01—Abstract
Summary
Summary of the 10-Q filed August 2, 2024. Cited figures are marked; the original filing is the authoritative source.
APA Corporation (formerly Apache Corporation's parent, filed as APA Corporation) reported second-quarter 2024 net income attributable to common stock of $541 milliona, or $1.46 per diluted share, compared with $381 million, or $1.23 per diluted share, in the second quarter of 2023.
For the first six months of 2024, net income attributable to common stock was $673 millionb, or $2.00 per diluted share, versus $623 million, or $2.01 per diluted share, a year earlier. Results were lifted by higher production from the Callon Petroleum acquisition, completed April 1, 2024 in an all-stock transaction valued at approximately $4.5 billion including Callon's debt, along with increased Permian drilling and $276 million of second-quarter net divestiture gains. Partially offsetting these were higher depreciation, transaction and reorganization costs, and lease operating expenses.
Cash generation was steady but working-capital driven: net cash provided by operating activities was $1.2 billionc for the first six months of 2024, down $90 million from the prior-year period. The company invested $1.2 billion in upstream oil and gas property additions, raised $1.5 billion under a term loan to refinance Callon debt, and received $729 million from asset divestitures and $428 million from the sale of its remaining Kinetik shares. Total debt rose to $6.7 billion from $5.2 billion at year-end 2023, and cash and equivalents were $160 million at June 30, 2024.
The company revised its full-year 2024 upstream capital investment estimate to approximately $2.7 billiond following the Callon acquisition. The filing also highlights ongoing contingent exposures. Contingent liabilities for decommissioning Legacy Gulf of Mexico assets totaled $862 million at June 30, 2024, after surety-related disputes and BSEE orders, and the company recorded a $187 million asset for expected reimbursement from related security.
Egyptian receivables from EGPC are being collected late, though management expects full collection. Shareholder returns continued, with $168 million of dividends and $144 million of share repurchases in the first half of 2024, and 39.4 million shares remaining under repurchase authorization at June 30, 2024.
02—Key points
Key Highlights
- Q2 2024 net income attributable to common stock was $541 million ($1.46 per diluted share), up from $381 million ($1.23) in Q2 2023.
- Callon Petroleum acquisition closed April 1, 2024 (about $4.5 billion including debt), issuing roughly 70 million APA shares and adding about 120,000 net Delaware Basin acres and 25,000 net Midland Basin acres.
- Q2 2024 oil and gas production revenues were $2.2 billion, up from $1.65 billion, with average daily oil production of 253,649 barrels per day, up 28% year over year.
- Second-quarter net gains on divestitures of $276 million, including a $321 million gain on sale of non-core Permian mineral and royalty interests.
- Total debt increased to $6.7 billion at June 30, 2024 from $5.2 billion at December 31, 2023, driven by a $1.5 billion term loan used to refinance Callon debt.
- Full-year 2024 upstream capital investment revised to approximately $2.7 billion following the Callon acquisition.
- Contingent decommissioning liabilities for sold Gulf of Mexico properties were $862 million at June 30, 2024, with ongoing BSEE orders and sureties litigation.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 2, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Operating Expenses | $1.86B$1.26B | +47.8% |
| Operating Income | $979.00M$691.00M | +41.7% |
| Interest Expense | $108.00M$89.00M | +21.3% |
| Net Income | $541.00M$381.00M | +42.0% |
| EPS (Basic) | $1.46$1.24 | +17.7% |
| EPS (Diluted) | $1.46$1.23 | +18.7% |
| Shares Outstanding (Basic) | 371.00M308.00M | +20.5% |
| Shares Outstanding (Diluted) | 372.00M309.00M | +20.4% |
05—Questions
Frequently Asked Questions
What drove the increase in APA's second-quarter 2024 earnings?
The filing attributes the increase in net income attributable to common stock primarily to higher revenues from production acquired in the Callon acquisition, increased U.S. drilling activity, and higher realized oil and NGL prices. Net income also benefited from $276 million of net gains on divestitures of non-core assets. These benefits were partly offset by higher depreciation, transaction and reorganization costs, and lease operating expenses.
How did the Callon acquisition affect APA's balance sheet and financing?
APA issued about 70 million shares, valued at approximately $2.4 billion, and borrowed $1.5 billion under a term loan facility to refinance Callon indebtedness. Callon's credit agreement and notes were largely repaid, with the remaining Callon notes redeemed by May 6, 2024. Total debt was $6.7 billion at June 30, 2024, and total equity rose to $6.5 billion from $3.7 billion at year-end 2023.
Is APA's operating cash flow weakening?
Net cash provided by operating activities was $1.2 billion for the first six months of 2024, down $90 million from the prior-year period, which the company attributes primarily to timing of working capital items. The company also noted that Egyptian receivables from EGPC are being collected late, though management believes the full balance will be collected.
What are the main outstanding contingent liabilities mentioned in the filing?
The most significant contingency is decommissioning for Legacy Gulf of Mexico assets, with contingent liabilities of $862 million at June 30, 2024. The company recorded a $187 million asset for amounts it expects to be reimbursed from security, and it is pursuing claims against sureties who refused to pay bond draws. Other matters include the Apollo Exploration lawsuit, the Australian divestiture dispute with Quadrant, and climate-related suits, and the company states that none are expected to be material beyond recorded accruals.
How much capital is APA returning to shareholders?
In the first six months of 2024, APA paid $168 million in dividends at $0.25 per quarter and repurchased 4.5 million shares for about $144 million. As of June 30, 2024, the company had remaining authorization to repurchase 39.4 million shares, and the company states it aims to return 60 percent of cash flow over capital investment to shareholders.
06—Continue