APA (APA) Q4 FY25 earnings call: guidance and Q&A

Seeking clarity on the $100M Permian capital for LOE projects and its payback/impact, and details on the exploration budget for Egypt, Alaska, and Suriname, specifically a 'game changer' target in Alaska.

John Christmann detailed the $70M exploration budget ($20M Alaska prep, $50M Suriname Q4 drilling). He highlighted Egypt's gas strategy under the new pricing framework, leading to new exploration inventory. Tracey Henderson elaborated on Alaska's robust prospect inventory, focusing on maturing analogous prospects to Sockeye and appraising the Sockeye discovery in early 2027. Ben Rodgers explained the $100M Permian capital for LOE projects (compression, facilities consolidation, artificial lift), expecting $3.5M+ per month LOE reduction by late 2026, implying a 1-2 year payback. Steve Riney added that these investments also increase production reliability and can move high-breakeven inventory into economic categories.

“So spending that $100 million gets you $40 million to $50 million of savings, which is pretty much in line with the kind of 1- to 2-year payback.”

asked by Douglas George Blyth Leggate · answered by Ben Rodgers

Seeking a breakdown of factors contributing to the significant beat on US oil volumes in Q4 (improved run time, incremental completions, moderate weather).

John Christmann noted Q4 had virtually no weather impact, unlike Q1 2026. Steve Riney estimated roughly one-third impact from each factor: no weather downtime, earlier-than-expected TILs (Turn-In-Lines), and phenomenal underlying run time improvement.

“I would just say roughly 1/3 each, 3 big impacts, virtually no weather downtime in the fourth quarter, the TILs and then the actual improvement in underlying run time was just phenomenal during the fourth quarter.”

asked by John Freeman · answered by Stephen Riney

Inquiring about the breakdown of 130 completions in Permian between Midland and Delaware and the D&C per foot basis for the 2026 plan, given the significant D&C cost reduction in 2025.

Steve Riney declined to provide the exact breakdown on the call but stated that significant D&C cost progress was made in 2025, with some shallow wells achieving under $500/lateral foot in Midland and under $700/foot in Delaware. He expects continued improvement in 2026, noting a mix effect.

“We're not prepared to do that on this call... What I would just say is that we made huge progress on drilling and completion costs in 2025.”

asked by John Freeman · answered by Stephen Riney

Asking about the sensitivity of Permian inventory, particularly regarding gassy assets, and the definition of 'economic inventory.'

John Christmann clarified that the current inventory assessment focuses on oil, not pure gas locations. Steve Riney detailed 'economic inventory' as operated locations with a very high confidence in type curve, including all drilling, completion, equipping, and full field facilities costs (including central facilities, gathering, saltwater disposal), and requiring a 10% rate of return. He noted that 40-50% of technical upside is in shallow Delaware Basin (Avalon, First/Second Bone Springs), with some wells breaking even at $41 WTI, indicating strong economics for future conversion.

“The economics include all drilling, completion, equipping and facilities costs and it's actually burdened with central facilities, which some people don't do... and it has to have a 10% rate of return to make it into economic inventory.”

asked by Neal Dingmann · answered by Stephen Riney

Confirming if the $230 million capital for Suriname is solely for GranMorgu development or includes other Block 58/52 activities.

John Christmann confirmed the $230 million is entirely for GranMorgu development, covering FPSO, umbilicals, and starting development drilling. Exploration capital for Block 58 is separate.

“No. The $230 million there is for GranMorgu and then the exploration capital would be covered in the exploration side.”

asked by Neal Dingmann · answered by John Christmann

Inquiring about the exploration philosophy for gas in Egypt, particularly for distant opportunities given the 7.5 million acres, and if it's efficient to step out from existing infrastructure.

John Christmann explained that with the new gas price environment, APA is revisiting deeper, gas-prone pockets previously avoided. Tracey Henderson added that they are building a better regional picture, reprocessing seismic data, and developing an inventory of longer-term gas prospects, some of which will be drilled this year.

“we enter into a new gas price environment and it lets us start that process over on the gas side... we're stepping back and doing a regional look.”

asked by Bob Brackett · answered by John Christmann

Clarifying if a successful 4-well spacing test in the Bone Spring could convert 130 technical locations to economic inventory, representing a year's worth of drilling.

Steve Riney confirmed that a successful test in the First Bone Spring could indeed prove up concepts that would move up to a year's worth of drilling from technical upside into economic inventory, noting that 40-50% of their 1,700 technical upside locations are in the shallow Delaware Basin.

“Yes, that's a correct read. And that's just for the First Bone Spring... it can prove up just in the First Bone Springs in that area up to another year worth of drilling but there's a lot more at play there.”

asked by Michael Scialla · answered by Stephen Riney

Asking if the $230 million for GranMorgu development includes development drilling or if that's separate.

John Christmann confirmed the $230 million covers everything for GranMorgu development, including FPSO, umbilicals, and starting development drilling with multiple rigs late next year/early 2027.

“It's everything, Mike and we will be starting the drilling. Those rigs coming on late next year, early '27. So there could -- some of that would fall in on the drilling side, too.”

asked by Michael Scialla · answered by John Christmann

Inquiring about the trend of the $650M trading benefit for 2026, especially with new Permian pipeline capacity coming online, and if it will decline in 2027 and beyond.

Ben Rodgers stated that the trading benefit is expected to come down in 2027 based on strip prices due to new Permian pipeline capacity. He noted that while this is a recurring trend, if Waha spreads compress, APA would benefit from better prices on its equity gas, partially mitigating the drop in marketing income. The trading activities are expected to remain positive through 2028.

“So this year is [ 650 ], you look at next year, it does come down just based on strip. There is quite a lot of takeaway coming online late this year, a little bit next year.”

asked by Josh Silverstein · answered by Ben Rodgers