01—Abstract
Summary
Summary of the 10-K filed February 23, 2023. Cited figures are marked; the original filing is the authoritative source.
APA Corporation (APA) is an independent energy company that explores for, develops, and produces natural gas, crude oil, and NGLs across three upstream areas: the U.S., Egypt, and offshore the U.K. in the North Sea, with exploration and appraisal activity in Suriname.
In 2022 the company reported net income attributable to common stock of $3.674 billiona, or $11.02 per diluted share, compared with $973 million, or $2.59 per diluted share, in 2021. Oil, natural gas, and NGL production revenues rose to $9.22 billion from $6.50 billion, and net cash provided by operating activities was $4.94 billion, up $1.4 billion from the prior year. Average realized crude oil prices were $99.11 per barrel, up 44 percent.
Capital allocation focused on shareholder returns and debt reduction. APA repurchased 36.2 million shares for $1.4 billionb in 2022, and its quarterly dividend was raised to $0.25 per share in the third quarter of 2022. Since year-end 2021, total outstanding debt and redeemable preferred interests were reduced by $2 billion and $712 million, respectively, largely through the deconsolidation of Altus Midstream and note retirements.
Year-end total debt stood at $5.453 billionc, with $245 million of cash on hand and total equity of $1.345 billion, compared with a deficit of $717 million a year earlier. The filing also highlights risks and contingent liabilities. APA recorded a $1.2 billion contingent liability for decommissioning obligations on Gulf of Mexico properties it previously sold, after a purchaser's bankruptcy and inability to fund decommissioning.
The company expects a deferred tax expense of approximately $170 million to $190 milliond in the first quarter of 2023 from the U.K. Energy Profits Levy increase to 35 percent. For 2023, upstream capital is budgeted at $2.0 billion to $2.1 billion, with worldwide production expected to rise about four to five percent.
02—Key points
Key Highlights
- 2022 net income attributable to common stock of $3.674 billion ($11.02 per diluted share), versus $973 million ($2.59 per diluted share) in 2021.
- Oil, natural gas, and NGL production revenues of $9.22 billion in 2022, up from $6.50 billion in 2021; average realized oil price of $99.11 per barrel, up 44 percent.
- Net cash provided by operating activities of $4.94 billion in 2022, up $1.4 billion or 41 percent from 2021.
- Returned capital through 36.2 million shares repurchased for $1.4 billion and a quarterly dividend increase to $0.25 per share; 52.6 million shares remain authorized for repurchase.
- Reduced total outstanding debt and redeemable preferred interests by $2 billion and $712 million since year-end 2021, primarily via the Altus deconsolidation and note retirements; total equity turned positive at $1.345 billion.
- Recorded a $1.2 billion contingent liability for decommissioning sold Gulf of Mexico properties after purchaser GOM Shelf said it could not fund its obligations.
- 2023 upstream capital budget of $2.0 billion to $2.1 billion, with worldwide production expected to increase about four to five percent; U.K. tax changes expected to add roughly $170 million to $190 million of deferred tax expense in Q1 2023.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 23, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Operating Expenses | $6.40B$6.04B | +6.0% |
| Operating Income | $5.57B$2.86B | +94.6% |
| Interest Expense | $332.00M$419.00M | −20.8% |
| Net Income | $3.67B$973.00M | +277.6% |
| EPS (Basic) | $11.05$2.60 | +325.0% |
| EPS (Diluted) | $11.02$2.59 | +325.5% |
| Shares Outstanding (Basic) | 332.00M374.00M | −11.2% |
| Shares Outstanding (Diluted) | 333.00M375.00M | −11.2% |
05—Questions
Frequently Asked Questions
How profitable was APA in 2022 compared with 2021?
APA reported net income attributable to common stock of $3.674 billion, or $11.02 per diluted share, in 2022, compared with $973 million, or $2.59 per diluted share, in 2021. The filing attributes the improvement to higher commodity prices and increased revenues from the new merged concession agreement in Egypt.
How strong is APA's cash generation and balance sheet?
Net cash provided by operating activities was $4.9 billion in 2022, up $1.4 billion from 2021. Year-end cash was $245 million, total debt was $5.5 billion, and total equity was $1.345 billion, up from a deficit of $717 million at the end of 2021.
What is APA's capital return policy?
The company states it believes returning 60 percent of cash flow over capital investment creates a good balance between near-term shareholder returns and balance sheet strengthening. In 2022 it repurchased 36.2 million shares for $1.4 billion and raised its quarterly dividend to $0.25 per share.
What are the main risks flagged in the filing?
Key risks include commodity price volatility, the Gulf of Mexico decommissioning contingency of $1.2 billion on sold properties, higher U.K. taxes through the Energy Profits Levy rising to 35 percent from January 1, 2023, and international operations risk, particularly in Egypt, which contributed 28 percent of 2022 production excluding the noncontrolling interest.
What is the outlook for 2023?
APA budgeted upstream capital of $2.0 billion to $2.1 billion for 2023 and anticipates worldwide production to rise approximately four to five percent versus 2022, driven mainly by higher oil volumes in Egypt and the U.S. The company expects to generate significant cash flow above this capital budget at current strip pricing.
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