APA to beef up exploration spending in 2027
Executives at APA Corp., Houston, plan to bump the company’s 2027 capital spending to $2.5 billion from an expected $2.1 billion and will dedicate the majority of that increase to exploration work and the development of the GranMorgu project in which it is a 40% partner.
Speaking to analysts and investors after APA reported third-quarter profits of $698 million on revenues of more than $2.8 billion, chief executice officer John Christmann said the allocation of $250 million to exploration and another $250 million to developing GranMorgu will return APA to its targeted range of having 10-15% of annual upstream capital go to such work. The plans comprise:
- Two exploration wells in Suriname’s GranMorgu offshore development with TotalEnergies, which also owns 40% of that project and is the operator. Christmann said the wells will look to extend GranMorgu’s production plateau “or even support a second development.”
- A winter program in Alaska that includes an exploration well and an appraisal test of the company’s Sockeye discovery.
- The spudding of APA’s well in the OFF-6 block of which it owns 60%, with Eni holding the remainder. Tracey Henderson, APA’s executive vice-president of exploration, said the block reminds her team of conditions offshore Namibia and that its work with Eni will essentially be a “petroleum systems test.”
Addressing the potential of GranMorgu—which APA and TotalEnergies teams have estimated has nearly 760 million bbl of reserves—and the goal of starting production in mid-2028, Christmann said 4 wells are being planned over the next 2 years and that he wants to move relatively quickly to assess the potential need for a second floating production, storage, and offloading unit (FPSO) or permanent infrastructure.
Drilling rig at sunrise
APA Alaska asset map“It is important that you get after them early because it gives you some clues on what you might be able to do with it versus if they were only going to be plateau extenders and you would be more inclined to drill them later in the life cycle,” he said on a Nov. 5 conference call. “It is something that both us and our partner are excited to get after because they are definitely going to add more resource.”
In preparing to ramp up exploration work, APA executives are joining their peers at Chevron Corp., who last week said they could spend an additional $500 million on exploration in 2027 compared with this year. Christmann and APA chief financial officer Ben Rodgers told analysts that ramping up spending will set up the company to build on the gains it has made on costs and on paying down debt.
“We have got a differentiated free cash flow inflection coming from GranMorgu in 2028 and that continues through the end of the decade,” Rodgers said. “We look at that and understand we need to continue to delever the balance sheet so that we can be more opportunistic […] We believe that instead of being defensive on our debt balance now, we can be more on the offensive as opportunities arise and that will be accretive to shareholders over the long term.”
Shares of APA (Ticker: APA) were up slightly to $44.53 in afternoon trading on Nov. 5. Over the past 6 months, shares have risen about 8% and the company’s market capitalization is now about $15.6 billion.
About the Author
Geert De LombaerdeGeert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare Innovation, IndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.
