APA(APA) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the company's consolidated financial statements, management's analysis of operations and liquidity, market risk disclosures, and internal controls Item 1. Financial Statements The company reported a net income attributable to common stock of $132 million for Q1 2024, a decrease from $242 million in Q1 2023, with diluted EPS falling to $0.44 from $0.78. Total revenues were slightly down at $1.95 billion. Net cash from operations increased to $368 million. The balance sheet shows total assets of $14.95 billion and total equity of $3.65 billion as of March 31, 2024. Key events include the post-quarter acquisition of Callon Petroleum, the sale of Kinetik shares, and ongoing management of significant decommissioning liabilities for sold Gulf of Mexico properties Statement of Consolidated Operations This statement details the company's revenues, expenses, net income, and diluted earnings per share for the reported periods Q1 2024 vs Q1 2023 Statement of Operations (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $1,951 | $2,008 | | Total Operating Expenses | $1,456 | $1,220 | | Net Income Before Income Taxes | $447 | $810 | | Net Income Attributable to Common Stock | $132 | $242 | | Diluted EPS | $0.44 | $0.78 | | Weighted-Average Diluted Shares | 302 | 312 | - Key drivers for the decrease in net income include a $66 million loss on previously sold Gulf of Mexico properties, a $96 million increase in exploration expenses, and a $98 million increase in depreciation, depletion, and amortization (DD&A) compared to the prior-year period[12] Statement of Consolidated Cash Flows This statement presents the company's cash flows from operating, investing, and financing activities for the reported periods Q1 2024 vs Q1 2023 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $368 | $335 | | Net Cash Used in Investing Activities | $(88) | $(532) | | Net Cash Provided by (Used in) Financing Activities | $(265) | $106 | | Net Increase (Decrease) in Cash | $15 | $(91) | - Investing activities in Q1 2024 included $467 million for additions to upstream oil and gas property, offset by $428 million in proceeds from the sale of Kinetik shares. Financing activities included $101 million for treasury stock repurchases and $76 million in dividend payments[16] Consolidated Balance Sheet This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Balance Sheet Summary (in millions) | Account | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $102 | $87 | | Total Current Assets | $2,506 | $2,462 | | Total Assets | $14,952 | $15,244 | | Total Current Liabilities | $2,152 | $2,404 | | Long-Term Debt | $5,178 | $5,186 | | Total Liabilities | $11,299 | $11,553 | | Total Equity | $3,653 | $3,691 | Notes to Consolidated Financial Statements These notes provide detailed explanations of significant accounting policies, transactions, and contingent liabilities impacting the financial statements - On April 1, 2024, subsequent to the reporting period, APA completed its acquisition of Callon Petroleum Company in an all-stock transaction valued at approximately $4.5 billion, including debt[43] - On March 18, 2024, the Company sold its remaining shares in Kinetik Holdings Inc. for cash proceeds of $428 million[45][62] - The company has a contingent liability of $847 million as of March 31, 2024, for potential decommissioning costs of legacy Gulf of Mexico properties sold to Fieldwood and other operators. A loss of $66 million related to these properties was recognized in Q1 2024[108] - In Q1 2024, the company repurchased approximately 3.0 million shares for $101 million. As of March 31, 2024, authorization remained to repurchase up to 40.9 million shares[111] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported Q1 2024 net income of $132 million, down from Q1 2023, primarily due to higher DD&A, exploration expenses, and a loss on sold Gulf of Mexico assets. Total production was slightly down at 389.2 Mboe/d, with U.S. volumes increasing 6% while Egypt and North Sea declined. The company completed the $4.5 billion acquisition of Callon Petroleum post-quarter end and revised its full-year 2024 capital investment estimate to $2.7 billion. The company remains committed to its capital return framework, having repurchased $101 million of stock and paid $76 million in dividends during the quarter. Liquidity remains strong with $102 million in cash and $2.9 billion in available borrowing capacity Financial and Operational Highlights This section summarizes key financial results, significant corporate transactions, and operational performance across various regions - Reported net income attributable to common stock was $132 million ($0.44 per diluted share) in Q1 2024, compared to $242 million ($0.78 per diluted share) in Q1 2023[125] - On April 1, 2024, APA completed its acquisition of Callon Petroleum Company in an all-stock transaction valued at approximately $4.5 billion, including debt. The acquired assets add approximately 145,000 net acres in the Permian Basin[127] - U.S. daily production increased 6% YoY, with oil production up 16%. The company plans to increase its U.S. rig count from six to an average of ten for the remainder of 2024 to integrate Callon's operations[128] - Egypt's net equivalent production decreased 8% YoY, though daily oil production remained flat. All new drilling activity in the North Sea was suspended in Q2 2023[129] Results of Operations This section provides a detailed analysis of the company's production volumes, average realized prices, and key operating expenses Production Volumes by Region (Q1 2024 vs Q1 2023) | Region | Q1 2024 (BOE/d) | Q1 2023 (BOE/d) | % Change | | :--- | :--- | :--- | :--- | | United States | 214,050 | 201,580 | 6% | | Egypt | 135,140 | 147,186 | (8)% | | North Sea | 39,967 | 45,483 | (12)% | | Total | 389,157 | 394,249 | (1)% | Average Realized Prices (Q1 2024 vs Q1 2023) | Commodity | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Oil (per bbl) | $80.65 | $78.37 | 3% | | Natural Gas (per Mcf) | $2.47 | $3.22 | (23)% | | NGL (per bbl) | $25.38 (U.S.) | $23.79 (U.S.) | 7% | - Exploration expenses increased significantly by $96 million YoY to $148 million, primarily due to dry hole expenses from an unsuccessful initial drilling campaign in Alaska[150] - Depreciation, Depletion, and Amortization (DD&A) increased by $98 million YoY, driven by a higher DD&A rate on oil and gas properties due to price-related negative reserve revisions and higher property balances from U.S. capital investment[153] Capital Resources and Liquidity This section discusses the company's cash flow generation, capital allocation strategies, and overall liquidity position Sources and Uses of Cash (Q1 2024, in millions) | Category | Amount | | :--- | :--- | | Sources of Cash | | | Net cash from operations | $368 | | Proceeds from asset divestitures | $27 | | Proceeds from sale of Kinetik Shares | $428 | | Total Sources | $823 | | Uses of Cash | | | Additions to upstream oil and gas property | $467 | | Treasury stock activity, net | $101 | | Dividends paid to APA common stockholders | $76 | | Distributions to noncontrolling interest | $70 | | Total Uses | $808 | - Following the Callon acquisition, the company revised its full-year 2024 estimated upstream capital investment to approximately $2.7 billion[161] Liquidity Position (as of March 31, 2024, in millions) | Item | Amount | | :--- | :--- | | Cash and cash equivalents | $102 | | Total debt | $5,180 | | Available committed borrowing capacity | $2,884 | - Subsequent to quarter-end, on April 1, 2024, APA borrowed an aggregate $1.5 billion in senior unsecured term loans to refinance certain indebtedness of Callon as part of the acquisition[178] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to market risks from commodity prices, interest rates, and foreign currency exchange rates. A sensitivity analysis indicates that a $1.00 per barrel change in oil price would impact quarterly revenues by approximately $18 million. The company's debt is predominantly fixed-rate, mitigating interest rate risk on existing debt. Foreign currency risk is mainly tied to British pound expenditures for North Sea operations - The company's revenues and cash flow are highly dependent on volatile crude oil, natural gas, and NGL prices[192] Commodity Price Sensitivity Analysis (per quarter) | Price Change | Estimated Revenue Impact | | :--- | :--- | | $1.00 / bbl change in oil price | ~$18 million | | $0.10 / Mcf change in natural gas price | ~$7 million | | $1.00 / bbl change in NGL price | ~$5 million | - As of March 31, 2024, the company had $4.8 billion in fixed-rate notes and debentures, minimizing cash flow risk from interest rate changes on this debt[196] - Foreign currency risk is primarily from North Sea operations where costs are in British pounds but revenues are in U.S. dollars. A 10% change in the British pound exchange rate would result in a net gain or loss of approximately $3 million[198][199] Item 4. Controls and Procedures The company's principal executive and financial officers evaluated the disclosure controls and procedures as of March 31, 2024, and concluded they were effective. There were no material changes to the company's internal controls over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[200] - No changes occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[202] PART II - OTHER INFORMATION This section details legal proceedings, risk factors, equity security sales, other relevant information, and a list of filed exhibits Item 1. Legal Proceedings This section refers to Note 11 of the Consolidated Financial Statements for a description of material legal proceedings - For details on material legal proceedings, the report refers to Note 11—Commitments and Contingencies in the financial statements[204] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes have been made to the risk factors disclosed in the company's 2023 Annual Report on Form 10-K[205] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2024, the company repurchased a total of 3,011,117 shares of its common stock at an average price of $33.27 per share Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 2,226,352 | $34.22 | | February 2024 | 784,765 | $30.59 | | March 2024 | 0 | N/A | | Total | 3,011,117 | $33.27 | Item 5. Other Information During the first quarter of 2024, no officers or directors of the company adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - No company officers or directors adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended March 31, 2024[208] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications by the CEO and CFO, and interactive data files (Inline XBRL) - The report includes a list of exhibits filed, such as the Merger Agreement with Callon Petroleum, credit agreements, and required officer certifications[210][211]