APA(US:APA)2025-05-08 16:02Financial Data and Key Metrics Changes - APA Corporation reported consolidated net income of $347 million or $0.96 per diluted common share for Q1 2025, with adjusted net income of $385 million or $1.06 per share, reflecting a significant after-tax gain on debt extinguishment and a charge for deferred tax liability in the UK [19][20] - The company generated $126 million of free cash flow in the first quarter, with past due balances in Egypt at their lowest since the end of 2022 [20] Business Line Data and Key Metrics Changes - In the Permian, oil production was within guidance despite a larger-than-expected impact from downtime, with capital expenditures coming in below guidance due to improved drilling performance [6][14] - In Egypt, gas production exceeded guidance due to successful development programs, with an average realized gas price of $3.19, up from $2.97 in the previous quarter [20][28] - The North Sea operations also performed well, with volumes ahead of guidance driven by operational efficiency [7] Market Data and Key Metrics Changes - The company anticipates continued growth in gas volumes in Egypt, expecting to reach approximately 500 million cubic feet per day by year-end [28] - The average realized gas price is expected to increase steadily, reaching $3.8 in Q4 2025 [28] Company Strategy and Development Direction - APA is focused on cost reduction initiatives, targeting $130 million in realized savings for 2025 and an annualized run rate of $225 million by year-end [9][17] - The company is streamlining its portfolio, having signed an agreement to sell New Mexico Permian properties for $68 million, which will primarily be used for debt reduction [13][60] - The strategic shift towards gas drilling in Egypt is seen as economically favorable, especially with the new gas price agreement [16][94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining free cash flow despite commodity price volatility, with a focus on operational efficiency and cost reductions [6][17] - The company is optimistic about the potential for further drilling efficiencies in the Permian, allowing for reduced rig counts while maintaining production levels [14][39] - Management highlighted the importance of balancing growth with shareholder returns and strengthening the balance sheet [17] Other Important Information - The company has made significant progress in reducing controllable spending, particularly in the Permian, with an average savings of $800,000 per well achieved [23][24] - Changes in upstream capital definitions were made, with cash ARO expenses and leasehold acquisitions now treated as separate line items [31] Q&A Session Summary Question: Cost savings achievements and future targets - Management confirmed that they are ahead of schedule on cost savings, with expectations to potentially raise targets in the future [35][36] Question: Rig count and production maintenance - Management indicated that they can maintain production flat with 6.5 rigs and are confident in further efficiency gains [39] Question: Asset sale motivations - The sale of New Mexico assets was strategic, allowing the company to focus on core Texas operations and reduce debt [60][61] Question: LOE inflationary pressures - Management acknowledged challenges in achieving LOE savings due to inflation but remains optimistic about future reductions [64][65] Question: Gas development in Egypt - Management confirmed a shift towards gas drilling in Egypt, with oil production expected to remain stable due to condensate from gas production [94][95] Question: Buyback strategy amidst market conditions - Management stated that while they are focused on debt reduction, they remain open to opportunistic buybacks if conditions allow [104]