APA Corporation (NASDAQ: APA) continues to refine its Permian Basin operations, focusing on efficiency improvements, cost reductions, and production optimization. As the cornerstone of APA’s portfolio, the Permian accounted for 75% of the company’s adjusted production in Q4 2024, demonstrating its significance in the company’s long-term strategy.
In its Q4 2024 earnings release, APA emphasized its commitment to reducing costs, improving well economics, and maximizing free cash flow while maintaining steady production levels.
Optimizing Permian Operations
APA has taken several steps to improve capital efficiency and operational performance in the Permian Basin. The company’s 2025 plan includes running eight rigs, split between the Midland and Delaware Basins, with a projected 7% increase in total Permian production. However, oil production is expected to remain flat, signaling APA’s focus on optimizing cost structures and asset performance rather than simply increasing volumes.
A key driver of this optimization effort is APA’s acquisition of Callon Petroleum, which has significantly improved the company’s Permian portfolio. The integration of Callon’s assets has resulted in a 22% reduction in breakeven oil price on Delaware acreage, positioning APA for stronger margins and higher returns.
APA CEO John Christmann IV highlighted this shift, stating:
“Through inventory expansion in the Permian Basin and the renegotiation of both oil and gas economics in Egypt, we have positioned our core producing portfolio to deliver steady and predictable production.”
Cost-Saving Initiatives in the Permian
One of APA’s most notable 2025 initiatives is a targeted 20% reduction in lease operating expenses (LOE) per BOE in the Permian Basin. This decrease is primarily driven by:
- Non-core asset divestitures that streamline operations.
- Callon Petroleum integration, unlocking new synergies and reducing costs.
- Operational efficiencies, including longer laterals and improved completion techniques.
APA specifically noted:
“We expect continued improvement in cost structure and capital efficiency in 2025+ with progress on reducing controllable spend.”
Additionally, APA is focused on:
- Increasing development density to maximize well productivity.
- Optimizing rig utilization for better capital efficiency.
- Enhancing frac efficiencies to improve completion times and reduce costs.
- Standardizing facility designs to minimize development expenses.
Investment Discipline and Capital Efficiency
APA’s 2025 Permian development capital is set to decrease by 22% year-over-year, aligning with its broader capital efficiency goals. Despite lower spending, APA is maintaining production stability while enhancing cash flow generation.
The company is also implementing a $350 million cost reduction plan through 2027, targeting LOE, overhead, and capital efficiency. This approach reflects APA’s focus on long-term profitability rather than short-term volume growth.
APA’s statement on cost-cutting efforts:
“Our objective is to return our cost structure to a leading position by streamlining every aspect of the business while enhancing the predictability and delivery of our long-term plan.”
Looking Ahead: A Leaner, More Efficient APA in the Permian
With a refined Permian asset base, disciplined capital allocation, and a focus on operational efficiencies, APA Corporation is positioning itself as a cost leader in the region. The integration of Callon’s assets, targeted cost reductions, and optimized drilling strategies will support sustained free cash flow generation and enhanced shareholder returns.
As APA CEO Christmann concluded:
“We are confident that our disciplined approach to capital allocation and rigorous cost management will underpin strong free cash flow growth over the next few years.”
With a streamlined cost structure, improved efficiencies, and a disciplined investment approach, APA’s Permian operations are well-positioned for long-term success in a competitive oil and gas market.
