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APA Corp Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company is very pleased with the early results and expects YoY gas production to increase for the first time in over a decade.
- The company has made good progress on restructuring its organization, starting with the reduction in its officer count.
- The company is pleased with the early results and expects YoY gas production to increase for the first time in over a decade.
- The company is pleased with the early results and expects YoY gas production to increase for the first time in over a decade.
- Lease operating expense in Q4 was slightly higher than guidance, due to an extra North Sea cargo lifting in the quarter.
- The company had some weather downtime in Q1.
- The company believes the third party's cash costs for these activities remain too high.
- The company reported consolidated net income of $354 million or $0.96 per diluted common share in Q4, including items outside of core earnings, such as a $224 million US deferred tax benefit related to the write-off of APA's investment in UK subsidiaries and a $190 million increase in net liability on the former Fieldwood properties.
- The company expects adjusted production in Egypt to grow slightly YoY, with a modest decline in gross volumes.
- The company expects gross gas production to grow YoY.
- The company expects to deliver higher total adjusted production in 2025 compared to 2024.
- The company expects to right size its entire cost structure to achieve a long-term, purposeful, and sustainable outcome.
- The company continues to believe its shares offer a compelling value and will be inclined to lean into the buyback program at such prices.
Q&A Highlights from APA Corp Earnings Call Q4 2024
- Analyst asked about the company's continued prioritization of share buybacks despite the decline in share price.
- The company explained that they are working on both sides of the equation, buying back shares and debt, and that they have a $40 price target on the company, which would lead to potential appreciation. They also mentioned that their shareholders support the buyback program.
- The company explained that they are working on both sides of the equation, buying back shares and debt, and that they have a $40 price target on the company, which would lead to potential appreciation. They also mentioned that their shareholders support the buyback program.
- Analyst asked about the status of the Sockeye exploration well in Alaska and how it relates to the company's previous drilling season.
- The company stated that operations are going well and smoothly, but they are not yet in a position to comment on the results. They confirmed that things are on track and going well operationally, and they are eagerly awaiting the results.
- The company stated that operations are going well and smoothly, but they are not yet in a position to comment on the results. They confirmed that things are on track and going well operationally, and they are eagerly awaiting the results.
- Analyst asked about the delineation of zones and how much capital is being allocated to that for 2023.
- The company is testing new zones and landing zones in the Permian, and they always sprinkle a few of those in their exploration. They are currently running eight rigs in the Permian and are looking to come back to that number.
- The company is testing new zones and landing zones in the Permian, and they always sprinkle a few of those in their exploration. They are currently running eight rigs in the Permian and are looking to come back to that number.
- Analyst asked about APA Corporation's 12-rig activity and how it balances between oil and gas drilling.
- APA Corporation has dedicated one of its 12 rigs to gas drilling, focusing on high-gas-yield wells with liquids and condensate. The company has been able to drill some good wells and bring them into infrastructure, which is why they're running strong on the gas side. They plan to shift another rig or two to gas this year, maintaining the 12 rigs but running 2-3 rigs on the gas program. The company is anxious to get to some exploration targets, but they need to eliminate bottlenecks for capacity or find ways to pipe the gas into areas where they can trade it.
- APA Corporation has dedicated one of its 12 rigs to gas drilling, focusing on high-gas-yield wells with liquids and condensate. The company has been able to drill some good wells and bring them into infrastructure, which is why they're running strong on the gas side. They plan to shift another rig or two to gas this year, maintaining the 12 rigs but running 2-3 rigs on the gas program. The company is anxious to get to some exploration targets, but they need to eliminate bottlenecks for capacity or find ways to pipe the gas into areas where they can trade it.
- Analyst asked about APA Corporation's receivable situation and whether they have started to see a paydown of that.
- APA Corporation's receivable situation has been stable, with past due balances moving within a tight band due to timing. They do have reason to believe that they will make progress on that, with the Egyptian government committed to making progress on their payments. However, the increase in receivables in the quarter was not due to an increase in receivables but rather an increase in drilling long lead, which is inventory for the drilling program.
- APA Corporation's receivable situation has been stable, with past due balances moving within a tight band due to timing. They do have reason to believe that they will make progress on that, with the Egyptian government committed to making progress on their payments. However, the increase in receivables in the quarter was not due to an increase in receivables but rather an increase in drilling long lead, which is inventory for the drilling program.
- Analyst asked about the company's assessment of its years of inventory life in both the Delaware and Midland basins.
- The company is confident that it can see through 2029, into the next decade, and that it will continue to add more locations than it drills. The company has good visibility to the end of this decade with the program it's running today, and it's confident that it can hold flat through that time period.
- The company is confident that it can see through 2029, into the next decade, and that it will continue to add more locations than it drills. The company has good visibility to the end of this decade with the program it's running today, and it's confident that it can hold flat through that time period.
- Analyst asked about the company's strategy if it doesn't see a price response in its shares.
- The company will continue to buy back stock and invest in itself, believing in the asset base and the free cash flow coming in.
- The company will continue to buy back stock and invest in itself, believing in the asset base and the free cash flow coming in.
- Analyst asked about the logistical constraints in Egypt and if the company's top line rig count will be a constraint.
- The company is in a good place with its current rig count, and the constraint is not the top line rig count, but rather getting to the opportunities and using the infrastructure efficiently. The company plans to focus on bringing on the low-hanging fruit and then drilling nicer prospects to gather information for future infrastructure development.
- The company is in a good place with its current rig count, and the constraint is not the top line rig count, but rather getting to the opportunities and using the infrastructure efficiently. The company plans to focus on bringing on the low-hanging fruit and then drilling nicer prospects to gather information for future infrastructure development.
- Analyst asked about the possibility of accelerating production in the Permian time horizon.
- The company has inventory depth to accelerate production, but it wants to focus on execution mode and delivering cost efficiencies while running flat. The company's differentiated strategy around exploration means that it doesn't need to grow the base production volume in the Permian or Egypt. Instead, exploration provides the growth for the future.
- The company has inventory depth to accelerate production, but it wants to focus on execution mode and delivering cost efficiencies while running flat. The company's differentiated strategy around exploration means that it doesn't need to grow the base production volume in the Permian or Egypt. Instead, exploration provides the growth for the future.
