The operator introduces the APA Corporation's Fourth Quarter and Full Year 2023 Results Conference Call, with CEO John Christmann and other executives providing an overview of financial and operational results. A Q&A session will follow. The company's financial and operational supplement, which can be found on the Investor Relations website, may include non-GAAP financial measures. The discussion may contain forward-looking statements, but actual results may differ due to various factors.

APA Corporation has a disclaimer on their website and their forward guidance does not include the pending Callon Petroleum acquisition. CEO John Christmann discussed the company's strategic framework and their accomplishments in 2023, including meeting production and financial targets, generating free cash flow, and returning a significant portion to shareholders through stock repurchases and dividends. He also mentioned their focus on responsible cost management, organic growth, and inorganic growth through acquisitions.

In the fourth quarter of 2023, the company saw a 4% increase in oil production, with significant growth in Midland and Delaware production. They also made successful discoveries in Suriname and are making progress on their goal to reduce emissions. The company also had a strong safety record and exceeded their production guidance in the U.S. However, production in the North Sea was below expectations due to unplanned downtime.

In Egypt, production exceeded expectations due to higher natural gas production and the positive impact of lower oil prices. However, gross oil production was lower than expected due to delays and constraints in workover rig capacity. This was compounded by early failures of new electrical submersible pumps. The company plans to decrease their drilling program in Egypt in 2024 to free up workover rig capacity. The company has established an activity plan and budget based on lower oil prices and is reducing total capital investment.

APA's budget for the year includes $100 million for exploration and $50 million for FEED work in Suriname. This will result in flat adjusted oil and natural gas production, but lower NGL volumes due to rejecting ethane. In the U.S., total volumes will be up 2% and oil production is expected to increase by more than 10% in the fourth quarter of 2024. In Egypt, there will be a gross oil production decline but adjusted production will remain flat due to lower oil prices and the PSC. In the North Sea, there will be a 20% decrease in production due to reduced capital investment and planned maintenance. The company's Permian operations have been performing well and they are acquiring Callon Petroleum.

APA has seen continuous improvement in well productivity and capital efficiency since 2019, with their Midland Basin wells now among the top quartile producers. The recently announced Callon acquisition will bring scale and balance to their Permian asset base, and APA expects to further improve productivity through leveraging their technical capabilities and work processes. While the transaction is already accretive on cost synergies, there is potential for even more upside through integration and optimization. APA remains committed to their strategy and financial objectives.

In the last 3 years, the company has reduced its bond debt and repurchased shares, while also generating free cash flow from its Permian Basin and Egypt operations. They have also progressed a large-scale exploration program in Suriname and expanded their exploration portfolio with opportunities in Alaska and Uruguay. Despite potential short-term commodity price weakness, the company maintains a positive outlook and plans to continue investing in longer-term exploration opportunities. They also remain committed to returning at least 60% of their free cash flow to shareholders through dividends and share buybacks. In the fourth quarter, the company reported a consolidated net income of $1.8 billion, with adjusted net income of $352 million. They also generated free cash flow of $292 million and returned 68% of this amount to shareholders through dividends and share repurchases.

In the fourth quarter, APA returned 66% of free cash flow and G&A expenses were significantly below guidance. The Cheniere gas sales contract contributed $74 million in free cash flow and pretax net income, below guidance due to narrowing LNG margins. For 2024, the Cheniere contract is expected to contribute $100 million in cash flow and third-party marketing income will be breakeven. Remaining decommissioning costs in the Gulf of Mexico are estimated to be $815 million over the next 10-15 years, with $60 million expected in 2024. The Callon acquisition is being prepared for and operational synergies are expected to exceed $55 million, with G&A and financing synergies meeting or exceeding $95 million annually. Most G&A synergies will be realized shortly after closing, with a small transition period for the rest.

The company expects to realize financing synergies soon after closing the acquisition, and they are working towards a BBB rating with all three rating agencies. They plan to reduce debt through cash flow and possible asset sales. During the Q&A portion of the call, an analyst asks about the issue in Egypt and when it will be resolved. The CEO explains that the issue is related to the ratio of workover rigs to drilling rigs, and they are working to address it. This has affected their growth trajectory, but they anticipate a turnaround in the near future.

The company's ratio has been slightly over 1 and they are reducing the rig program while still running 13 to 15 rigs. They want to decrease the workover count and focus on key workovers and recompletions. The delay in production was due to manufacturing issues with sub pumps, but they are working on fixing it. They estimate 13,000 barrels a day are currently offline and need to be worked over. They will guide to flat adjusted production for Egypt for now. The analyst is interested in hearing more about Callon, but it is unlikely to be discussed in this call.

The speaker is asking Tracey about the company's exploration program in Alaska and the risk profile associated with it. They mention that exploration is often overlooked until there are results, but Alaska is a large and underexplored area with potential for success. The company plans to drill three wells this winter and is currently close to spudding the first well. Tracey adds that they are exploring in a region with successful analogs but in an under-explored area. They will provide an update on the drilling program once it is completed.

John Christmann, CEO of an oil and gas company, discusses the company's portfolio diversification and the need for activity changes in Egypt. He mentions the company's focus on building a diverse portfolio with both proven and exploration-based plays, and mentions upcoming developments in Alaska. He also addresses a question about recent well performance and productivity in Egypt, stating that the program has been performing as expected and that there have been some high-impact wells, but challenges with equipment have caused delays.

The speaker discusses the importance of finding a balance and slowing down in order to go faster in the future. They also mention the ongoing integration of two companies and their plans for operations in the Permian. A question is then asked about their plans for Alaska, to which the speaker responds that they are still in the early stages and cannot provide specific details at this time.

Charles Meade asks a question about the possibility of getting more workover rigs in Egypt and debottlenecking the system. John Christmann responds that there are no options in the short term and that getting equipment into the country takes time.

The speaker is responding to a question about the company's plans for their Alaska project. They are currently limited to 20 workover rigs and do not have any near-term options. They are exploring for play types similar to Pika and Willow and if successful, they will need to put in infrastructure and have a shorter timeline due to being on state land.

The company is currently in an exploration phase and will determine the necessary infrastructure after the results are known. In Egypt, there is a shortage of workover rigs due to the increase in drilling activity and the need for more equipment in the long term. A question is then asked about Suriname.

John Christmann is asked about the status of the Suriname project and he confirms that they are targeting an FID in 2024. They are also working to accelerate the timelines for first oil in 2028. He also mentions that they are focused on the Permian and anticipate strong growth in the second half of the year.

During a conference call, an analyst asks about the payment situation in Egypt and the company's progress in collecting past due receivables from EGPC. The operator instructs the analyst to ask their question, and the CFO provides an update on the situation, stating that past due receivables have decreased but are still elevated. The analyst also asks about the impact of abandonment costs on cash flow, specifically for Fieldwood. The CFO clarifies that these costs do not go through the capital program and are a booked liability for decommissioning obligations.

The speaker discusses the costs incurred in the quarter and the possibility of quantifying outflows associated with ARO in 2023. They mention taking the discussion offline and working with someone named Gary to get back in touch. The next question is about the risk profile in Alaska and the speaker responds by saying that they see more exploration upside in Block 58 compared to Block 53, which they have relinquished. They also mention that the wells in Alaska are 3D and amplitude supported but still carry risk, and they will be drilling 3 of them. The speaker does not give a specific ratio for the risk but acknowledges that it is high reward.

During a recent call, APA discussed its decision to exit Block 53 in Suriname and focus on more prospective opportunities in Block 58 and other areas. They also mentioned the potential for downsizing the organization in response to lower activity levels, but are still excited about integrating the Callon assets and see potential synergies. There were no further questions from participants on the call.

John Christmann, CEO of the company, is giving closing remarks on their decision to reduce capital and maintain production, while also focusing on the Permian region and their upcoming exploration projects. The conference call is now concluded.

This summary was generated with AI and may contain some inaccuracies.