APA Corporation Q3 FY2025 earnings call

• John Christmann reviewed third quarter results, outlined progress on strategic initiatives, and discussed outlook for fourth quarter and 2026. The macro environment was challenging with commodity price volatility, but APA made progress in cost structure, capital allocation, and operational focus. - Ben Rodgers provided financial details including consolidated net income, free cash flow, cost reduction initiatives, and updates on asset retirement and decommissioning obligations. - Emphasized cost reduction efforts with $300 million savings realized in 2025 and target of $350 million run rate savings by end of 2025, with potential for additional $50 million to $100 million by end of 2026. - Outlook for fourth quarter included raised Permian oil production guidance, adjusted gas guidance due to Waha pricing, increased Egypt production estimates, and ongoing exploration in Egypt.

In the Permian, exceeded production guidance with oil production above guidance and capital investment/operating costs in line with expectations. In Egypt, received substantial payments reducing past due receivables, gross BOEs grew sequentially in gas with oil production moderated by waterflood and recompletions. In the North Sea, higher production and lower costs than guidance, focused on operating efficiency and preparing for decommissioning. In Suriname, GranMorgu progress continued with first oil on track for mid-2028. Revenue contribution details were not explicitly provided in absolute terms with percentages in the transcript, but each segment's performance was outlined.

• In the Permian, raised oil production guidance for fourth quarter while maintaining capital spend, adjusting gas guidance due to Waha pricing with minimal impact on free cash flow. - In Egypt, slightly increased fourth quarter production estimates and ongoing exploration including new acreage. - Target to realize $300 million in savings in 2025 and reach $350 million run rate savings by end of 2025, with potential for additional $50 million to $100 million by end of 2026. - For 2026, evaluating capital allocation scenarios with focus on free cash flow generation, aiming to sustain Permian oil production, grow gas in Egypt, and advance Suriname project.

• Commodity price volatility driven by shifting trade policies and geopolitical tensions, which could impact results. - Uncertainty around the impact of external factors on oil and gas prices, affecting financial performance. - Risks associated with decommissioning and asset retirement obligations, including operational and financial considerations.

Q: Could you offer color on the flexibility in Permian capital given oil price movements?

A: John Christmann stated there is flexibility to moderate activity in Permian if oil prices move lower, with focus on capital discipline and maintaining Permian oil at about 120,000 bpd.

Q: What is the cash flow impact of legacy accelerated cost recovery rolling off in Egypt in 2026?

A: Ben Rodgers explained about $60 million potential impact, but offset by capital efficiencies in Egypt, gas performance, and other oil projects.

Q: Thoughts on exploration capital in 2026?

A: John Christmann said 2026 is likely a light year for exploration, with potential ice road building in Alaska and Suriname exploration wells in late 2026.

Q: Details on Egypt gas pricing and growth?

A: John Christmann mentioned new gas pricing with everything above PDP being premium priced, and gas expected to grow year-over-year with exploration program key to long-term potential.

Q: Permian breakevens and activity flexibility?

A: John Christmann said there is flexibility depending on price, with ability to move or drop rigs as needed.

Q: North Sea ARO activity and production consequences?

A: Ben Rodgers said production to decline 15%-20% from 2025 to 2026, but tax benefits from ARO spend.

Q: Non-D&C CapEx and LOE reduction?

A: Ben Rodgers discussed ongoing investment in LOE reduction initiatives through capital investment and operational changes.

Q: U.S. cash tax outlook beyond 2026?

A: Ben Rodgers said continued benefits expected but focus on 2025 and 2026 currently.

Q: Alaska exploration game plan?

A: John Christmann said reprocessing seismic surveys for Sockeye discovery, with next steps in appraisal and exploration to be updated.

Q: Uruguay exploration and Alpine High DUCs?

A: John Christmann said data room open in Uruguay with industry interest, and DUC completions in Alpine for acreage retention with improved Waha economics.