01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
APA Corporation reported first-quarter 2024 net income attributable to common stock of $132 milliona, or $0.44 per diluted share, compared with $242 million, or $0.78 per diluted share, in the first quarter of 2023.
Results were primarily impacted by higher depreciation, depletion, and amortization ($430 millionb versus $332 million), higher exploration expense driven by dry hole costs ($148 million versus $52 million), and a $66 million loss on previously sold Gulf of Mexico properties, partially offset by lower deferred income tax expense. Total revenues were $1.95 billion, versus $2.01 billion a year earlier. Net cash provided by operating activities rose to $368 million from $335 million, which the company attributes primarily to the timing of working capital items.
The filing describes the April 1, 2024 completion of the all-stock acquisition of Callon Petroleum Company, valued at approximately $4.5 billionc including Callon's debt, with APA issuing approximately 70 million shares. APA funded the refinancing of Callon debt with $1.5 billion of senior unsecured term loans and borrowings under its USD credit facility. Following the acquisition, the company revised its full-year 2024 estimated upstream capital investment to approximately $2.7 billion.
During the quarter, APA sold its remaining Kinetik shares for $428 milliond and repurchased 3.0 million shares for $101 million while paying $76 million in common dividends. Balance sheet figures show total debt of $5.18 billion and cash of $102 million at March 31, 2024. The filing also discloses ongoing exposure to legacy Gulf of Mexico decommissioning obligations, with contingent liabilities of $847 million, and the Egyptian receivable collection delays tied to a U.S. dollar shortage in Egypt.
02—Key points
Key Highlights
- Net income attributable to common stock was $132 million, or $0.44 per diluted share, versus $242 million, or $0.78 per diluted share, in Q1 2023.
- Total revenues were $1.95 billion versus $2.01 billion in the prior-year quarter, with oil revenues of $1.43 billion, up from $1.40 billion.
- Exploration expense rose to $148 million from $52 million, driven mainly by dry hole expense tied to an initial drilling campaign in Alaska.
- A $66 million loss on previously sold Gulf of Mexico properties was recognized, including $33 million from new BSEE decommissioning orders.
- Acquisition of Callon Petroleum Company closed April 1, 2024, in an all-stock transaction valued at approximately $4.5 billion including debt, with about 70 million shares issued.
- Operating cash flow was $368 million, and the company sold its remaining Kinetik shares for $428 million, while repurchasing $101 million of stock and paying $76 million in dividends.
- Total debt was $5.18 billion at March 31, 2024, and the company borrowed $1.5 billion in term loans on April 1, 2024 to refinance Callon debt.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Operating Expenses | $1.46B$1.22B | +19.3% |
| Operating Income | $691.00M$929.00M | −25.6% |
| Interest Expense | $85.00M$88.00M | −3.4% |
| Net Income | $132.00M$242.00M | −45.5% |
| EPS (Basic) | $0.44$0.78 | −43.6% |
| EPS (Diluted) | $0.44$0.78 | −43.6% |
| Shares Outstanding (Basic) | 302.00M311.00M | −2.9% |
| Shares Outstanding (Diluted) | 302.00M312.00M | −3.2% |
05—Questions
Frequently Asked Questions
What drove the decline in earnings compared with the first quarter of 2023?
The filing states that results were primarily impacted by higher DD&A and dry hole expense and an upward revision on decommissioning costs for previously sold Gulf of Mexico assets, partially offset by lower deferred income tax expense. Net income attributable to common stock fell to $132 million from $242 million.
What is the significance of the Callon acquisition for APA?
APA completed the all-stock acquisition of Callon Petroleum Company on April 1, 2024, valued at approximately $4.5 billion including debt. The filing states the acquired assets include approximately 120,000 net acres in the Delaware Basin and 25,000 net acres in the Midland Basin, and the company revised its full-year 2024 upstream capital investment estimate to approximately $2.7 billion.
How is APA funding its capital return and debt obligations?
The company repurchased 3.0 million shares for $101 million and paid $76 million in dividends during the quarter, and it states it remains committed to returning 60 percent of cash flow over capital investment. Liquidity came partly from the $428 million sale of Kinetik shares, and the company reported $2.88 billion in available committed borrowing capacity under syndicated credit facilities.
What are the main ongoing contingent risks disclosed in the filing?
The filing discloses contingent liabilities of $847 million for estimated decommissioning costs on legacy Gulf of Mexico properties previously sold, after orders from BSEE following GOM Shelf's inability to fund decommissioning. It also notes delays in receipts from Egypt's EGPC due to a U.S. dollar shortage, and an accrued liability of approximately $84 million for legal contingencies that are probable and estimable.
06—Continue