# FELLOW
SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NASDAQ_APA_2021/NASDAQ_APA_2021.mmd` · pages 5-11_

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FELLOW
SHAREHOLDERS,

Although several of the challenges experienced in 2020 persisted throughout 2021, our employees around the world rose to the occasion navigating the turbulence of the pandemic and related economic uncertainties.

Last year our company achieved a number of significant milestones that positioned us to chart a strong and steady course for the future. With the return to the office, we began to reimagine the future of our company and employees, transforming our work environment to a hybrid model and sparking new ideas from team members. Thanks to our collective efforts, we were able to meet these challenges with steadfast resolve and creativity.

We would like to highlight several accomplishments from the last year, beginning with our financials. Bolstered by strong commodity prices, the company generated \(1.8 billion of free cash flow exceeding our plan by nearly \)1.5 billion, and we introduced a framework to return 60% of free cash flow to our shareholders via share buybacks and dividends. We strengthened our overall financial position by reducing upstream net debt by \(1.2 billion, and we also repurchased \)847 million of stock and increased our dividend twice in 2021.

Our robust financial performance was complemented by strategic developments throughout our operations. We strengthened long-standing partnerships, ending the year with a modernized PSC with the Egyptian Ministry of Petroleum and Mineral Resources and the Egyptian General Petroleum Corporation. This agreement is an excellent outcome for both parties, and returns Egypt to one of the best long-term investment opportunities in APA's portfolio.
2021 also witnessed continued progress with our exploration and appraisal program in Block 58. After encountering high-quality reservoirs at the Kwaskwasi and Keskesi South wells, we later announced a successful flow test at Sapakara South. In early 2022, we announced an additional oil discovery at the Krabdagu exploration well in Block 58, drawing us closer toward achieving our first FID.

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Furthermore, we continued to streamline our Permian Basin portfolio by divesting noncore assets, and in early 2022, announced the sale of an $805 million mineral rights package in the Delaware Basin. We also announced the Altus Midstream and EagleClaw business combination, which closed in February 2022, deconsolidating the midstream business and its associated debt as well as providing an opportunity for near-term liquidity.

We accomplished ambitious ESG goals, most notably in the U.S., where we eliminated all onshore routine flaring, reduced our overall flaring intensity to less than 1% of the gas we produced in 2021, and reduced freshwater consumption by 20%.

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"Last year our company achieved a number of significant milestones that positioned us to chart a strong and steady course for the future."

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## Looking Ahead

Looking ahead, we have introduced a three-year outlook, providing guidance for free cash flow, production levels and capital investments. We are planning a modest capital investment program and stable activity set, which will return our production to pre-pandemic levels sometime in 2024 and generate significant free cash flow. We also remain committed to the capital framework introduced in 2021 returning a minimum of 60% of our free cash flow to shareholders.
As we continue to provide the energy needed for world economies to emerge from the COVID-19 pandemic, we have established a set of long and short-term environmental, social and governance goals to meet this energy demand in a responsible manner. We are committed to leading by example when taking on this challenge. For the first time, we are setting an ambitious ESG goal directly tied to long-term incentive compensation. Specifically, by the end of 2024, we will implement capital and operational projects that collectively will eliminate at least 1MM tonnes of annualized  \( CO_{2} \)  emissions. In 2022, we have also established short-term goals tied to all employee compensation, including reducing upstream flaring in Egypt by 40%, establishing a supplier diversity program, and enhancing our employee work experience.

Our long-term strategy remains unchanged. We will focus on creating sustainable free cash flow by continuing to prioritize long-term returns over production growth, strengthening our balance sheet through debt reduction, advancing our large-scale opportunity in Suriname, and leveraging our updated production sharing contract terms in Egypt. We will continue our efforts to differentiate through our diversified portfolio, steady development pace, unique exploration opportunities and ESG leadership. Through all of these endeavors, we are stemming the tide of uncertainty, charting a steady course, and positioning ourselves for greater financial strength, sustainability, increased returns and enhanced operational efficiency.

Thank you for your continued investment and support.

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John E. Lowe
Chairman of the Board

John J. Christmann IV
Chief Executive Officer
and President