APA Announces Agreement for $950 Million Asset Sale of Non-core Properties in the Permian Basin

Rhea-AI Summary

APA has announced the sale of non-core producing properties in the Permian Basin for $950 million. The properties, located in various areas of Texas and New Mexico, currently produce an estimated 21,000 barrels of oil equivalent per day, with 57% being oil. The transaction, expected to close in Q4 2024, will primarily use proceeds to reduce debt.

CEO John J. Christmann IV highlighted that this sale, along with other transactions, has high-graded and focused APA's U.S. asset base. The company has increased its onshore U.S. production by approximately 66,000 boe/d in 2024 without materially changing net debt levels compared to year-end 2023. Pro-forma Q4 U.S. production guidance is set at 307,000 boe/d, a 34% increase from Q4 2023.

Positive

• Sale of non-core assets for $950 million, improving focus on core operations
• Proceeds to be used primarily for debt reduction
• Increased onshore U.S. production by 66,000 boe/d in 2024
• Pro-forma Q4 U.S. production guidance of 307,000 boe/d, 34% above Q4 2023
• Maintained net debt levels compared to year-end 2023 despite acquisitions

Negative

• Divestiture of assets producing 21,000 boe/d, potentially impacting overall production

Insights

Financial Analyst

APA's $950 million asset sale is a strategic move to optimize its portfolio and strengthen its financial position. The divestment of non-core assets producing 21,000 boe/d aligns with the industry trend of focusing on high-quality, core assets. The decision to use proceeds primarily for debt reduction is prudent, potentially improving APA's balance sheet and financial flexibility.

Post-transaction, APA's pro-forma Q4 U.S. production guidance of 307,000 boe/d, a 34% increase from Q4 2023, suggests significant growth. The company's claim of no material change in net debt levels, despite recent acquisitions and sales, indicates effective capital management. However, investors should closely monitor the execution of this strategy and its impact on future cash flows and profitability.

Oil & Gas Industry Expert

APA's divestment of non-core Permian assets while retaining scale in the Midland and Delaware Basins demonstrates a calculated approach to portfolio optimization. The 57% oil content in the divested assets suggests a focus on higher-margin, liquids-rich properties in their core portfolio. This aligns with the industry's shift towards quality over quantity in asset holdings.

The company's enhanced position in unconventional plays, coupled with its global conventional portfolio, provides a balanced risk profile. This diversification strategy could prove advantageous in navigating market volatility. The mention of 'differential exploration upside' hints at potential future growth catalysts, which could set APA apart from pure-play Permian peers. Investors should watch for details on how APA plans to leverage this diversified portfolio for long-term value creation.

Market Research Analyst

APA's strategic moves, including the Callon Petroleum acquisition and subsequent asset sales, position it competitively among mid-sized Permian operators. The company's claim of a favorable comparison to pure-play peers in terms of asset quality and logistics is noteworthy. However, investors should seek concrete metrics to validate this assertion.

The transaction's timing, amid industry consolidation trends, suggests APA is proactively shaping its portfolio. The retention of advisors like RBC Richardson Barr and Truist Securities indicates a well-structured deal process. Market reaction will likely hinge on how effectively APA articulates its post-transaction growth strategy and differentiators. Key factors to monitor include production efficiency metrics, operating costs and the company's ability to translate its diversified portfolio into superior returns compared to peers.

HOUSTON, Sept. 10, 2024 (GLOBE NEWSWIRE) -- APA Corporation (Nasdaq: APA) announced today entry into an agreement for the sale of non-core producing properties in the Permian Basin to an undisclosed buyer for $950 million, prior to customary closing adjustments. The properties are located in the Central Basin Platform, Texas and New Mexico Shelf, and Northwest Shelf and currently represent estimated net production of 21,000 barrels of oil equivalent per day (boe/d), of which approximately 57% is oil. Proceeds from this sale will be used primarily to reduce debt. The effective date of the transaction is July 1, 2024, and the transaction is expected to close during the fourth-quarter 2024.

“Through multiple transactions completed this year, we have high graded and focused our U.S. asset base. Our remaining Permian position has scale and balance in the unconventional Midland and Delaware Basins,” said John J. Christmann IV, CEO of APA Corporation. “The net impact of our acquisition of Callon Petroleum and the follow-on asset sales is that APA has increased its onshore U.S. production by approximately 66,000 boe/d in 2024 and continued to add economic unconventional inventory, with no material change in net debt levels compared to year-end 2023.”

Pro-forma fourth-quarter U.S. production guidance is 307,000 boe/d which is 34% above the company’s fourth-quarter 2023 production.

Christmann continued, “The company’s more focused unconventional Permian asset base and advantageous transport and marketing positions compares favorably with like-sized, pure-play peers in the region, while APA’s conventional global portfolio also provides geologic, geographic and price diversification as well as differential exploration upside.”

RBC Richardson Barr served as the lead financial advisor to APA and Truist Securities also served as financial advisors; Bracewell LLP provided legal counsel to APA.

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 and elsewhere. APA posts announcements, operational updates, investor information and press releases on its website, www.apacorp.com.

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,” “goals,” “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, 2023, 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.

Contacts

Investors:	(281) 302-2286	Gary Clark
Media:	(713) 296-7276	Alexandra Franceschi
Website:	www.apacorp.com

APA-G

FAQ

What is the value of APA's asset sale in the Permian Basin?

APA has agreed to sell non-core producing properties in the Permian Basin for $950 million, subject to customary closing adjustments.

How much daily production do the sold APA properties represent?

The properties being sold by APA currently represent estimated net production of 21,000 barrels of oil equivalent per day (boe/d), of which approximately 57% is oil.

When is APA's Permian Basin asset sale expected to close?

The transaction for APA's Permian Basin asset sale is expected to close during the fourth quarter of 2024.

How will APA use the proceeds from the Permian Basin asset sale?

APA plans to use the proceeds from the Permian Basin asset sale primarily to reduce debt.

What is APA's pro-forma fourth-quarter U.S. production guidance after the asset sale?

APA's pro-forma fourth-quarter U.S. production guidance is 307,000 boe/d, which is 34% above the company's fourth-quarter 2023 production.