APA Sells Non-Core Texas Assets for $700 Million

APA Corp. has signed two agreements divesting non-core producing oil and gas properties in the Eagle Ford shale, East Texas Austin Chalk and Midland basin to undisclosed entities for aggregate proceeds of more than $700 million.

The assets, owned by APA subsidiary Apache Corp., have a combined average production of 13,000 barrels of oil equivalent per day (boepd) in the first quarter of 2024, just over one-third of which was petroleum, APA said in a press release Monday.

In one of the transactions, Apache and its subsidiaries are selling 237,000 net acres in Eagle Ford and East Texas Austin Chalk. These assets had an average net output of 11,000 boepd in the first three months of 2024.

In the Midland, a Permian sub-basin, Apache and its subsidiaries are exiting nearly 24,000 net royalty acres across several Texas counties. “These mineral and royalty interests were primarily non-operated properties that produced approximately 2.0 Mboe/d [thousand boepd] net to Apache during the first quarter 2024”, Houston, Texas-based APA said.

APA expects to close both transactions in the third quarter.

APA chief executive John J. Christmann IV commented, “These transactions are consistent with our active management of the portfolio, and we will continue to look for opportunities to exit assets that are unlikely to compete for capital within our portfolio or to monetize non-core assets at attractive prices”.

APA inched up to $30.9 from $30.88 in closing price on Monday on Nasdaq.

“Proceeds from these asset sales will be used primarily to reduce nearer-term borrowings”, APA said.

APA has assumed Callon Petroleum Co’s debt as part of a $4.5 billion acquisition transaction completed earlier this year. Houston-headquartered Callon had last reported $1.9 billion in debt as of yearend 2023.

For the first quarter of 2024, APA posted $5.2 billion in debt, $2 million of which is current or due within a year. Its current liabilities totaled $2.2 billion. Meanwhile its current assets stood at $2.5 billion including $102 million in cash and cash equivalents as of end-March, according to APA’s quarterly financial report May 1.

“[W]e are looking at non-core asset sales as a source of debt reduction, in addition to the 40 percent of free cash flow not designated for shareholder return”, APA chief financial officer and executive vice president Steve Riney told the company’s earnings call. “Our priorities for debt reduction will be the three-year term loan we used to refinance the Callon debt and the revolver”.

APA expects the Callon acquisition to raise its production to about 500,000 boepd, according to its April 1 announcement of the completion of the transaction. The Permian is expected to account for around two-thirds of APA’s post-acquisition production.

“Callon’s assets bring scale to our Delaware position and balance to our overall Permian asset base — all at what we believe is a compelling valuation”, Christmann said at the time. “We are confident this transaction will create shareholder value, as we expect to drive improved capital productivity and well performance, while realizing significant cost synergies”.

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