APA Corp. Q4 FY2024 earnings call

2024 Achievements - Enhanced Permian Basin portfolio through acquisition and asset sales, with US business now mostly unconventional, making Permian the cornerstone. - Egypt signed new gas price agreement for more drilling opportunities with oil - like returns. - Suriname reached final investment decision for first oil development. - Achieved BBB- rating from S&P and investment grade with all three rating agencies. ### Fourth Quarter Highlights - Delivered production volumes above guidance in all regions with capital program lower than guidance, resulting in $420 million free cash flow. - Added a rig in Egypt for gas-focused drilling with early positive results. - Closed sale of non-core conventional properties in Permian. ### 2025 Plan - Expect to run 8-rig program in Permian and 12-rig program in Egypt, with combined development capital budget $2.2 - $2.3 billion, total capital budget $2.5 - $2.6 billion, expecting higher total adjusted production in 2025. - Launched cost reduction initiative targeting $350 million annualized savings by end of 2027, with $100 - $125 million run-rate savings targeted for 2025, already having captured $35 million.

In the Permian Basin, it has become the cornerstone of APA's asset base, driving over 75% of current adjusted production. For the fourth quarter, APA generated $420 million of free cash flow, the highest of any quarter in 2024. For the full year, $841 million in free cash flow was generated. In 2024, adjusted net income for the fourth quarter excluding certain items was $290 million or $0.79 per share. Fourth quarter DD&A expense was higher than guidance due to accelerated depreciation at Alpine High, and lease operating expense was slightly higher than guidance due to an extra North Sea cargo lifting. The US business is almost entirely unconventional, with the Permian contributing over 75% of adjusted production. Egypt saw success with improved PDP decline through water flood activities, and Suriname reached a final investment decision for its first oil development.

Capital Spending - Spending to be front-half weighted due to Suriname capital calls and Alaska exploration, with Permian also front-half weighted due to facility spend timing. ### Production - US oil volumes in Permian expected to be in 125,000 - 127,000 barrels per day range in 2025. - Average realized gas price expected in $3.40 - $3.50 per Mcf range for 2025. ### Gas Trading - Anticipate generating combined net gain of $600 million for 2025 from third-party gas trading and Cheniere contract. ### Cost Savings - Target to achieve $100 - $125 million run-rate savings by end of 2025, with in-year capture of around $60 million expected.

• Actual results may differ materially from forward-looking estimates due to various factors. - Increase in net contingent liability for Fieldwood properties as third party's cash cost for activities is too high. - Potential infrastructure constraints in Egypt affecting gas growth.

Q: Doug Leggett asked about prioritizing share buybacks when debt can be paid down as share price is down 57%.

A: John Christmann said they've been buying back debt too and will make progress on both share and debt sides. Steve Riney added they're working both sides and buying back shares leverages the current shareholder base.

Q: Charles Meade asked about Alaska's Sockeye exploration well progress and Permian's Howard County productivity.

A: John Christmann said Alaska operations are going well but not into pay zones yet; in Permian's Howard County, results from wider spacing are fantastic and they'll come back with tighter spacing.

Q: Scott Hanold asked about Permian zone delineation capital allocation and guidance softness.

A: John Christmann said they test new zones to build future inventory and have leveled off at 8 rigs; Steve Riney explained 2025 Permian production pattern with base volume sustainable through the year.

Q: Scott Hanold asked about balancing Egypt rig activity between oil and gas and infrastructure for gas growth.

A: John Christmann said they started with gas-focused rig, will shift more rigs to gas, have good infrastructure but may need to build more depending on results.

Q: Leo Mariani asked about Egypt receivables and gas trading breakdown.

A: John Christmann said Egypt receivables have been stable and may progress in 2025; Steve Riney said 2025 gas trading breakdown is ~$400 million from pipeline contracts and ~$200 million from Cheniere LNG contract.

Q: Betty Jiang asked about cost-cutting initiative structure and Permian inventory.

A: John Christmann said cost-cutting has buckets in capital, LOE, G&A, with G&A first addressed and good start made; John Christmann and Steve Riney said Permian has inventory visibility through 2029 and beyond.

Q: Bertrand Donz asked about balancing shareholder return program with business growth.

A: Steve Riney explained free cash flow per share chart assumptions including cost savings, debt paydown, dividends, and share buybacks; John Christmann said they'll continue with shareholder return program while managing debt.

Q: David Deckelbaum asked about Egypt gas agreement details.

A: John Christmann said gas agreement puts gas on par with oil, incremental gas above decline curve; Steve Riney added it includes full cycle cost considerations for infrastructure.

Q: Neil Mehta asked about Suriname milestones and Permian production profile.

A: John Christmann said Suriname is on track, Permian can run flat with cost efficiencies to improve free cash flow while not needing to ramp up production immediately