Business Strategy and Outlook| Dave Meats, CFA |
APA Corp. is an upstream oil and natural gas producer with assets in the U.S. and overseas. The vast majority of its domestic production is derived from the Permian Basin. This was a key growth engine for the company until 2020, when the coronavirus-related collapse in crude prices forced the company to dial back on drilling capital. Since then production has declined due to lower investment, though management now intends to grow its Permian output to prepandemic levels during 2022. It has recently focused on the same reservoirs that competitors are targeting (the Spraberry and Wolfcamp intervals in the Midland Basin and the Bone Spring and Wolfcamp formations in the Delaware). But in the past the firm also focused on its own discovery in the Permian region, the Alpine High play, and in a higher natural gas price environment this competes effectively for capital. Alpine High wells are characterized by very strong initial production rates but with a much higher gas and natural gas liquids content than we'd expect elsewhere in the Permian.