APA Corporation — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; the supplied text does not provide a standalone fourth-quarter income statement. APA is an independent oil and gas producer operating in the U.S., Egypt and the U.K. North Sea, with exploration and appraisal interests in Suriname. Its consolidated results also include Altus Midstream, which APA expected to deconsolidate after a planned 2022 transaction.
Financial and operating results
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenues | $7.985 billion | $4.435 billion |
| Oil, natural gas and NGL production revenue | $6.498 billion | $4.037 billion |
| Net income (loss) attributable to common stock | $973 million; $2.59 diluted EPS | $(4.860) billion; $(12.86) diluted EPS |
| Cash provided by operating activities | $3.496 billion | $1.388 billion |
| Cash and cash equivalents at year-end | $302 million | $262 million |
| Total debt at year-end | $7.510 billion | $8.772 billion |
| Production | 388,061 boe/d | 439,740 boe/d |
| Proved reserves at year-end | 913 MMboe | 874 MMboe |
- Oil and gas production revenue increased 61%, as realized prices rose: oil to $68.97/bbl (+74%), natural gas to $3.99/Mcf (+118%) and NGLs to $28.48/bbl (+141%). Production fell 12% year over year.
- Operating income was $2.860 billion, versus an operating loss of $4.102 billion in 2020. The 2020 result included $4.501 billion of impairments; 2021 impairments were $208 million.
- 2021 earnings included a $446 million loss related to potential decommissioning of previously sold Gulf of Mexico properties and a $104 million net loss on debt extinguishment. Derivative gains were $94 million.
- Cash capital expenditures were $1.101 billion for oil and gas properties and $3 million for Altus facilities. APA repaid $1.795 billion of fixed-rate debt and borrowed $425 million net under its credit facilities. Available committed borrowing capacity was $2.426 billion at Apache and $141 million at Altus.
- Year-end equity was a deficit of $717 million. The Apache credit-facility debt-to-capital ratio was 28%, against a 60% covenant ceiling; both Apache and Altus were in compliance with their facilities.
- Proved reserves rose from 873.7 to 913.0 MMboe. Additions were 102 MMboe and upward revisions were 107 MMboe, including an estimated 57 MMboe increase associated with Egypt’s modernized PSC; 28 MMboe were sold with U.S. divestitures.
Material changes and strategic developments
- APA returned to modest U.S. drilling activity after largely halting drilling and completions in 2020. Worldwide production still declined, reflecting natural declines, reduced prior-year activity and North Sea downtime.
- Egypt ratified a modernized production-sharing contract effective April 1, 2021, consolidating most acreage and production into one concession and extending development leases for 20 years. APA estimated a 57 MMboe proved-reserve uplift and approximately $750 million in discounted future net cash flows from the revised terms.
- APA repurchased 31.2 million shares for $847 million in the fourth quarter at an average $27.14 per share. The quarterly dividend was raised to $0.125 per share, payable in February 2022. Management described a framework targeting returns of 60% of cash flow over capital investment.
- APA’s planned Altus combination with BCP was expected to close in the first quarter of 2022. APA anticipated its ownership falling from about 79% to about 20%, ending its control of Altus.
- 2021 U.S. and other non-core asset sales generated $256 million of proceeds. Subsequent to year-end, APA agreed to sell Delaware Basin mineral rights for approximately $805 million, subject to adjustments and approvals.
Outlook, risks and contingencies
- 2022 outlook: Upstream capital spending was budgeted at approximately $1.6 billion, including about $200 million for exploration and appraisal, primarily in Suriname. Management expected worldwide production to be similar to 2021 after adjusting for divestitures, moderate U.S. declines, and increased Egypt activity. APA’s Egypt plan separately targeted 13%–15% gross oil production growth.
- Management stated that, at then-current strip prices, it expected significant cash flow above the capital budget, while emphasizing conservative budgeting, debt reduction and shareholder returns. Future results remain highly sensitive to commodity prices, production, costs and capital access.
- Gulf of Mexico decommissioning: APA estimated potential undiscounted exposure of $1.2–$1.4 billion for assets sold to Fieldwood, recorded a $1.2 billion liability and a $740 million recovery asset, and recognized a $446 million loss. Reimbursements depend on trust funds, bonds and letters of credit; APA also agreed to a standby loan of up to $400 million after those sources are exhausted. Actual costs could exceed estimates.
- Other commitments include $4.9 billion of purchase obligations, including $3.5 billion under the Egypt PSC to be spent by March 31, 2026, and $272 million of operating lease commitments. The filing also reports $84 million accrued for probable legal contingencies and $2 million for environmental remediation.
- Key risks include volatile oil and gas prices, pandemic-related uncertainty, operational and drilling hazards, international and political risks, climate and environmental regulation, water disposal restrictions, cyberattacks, counterparty credit risk and uncertainty in reserve estimates. The company’s credit ratings were Ba1/Stable from Moody’s and BB+/Stable from S&P.
- APA reported that disclosure controls and internal control over financial reporting were effective; the independent auditor issued unqualified opinions on the financial statements and internal controls.
Most important facts for investors to verify
- Whether the 2022 production and capital-spending outlook was achieved, especially the expected Egypt growth and U.S. production trajectory.
- The realized cash cost and funding needs for Gulf of Mexico decommissioning, including recoveries from security instruments and potential use of the standby loan.
- Progress on debt reduction and liquidity after the 2021 repayments, share repurchases, dividend increases and upcoming maturities.
- Completion and financial consequences of the BCP-Altus combination, including APA’s post-transaction ownership and accounting treatment.
- Reserve replacement, actual development of PUD reserves, and the extent to which reserve revisions depend on commodity prices and the Egypt PSC.
- Exposure to price changes, customer concentration, and the $3.5 billion Egypt spending commitment through 2026.