APA's Q4 2024: Key Contradictions in Gas Contracts, Exploration, and Financial Confidence

These are the key contradictions discussed in APA's latest 2024Q4 earnings call, specifically including: Egypt's Gas Contract and Production Impact, Alaska Exploration Updates, Confidence in Financial Guidance, and Gas Production Strategy in the Permian:



Withdrawal from Noncore Assets and Strategic Focus:
- APA Corporation exited the U.S. conventional properties by selling noncore assets and acquired Callon assets to enhance its Permian Basin presence.
- The company adjusted its focus to prioritize unconventional assets, improving portfolio sustainability and enhancing capital efficiency.

Production and Cost Management in Permian:
- The Permian Basin accounted for over 75% of APA's adjusted production, with significant cost reductions achieved, lowering breakeven oil prices by $61 per barrel compared to 2023.
- These efforts were driven by improving lateral length and reducing total well costs, resulting in a more predictable and steady business model.

Egypt Operations and Gas Strategy:
- In Egypt, APA initiated a gas-focused drilling program, leading to expected year-over-year gas production increase for the first time in over a decade.
- The company achieved a new gas price agreement that puts gas on par with oil, facilitating additional drilling and infrastructure investment opportunities.

Cost Reduction Initiatives:
- APA aims to achieve $350 million in annualized savings by year-end 2027, with a focus on streamlining operations, capital, LOE, and overhead costs.
- This initiative includes a 33% reduction in corporate officers and other organizational simplifications, aiming to drive sustainable cost management and efficiency.

Capital Return and Shareholder Value:
- APA returned 71% of free cash flow through $353 million in dividends and $246 million in share repurchases in 2024.
- The company plans to continue with a 60% shareholder return framework, emphasizing shareholder value through strategic capital allocation.