APA CORPORATION The following discussion relates to
Item 1-Financial Statements of this Quarterly Report on Form 10-Q, as well
as related information set forth in the Company's Consolidated Financial
Statements, accompanying Notes to Consolidated Financial Statements, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's Annual Report on Form 10-K for the fiscal
year ended
On
Overview
Apache, a direct, wholly owned subsidiary of APA, is an independent energy
company that explores for, develops, and produces natural gas, crude oil, and
natural gas liquids (NGLs). The Company's upstream business currently has
exploration and production operations in three geographic areas: the
The Company's mission is to grow in an innovative, safe, environmentally responsible, and profitable manner for the long-term benefit of its stakeholders. The Company is focused on rigorous portfolio management, disciplined financial structure, and optimization of returns.
The global economy and the energy industry have been deeply impacted by the
effects of the conflict in
In the first quarter of 2022, the Company reported net income of
The Company generated
Following this progress and considering the ongoing constructive price
environment, the Company has adjusted its cash allocation approach. The capital
investment program will be increased to a level intended to sustain or slightly
grow global production volumes. This will be primarily accomplished through a
gradual ramp in activity over the next few quarters, primarily in
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Operational Highlights
Key operational highlights for the quarter include:
•Daily boe production from the Company's
•On
ALTM's stockholders continued to hold their existing shares of ALTM Common
Stock.
Subsequent to the close of the transaction, in
•In
International
•In Egypt, the Company averaged 11 drilling rigs and drilled 15 productive wells
during the first quarter of 2022. First quarter 2022 gross equivalent production
in the Company's
•The Company averaged one rig in the
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Results of Operations
Oil, Natural Gas, and Natural Gas Liquids Production Revenues
Revenue
The Company's production revenues and respective contribution to total revenues
by country were as follows:
For the Quarter Ended
March 31,
2022 2021
% %
$ Value Contribution $ Value Contribution
($ in millions)
Oil Revenues:
United States $ 599 35 % $ 348 35 %
Egypt(1) 790 46 % 402 41 %
North Sea 328 19 % 241 24 %
Total(1) $ 1,717 100 % $ 991 100 %
Natural Gas Revenues:
United States $ 183 48 % $ 211 68 %
Egypt(1) 98 26 % 70 22 %
North Sea 99 26 % 31 10 %
Total(1) $ 380 100 % $ 312 100 %
NGL Revenues:
United States $ 204 91 % $ 120 94 %
Egypt(1) 3 2 % 2 1 %
North Sea 16 7 % 6 5 %
Total(1) $ 223 100 % $ 128 100 %
Oil and Gas Revenues:
United States $ 986 43 % $ 679 47 %
Egypt(1) 891 38 % 474 33 %
North Sea 443 19 % 278 20 %
Total(1) $ 2,320 100 % $ 1,431 100 %
(1) Includes revenues attributable to noncontrolling interests in Egypt .
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Production
The Company's production volumes by country were as follows:
For the Quarter Ended
March 31,
Increase
2022 (Decrease) 2021
Oil Volume (b/d)
United States 69,636 3% 67,690
Egypt(1)(2) 85,018 18% 72,170
North Sea 35,242 (19)% 43,524
Total 189,896 4% 183,384
Natural Gas Volume (Mcf/d)
United States 477,637 (6)% 507,517
Egypt(1)(2) 386,577 39% 278,149
North Sea 38,466 (23)% 49,840
Total 902,680 8% 835,506
NGL Volume (b/d)
United States 61,711 7% 57,815
Egypt(1)(2) 491 (16)% 583
North Sea 1,498 10% 1,368
Total 63,700 7% 59,766
BOE per day(3)
United States 210,953 -% 210,091
Egypt(1)(2) 149,938 26% 119,111
North Sea(4) 43,151 (19)% 53,199
Total 404,042 6% 382,401
(1) Gross oil, natural gas, and NGL production in
For the Quarter Ended March 31,
2022 2021
Oil (b/d) 134,397 135,320
Natural Gas (Mcf/d) 597,812 603,269
NGL (b/d) 735 897
(2) Includes net production volumes per day attributable to noncontrolling
interests in Egypt of:
For the Quarter Ended March 31,
2022 2021
Oil (b/d) 45,332 24,088
Natural Gas (Mcf/d) 206,079 92,936
NGL (b/d) 262 194
(3) The table shows production on a boe basis in which natural gas is converted to an equivalent barrel of oil based on a 6:1 energy equivalent ratio. This ratio is not reflective of the price ratio between the two products.
(4) Average sales volumes from the
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Pricing
The Company's average selling prices by country were as follows:
For the Quarter Ended
March 31,
Increase
2022 (Decrease) 2021
Average Oil Price - Per barrel
United States $ 95.58 67% $ 57.16
Egypt 103.22 67% 61.89
North Sea 102.20 71% 59.67
Total 100.23 68% 59.62
Average Natural Gas Price - Per Mcf
United States $ 4.25 (8)% $ 4.61
Egypt 2.83 1% 2.79
North Sea 32.35 367% 6.93
Total 4.70 14% 4.14
Average NGL Price - Per barrel
United States $ 36.67 60% $ 22.99
Egypt 77.81 74% 44.74
North Sea 74.64 54% 48.59
Total 38.33 61% 23.79
First-Quarter 2022 compared to First-Quarter 2021
Crude Oil Crude oil revenues for the first quarter of 2022 totaled
NGL NGL revenues for the first quarter of 2022 totaled
Altus Midstream Revenues
Prior to the deconsolidation of Altus on
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Purchased Oil and Gas Sales
Purchased oil and gas sales represent volumes primarily attributable to
transport, fuel, and physical in-basin gas purchases that were sold by the
Company to fulfill natural gas takeaway obligations. Sales related to these
purchased volumes totaled
Operating Expenses
The Company's operating expenses were as follows:
For the Quarter Ended
March 31,
2022 2021
(In millions)
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 25 46
General and administrative 151 83
Transaction, reorganization, and separation 14 -
Depreciation, depletion, and amortization:
Oil and gas property and equipment 278 312
Gathering, processing, and transmission assets 5 19
Other assets 8 11
Asset retirement obligation accretion 29 28
Financing costs, net 140 107
Total Operating Expenses $ 1,496 $ 1,466 Lease Operating Expenses (LOE)
LOE increased
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Gathering, Processing, and Transmission (GPT)
The Company's GPT expenses were as follows:
For the Quarter Ended
March 31,
2022 2021
(In millions)
Third-party processing and transmission costs $ 66 $ 51
Midstream service costs - ALTM 18 31
Midstream service costs - Kinetik 10 -
Upstream processing and transmission costs 94 82
Midstream operating expenses 5 7
Intersegment eliminations (18) (31)
Total Gathering, processing, and transmission $ 81 $ 58 GPT costs increased
Purchased Oil and Gas Costs
Purchased oil and gas costs totaled
Taxes Other Than Income
Taxes other than income increased
Exploration Expenses
The Company's exploration expenses were as follows:
For the Quarter Ended
March 31,
2022 2021
(In millions)
Unproved leasehold impairments $ 4 $ 18
Dry hole expense 5 19
Geological and geophysical expense 1 2
Exploration overhead and other 15 7
Total Exploration $ 25 $ 46 Exploration expenses decreased
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General and Administrative (G&A) Expenses
G&A expenses increased
Transaction, Reorganization, and Separation (TRS) Costs
TRS costs increased
Depreciation, Depletion, and Amortization (DD&A)
DD&A expenses on the Company's oil and gas properties decreased
Financing Costs, Net
The Company's Financing costs were as follows:
For the Quarter Ended
March 31,
2022 2021
(In millions)
Interest expense $ 90 $ 112
Amortization of debt issuance costs 2 2
Capitalized interest - -
Loss on extinguishment of debt 67 -
Interest income (4) (2)
Interest income from APA Corporation, net (15) (5)
Total Financing costs, net $ 140 $ 107 Net financing costs increased
Provision for Income Taxes
The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Non-cash impairments on the carrying value of the Company's oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.
During the first quarter of 2022, the Company's effective income tax rate was
primarily impacted by the gain associated with the deconsolidation of Altus, the
gain on sale of certain non-core mineral rights in the
The Company recorded a full valuation allowance against its
The Company is subject to
Critical Accounting Estimates
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The Company prepares its financial statements and accompanying notes in
conformity with accounting principles generally accepted in the
New Accounting Pronouncements
There were no material changes in recently issued or adopted accounting
standards from those disclosed in the Company's Annual Report on Form 10-K for
the fiscal year ended
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