APA Corp false 0001841666 0001841666 2022-05-04 2022-05-04

 

 

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): May 4, 2022

 

 

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 May 4, 2022, APA Corporation issued a press release announcing financial and operating results for the fiscal quarter ended March 31, 2022. 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 May 4, 2022.
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: May 5, 2022   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 First-Quarter 2022

Financial and Operational Results

Key Takeaways

 

   

Reported production of 404,000 barrels of oil equivalent (BOE) per day; adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 322,000 BOE per day;

 

   

Generated net cash from operating activities of $891 million, adjusted EBITDAX of $1.7 billion, and free cash flow of $675 million, up 39% from previous quarter;

 

   

Announced discovery at Krabdagu exploration well on Block 58 offshore Suriname and spud Rasper exploration well on Block 53;

 

   

Retired $1.3 billion of bonds and repurchased more than $260 million of APA shares; and

 

   

Received approximately $1 billion in proceeds from previously announced sales of Delaware Basin minerals package and Kinetik common stock.

HOUSTON, May 4, 2022 – APA Corporation (Nasdaq: APA) today announced its financial and operational results for the first-quarter 2022.

APA reported net income attributable to common stock of $1.9 billion, or $5.43 per diluted share. When adjusted for items that impact the comparability of results, most notably the gains on the closing of the Altus Midstream business combination in February and the sale of the Delaware Basin minerals package in March, APA’s first-quarter earnings were $668 million, or $1.92 per diluted share. Net cash provided by operating activities was $891 million, and adjusted EBITDAX was $1.7 billion. The company generated $675 million in free cash flow during the quarter, and at recent strip oil and gas prices, expects to generate approximately $2.9 billion of free cash flow for the full year 2022.

“APA’s strong first-quarter results reflect the benefits of our recently modernized production sharing contract in Egypt and demonstrate the strength of a diversified, unhedged upstream oil and gas portfolio,” said John J. Christmann IV, APA’s CEO and president. “We had a number of important achievements during the first quarter including a $1.3 billion reduction in bonds outstanding, the return of more than $300 million of capital to shareholders through dividends and share repurchases, and the completion of the Altus Midstream transaction and its resulting deconsolidation.

 

 

1


APA CORPORATION ANNOUNCES FIRST-QUARTER 2022

FINANCIAL AND OPERATIONAL RESULTS — PAGE 2 of 5

 

“In the U.S., oil production exceeded expectations as well performance in the Permian Basin benefitted from longer laterals and enhanced completion techniques. In Suriname Block 58, flow test operations are complete and pressure build-up tests are ongoing at Krabdagu and should be finished later this month. On Block 53, we spud the Rasper exploration well in late March and have not yet reached the targeted zones,” he said.

First-Quarter Summary

First-quarter reported production was 404,000 BOE per day, and adjusted production, which excludes Egypt noncontrolling interest and tax barrels, was 322,000 BOE per day. APA’s first-quarter upstream capital investment was $361 million, which was lower than expected as activity in Egypt and the North Sea was deferred to the second quarter.

Debt Reduction Progress and Capital Return to Shareholders

During the first quarter, APA paid off $213 million in bonds that were set to mature in April and completed an upsized tender offer, which eliminated $1.1 billion of additional near-term maturities. At the end of April, APA established new credit facilities comprising a $1.8 billion revolver and £1.5 billion letter of credit facility, the latter to support asset retirement obligations in the North Sea.

As part of its capital return framework, APA repurchased 7.2 million shares of common stock during the quarter at an average price of $36 per share. Since the inception of the buyback program in October 2021 through the end of the first quarter 2022, APA has bought back 38.4 million shares at an average price of $28.83 per share.

Capital Guidance

APA is raising capital investment guidance for the full year by approximately 8%, to $1.725 billion, to support increased drilling activity in Suriname, as well as an expected increase in U.S. non-operated activity.

“Recent geopolitical events and rising commodity prices have highlighted the need for reliable and abundant sources of energy, and APA is focused on safely and responsibly meeting the global demands for oil and gas. We remain committed to our capital investment program and capital return framework and anticipate an increase in share repurchases if the current commodity price environment sustains through the year. We are equally committed to progressing our ESG initiatives including reducing emissions and bettering the lives of our employees and communities,” Christmann said.

 

2


APA CORPORATION ANNOUNCES FIRST-QUARTER 2022

FINANCIAL AND OPERATIONAL RESULTS — PAGE 3 of 5

 

Conference Call

APA will host a conference call to discuss its first-quarter 2022 results at 10 a.m. Central time, Thursday, May 5. 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 May 5. The number for the replay is 855-859-2056 or 404-537-3406 for international calls. The conference access code is 7382328. 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 natural gas in the United States, Egypt and the United Kingdom and that explore for oil and natural gas offshore Suriname. APA posts announcements, operational updates, investor information and press releases on its website, www.apacorp.com. Additional details regarding 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.

 

3


APA CORPORATION ANNOUNCES FIRST-QUARTER 2022

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 APA’s Form 10-K for the year ended December 31, 2021, and in our quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission for a discussion of risk factors that affect our business. Any 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.

 

4


APA CORPORATION ANNOUNCES FIRST-QUARTER 2022

FINANCIAL AND OPERATIONAL RESULTS — PAGE 5 of 5

 

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 APA’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2021 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    Alexandra Franceschi

Website:  www.apacorp.com

Click here for the full release with quarterly financial statements.

-end-

 

5


APA CORPORATION

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

(In millions, except per share data)

 

     For the Quarter Ended  
     March 31,  
     2022     2021  

REVENUES AND OTHER:

    

Oil, natural gas, and natural gas liquids production revenues

    

Oil revenues

   $ 1,717     $ 991  

Natural gas revenues

     380       312  

Natural gas liquids revenues

     223       128  
  

 

 

   

 

 

 
     2,320       1,431  

Purchased oil and gas sales

     349       440  
  

 

 

   

 

 

 

Total revenues

     2,669       1,871  

Derivative instrument gain (loss), net

     (62     158  

Gain on divestitures, net

     1,176       2  

Other, net

     45       61  
  

 

 

   

 

 

 
     3,828       2,092  
  

 

 

   

 

 

 

OPERATING EXPENSES:

    

Lease operating expenses

     344       264  

Gathering, processing, and transmission

     81       58  

Purchased oil and gas costs

     351       494  

Taxes other than income

     70       44  

Exploration

     42       49  

General and administrative

     156       83  

Transaction, reorganization, and separation

     14       —    

Depreciation, depletion, and amortization:

    

Oil and gas property and equipment

     278       312  

Other assets

     13       30  

Asset retirement obligation accretion

     29       28  

Financing costs, net

     152       110  
  

 

 

   

 

 

 
     1,530       1,472  
  

 

 

   

 

 

 

NET INCOME BEFORE INCOME TAXES

     2,298       620  

Current income tax provision

     392       149  

Deferred income tax provision (benefit)

     (40     21  
  

 

 

   

 

 

 

NET INCOME INCLUDING NONCONTROLLING INTERESTS

     1,946       450  

Net income attributable to noncontrolling interest - Egypt

     119       42  

Net income attributable to noncontrolling interest - Altus

     14       1  

Net income (loss) attributable to Altus Preferred Unit limited partners

     (70     19  
  

 

 

   

 

 

 

NET INCOME ATTRIBUTABLE TO COMMON STOCK

   $ 1,883     $ 388  
  

 

 

   

 

 

 

NET INCOME PER COMMON SHARE:

    

Basic

   $ 5.44     $ 1.02  

Diluted

   $ 5.43     $ 1.02  

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

    

Basic

     346       378  

Diluted

     347       379  

DIVIDENDS DECLARED PER COMMON SHARE

   $ 0.125     $ 0.025  

 

6


APA CORPORATION

PRODUCTION INFORMATION

 

     For the Quarter Ended      % Change  
     March 31,
2022
     December 31,
2021
     March 31,
2021
     1Q22 to
4Q21
    1Q22 to
1Q21
 

OIL VOLUME - Barrels per day

             

United States

     69,636        74,673        67,690        -7     3

Egypt (1, 2)

     85,018        68,261        72,170        25     18

North Sea

     35,242        35,873        43,524        -2     -19
  

 

 

    

 

 

    

 

 

      

International (1)

     120,260        104,134        115,694        15     4
  

 

 

    

 

 

    

 

 

      

Total (1)

     189,896        178,807        183,384        6     4
  

 

 

    

 

 

    

 

 

      

NATURAL GAS VOLUME - Mcf per day

             

United States

     477,637        514,894        507,517        -7     -6

Egypt (1, 2)

     386,577        277,142        278,149        39     39

North Sea

     38,466        34,124        49,840        13     -23
  

 

 

    

 

 

    

 

 

      

International (1)

     425,043        311,266        327,989        37     30
  

 

 

    

 

 

    

 

 

      

Total (1)

     902,680        826,160        835,506        9     8
  

 

 

    

 

 

    

 

 

      

NGL VOLUME - Barrels per day

             

United States

     61,711        67,502        57,815        -9     7

Egypt (1, 2)

     491        492        583        0     -16

North Sea

     1,498        1,136        1,368        32     10
  

 

 

    

 

 

    

 

 

      

International (1)

     1,989        1,628        1,951        22     2
  

 

 

    

 

 

    

 

 

      

Total (1)

     63,700        69,130        59,766        -8     7
  

 

 

    

 

 

    

 

 

      

BOE per day

             

United States

     210,953        227,991        210,091        -7     0

Egypt (1, 2)

     149,938        114,943        119,111        30     26

North Sea

     43,151        42,696        53,199        1     -19
  

 

 

    

 

 

    

 

 

      

International (1)

     193,089        157,639        172,310        22     12
  

 

 

    

 

 

    

 

 

      

Total (1)

     404,042        385,630        382,401        5     6
  

 

 

    

 

 

    

 

 

      

Total excluding noncontrolling interests

     354,089        346,944        342,630        2     3
  

 

 

    

 

 

    

 

 

      

 

(1)

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

 

Oil (b/d)

     28,328        22,875        24,088       

Gas (Mcf/d)

                     128,764        93,883        92,936       

NGL (b/d)

     164        164        194       

BOE per day

     49,953                    38,686                39,771                29             26

 

(2)

Egypt Gross Production

 

Oil (b/d)

                 134,397        133,925        135,320       

Gas (Mcf/d)

     597,812                  600,919        603,269       

NGL (b/d)

     735        876        897       

BOE per day

     234,767        234,954                236,762                0             -1

 

7


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  
     March 31,      December 31,      March 31,      1Q22 to     1Q22 to  
     2022      2021      2021      4Q21     1Q21  

OIL VOLUME - Barrels per day

             

United States

     69,636        74,673        67,690        -7     3

Egypt

     38,784        35,017        37,019        11     5

North Sea

     35,242        35,873        43,524        -2     -19
  

 

 

    

 

 

    

 

 

      

International

     74,026        70,890        80,543        4     -8
  

 

 

    

 

 

    

 

 

      

Total

     143,662        145,563        148,233        -1     -3
  

 

 

    

 

 

    

 

 

      

NATURAL GAS VOLUME - Mcf per day

             

United States

     477,637        514,894        507,517        -7     -6

Egypt

     175,509        149,341        153,075        18     15

North Sea

     38,466        34,124        49,840        13     -23
  

 

 

    

 

 

    

 

 

      

International

     213,975        183,465        202,915        17     5
  

 

 

    

 

 

    

 

 

      

Total

     691,612        698,359        710,432        -1     -3
  

 

 

    

 

 

    

 

 

      

NGL VOLUME - Barrels per day

             

United States

     61,711        67,502        57,815        -9     7

Egypt

     225        263        311        -14     -28

North Sea

     1,498        1,136        1,368        32     10
  

 

 

    

 

 

    

 

 

      

International

     1,723        1,399        1,679        23     3
  

 

 

    

 

 

    

 

 

      

Total

     63,434        68,901        59,494        -8     7
  

 

 

    

 

 

    

 

 

      

BOE per day

             

United States

     210,953        227,991        210,091        -7     0

Egypt

     68,261        60,170        62,843        13     9

North Sea

     43,151        42,696        53,199        1     -19
  

 

 

    

 

 

    

 

 

      

International

     111,412        102,866        116,042        8     -4
  

 

 

    

 

 

    

 

 

      

Total

     322,365        330,857        326,133        -3     -1
  

 

 

    

 

 

    

 

 

      

 

8


APA CORPORATION

PRICE INFORMATION

 

     For the Quarter Ended  
     March 31,      December 31,      March 31,  
     2022      2021      2021  

AVERAGE OIL PRICE PER BARREL

        

United States

   $ 95.58      $ 76.32      $  57.16  

Egypt

     103.22        80.71        61.89  

North Sea

     102.20        78.94        59.67  

International

     102.92        80.13        61.04  

Total

     100.23        78.52        59.62  

AVERAGE NATURAL GAS PRICE PER MCF

        

United States

   $ 4.25      $ 4.67      $ 4.61  

Egypt

     2.83        2.82        2.79  

North Sea

     32.35        26.34        6.93  

International

     5.21        5.40        3.42  

Total

     4.70        4.95        4.14  

AVERAGE NGL PRICE PER BARREL

        

United States

   $ 36.67      $  33.92      $ 22.99  

Egypt

     77.81        62.32        44.74  

North Sea

     74.64        73.33        48.59  

International

     75.20        70.00        47.44  

Total

     38.33        34.77        23.79  

 

9


APA CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

(In millions)

SUMMARY EXPLORATION EXPENSE INFORMATION

 

     For the Quarter Ended
March 31,
 
     2022      2021  

Unproved leasehold impairments

   $ 4      $ 18  

Dry hole expense

     5        19  

Geological and geophysical expense

     15        4  

Exploration overhead and other

     18        8  
  

 

 

    

 

 

 
   $      42       $    49   
  

 

 

    

 

 

 

SUMMARY CASH FLOW INFORMATION

 

     For the Quarter Ended
March 31,
 
     2022      2021  

Net cash provided by operating activities

   $ 891      $ 671  
  

 

 

    

 

 

 

Additions to upstream oil and gas property

     (378      (255

Additions to Altus gathering, processing, and transmission facilities

     (1      (1

Contributions to Altus equity method interests

     (2      (21

Proceeds from sale of oil and gas properties

     767        3  

Proceeds from sale of Kinetik shares

     224        —    

Deconsolidation of Altus cash and cash equivalents

     (143      —    

Other, net

     (1      7  
  

 

 

    

 

 

 

Net cash provided by (used in) investing activities

   $ 466      $ (267
  

 

 

    

 

 

 

Proceeds from (payment on) Apache credit facility, net

     338        (85

Proceeds from Altus credit facility

     —          33  

Payments on Apache fixed-rate debt

     (1,370      (6

Distributions to noncontrolling interest - Egypt

     (69      (40

Distributions to Altus Preferred Unit limited partners

     (11      (11

Treasury stock activity, net

     (261      —    

Dividends paid to APA common stockholders

     (43      (9

Other

     (9      (10
  

 

 

    

 

 

 

Net cash used in financing activities

   $ (1,425    $ (128
  

 

 

    

 

 

 

SUMMARY BALANCE SHEET INFORMATION

 

     March 31,
2022
     December 31,
2021
 

Cash and cash equivalents

   $ 234      $ 302  

Other current assets

     2,359        2,078  

Property and equipment, net

     8,082        8,335  

Decommissioning security for sold Gulf of Mexico properties

     640        640  

Other assets

     1,161        1,948  
  

 

 

    

 

 

 

Total assets

   $ 12,476      $ 13,303  
  

 

 

    

 

 

 

Current debt - Apache *

   $ 125      $ 215  

Current liabilities

     1,989        1,902  

Long-term debt - Apache *

     5,764        6,638  

Long-term debt - Altus

     —          657  

Decommissioning contingency for sold Gulf of Mexico properties

     1,086        1,086  

Deferred credits and other noncurrent liabilities

     2,660        2,810  

Redeemable noncontrolling interest - Altus Preferred Unit limited partners

     —          712  

APA shareholders’ deficit

     (18      (1,595

Noncontrolling interest - Egypt

     870        820  

Noncontrolling interest - Altus

     —          58  
  

 

 

    

 

 

 

Total Liabilities and equity

   $ 12,476      $ 13,303  
  

 

 

    

 

 

 

Common shares outstanding at end of period

     340        347  

 

*

Excludes Altus

 

10


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
March 31,
 
     2022      2021  

Costs incurred in oil and gas property:

     

Acquisitions

     

Proved

   $ 9      $ 1  

Unproved

     11        2  

Exploration and development

     419        284  
  

 

 

    

 

 

 

Total Costs incurred in oil and gas property

   $ 439      $ 287  
  

 

 

    

 

 

 

Reconciliation of Costs incurred to Upstream capital investment:

     

Total Costs incurred in oil and gas property

   $ 439      $ 287  

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

     7        2  

Capitalized interest

     (3      (2

Exploration seismic and administration costs

     (33      (12
  

 

 

    

 

 

 

Upstream capital investment including noncontrolling interest - Egypt

   $ 410      $ 275  

Less noncontrolling interest - Egypt

     (49      (31
  

 

 

    

 

 

 

Total Upstream capital investment

   $ 361      $ 212  
  

 

 

    

 

 

 

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
March 31,
 
     2022        2021    

Net cash provided by operating activities

   $ 891      $ 671  

Changes in operating assets and liabilities

     263        175  
  

 

 

    

 

 

 

Cash flows from operations before changes in operating assets and liabilities

   $ 1,154      $ 846  

Adjustments to free cash flow:

     

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

     —          (39

Upstream capital investment including noncontrolling interest - Egypt

     (410      (275

Distributions to Sinopec noncontrolling interest

     (69      (40
  

 

 

    

 

 

 

Upstream free cash flow

   $ 675      $ 492  

Cash dividends received from Altus Midstream

     —          19  
  

 

 

    

 

 

 

Free cash flow

   $ 675      $ 511  
  

 

 

    

 

 

 

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  
     March 31,     December 31,     March 31,  
     2022     2021     2021  

Net cash provided by operating activities

   $ 891     $ 1,085     $ 671  

Adjustments:

      

Exploration expense other than dry hole expense and unproved leasehold impairments

     33       16       12  

Current income tax provision

     392       189       149  

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

     29       (34     20  

Changes in operating assets and liabilities

     263       (95     175  

Financing costs, net

     85       92       110  

Transaction, reorganization & separation costs

     14       14       —    
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDAX (Non-GAAP)

   $ 1,707     $ 1,267     $ 1,137  
  

 

 

   

 

 

   

 

 

 

 

11


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.

 

     March 31, 2022      December 31, 2021  
     APA      Altus      APA      APA      Altus      APA  
     Upstream      Midstream      Consolidated      Upstream      Midstream      Consolidated  

Current debt - Apache

   $ 125      $ —        $ 125      $ 215      $ —        $ 215  

Long-term debt - Apache

     5,764        —          5,764        6,638        —          6,638  

Long-term debt - Altus

     —          —          —          —          657        657  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

     5,889        —          5,889        6,853        657        7,510  

Cash and cash equivalents

     234        —          234        170        132        302  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net debt

   $ 5,655      $ —        $ 5,655      $ 6,683      $ 525      $ 7,208  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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     For the Quarter Ended  
     March 31, 2022     March 31, 2021  
     Before     Tax     After     Diluted     Before     Tax     After     Diluted  
     Tax     Impact     Tax     EPS     Tax     Impact     Tax     EPS  

Net income including noncontrolling interests (GAAP)

   $ 2,298     $ (352   $ 1,946     $ 5.61     $ 620     $ (170   $ 450     $ 1.19  

Income attributable to noncontrolling interests

     227       (94     133       0.38       78       (35     43       0.12  

Income (loss) attributable to Altus preferred unit limited partner

     (70     —         (70     (0.20     19       —         19       0.05  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stock

     2,141       (258     1,883       5.43       523       (135     388       1.02  

Adjustments: *

                

Asset and unproved leasehold impairments

     4       (1     3       0.01       18       (4     14       0.04  

Noncontrolling interest & tax barrel impact on Egypt adjustments

     —         —         —         —         (1     —         (1     —    

Valuation allowance and other tax adjustments

     —         (187     (187     (0.54     —         (43     (43     (0.12

Loss on extinguishment of debt

     67       (14     53       0.15       —         —         —         —    

Unrealized derivative instrument loss and related Altus Preferred impacts

     (15     (5     (20     (0.06     (14     3       (11     (0.03

Kinetik equity investment mark-to-market gain

     (24     —         (24     (0.07     —         —         —         —    

Transaction, reorganization & separation costs

     14       (3     11       0.03       —         —         —         —    

Gain on divestitures, net

     (1,176     125       (1,051     (3.03     (2     1       (1     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings (Non-GAAP)

   $ 1,011     $ (343   $ 668     $ 1.92     $ 524     $ (178   $ 346     $ 0.91  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

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

 

12

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