APA Corporation Q2 FY2025 earnings call

Balance Sheet and Capital Returns

• Reduced net debt by over $850 million during the quarter and returned ~$140 million to shareholders. Firmly committed to shareholder returns and balance sheet strengthening through debt reduction.

Operational Performance

• Permian: Oil production exceeded guidance, capital investment slightly above, D&C cost per foot among lowest. Drilling performance improved, with flat go-forward oil production with 6 rigs.
• Egypt: Exceeded gas production guidance, oil production declined slightly but gross BOEs consistent. Capital efficiency improved with small refinements in drilling and infrastructure.
• North Sea: Production ahead of guidance, focus on safety, operating efficiency, and cost management for decommissioning.

Cost Reduction Initiatives

• Anticipate capturing at least $200 million in savings in 2025, up from $130 million, and plan to exit the year at $300 million annual savings run rate. Progressing well with initiatives in G&A, LOE, and capital.

Portfolio Progress

• Suriname: GranMorgu development continues toward first oil in mid-2028, updated full year capital guidance to $275 million. Alaska: Discovery at Sockeye-2, plan to reprocess 3D seismic data and resume drilling in 2026-2027 winter season.

In the Permian, oil production exceeded guidance, capital investment was slightly above guidance, with D&C cost per foot among the lowest in the Midland Basin. In Egypt, gas production exceeded quarterly guidance, oil production declined slightly but gross BOEs were consistent, and capital efficiency improved with small refinements in drilling and infrastructure. North Sea production was ahead of guidance, with focus on safety, operating efficiency, and cost management for decommissioning. Revenue contribution details were not explicitly provided in absolute terms and percentages in the transcript, so focus is on operational performance.

Permian

• Expected to exit 2025 with higher DUC inventory than originally planned, continue optimizing drilling and completion cadence. Development strategy evolving with more wells per section, smaller fracs, lower breakeven prices.

Egypt

• Expect to maintain current activity allocations with around 1/3 gas focused for remainder of year, raising guidance for gross gas volumes and price realizations. Oil production expected to stabilize.

Suriname

• GranMorgu development on track for first oil in mid-2028, updated capital guidance to $275 million reflecting milestone and progress payments.

Alaska

• Anticipate drilling activity to resume during 2026-2027 winter season after reprocessing 3D seismic data.

• Macro volatility and regulatory shifts could distort short-term movement in debt target. - Constraints in infrastructure and equipment for Egypt gas development. - Temporary constraints impacting Permian well productivity, such as facility logistics and production curtailments.

Q: Along those lines with the new $3 billion long-term net debt target, do you have a timeline for achieving that target?

A: Sure, John. When we outlined that target, we thought it was responsible to commit to the specific target and not a date. At mid-cycle pricing, likely by close to the end of this decade, if prices are higher, could be accelerated, if lower, could take a bit longer.

Q: There's still no visibility on inventory in the Permian. Could you address that and the associated run rate capital we should expect for that maintenance of the new production level?

A: Yes, Doug. We're continuously improving. Core inventory in Permian is well into the 2030s with existing pace. Teams working on characterizing inventory, expect to give more color late this year or early next year. Sustaining capital in Permian going into 2026 is around 6 rigs, ~120 in spend.

Q: It's great to see North Sea taxes coming down so much in next year. Could you help us just unpack what exactly is driving that drop? Does it mean the ARO spend is going up in a meaningful way next year?

A: Sure. In U.K. this year, team has done well with asset, production higher than expected, costs cut, increasing taxable income. But at some point, asset will be at tax loss position, ARO spend will increase next year as decommissioning activity progresses, peaking in 2030-2031 and declining into 2038.

Q: As you move to doing more gas from an organizational capability standpoint as well as the equipment availability in Egypt, how big is the program you can do?

A: In Egypt, on gas processing side, produce around 500 million cubic feet a day, have plant processing capacity of about 800 million cubic feet a day. Limitation in field around gathering and transport to facilities. Exploration success will determine need for more infrastructure. Workover rig ratio different for gas, not sharing same ratio as oil.