APA Corp false 0001841666 0001841666 2021-11-03 2021-11-03

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 3, 2021

 

 

APA CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-40144   86-1430562
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (713) 296-6000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange
on which registered

Common Stock, $0.625 par value   APA   Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 


The information in this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of Section 18, and shall not be incorporated by reference in any filing under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing.

 

Item 2.02.

Results of Operations and Financial Condition.

On November 3, 2021, APA Corporation issued a press release announcing financial and operating results for the fiscal quarter ended September 30, 2021. The full text of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit No.    Description
99.1    Press Release of APA Corporation dated November 3, 2021.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    APA CORPORATION
Date: November 4, 2021     By:  

/s/ Rebecca A. Hoyt

      Rebecca A. Hoyt
      Senior Vice President, Chief Accounting Officer, and Controller
      (Principal Accounting Officer)

Exhibit 99.1

 

LOGO    NEWS RELEASE

APA Corporation Announces Third-Quarter 2021

Financial and Operational Results

Key Takeaways

 

   

Reported production of 389,000 barrels of oil equivalent (BOE) per day; adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 336,000 BOE per day;

 

   

Generated net cash from operating activities of $771 million and adjusted EBITDAX of $1.16 billion;

 

   

Committing to return a minimum of 60% of Free Cash Flow to shareholders through dividends and stock repurchases;

 

   

Increasing annualized dividend from $0.25 to $0.50 per share; repurchased 14.7 million shares in October;

 

   

Completed $1.7 billion bond tender in August, significantly strengthening the balance sheet; and

 

   

Ended routine flaring onshore U.S., achieving goal three months ahead of schedule.

HOUSTON, Nov. 3, 2021 – APA Corporation (Nasdaq: APA) today announced its financial and operational results for the third-quarter 2021.

APA reported a loss of $113 million, or $0.30 per diluted common share. When adjusted for items that impact the comparability of results, predominately a $446 million undiscounted net contingency recognized for asset retirement obligations associated with previously divested Gulf of Mexico properties, APA’s third-quarter earnings were $372 million, or $0.98 per diluted share. Net cash provided by operating activities was $771 million, and adjusted EBITDAX was $1.16 billion, making it the strongest quarterly performance of the year. The company anticipates the fourth quarter will be even stronger.

“APA delivered another excellent quarter, driven by strong U.S. well performance, continued capital and cost discipline, and better-than-expected commodity prices,” said John J. Christmann IV, APA’s CEO and president. “We generated $1.3 billion of Free Cash Flow in the first three quarters of 2021, and, at current strip pricing, we anticipate approximately $2 billion for the full-year. With the substantial strengthening of our balance sheet, a streamlined and more profitable enterprise and a planned capital program that will sustain or slightly grow production for the long term, we are committing to returning a minimum of 60% of our Free Cash Flow to shareholders. This began with the repurchase of 14.7 million shares in the month of October and today’s announced increase in our annual dividend to $0.50 per share, and we intend to continue these returns of capital to shareholders this quarter and into 2022.”


APA CORPORATION ANNOUNCES THIRD-QUARTER 2021 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 2 of 5

 

Third-Quarter Summary

Third-quarter reported production was 389,000 BOE per day, and adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 336,000 BOE per day. U.S. production was 237,000 BOE per day and international adjusted volumes were 99,000 BOE per day. APA’s third-quarter upstream capital investment was $228 million.

Production in the Southern Midland Basin and in Alpine High exceeded expectations during the quarter and the company recently added a third U.S. rig in its Austin Chalk play. Gross volumes in Egypt and the North Sea bottomed in the third quarter and have begun to move higher in the fourth quarter. In Egypt, the company has increased its rig count to 11 in anticipation of final approvals on modernized PSC terms before year end. In Block 58 Offshore Suriname, flow testing at Sapakara South and exploration work at Bonboni are continuing. Data collected from these operations will inform next steps in the exploration and appraisal program for the block.

Balance Sheet Progress and Share Repurchase Program

In August, the company significantly reduced its outstanding term debt through a $1.7 billion upsized bond tender, which was funded by cash on hand and borrowings from its revolving credit facility. At the end of the third quarter, APA’s total debt, excluding Altus Midstream, was $6.75 billion, and cash and cash equivalents were $268 million.

APA repurchased approximately 14.7 million shares in October under an existing authorization of 40 million shares. The company’s board of directors increased that authorization by an additional 40 million shares, bringing the total to 80 million shares, with approximately 65 million remaining at the end of October. In the fourth quarter, the company expects to return more than 60% of Free Cash Flow to shareholders.


APA CORPORATION ANNOUNCES THIRD-QUARTER 2021 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 3 of 5

 

ESG Progress

On Sept. 30, the company ended routine flaring in onshore U.S. operations. Through the end of the third quarter, flaring intensity in the U.S. onshore was 0.38%, significantly below the 2021 target of less than 1%.

The company published its 2021 Sustainability Report in October, which has a more in-depth look at ESG philosophy, performance, initiatives and success stories.

Conference Call

APA will host a conference call to discuss its third-quarter 2021 results at 10 a.m. Central time, Thursday, Nov. 4. The conference call will be webcast from APA’s website at www.apacorp.com and investor.apacorp.com, and the webcast replay will be archived there as well. The conference call will also be available for playback by telephone for one week beginning at approximately 4 p.m. Central time Nov. 4. The number for the replay is 855-859-2056 or 404-537-3406 for international calls. The conference access code is 7990266. Sign up for email alerts to be reminded of the webcast at investor.apacorp.com/alerts/email-alerts-subscription.

About APA

APA Corporation owns consolidated subsidiaries that explore for and produce oil and gas in the United States, Egypt and the United Kingdom and that explore for oil and gas offshore Suriname. APA posts announcements, operational updates, investor information and press releases on its website, www.apacorp.com. Specific information concerning Suriname, ESG performance and other investor-related topics are posted at investor.apacorp.com.

Additional Information

Additional information follows, including reconciliations of adjusted earnings, adjusted EBITDAX, upstream capital investment, net debt, cash flows from operations before changes in operating assets and liabilities and free cash flow (non-GAAP financial measures) to GAAP measures and information regarding adjusted production. APA’s quarterly supplement is available at http://www.apacorp.com/financialdata.


APA CORPORATION ANNOUNCES THIRD-QUARTER 2021 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 4 of 5

 

Non-GAAP Financial Measures

APA’s financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial information. It is management’s intent to provide non-GAAP financial information to enhance understanding of our consolidated financial information as prepared in accordance with GAAP. Adjusted earnings, adjusted EBITDAX, upstream capital investment, net debt, cash flows from operations before changes in operating assets and liabilities and free cash flow are non-GAAP measures. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “continues,” “could,” “estimates,” “expects,” “guidance,” “may,” “might,” “outlook,” “possibly,” “potential,” “projects,” “prospects,” “should,” “will,” “would,” and similar references to future periods, but the absence of these words does not mean that a statement is not forward-looking. These statements include, but are not limited to, statements about future plans, expectations, and objectives for operations, including statements about our capital plans, drilling plans, production expectations, asset sales, and monetizations. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations. See “Risk Factors” in Apache Corporation’s Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 25, 2021, and in our quarterly reports on Form 10-Q for a discussion of risk factors that affect our business. Any


APA CORPORATION ANNOUNCES THIRD-QUARTER 2021 FINANCIAL AND OPERATIONAL RESULTS

— PAGE 5 of 5

 

forward-looking statement made in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. APA and its subsidiaries undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future development or otherwise, except as may be required by law.

Cautionary Note to Investors

The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC’s definitions for such terms. APA may use certain terms in this news release, such as “resources,” “potential resources,” “resource potential,” “estimated net reserves,” “recoverable reserves,” and other similar terms that the SEC guidelines strictly prohibit APA from including in filings with the SEC. Such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality, and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache Corporation’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2020 available from APA at www.apacorp.com or by writing APA at: 2000 Post Oak Blvd., Suite 100, Houston, TX 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.

Contacts

Investor:   (281) 302-2286  Gary Clark

Media:     (713) 296-7276  Phil West

Website:    www.apacorp.com

APA-F

-end-


APA CORPORATION

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

(In millions, except per share data)

 

     For the Quarter
Ended September 30,
    For the Nine Months
Ended September 30,
 
     2021     2020     2021     2020  

REVENUES AND OTHER:

        

Oil, natural gas, and natural gas liquids production revenues

        

Oil revenues

   $ 1,182     $ 785     $ 3,314     $ 2,330  

Natural gas revenues

     293       164       831       417  

Natural gas liquids revenues

     210       97       485       232  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,685       1,046       4,630       2,979  

Purchased oil and gas sales

     374       74       1,056       237  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     2,059       1,120       5,686       3,216  

Derivative instrument gain (loss), net

     —         16       45       (262

Gain (loss) on divestitures, net

     (2     (1     65       24  

Loss on previously sold Gulf of Mexico properties

     (446     —         (446     —    

Other, net

     40       9       175       41  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,651       1,144       5,525       3,019  
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES:

        

Lease operating expenses

     316       259       891       858  

Gathering, processing, and transmission

     68       63       187       206  

Purchased oil and gas costs

     396       75       1,152       207  

Taxes other than income

     54       34       149       90  

Exploration

     34       58       109       187  

General and administrative

     70       52       239       214  

Transaction, reorganization, and separation

     4       7       8       44  

Depreciation, depletion, and amortization:

        

Oil and gas property and equipment

     306       366       940       1,284  

Other assets

     29       32       88       98  

Asset retirement obligation accretion

     29       27       85       81  

Impairments

     18       —         18       4,492  

Financing costs, net

     205       99       422       168  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,529       1,072       4,288       7,929  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) BEFORE INCOME TAXES

     122       72       1,237       (4,910

Current income tax provision

     183       58       463       120  

Deferred income tax benefit

     (31     (27     (54     (71
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS

     (30     41       828       (4,959

Net income (loss) attributable to noncontrolling interest—Egypt

     49       24       132       (138

Net income (loss) attributable to noncontrolling interest—Altus

     4       2       32       (7

Net income attributable to Altus Preferred Unit limited partners

     30       19       73       56  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK

   $ (113   $ (4   $ 591     $ (4,870
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) PER COMMON SHARE:

        

Basic

   $ (0.30   $ (0.01   $ 1.56     $ (12.89

Diluted

   $ (0.30   $ (0.02   $ 1.53     $ (12.89

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

        

Basic

     379       378       378       378  

Diluted

     379       378       379       378  

DIVIDENDS DECLARED PER COMMON SHARE

   $ 0.0625     $ 0.025     $ 0.1125     $ 0.075  

 

Page 1


APA CORPORATION

PRODUCTION INFORMATION

 

     For the Quarter Ended      % Change     For the Nine Months Ended  
     September,
2021
     June,
2021
     September,
2020
     3Q21 to
2Q21
    3Q21 to
3Q20
    September,
2021
     September,
2020
 

OIL VOLUME - Barrels per day

                  

United States

     75,526        82,852        83,178        -9     -9     75,384        93,051  

Egypt (1, 2)

     69,830        71,182        79,194        -2     -12     71,052        77,410  

North Sea

     33,783        31,992        48,755        6     -31     36,398        50,339  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     103,613        103,174        127,949        0     -19     107,450        127,749  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total (1)

     179,139        186,026        211,127        -4     -15     182,834        220,800  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NATURAL GAS VOLUME - Mcf per day

                  

United States

     546,058        541,088        597,686        1     -9     531,695        571,325  

Egypt (1, 2)

     243,294        256,262        286,744        -5     -15     259,108        273,676  

North Sea

     33,752        36,769        53,137        -8     -36     40,061        57,659  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     277,046        293,031        339,881        -5     -18     299,169        331,335  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total (1)

     823,104        834,119        937,567        -1     -12     830,864        902,660  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NGL VOLUME - Barrels per day

                  

United States

     70,962        68,492        75,266        4     -6     65,805        75,468  

Egypt (1, 2)

     496        553        611        -10     -19     544        812  

North Sea

     1,200        1,095        1,976        10     -39     1,220        1,948  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     1,696        1,648        2,587        3     -34     1,764        2,760  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total (1)

     72,658        70,140        77,853        4     -7     67,569        78,228  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

BOE per day

                  

United States

     237,498        241,525        258,058        -2     -8     229,805        263,740  

Egypt (1, 2)

     110,875        114,445        127,595        -3     -13     114,780        123,834  

North Sea

     40,608        39,216        59,588        4     -32     44,295        61,897  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International (1)

     151,483        153,661        187,183        -1     -19     159,075        185,731  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total (1)

     388,981        395,186        445,241        -2     -13     388,880        449,471  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total excluding noncontrolling interests

     351,955        356,981        402,615        -1     -13     350,556        408,080  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

(1)  Includes net production volumes attributed to our noncontrolling partner in Egypt below:

   

Oil (b/d)

     23,309        23,759        26,459            23,716        25,891  

Gas (Mcf/d)

     81,309        85,574        95,776            86,564        91,374  

NGL (b/d)

     165        184        204            181        271  

BOE per day

     37,026        38,205        42,626        -3     -13     38,324        41,391  

(2)  Egypt Gross Production

                  

Oil (b/d)

     134,128        135,494        159,941            134,976        171,778  

Gas (Mcf/d)

     564,354        578,380        649,566            581,859        648,995  

NGL (b/d)

     776        866        1,175            846        1,534  

BOE per day

     228,963        232,757        269,377        -2     -15     232,799        281,478  

 

Page 2


APA CORPORATION

ADJUSTED PRODUCTION INFORMATION

Adjusted production excludes certain items that management believes affect the comparability of operating results for the periods presented. Adjusted production excludes production attributable to 1) noncontrolling interest in Egypt and 2) Egypt tax barrels. Management uses adjusted production to evaluate the company’s operational trends and performance and believes it is useful to investors and other third parties.

 

     For the Quarter Ended      % Change     For the Nine Months Ended  
     September 30,      June 30,      September 30,      3Q21 to     3Q21 to     September 30,      September 30,  
     2021      2021      2020      2Q21     3Q20     2021      2020  

OIL VOLUME - Barrels per day

                  

United States

     75,526        82,852        83,178        -9     -9     75,384        93,051  

Egypt

     35,450        36,753        46,198        -4     -23     36,402        48,378  

North Sea

     33,783        31,992        48,755        6     -31     36,398        50,339  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     69,233        68,745        94,953        1     -27     72,800        98,717  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     144,759        151,597        178,131        -5     -19     148,184        191,768  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NATURAL GAS VOLUME - Mcf per day

                  

United States

     546,058        541,088        597,686        1     -9     531,695        571,325  

Egypt

     133,750        144,712        175,667        -8     -24     143,775        174,534  

North Sea

     33,752        36,769        53,137        -8     -36     40,061        57,659  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     167,502        181,481        228,804        -8     -27     183,836        232,193  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     713,560        722,569        826,490        -1     -14     715,531        803,518  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

NGL VOLUME - Barrels per day

                  

United States

     70,962        68,492        75,266        4     -6     65,805        75,468  

Egypt

     260        300        407        -13     -36     290        541  

North Sea

     1,200        1,095        1,976        10     -39     1,220        1,948  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     1,460        1,395        2,383        5     -39     1,510        2,489  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     72,422        69,887        77,649        4     -7     67,315        77,957  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

BOE per day

                  

United States

     237,498        241,525        258,058        -2     -8     229,805        263,740  

Egypt

     58,002        61,172        75,883        -5     -24     60,655        78,008  

North Sea

     40,608        39,216        59,588        4     -32     44,295        61,897  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

International

     98,610        100,388        135,471        -2     -27     104,950        139,905  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total

     336,108        341,913        393,529        -2     -15     334,755        403,645  
  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

 

Page 3


APA CORPORATION

PRICE INFORMATION

 

 
     For the Quarter Ended      For the Nine Months Ended  
     September 30,
2021
     June 30,
2021
     September 30,
2020
     September 30,
2021
     September 30,
2020
 

AVERAGE OIL PRICE PER BARREL

              

United States

   $ 69.69      $ 65.32      $ 39.60      $ 64.38      $ 36.45  

Egypt

     72.37        66.70        41.51        66.97        38.79  

North Sea

     74.94        68.34        42.10        66.93        41.99  

International

     73.20        67.24        41.73        66.96        40.05  

Total

     71.72        66.40        40.88        65.90        38.53  

AVERAGE NATURAL GAS PRICE PER MCF

              

United States

   $ 3.75      $ 2.73      $ 1.40      $ 3.67      $ 1.08  

Egypt

     2.82        2.80        2.82        2.80        2.79  

North Sea

     13.40        8.10        2.58        9.13        2.46  

International

     4.11        3.46        2.78        3.65        2.73  

Total

     3.87        2.99        1.90        3.66        1.69  

AVERAGE NGL PRICE PER BARREL

              

United States

   $ 30.85      $ 22.72      $ 13.06      $ 25.75      $ 10.20  

Egypt

     52.02        38.10        25.88        44.73        26.24  

North Sea

     56.64        38.79        27.08        48.32        28.54  

International

     55.29        38.56        26.80        47.22        27.86  

Total

     31.42        23.10        13.51        26.32        10.83  

 

Page 4


APA CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

(In millions)

SUMMARY EXPLORATION EXPENSE INFORMATION

 

     For the Quarter Ended
September 30,
     For the Nine Months Ended
September 30,
 
     2021      2020      2021      2020  

Unproved leasehold impairments

   $ 5      $ 36      $ 26      $ 86  

Dry hole expense

     16        5        41        52  

Geological and geophysical expense

     4        7        14        14  

Exploration overhead and other

     9        10        28        35  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 34      $ 58      $ 109      $ 187  
  

 

 

    

 

 

    

 

 

    

 

 

 

SUMMARY CASH FLOW INFORMATION

 

     For the Quarter Ended
September 30,
    For the Nine Months Ended
September 30,
 
     2021     2020     2021     2020  

Net cash provided by operating activities

   $ 771     $ 304     $ 2,411     $ 890  
  

 

 

     

 

 

   

 

 

 

Additions to upstream oil and gas property

     (235     (237     (796     (1,078

Additions to Altus gathering, processing, and transmission facilities

     (1     (2     (2     (27

Contributions to Altus equity method interests

     (3     (132     (27     (286

Proceeds from sale of oil and gas properties

     58       6       239       132  

Other, net

     32       6       44       (17
  

 

 

     

 

 

   

 

 

 

Net cash used in investing activities

   $ (149   $ (359   $ (542   $ (1,276
  

 

 

     

 

 

   

 

 

 

Apache debt borrowings and payments, net

     (1,335     44       (1,505     345  

Altus credit facility borrowings

     —         87       33       184  

Distributions to noncontrolling interest - Egypt

     (143     (21     (203     (61

Distributions to Altus Preferred Unit limited partners

     (11     (11     (34     (11

Dividends paid to APA common stockholders

     (9     (9     (28     (113

Other

     4       (8     (17     (43
  

 

 

     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

   $ (1,494   $ 82     $ (1,754   $ 301  
  

 

 

     

 

 

   

 

 

 

SUMMARY BALANCE SHEET INFORMATION

 

     September 30,
2021
    December 31,
2020
 

Cash and cash equivalents

   $ 377     $ 262  

Other current assets

     1,804       1,584  

Property and equipment, net

     8,336       8,819  

Long-term offshore decommissioning security

     740       —    

Other assets

     2,053       2,081  
  

 

 

   

 

 

 

Total assets

   $ 13,310     $ 12,746  
  

 

 

   

 

 

 

Current debt - Apache *

   $ 215     $ 2  

Current liabilities

     1,624       1,306  

Long-term debt - Apache *

     6,536       8,146  

Long-term debt - Altus

     657       624  

Non-current offshore decommissioning contingency

     1,186       —    

Deferred credits and other noncurrent liabilities

     2,607       2,705  

Redeemable noncontrolling interest - Altus Preferred Unit limited partners

     635       608  

APA shareholders’ deficit

     (1,095     (1,639

Noncontrolling interest - Egypt

     854       925  

Noncontrolling interest - Altus

     91       69  
  

 

 

   

 

 

 

Total Liabilities and equity

   $ 13,310     $ 12,746  
  

 

 

   

 

 

 

Common shares outstanding at end of period

     378       377  

 

*

Excludes Altus

 

Page 5


APA CORPORATION

NON-GAAP FINANCIAL MEASURES

(In millions, except per share data)

Reconciliation of Costs incurred to Upstream capital investment

Management believes the presentation of upstream capital investments is useful for investors to assess APA’s expenditures related to our upstream capital activity. We define capital investments as costs incurred for oil and gas activities, adjusted to exclude asset retirement obligation revisions and liabilities incurred, capitalized interest, and certain exploration expenses, while including amounts paid during the period for abandonment and decommissioning expenditures. Upstream capital expenditures attributable to a one-third noncontrolling interest in Egypt are also excluded. Management believes this provides a more accurate reflection of APA’s cash expenditures related to upstream capital activity and is consistent with how we plan our capital budget.

 

     For the Quarter Ended
September 30,
     For the Nine Months Ended
September 30,
 
     2021      2020      2021      2020  

Costs incurred in oil and gas property:

           

Acquisitions

           

Proved

   $  —        $  —        $ 3      $ 7  

Unproved

     3        —          6        3  

Exploration and development

     270        188        858        944  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Costs incurred in oil and gas property

   $ 273      $ 188      $ 867      $ 954  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Costs incurred to Upstream capital investment:

           

Total Costs incurred in oil and gas property

   $ 273      $ 188      $ 867      $ 954  

Asset retirement obligations settled vs. incurred - oil and gas property

     9        4        17        17  

Capitalized interest

     (2      (1      (6      (1

Exploration seismic and administration costs

     (13      (17      (42      (49
  

 

 

    

 

 

    

 

 

    

 

 

 

Upstream capital investment including noncontrolling interest - Egypt

   $ 267      $ 174      $ 836      $ 921  

Less noncontrolling interest - Egypt

     (39      (33      (108      (122
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Upstream capital investment

   $ 228      $ 141      $ 728      $ 799  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Net cash provided by operating activities to Cash flows from operations before changes in operating assets and liabilities and Free cash flow

Cash flows from operations before changes in operating assets and liabilities and free cash flow are non-GAAP financial measures. APA uses these measures internally and provides this information because management believes it is useful in evaluating the company’s ability to generate cash to internally fund exploration and development activities, fund dividend programs, and service debt, as well as to compare our results from period to period. We believe these measures are also used by research analysts and investors to value and compare oil and gas exploration and production companies and are frequently included in published research reports when providing investment recommendations. Cash flows from operations before changes in operating assets and liabilities and free cash flow are additional measures of liquidity but are not measures of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities. Additionally, this presentation of free cash flow may not be comparable to similar measures presented by other companies in our industry.

 

     For the Quarter Ended
September 30,
     For the Nine Months Ended
September 30,
 
     2021      2020      2021      2020  

Net cash provided by operating activities

   $ 771      $ 304      $ 2,411      $ 890  

Changes in operating assets and liabilities

     95        97        58        184  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flows from operations before changes in operating assets and liabilities

   $ 866      $ 401      $ 2,469      $ 1,074  

Adjustments to free cash flow:

           

Altus Midstream cash flows from operations before changes in operating assets and liabilities

     (53      (46      (148      (122

Upstream capital investment including noncontrolling interest - Egypt

     (267      (174      (836      (921

Distributions to Sinopec noncontrolling interest

     (143      (21      (203      (61
  

 

 

    

 

 

    

 

 

    

 

 

 

Upstream free cash flow

   $ 403      $ 160      $ 1,282      $ (30

Cash dividends received from Altus Midstream

     18        —          56        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 421      $ 160      $ 1,338      $ (30
  

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Net cash provided by operating activities to Adjusted EBITDAX

Management believes EBITDAX, or earnings before income tax expense, interest expense, depreciation, amortization and exploration expense is a widely accepted financial indicator, and useful for investors, to assess a company’s ability to incur and service debt, fund capital expenditures, and make distributions to shareholders. We define adjusted EBITDAX, a non-GAAP financial measure, as EBITDAX adjusted for certain items presented in the accompanying reconciliation. Management uses adjusted EBITDAX to evaluate our ability to fund our capital expenditures, debt services and other operational requirements and to compare our results from period to period by eliminating the impact of certain items that management does not consider to be representative of the Company’s on-going operations. Management also believes adjusted EBITDAX facilitates investors and analysts in evaluating and comparing EBITDAX from period to period by eliminating differences caused by the existence and timing of certain operating expenses that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted EBITDAX may not be comparable to similar measures of other companies in our industry.

 

     For the Quarter Ended     For the Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,  
     2021     2021     2020     2021      2020  

Net cash provided by operating activities

   $ 771     $ 969     $  304     $  2,411      $ 890  

Adjustments:

           

Exploration expense other than dry hole expense and unproved leasehold impairments

     13       17       17       42        49  

Current income tax provision

     183       131       58       463        120  

Other adjustments to reconcile net income (loss) to net cash provided by operating activities

     (8     (6     (31     6        (45

Changes in operating assets and liabilities

     95       (212     97       58        184  

Financing costs, net

     100       108       111       318        320  

Transaction, reorganization & separation costs

     4       4       7       8        44  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Adjusted EBITDAX (Non-GAAP)

   $  1,158     $  1,011     $ 563     $ 3,306      $  1,562  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

Page 6


APA CORPORATION

NON-GAAP FINANCIAL MEASURES

(In millions)

Reconciliation of debt to net debt

Net debt, or outstanding debt obligations less cash and cash equivalents, is a non-GAAP financial measure. Management uses net debt as a measure of the Company’s outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. The Altus Midstream LP credit facility is unsecured and is not guaranteed by APA or any of APA’s other subsidiaries.

 

     September 30, 2021      December 31, 2020  
     APA
Upstream
     Altus
Midstream
     APA
Consolidated
     APA
Upstream
     Altus
Midstream
     APA
Consolidated
 

Current debt - Apache

   $ 215      $ —        $ 215      $ 2      $ —        $ 2  

Long-term debt - Apache

     6,536        —          6,536        8,146        —          8,146  

Long-term debt - Altus

     —          657        657        —          624        624  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

     6,751        657        7,408        8,148        624        8,772  

Cash and cash equivalents

     268        109        377        238        24        262  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net debt

   $ 6,483      $ 548      $ 7,031      $ 7,910      $ 600      $ 8,510  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Income attributable to common stock to Adjusted earnings

Our presentation of adjusted earnings and adjusted earnings per share are non-GAAP measures because they exclude the effect of certain items included in Income Attributable to Common Stock. Management believes that adjusted earnings and adjusted earnings per share provides relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management in assessing the Company’s operational trends and comparability of results to our peers.

Management uses adjusted earnings and adjusted earnings per share to evaluate our operating and financial performance because it eliminates the impact of certain items that management does not consider to be representative of the Company’s on-going business operations. As a performance measure, adjusted earnings may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, capital structure and asset sales and other divestitures, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted earnings and adjusted earnings per share may not be comparable to similar measures of other companies in our industry.

 

     For the Quarter Ended
September 30, 2021
    For the Quarter Ended
September 30, 2020
 
     Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
    Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
 
                                                  

Net income (loss) including noncontrolling interests (GAAP)

   $ 122     $ (152   $ (30   $ (0.08   $ 72     $ (31   $ 41     $ 0.11  

Income attributable to noncontrolling interests

     94       (41     53       0.14       41       (15     26       0.07  

Income attributable to Altus preferred unit limited partner

     30       —         30       0.08       19       —         19       0.05  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stock—Basic

     (2     (111     (113     (0.30     12       (16     (4     (0.01

Effect of dilutive securities **

     —         —         —         —         (4     —         (4     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stock

     (2     (111     (113     (0.30     8       (16     (8     (0.02

Adjustments: *

                

Asset and unproved leasehold impairments

     23       (8     15       0.04       36       (7     29       0.08  

Noncontrolling interest & tax barrel impact on Egypt adjustments

     (1     —         (1     —         (1     —         (1     —    

Valuation allowance and other tax adjustments

     —         60       60       0.16       —         —         —         —    

(Gain)/loss on extinguishment of debt

     105       (22     83       0.22       (12     3       (9     (0.03

Unrealized derivative instrument gain

     (37     8       (29     (0.08     (99     21       (78     (0.20

Noncontrolling interest on Altus preferred units embedded derivative

     1       —         1       —         (1     —         (1     —    

Loss on previously sold Gulf of Mexico properties

     446       (94     352       0.93       —         —         —         —    

Effect of dilutive securities **

     —         —         —         —         4       —         4       0.01  

Transaction, reorganization & separation costs

     4       (1     3       0.01       7       (1     6       0.01  

Loss on divestitures, net

     2       (1     1       —         1       —         1       —    

Drilling contract termination charges and other

     —         —         —         —         3       (1     2       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings (Non-GAAP)

   $ 541     $ (169   $ 372     $ 0.98     $ (54   $ (1   $ (55   $ (0.15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     For the Nine Months Ended
September 30, 2021
    For the Nine Months Ended
September 30, 2020
 
     Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
    Before
Tax
    Tax
Impact
    After
Tax
    Diluted
EPS
 
                                                  

Net income (loss) including noncontrolling interests (GAAP)

   $ 1,237     $ (409   $ 828     $ 2.18     $ (4,910   $ (49   $ (4,959   $ (13.12

Income (loss) attributable to noncontrolling interests

     277       (113     164       0.43       (120     (25     (145     (0.38

Income attributable to Altus preferred unit limited partner

     73       —         73       0.19       56       —         56       0.15  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common stock—Basic

     887       (296     591       1.56       (4,846     (24     (4,870     (12.89

Effect of dilutive securities **

     (10     —         (10     (0.03     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common stock

     877       (296     581       1.53       (4,846     (24     (4,870     (12.89

Adjustments: *

                

Asset and unproved leasehold impairments

     44       (12     32       0.09       4,578       (851     3,727       9.87  

Noncontrolling interest & tax barrel impact on Egypt adjustments

     (2     —         (2     (0.01     (171     (7     (178     (0.47

Valuation allowance and other tax adjustments

     —         (43     (43     (0.11     —         932       932       2.46  

(Gain)/loss on extinguishment of debt

     104       (22     82       0.22       (152     32       (120     (0.32

Unrealized derivative instrument loss

     18       (3     15       0.04       142       (30     112       0.30  

Noncontrolling interest on Altus preferred units embedded derivative

     4       (1     3       0.01       (16     4       (12     (0.03

Loss on previously sold Gulf of Mexico properties

     446       (94     352       0.93       —         —         —         —    

Effect of dilutive securities **

     10       —         10       0.03       —         —         —         —    

Transaction, reorganization & separation costs

     8       (2     6       0.02       44       (10     34       0.09  

Gain on divestitures, net

     (65     14       (51     (0.14     (24     8       (16     (0.04

Drilling contract termination charges and other

     (1     —         (1     (0.01     6       (2     4       0.01  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Earnings (Non-GAAP)

   $ 1,443     $ (459   $ 984     $ 2.60     $ (439   $ 52     $ (387   $ (1.02
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

The income tax effect of the reconciling items are calculated based on the statutory rate of the jurisdiction in which the discrete item resides.

**

The assumed conversion of Altus’ Preferred Unit limited partner is primarily associated with unrealized gains on the Preferred Unit embedded derivative. These amounts are antidilutive for the third quarter 2021 and nine-months ended 2020.

 

Page 7

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