Apache's Q1 2025: Key Contradictions on Rig Count, Cost Savings, and Exploration Strategies
Earnings DecryptMonday, May 19, 2025 9:58 pm ET
2min read
Permian count and production strategy, cost savings and efficiency improvements, Alaska exploration plans and funding, capital expenditure and spending strategy, cost savings and efficiency gains are the key contradictions discussed in Apache's latest 2025Q1 earnings call.
Improved Capital Efficiency and Cost Reductions:
- reported significant strides in drilling efficiencies, reducing average well cost by $800,000 per well compared to 2024 levels.
- The company increased its 2025 targets for realized savings to $130 million and annualized run rate savings to $225 million.
- This was driven by Permian drilling efficiencies and overhead cost reductions, with the objectives to achieve top quartile operational performance.
Egypt Gas Development and Pricing Outlook:
- The company plans to maintain approximately one-third of its activity focused on gas, expecting gross gas volumes to grow to 500 million cubic feet per day by year-end.
- Average realized gas prices are expected to increase from $3.15 in the first quarter to exceed $3.80 per Mcf by the fourth quarter.
- This shift to gas development is attributed to the new gas price agreement and the attractive economics of gas-focused activities compared to oil production.
Permian Production and Rig Count Adjustments:
- APA Corporation can now hold Permian oil volumes flat with 6.5 rigs, down from the initially planned 8 rigs, and potentially further to 6 rigs.
- The company is adjusting its frac fleets and completion schedules to align with lower rig counts, impacting well turn-in-line timing.
- The reduction in rig count is due to continued efficiency improvements and capital savings, ensuring flat production with fewer resources.
Asset Sales and Debt Reduction Strategy:
- APA announced the sale of its New Mexico Permian properties for $608 million, contributing approximately 5,000 barrels per day of oil production.
- The proceeds will be primarily used for debt reduction, reflecting a strategy to focus solely on the Texas side of the Permian Basin.
- The decision to sell was based on securing a competitive price for an asset that was a small contributor to production and not prioritized for significant capital allocation.
Improved Capital Efficiency and Cost Reductions:
- reported significant strides in drilling efficiencies, reducing average well cost by $800,000 per well compared to 2024 levels.
- The company increased its 2025 targets for realized savings to $130 million and annualized run rate savings to $225 million.
- This was driven by Permian drilling efficiencies and overhead cost reductions, with the objectives to achieve top quartile operational performance.
Egypt Gas Development and Pricing Outlook:
- The company plans to maintain approximately one-third of its activity focused on gas, expecting gross gas volumes to grow to 500 million cubic feet per day by year-end.
- Average realized gas prices are expected to increase from $3.15 in the first quarter to exceed $3.80 per Mcf by the fourth quarter.
- This shift to gas development is attributed to the new gas price agreement and the attractive economics of gas-focused activities compared to oil production.
Permian Production and Rig Count Adjustments:
- APA Corporation can now hold Permian oil volumes flat with 6.5 rigs, down from the initially planned 8 rigs, and potentially further to 6 rigs.
- The company is adjusting its frac fleets and completion schedules to align with lower rig counts, impacting well turn-in-line timing.
- The reduction in rig count is due to continued efficiency improvements and capital savings, ensuring flat production with fewer resources.
Asset Sales and Debt Reduction Strategy:
- APA announced the sale of its New Mexico Permian properties for $608 million, contributing approximately 5,000 barrels per day of oil production.
- The proceeds will be primarily used for debt reduction, reflecting a strategy to focus solely on the Texas side of the Permian Basin.
- The decision to sell was based on securing a competitive price for an asset that was a small contributor to production and not prioritized for significant capital allocation.
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