The conference call for APA Corporation's first quarter 2024 financial and operational results has begun. The call will include an overview by CEO John Christmann and further details from President and CFO Steve Riney. Other executives will also be available for questions. Non-GAAP financial measures may be discussed and a reconciliation can be found on the company's website. The discussion will also include forward-looking estimates and assumptions.

In the second paragraph of the article, the speaker discusses potential factors that could affect the company's results, including a disclaimer located on their website. They also mention that their first quarter results only reflect APA Corp. as the Callon acquisition was closed on April 1st. The speaker then turns the call over to John, who discusses the company's first quarter performance, their plans for the Callon acquisition, and their production expectations for the rest of 2024. The company saw strong growth in U.S. oil production and plans to continue this trend through the year. They also chose to curtail production in response to market dynamics, and are working to optimize their drilling rig ratio in Egypt.

The company plans to redirect workover rigs and reduce drilling rig count in the next three quarters in order to make progress on temporarily off-line oil production. They have resolved issues with faulty electrical submersible pumps and experienced downtime in North Sea production due to managing late-life assets. They recently concluded an exploration drilling program in Alaska and are analyzing data for next steps. In Suriname, they are progressing with a FEED study for their first development project. The Callon acquisition closed on April 1 and integration is going well.

The company is finding opportunities to reduce costs and improve efficiencies by applying their operational expertise to Callon's acreage. They have increased their estimate of annual cost synergies by 50% and see potential for even more value through capital efficiency improvements. They will be making changes to Callon's operational practices and workflows, which will result in wider well spacing, fewer discrete landing zones, and larger fracture stimulations. The company has already begun implementing these changes and is modifying Callon's previous 2024 plan to capture near-term benefits. The company is currently running 11 rigs in the Permian and expects to average 10 for the rest of the year as they manage changes to the combined rig fleet. They have provided guidance for the second quarter and full year 2024, as well as expected oil production rates for the fourth quarter.

The company will be adjusting its rig count and frac schedule in order to increase oil production. Production in the Permian Basin is expected to increase significantly due to the recent Callon acquisition. The company remains committed to its shareholder return framework and will focus on reducing debt while also returning a portion of free cash flow to shareholders. The call will now be turned over to Steve Riney.

In the first quarter, APA reported consolidated net income of $132 million or $0.44 per diluted common share. Adjusted net income was $237 million or $0.78 per share, excluding non-core items. The company returned $176 million to shareholders through dividends and share repurchases and plans to continue returning 60% of free cash flow. They also plan to reduce debt through non-core asset sales and prioritize paying off a three-year term loan and revolver. The company incurred $20 million in costs related to the Callon transaction in the first quarter and expects an additional $90 million in the second quarter. Progress on the Callon integration is ongoing.

The company is on track to achieve more cost savings than originally projected, with annual synergies now revised to $225 million. Overhead synergies are expected to be realized by the end of the second quarter, while cost of capital synergies will be fully realized when the debt is termed out or paid off. Operational synergies, which have been revised from $55 million to $215 million, are being achieved through various measures such as recontracting frac services, rig high-grading, and supply chain optimization. The company also sees potential for additional cost savings in areas like gas marketing and water handling. These cost synergy estimates do not include the potential for improved well economics through well spacing, landing zone optimization, and frac size. The company's 2024 outlook, including activity plans and production guidance, has already been discussed.

The speaker briefly discusses some changes to the company's guidance, including the impact of the Callon acquisition and gas pricing in the Permian. They mention that gas pricing at Waha Hub has been weak and will continue to affect production in the second quarter. They also mention an increase in income from third-party oil and gas purchases and the removal of DD&A from guidance. The company will be subject to the U.S. alternative minimum tax in 2024 and expects to incur these costs in the second half of the year. The call is then opened up for a question-and-answer session.

The speaker is discussing the decrease in the number of workover rigs and how it is taking longer to reach historical ratios due to changes in drilling techniques. They also mention the increase in Callon synergies and the progress made on cost reduction. They are looking forward to seeing the results of new wells designed and drilled by the company in the fourth quarter.

The current guidance for the Permian gas play assumes legacy Callon well results and does not include any uplift. The company is making changes to the completion side, but it is a work in progress and will take time to fully implement Apache's workflow and execution. The current rig count is 11, with four in the Delaware and seven in the Midland, and there are plans to accelerate drilling on Apache acreage. The company is looking forward to fully implementing Apache's workflow in the fourth quarter. In regards to the Permian gas play, the company is open to bringing some of the acreage back, but it would depend on certain factors.

David Deckelbaum asked about the company's capital program and plans for integrating the Callon assets in the coming years. He inquired about the number of DUCs (drilled but uncompleted wells) that will be worked down this year and how many will be carried into next year.

The speaker is discussing the capital program for the combined company and how they have added frac capital to reach their target of $2.7 billion for the year. They are still finalizing the plan and will provide more clarity in the second quarter earnings call. The company does not believe in carrying a lot of DUCs as it is not capital efficient.

John Christmann and Steve Riney discuss the expected improvement in capital productivity for the combined companies, as well as their focus on reducing debt through non-core asset sales. They do not have specific targets in mind but are optimistic about the market and ultimately aim to achieve a solid BBB rating for their debt.

During a call, David Deckelbaum asked Steve Riney if there is a possibility of achieving a high growth rate in the next few years, to which Riney responded that they are aiming for it and will make an effort to achieve it. John Christmann also mentioned that the Permian now makes up 75% of the company and they have been executing at a high rate. They are confident in delivering strong results and will be adding capital to work on DUCs in the fourth quarter. They are also planning to add frac capacity in the second half of the year, as it is currently inexpensive.

The speaker discusses the company's operations in the Permian Basin and how they are trying to plan activities in a more efficient manner to avoid big lulls or rushes in production. They also mention the potential for growth in Egypt, but note that costs and competition with the Permian will play a role in determining future plans for the region.

The speaker, Steve Riney, discusses the situation with receivables in Egypt and mentions that the country has received two payments in the first quarter of 2024. He also notes that despite a slight increase in receivables, Egypt is on a good path with the recent IMF loan, currency devaluation, and increased investment. He also mentions that both the World Bank and EU have pledged support.

The signs for Egypt's economy are improving, with better liquidity and a large payment expected in the second quarter. Gross volume has declined in the first quarter, but this is due to completion timing and a reduction in drilling rig count. The company will continue to balance their workover and drilling activities to maximize production.

The speaker discusses the importance of staying on top of the workover program and mentions the possibility of bringing in more workover rigs in the future. They also mention the need to balance drilling new wells and working through a backlog in 2024. In regards to Suriname, they express confidence in achieving FID by year end and potentially resuming drilling in 2025. The last question from Neil Mehta of Goldman Sachs is about the Callon cost synergies and the speaker talks about high-grading service providers and improving surface economics.

John Christmann explains that the company will be making changes to their program, including fewer wells per section, larger fracs, and different well completion methods. This will result in cost savings, as well as improvements in LOE, workover cost, and downtime. Steve Riney adds that Callon has a history of higher well failure rates and ESP failures, which they believe is due to their equipping choices. The company is already making changes to address these issues.

The company has identified areas of inefficiency in the acquired asset's operations, particularly in compression, power usage, labor, and water handling costs. They plan to use economies of scale and volume discounts to optimize costs. They also plan to use technology to decrease drilling time and improve rig rates. They will also make changes to their facilities to reduce LOE per BOE and downtime. The team is confident in their ability to improve the asset's operations.

Paul Cheng of Scotiabank asks a question about dry hole expenses and the King Street discovery in Alaska. John Christmann explains that there was one dry hole in Suriname and two wells in Alaska that were not completed due to the decision to redrill them. He also mentions that they are excited about the preliminary data from the King Street discovery, but need to analyze the rock data before sharing more information. He also notes that the positive results from the Upper Zone at King Street bode well for the larger target in Voodoo.

John Christmann, CEO of the company, is pleased with the performance of their Permian assets and the recent acquisition of Callon, which now makes up 75% of the company. They will be integrating Callon over the next few months and expect to see positive results by the fourth quarter. The company has also increased their cost synergy expectations and plans to capture most of these by the end of the year, with potential for more in the future.

The speaker concludes by stating their goal to make progress on debt reduction and meet their shareholder return commitment by the end of the year. They thank the listeners for joining the conference call. The operator then ends the call.

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