,095 | -20 | % | 9 | % | 1,345 | 1,231 | |||||||
| International | 1,328 | 1,723 | 1,395 | -23 | % | -5 | % | 1,524 | 1,536 | |||||||
| Total | 60,595 | 63,434 | 69,887 | -4 | % | -13 | % | 62,006 | 64,719 | |||||||
| BOE per day | ||||||||||||||||
| United States | 200,269 | 210,953 | 241,525 | -5 | % | -17 | % | 205,582 | 225,895 | |||||||
| Egypt | 63,530 | 68,261 | 61,172 | -7 | % | 4 | % | 65,882 | 62,003 | |||||||
| North Sea | 40,822 | 43,151 | 39,216 | -5 | % | 4 | % | 41,979 | 46,169 | |||||||
| International | 104,352 | 111,412 | 100,388 | -6 | % | 4 | % | 107,861 | 108,172 | |||||||
| Total | 304,621 | 322,365 | 341,913 | -6 | % | -11 | % | 313,443 | 334,067 |
PAGE 9 of 13
APA CORPORATION
PRICE INFORMATION
| For the Quarter Ended | For the Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2022 | March 31,2022 | June 30,2021 | June 30,2022 | June 30,2021 | ||||||
| AVERAGE OIL PRICE PER BARREL | ||||||||||
| United States | $ | 110.98 | $ | 95.58 | $ | 65.32 | $ | 103.05 | $ | 61.68 |
| Egypt | 115.97 | 103.22 | 66.70 | 109.65 | 64.30 | |||||
| North Sea | 113.77 | 102.20 | 68.34 | 107.47 | 63.48 | |||||
| International | 115.40 | 102.92 | 67.24 | 109.05 | 64.00 | |||||
| Total | 113.79 | 100.23 | 66.40 | 106.87 | 63.06 | |||||
| AVERAGE NATURAL GAS PRICE PER MCF | ||||||||||
| United States | $ | 6.75 | $ | 4.25 | $ | 2.73 | $ | 5.48 | $ | 3.63 |
| Egypt | 2.78 | 2.83 | 2.80 | 2.80 | 2.80 | |||||
| North Sea | 18.15 | 32.35 | 8.10 | 24.72 | 7.43 | |||||
| International | 4.33 | 5.21 | 3.46 | 4.79 | 3.44 | |||||
| Total | 5.65 | 4.70 | 2.99 | 5.16 | 3.56 | |||||
| AVERAGE NGL PRICE PER BARREL | ||||||||||
| United States | $ | 39.79 | $ | 36.67 | $ | 22.72 | $ | 38.20 | $ | 22.84 |
| Egypt | 75.14 | 77.81 | 38.10 | 76.80 | 41.49 | |||||
| North Sea | 71.71 | 74.64 | 38.79 | 73.29 | 44.21 | |||||
| International | 72.17 | 75.20 | 38.56 | 73.84 | 43.35 | |||||
| Total | 40.97 | 38.33 | 23.10 | 39.63 | 23.41 |
PAGE 10 of 13
APA CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
(In millions)
SUMMARY EXPLORATION EXPENSE INFORMATION
| For the Quarter EndedJune 30, | For the Six MonthsEnded June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Unproved leasehold impairments | $ | 2 | $ | 3 | $ | 6 | $ | 21 |
| Dry hole expense | 36 | 6 | 41 | 25 | ||||
| Geological and geophysical expense | 3 | 6 | 18 | 10 | ||||
| Exploration overhead and other | 15 | 11 | 33 | 19 | ||||
| $ | 56 | $ | 26 | $ | 98 | $ | 75 |
SUMMARY CASH FLOW INFORMATION
| For the Quarter EndedJune 30, | For the Six Months EndedJune 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Net cash provided by operating activities | $ | 1,535 | $ | 969 | $ | 2,426 | $ | 1,640 | ||||
| Additions to upstream oil and gas property | (389 | ) | (306 | ) | (767 | ) | (561 | ) | ||||
| Proceeds from sale of oil and gas properties | (16 | ) | 178 | 751 | 181 | |||||||
| Proceeds from sale of Kinetik shares | — | — | 224 | — | ||||||||
| Deconsolidation of Altus cash and cash equivalents | — | — | (143 | ) | — | |||||||
| Other, net | (45 | ) | 2 | (49 | ) | (13 | ) | |||||
| Net cash provided by (used in) investing activities | $ | (450 | ) | $ | (126 | ) | $ | 16 | $ | (393 | ) | |
| Payments on revolving credit facilities, net | (605 | ) | (65 | ) | (267 | ) | (150 | ) | ||||
| Proceeds from Altus credit facility | — | — | — | 33 | ||||||||
| Payments on Apache fixed-rate debt | — | (14 | ) | (1,370 | ) | (20 | ) | |||||
| Distributions to noncontrolling interest—Egypt | (90 | ) | (20 | ) | (159 | ) | (60 | ) | ||||
| Distributions to Altus Preferred Unit limited partners | — | (12 | ) | (11 | ) | (23 | ) | |||||
| Treasury stock activity, net | (291 | ) | — | (552 | ) | — | ||||||
| Dividends paid to APA common stockholders | (43 | ) | (10 | ) | (86 | ) | (19 | ) | ||||
| Other | (8 | ) | (11 | ) | (17 | ) | (21 | ) | ||||
| Net cash used in financing activities | $ | (1,037 | ) | $ | (132 | ) | $ | (2,462 | ) | $ | (260 | ) |
SUMMARY BALANCE SHEET INFORMATION
| June 30,2022 | December 31,2021 | ||||
|---|---|---|---|---|---|
| Cash and cash equivalents | $ | 282 | $ | 302 | |
| Other current assets | 2,801 | 2,078 | |||
| Property and equipment, net | 8,231 | 8,335 | |||
| Decommissioning security for sold Gulf of Mexico properties | 383 | 640 | |||
| Other assets | 1,227 | 1,948 | |||
| Total assets | $ | 12,924 | $ | 13,303 | |
| Current debt | $ | 125 | $ | 215 | |
| Current liabilities | 2,688 | 1,902 | |||
| Long-term debt | 5,160 | 6,638 | |||
| Long-term debt—Altus | — | 657 | |||
| Decommissioning contingency for sold Gulf of Mexico properties | 825 | 1,086 | |||
| Deferred credits and other noncurrent liabilities | 2,621 | 2,810 | |||
| Redeemable noncontrolling interest—Altus Preferred Unit limited partners | — | 712 | |||
| APA shareholders’ equity (deficit) | 584 | (1,595 | ) | ||
| Noncontrolling interest—Egypt | 921 | 820 | |||
| Noncontrolling interest—Altus | — | 58 | |||
| Total Liabilities and equity | $ | 12,924 | $ | 13,303 | |
| Common shares outstanding at end of period | 333 | 347 |
PAGE 11 of 13
APA CORPORATION
NON-GAAP FINANCIAL MEASURES
(In millions, except per share data)
Reconciliation of Costs incurred to Upstream capital investment
Management believes the presentation of upstream capital investments is useful for investors to assess APA’s expenditures related to our upstream capital activity. We define capital investments as costs incurred for oil and gas activities, adjusted to exclude asset retirement obligation revisions and liabilities incurred, capitalized interest, and certain exploration expenses, while including amounts paid during the period for abandonment and decommissioning expenditures. Upstream capital expenditures attributable to a one-third noncontrolling interest in Egypt are also excluded. Management believes this provides a more accurate reflection of APA’s cash expenditures related to upstream capital activity and is consistent with how we plan our capital budget.
| For the Quarter EndedJune 30, | For the Six Months EndedJune 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Costs incurred in oil and gas property: | ||||||||||||
| Acquisitions | ||||||||||||
| Proved | $ | — | $ | 2 | $ | 9 | $ | 3 | ||||
| Unproved | 6 | 1 | 17 | 3 | ||||||||
| Exploration and development | 492 | 304 | 911 | 588 | ||||||||
| Total Costs incurred in oil and gas property | $ | 498 | $ | 307 | $ | 937 | $ | 594 | ||||
| Reconciliation of Costs incurred to Upstream capital investment: | ||||||||||||
| Total Costs incurred in oil and gas property | $ | 498 | $ | 307 | $ | 937 | $ | 594 | ||||
| Asset retirement obligations settled vs. incurred—oil and gas property | 7 | 6 | 14 | 8 | ||||||||
| Capitalized interest | (5 | ) | (2 | ) | (8 | ) | (4 | ) | ||||
| Exploration seismic and administration costs | (18 | ) | (17 | ) | (51 | ) | (29 | ) | ||||
| Upstream capital investment including noncontrolling interest—Egypt | $ | 482 | $ | 294 | $ | 892 | $ | 569 | ||||
| Less noncontrolling interest—Egypt | (54 | ) | (37 | ) | (103 | ) | (69 | ) | ||||
| Total Upstream capital investment | $ | 428 | $ | 257 | $ | 789 | $ | 500 |
Reconciliation of Net cash provided by operating activities to Cash flows from operations before changes in operatingassets and liabilities and Free cash flow
Cash flows from operations before changes in operating assets and liabilities and free cash flow are non-GAAP financial measures. APA uses these measures internally and provides this information because management believes it is useful in evaluating the company’s ability to generate cash to internally fund exploration and development activities, fund dividend programs, and service debt, as well as to compare our results from period to period. We believe these measures are also used by research analysts and investors to value and compare oil and gas exploration and production companies and are frequently included in published research reports when providing investment recommendations. Cash flows from operations before changes in operating assets and liabilities and free cash flow are additional measures of liquidity but are not measures of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities. Additionally, this presentation of free cash flow may not be comparable to similar measures presented by other companies in our industry.
| For the Quarter EndedJune 30, | For the Six Months EndedJune 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Net cash provided by operating activities | $ | 1,535 | $ | 969 | $ | 2,426 | $ | 1,640 | ||||
| Changes in operating assets and liabilities | (149 | ) | (212 | ) | 114 | (37 | ) | |||||
| Cash flows from operations before changes in operating assets and liabilities | $ | 1,386 | $ | 757 | $ | 2,540 | $ | 1,603 | ||||
| Adjustments to free cash flow: | ||||||||||||
| Altus Midstream cash flows from operations before changes in operating assets and<br>liabilities | — | (56 | ) | — | (95 | ) | ||||||
| Upstream capital investment including noncontrolling interest—Egypt | (482 | ) | (294 | ) | (892 | ) | (569 | ) | ||||
| Distributions to Sinopec noncontrolling interest | (90 | ) | (20 | ) | (159 | ) | (60 | ) | ||||
| Upstream free cash flow | $ | 814 | $ | 387 | $ | 1,489 | $ | 879 | ||||
| Cash dividends received from Altus Midstream | — | 19 | — | 38 | ||||||||
| Free cash flow | $ | 814 | $ | 406 | $ | 1,489 | $ | 917 |
Reconciliation of Net cash provided by operating activities to Adjusted EBITDAX
Management believes EBITDAX, or earnings before income tax expense, interest expense, depreciation, amortization and exploration expense is a widely accepted financial indicator, and useful for investors, to assess a company’s ability to incur and service debt, fund capital expenditures, and make distributions to shareholders. We define adjusted EBITDAX, a non-GAAP financial measure, as EBITDAX adjusted for certain items presented in the accompanying reconciliation. Management uses adjusted EBITDAX to evaluate our ability to fund our capital expenditures, debt services and other operational requirements and to compare our results from period to period by eliminating the impact of certain items that management does not consider to be representative of the Company’s on-going operations. Management also believes adjusted EBITDAX facilitates investors and analysts in evaluating and comparing EBITDAX from period to period by eliminating differences caused by the existence and timing of certain operating expenses that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted EBITDAX may not be comparable to similar measures of other companies in our industry.
| For the Quarter Ended | For the Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | March 31, | June 30, | June 30, | ||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||
| Net cash provided by operating activities | $ | 1,535 | $ | 891 | $ | 969 | $ | 2,426 | $ | 1,640 | |||
| Adjustments: | |||||||||||||
| Exploration expense other than dry hole expense and unproved leasehold impairments | 18 | 33 | 17 | 51 | 29 | ||||||||
| Current income tax provision | 415 | 392 | 131 | 807 | 280 | ||||||||
| Other adjustments to reconcile net income (loss) to net cash provided by operating<br>activities | 59 | 29 | (6 | ) | 88 | 14 | |||||||
| Changes in operating assets and liabilities | (149 | ) | 263 | (212 | ) | 114 | (37 | ) | |||||
| Financing costs, net | 76 | 85 | 108 | 161 | 218 | ||||||||
| Transaction, reorganization & separation costs | 3 | 14 | 4 | 17 | 4 | ||||||||
| Adjusted EBITDAX (Non-GAAP) | $ | 1,957 | $ | 1,707 | $ | 1,011 | $ | 3,664 | $ | 2,148 |
PAGE 12 of 13
APA CORPORATION
NON-GAAP FINANCIAL MEASURES
(In millions)
Reconciliation of debt tonet debt
Net debt, or outstanding debt obligations less cash and cash equivalents, is a non-GAAP financial measure. Management uses net debt as a measure of the Company’s outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. The Altus Midstream LP credit facility is unsecured and is not guaranteed by APA or any of APA’s other subsidiaries.
| June 30, 2022 | December 31, 2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| APA | Altus | APA | APA | Altus | APA | |||||||
| Upstream | Midstream | Consolidated | Upstream | Midstream | Consolidated | |||||||
| Current debt | $ | 125 | $ | — | $ | 125 | $ | 215 | $ | — | $ | 215 |
| Long-term debt | 5,160 | — | 5,160 | 6,638 | — | 6,638 | ||||||
| Long-term debt—Altus | — | — | — | — | 657 | 657 | ||||||
| Total debt | 5,285 | — | 5,285 | 6,853 | 657 | 7,510 | ||||||
| Cash and cash equivalents | 282 | — | 282 | 170 | 132 | 302 | ||||||
| Net debt | $ | 5,003 | $ | — | $ | 5,003 | $ | 6,683 | $ | 525 | $ | 7,208 |
Reconciliation of Income attributable to common stock to Adjusted earnings
Our presentation of adjusted earnings and adjusted earnings per share are non-GAAP measures because they exclude the effect of certain items included in Income Attributable to Common Stock. Management believes that adjusted earnings and adjusted earnings per share provides relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management in assessing the Company’s operational trends and comparability of results to our peers.
Management uses adjusted earnings and adjusted earnings per share to evaluate our operating and financial performance because it eliminates the impact of certain items that management does not consider to be representative of the Company’s on-going business operations. As a performance measure, adjusted earnings may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, capital structure and asset sales and other divestitures, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted earnings and adjusted earnings per share may not be comparable to similar measures of other companies in our industry.
| For the Quarter Ended | For the Quarter Ended | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||
| Before | Tax | After | Diluted | Before | Tax | After | Diluted | |||||||||||||||||
| Tax | Impact | Tax | EPS | Tax | Impact | Tax | EPS | |||||||||||||||||
| Net income including noncontrolling interests (GAAP) | $ | 1,462 | $ | 395 | ) | $ | 1,067 | $ | 3.12 | $ | 495 | $ | (87) | $ | 408 | $ | 1.07 | |||||||
| Income attributable to noncontrolling interests | 251 | (110 | ) | 141 | 0.41 | 104 | (36 | ) | 68 | 0.18 | ||||||||||||||
| Income attributable to Altus preferred unit limited partner | — | — | — | — | 24 | — | 24 | 0.06 | ||||||||||||||||
| Net income attributable to common stock—Basic | 1,211 | (285 | ) | 926 | 2.71 | 367 | (51 | ) | 316 | 0.83 | ||||||||||||||
| Effect of dilutive securities ** | — | — | — | — | (6 | ) | — | (6 | ) | (0.01 | ) | |||||||||||||
| Net income attributable to common stock | 1,211 | (285 | ) | 926 | 2.71 | 361 | (51 | ) | 310 | 0.82 | ||||||||||||||
| Adjustments:* | ||||||||||||||||||||||||
| Asset and unproved leasehold impairments | 2 | — | 2 | — | 3 | — | 3 | 0.01 | ||||||||||||||||
| Valuation allowance and other tax adjustments | — | (129 | ) | (129 | ) | (0.38 | ) | — | (60 | ) | (60 | ) | (0.16 | ) | ||||||||||
| Gain on extinguishment of debt | — | — | — | — | (1 | ) | — | (1 | ) | — | ||||||||||||||
| Unrealized derivative instrument loss and related Altus Preferred impacts | 26 | (6 | ) | 20 | 0.06 | 72 | (15 | ) | 57 | 0.15 | ||||||||||||||
| Kinetik equity investment<br>mark-to-market gain | (29 | ) | — | (29 | ) | (0.08 | ) | — | — | — | — | |||||||||||||
| Effect of dilutive securities ** | — | — | — | — | 6 | — | 6 | 0.01 | ||||||||||||||||
| Transaction, reorganization & separation costs | 3 | (1 | ) | 2 | 0.01 | 4 | (1 | ) | 3 | 0.01 | ||||||||||||||
| (Gain) / loss on divestitures, net | 27 | (6 | ) | 21 | 0.06 | (65 | ) | 14 | (51 | ) | (0.13 | ) | ||||||||||||
| Other | (3 | ) | 1 | (2 | ) | (0.01 | ) | (1 | ) | — | (1 | ) | (0.01 | ) | ||||||||||
| Adjusted earnings (Non-GAAP) | $ | 1,237 | $ | (426 | ) | $ | 811 | $ | 2.37 | $ | 379 | $ | (113 | ) | $ | 266 | $ | 0.70 | ||||||
| For the Six Months Ended | For the Six Months Ended | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||
| Before | Tax | After | Diluted | Before | Tax | After | Diluted | |||||||||||||||||
| Tax | Impact | Tax | EPS | Tax | Impact | Tax | EPS | |||||||||||||||||
| Net income including noncontrolling interests (GAAP) | $ | 3,760 | $ | (747) | $ | 3,013 | $ | 8.75 | $ | 1,115 | $ | (257) | $ | 858 | $ | 2.26 | ||||||||
| Income attributable to noncontrolling interests | 478 | (204 | ) | 274 | 0.80 | 182 | (71 | ) | 111 | 0.29 | ||||||||||||||
| Income (loss) attributable to Altus preferred unit limited partner | (70 | ) | — | (70 | ) | (0.20 | ) | 43 | — | 43 | 0.11 | |||||||||||||
| Net income attributable to common stock | 3,352 | (543 | ) | 2,809 | 8.15 | 890 | (186 | ) | 704 | 1.86 | ||||||||||||||
| Adjustments:* | ||||||||||||||||||||||||
| Asset and unproved leasehold impairments | 6 | (1 | ) | 5 | 0.02 | 21 | (4 | ) | 17 | 0.05 | ||||||||||||||
| Noncontrolling interest & tax barrel impact on Egypt adjustments | — | — | — | — | (1 | ) | — | (1 | ) | — | ||||||||||||||
| Valuation allowance and other tax adjustments | — | (316 | ) | (316 | ) | (0.92 | ) | — | (103 | ) | (103 | ) | (0.27 | ) | ||||||||||
| (Gain)/loss on extinguishment of debt | 67 | (14 | ) | 53 | 0.15 | (1 | ) | — | (1 | ) | — | |||||||||||||
| Unrealized derivative instrument loss and related Altus Preferred impacts | 11 | (11 | ) | — | — | 58 | (12 | ) | 46 | 0.12 | ||||||||||||||
| Kinetik equity investment<br>mark-to-market gain | (53 | ) | — | (53 | ) | (0.15 | ) | — | — | — | — | |||||||||||||
| Transaction, reorganization & separation costs | 17 | (4 | ) | 13 | 0.04 | 4 | (1 | ) | 3 | 0.01 | ||||||||||||||
| Gain on divestitures, net | (1,149 | ) | 119 | (1,030 | ) | (2.99 | ) | (67 | ) | 15 | (52 | ) | (0.14 | ) | ||||||||||
| Other | (3 | ) | 1 | (2 | ) | (0.01 | ) | (1 | ) | — | (1 | ) | (0.01 | ) | ||||||||||
| Adjusted Earnings (Non-GAAP) | $ | 2,248 | $ | (769 | ) | $ | 1,479 | $ | 4.29 | $ | 903 | $ | (291 | ) | $ | 612 | $ | 1.62 | ||||||
| * | The income tax effect of the reconciling items are calculated based on the statutory rate of the jurisdiction<br>in which the discrete item resides. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| ** | The assumed conversion of Altus’ Preferred Unit limited partner is primarily associated with unrealized<br>gains on the Preferred Unit embedded derivative. These amounts are antidilutive for the second quarter 2021. | |||||||||||||||||||||||
| --- | --- |
PAGE 13 of 13