# Fellow
Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NASDAQ_APA_2020/NASDAQ_APA_2020.mmd` · pages 3-9_

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Fellow
Shareholders,

Following the unique challenges of 2020, we want to begin by first acknowledging and thanking the first responders and medical teams who provided care and comfort during the pandemic, the dedicated scientists who developed treatments and vaccines, and all those who met basic needs by enabling the food, energy and distribution supply chains to function at relatively normal levels. We would also like to thank our team, who persevered through many challenges to safely, reliably and responsibly deliver the natural gas and oil that helps power all aspects of our economy. We are grateful for their tremendous effort and results – throughout 2020 and continuing today.

Perhaps 2020 is best summed up with one word: resilience. The circumstances of 2020 demonstrated the resilience of people around the world and the resilience of our employees and our company as we addressed a number of challenges during the year.

We responded quickly and decisively to the pandemic-related supply and demand shocks that hit the energy market in March. Within three days of the resulting oil price collapse, we took several significant steps to protect our financial position in the event of a prolonged lower oil price environment:

• Reduced our capital budget by 37% from the plan we outlined just two weeks earlier;

• Initiated a shutdown of all drilling and completions activity in the U.S. and a reduction of activity in both Egypt and the North Sea;

• Doubled our target for combined G&A and LOE cost savings from \(150 million to more than \)300 million; and

• Cut our dividend by 90%.

These actions proved to be timely, necessary and successful. Despite a $1.3 billion decrease in price-related revenue compared to our original plan, and more than $300 million of incremental cash required to fund working capital, we finished the year with no increase in net debt, when excluding our consolidated ownership interest in Altus Midstream.

With relentless focus throughout the year, we ultimately achieved annual run-rate cost savings in excess of $400 million. We also repurchased a portion of our outstanding debt at a significant discount to par value and later issued $1.25 billion of new bonds to improve our debt maturity profile and protect near-term liquidity.
This strategy was underpinned by the strong free cash flow generation capacity – even at lower oil prices – of our core producing assets in Egypt, the U.K. and the U.S.

Our globally diversified portfolio, financial flexibility, and the organizational redesign we initiated in 2019 collectively enabled us to quickly shift resources to preserve free cash flow, further reduce costs, protect our balance sheet and prepare the company for improving economic and market conditions.

During 2020, we also made significant progress on ESG initiatives, increasing the weight of ESG goals in our short-term compensation calculation to 20% and refining our key focus areas to air, water, communities and people. We emphasized robust COVID-19 safety programs; provided assistance to communities that were impacted by the pandemic; and evaluated recruiting, talent management, learning and benefits processes to optimize our diversity and inclusion strategy. Specifically on the environmental front, we enhanced greenhouse gas data collection and recently initiated alignment of our disclosures with Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

Our COVID-19 protocols proved very effective worldwide. We navigated 2020 with no known cases of direct transmission from one team member to another and had no material operational disruptions. This includes work in Suriname, where our team executed 13 full crew rotations and more than 1,500 individual crewmember transfers to and from the drillship in the process of executing our exploration drilling campaign, which proved to be very successful. We have now made four significant discoveries with our first four exploration tests in Block 58. We're looking forward to the results of continued exploration and appraisal programs that are underway with our partner, TOTAL.

Since 1954, we have operated as Apache Corporation, and in 2021 we've modernized our company structure with APA serving as the holding company and Apache Corporation as one of its subsidiaries. The change provides financial and administrative flexibility and aligns our operating and legal structure with our growing international presence. Other than a change in name of the security you hold, this change will have no impact on you as a shareholder.

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## LOOKING AHEAD

Our strategy remains centered around capital discipline and flexibility. With our conservative investment approach in 2021, we are projecting a considerable amount of free cash flow generation, with only a moderate decline in global adjusted oil volumes. Beyond 2021, our goal is to establish an investment budget that will – at a minimum – sustain global oil production volumes. In executing this strategy, we will continue to prioritize free cash flow generation to reduce debt, long-term returns over short-term growth, aggressive management of our cost structure, and a continued focus on our exploration and appraisal activities in Suriname. We will also pursue continuous improvement in our ESG practices and metrics. This year we have added compensation-linked ESG goals that include eliminating routine flaring onshore in the U.S.

Early in the pandemic, we were reminded how important energy is to our way of life. Energy workers were deemed critical in the midst of early shutdowns and travel bans. While auto and jet fuel demand waned along with work commutes and travel, oil and gas provided reliable, affordable energy to power hospitals, critical transportation, traditional and home offices and schools, manufacturing centers, and research facilities. Just as they were before and during this crisis, natural gas and oil are critical underpinnings of the recovery.

Our team and our company proved resilient in the face of the many obstacles presented last year. We are stronger and more efficient as a result, and we are better prepared for the opportunities ahead as businesses and economies begin to thrive again.

THANK YOU for your continued investment and support.

Sincerely,

![](images/4_0.jpg)

Jill E. Lane

John E. Lowe
Chairman of the Board

![](images/4_1.jpg)

J. Christman IV
Chief Executive Officer
and President