The paragraph is the introductory part of a conference call for APA Corporation's third-quarter 2024 financial and operational results. The Operator introduces the call, stating that it is being recorded and will include a presentation followed by a Q&A session. Gary Clark, the Vice President of Investor Relations, outlines the sequence of the call, which includes CEO John Christmann's overview and additional insights by President and CFO Steve Riney. Other executives, Tracy Henderson and Clay Bretches, are also available for questions. The call will last about an hour, with 20 minutes allocated for prepared remarks. It is noted that non-GAAP financial measures might be discussed, and forward-looking statements will be made, with a caution that actual results could differ due to various factors. Participants are encouraged to review supplemental financial materials available on the company's Investor Relations website.

The paragraph discusses APA's strategic achievements and financial outlook. APA's 2024 guidance includes standalone and combined results with Callon. Since 2020, APA has transformed its asset base into a pure play Permian operation through significant acquisitions and divestitures, enhancing scale, production, and drilling inventory. These moves improved operational efficiency and reduced costs. In Egypt, APA modernized its PSC terms in 2021 for better capital allocation and cash flow and recently agreed to increase gas prices to enhance competitiveness. John Christmann will discuss these topics further in a call.

The paragraph discusses APA's strategic achievements, including reaching a final investment decision (FID) on the GranMorgu project in Suriname, which promises future oil production growth funded by operating cash flow. In the third quarter, APA sold non-core Permian properties for $950 million, partnered with Total Energies for a development project in Suriname, secured a favorable natural gas price agreement in Egypt, and received a credit rating upgrade to investment-grade. Despite lower oil and gas prices, APA exceeded production guidance and achieved increased cash flow, showcasing the resilience and strategic benefits of its portfolio.

The paragraph highlights the company's successful integration of Callon, resulting in cost synergies and increased cash flow resilience, particularly in challenging price environments. U.S. oil production has met or exceeded expectations for seven consecutive quarters, aided by reduced rig counts in the Permian Basin post-Callon acquisition. Initial results from new wells in the Midland Basin are promising, with more expected from the Delaware Basin. In Egypt, operations are stable, with oil production on track and a reduced drilling program helping to normalize oil volumes. A new gas price agreement in Egypt has led to an increase in the rig count. Additionally, the company has made progress in Suriname with a significant investment decision in Block 58, led by Total, which involves substantial production capacity and competitive costs.

The paragraph discusses APA's strategies and plans for various regions. It highlights the expected funding of Suriname development through operating cash flow until 2028, with potential for further exploration in Block 58. In the North Sea, APA plans to cease all hydrocarbon production by December 31, 2029, due to new U.K. regulations and financial burdens, despite recent completion of maintenance at Beryl. APA also plans to resume exploration in Alaska’s Sockeye prospect in early 2025. Looking ahead to 2025, APA expects to operate an eight-rig program in the Permian Basin and a 12-rig program in Egypt.

The paragraph outlines the company's capital and operational plans for 2025, focusing on maintaining asset safety in the North Sea with minimal spending, while allocating $2.2 to $2.3 billion for activities in the U.S., Egypt, and limited North Sea projects. An additional $200 million is earmarked for Suriname development and $100 million for exploration, mainly in Alaska. Production volumes in the Permian and Egypt are expected to be sustained, but North Sea production will decrease by 20%. The company aims to reduce costs by 10% to 15% overall and has made progress with strategic initiatives in the US, Egypt, and Suriname. It highlights a successful operational quarter, completion of Callon integration, and plans for cost management and cash flow growth. The company sees further value potential in exploration, particularly in Suriname Block 58.

In the third quarter, APA reported a consolidated net loss of $223 million under generally accepted accounting principles, impacted significantly by a $571 million after-tax impairment of North Sea and non-core Permian assets. Excluding these items, the adjusted net income was $370 million. The decision to revise the timeline for ceasing production in the North Sea led to a $325 million asset impairment, a $17 million write-down of non-expected reserves, and a $116 million increase in abandonment obligations liabilities, totaling $1.2 billion by 2038. Beryl Bravo is expected to cease production around 2027-2028. In Egypt, progress was made on reducing receivables, though this affects stated free cash flow due to APA's cash returns framework. For details on cash flow modeling, contact Gary's team.

The paragraph discusses APA's focus on debt reduction, particularly following the Callon acquisition, which increased their total debt. They aim to return to pre-acquisition debt levels, contributing to a recent credit rating upgrade. The capital budget for 2024 has been increased to $2.75 billion to support additional development in Suriname, a new well in Alaska, and an extra rig in Egypt, partially offset by reducing one rig in the Permian Basin. US production guidance for the fourth quarter has been adjusted due to deferred frac activity and planned production curtailments, particularly in the Alpine High area, due to weaker-than-expected Waha gas prices. This is projected to reduce US production by 20,000 to 25,000 BOE, but actual impact could vary based on regional gas price changes. Income from third-party oil and gas is linked to Waha price differentials.

The paragraph discusses a financial estimate adjustment and activities related to gas trading and a contract with Cheniere. The company is increasing its full-year estimate to $500 million due to continued weak pricing, with two-thirds from gas trading and one-third from the Cheniere contract. They also aim to realize a $250 million synergy target with Callon by year's end, expecting full synergy by 2025 without further reporting on this progress. The following Q&A session features Doug Leggate from Wolf Research inquiring about gas pricing in Egypt and the oil guide, especially concerning the sale of the Central Basin platform. John Christmann responds, noting Egypt's newfound need for gas alongside historical oil exploration efforts.

The paragraph discusses a new framework being developed to bring gas exploration on par with oil exploration in the Western Desert of Egypt. The company is focusing on incremental gas volumes, and any gas produced over the projected decline curve will receive new pricing. This includes enhancements from gas compression, recovery techniques, and infill drilling. The agreement includes adding one rig, and the company is optimistic about the potential for gas exploration given the region's significant hydrocarbon resources and past discoveries.

The paragraph discusses the exploration and development potential for gas in Egypt. While the focus has been primarily on oil exploration, there is significant potential for gas due to an understanding of geology and source rocks in the region. There is existing infrastructure for gas production, and further infrastructure needed in the future was considered in price negotiations. The company plans to expand its gas-focused exploration program, recognizing low-risk resource potential and continuing to test new gas prospects to grow their inventory. However, they are not disclosing specific details about the gas price agreement with Egypt yet. The financial impact on free cash flow will be clarified in the future, with updates expected by February 2025.

John Christmann discusses the reduction of rigs in the Permian oil operations, from nine to eight, with plans to maintain around 130,000 barrels of oil per day in the U.S. despite a 20% reduction in rig activity, turn in lines, and capital expenditure. Doug Leggate acknowledges the response, and John Freeman shifts the discussion to the North Sea. Freeman seeks clarification on the anticipated spend related to Asset Retirement Obligations (ARO) and capital expenditures in the North Sea up to 2030. Steve Riney responds, indicating that ARO spending will not appear as capital expenditure.

The paragraph discusses the financial treatment and impact of the Asset Retirement Obligation (ARO) related to the North Sea. It explains how increases in ARO are considered costs incurred under GAAP, similar to capital spending, but do not appear as capital expenditures in the CapEx program until the costs are actually spent. The paragraph further explains that the balance sheet reflects both a liability and a deferred tax asset due to a 40% tax savings on ARO spending, netting to $1.2 billion in total. Approximately 50% of this amount is expected to be spent on wellbore abandonment by 2030, with annual spending increasing from below $100 million in the first three years to above $100 million in the last three years of that period. Finally, John Freeman thanks the speaker for the detailed explanation and notes a significant 10-15% expected decline in Lease Operating Expenses (LOE) next year.

The paragraph features a discussion with John Christmann and Steve Riney addressing questions about the drivers behind a year-over-year decline, including account synergies and non-core Permian divestitures. Christmann explains that they haven't specifically broken down these factors, but emphasize changes in their U.S. portfolio, such as selling high-cost waterflood assets. They highlight efforts to enhance their unconventional Permian Basin business. Riney adds that more detailed plans will be shared in February and suggests reaching out to Gary for additional details. The conversation then transitions to Bob Brackett from Bernstein Research for the next question.

The paragraph involves a discussion between Bob Brackett, John Christmann, and Steve Riney regarding a company's cash return strategy and issues affecting free cash flow return in the third quarter, attributed mainly to timing issues beyond their control. Brackett also inquires about gas curtailment and the progress of the Matterhorn project. Riney explains that current pricing extremes are not due to Matterhorn but rather pipeline downtime from the Permian to the Gulf Coast, which should be resolved soon. Roger Read from Wells Fargo Securities then asks about cost reductions, particularly around LOE (Lease Operating Expense) and G&A (General and Administrative expenses).

The paragraph discusses the synergies and cost savings resulting from a merger with Callon. John Christmann and Steve Riney mention that while some of the anticipated $90 million in synergies relate to general and administrative (G&A) expenses, the actual G&A cost structure has remained stable due to the integration of Callon staff. They also note that additional one-off G&A costs are expected in 2024. Additionally, Christmann addresses exploration opportunities in Alaska, emphasizing their large land holdings on state land, which simplifies regulatory processes, and expressing optimism about recent discoveries and future prospects in the region.

In the paragraph, John Christmann discusses the integration of Callon and Apache and highlights the benefits gained from the merger. He mentions that Apache has been able to incorporate valuable personnel and quality acreage from Callon. Christmann notes that by learning from Callon's technical assumptions and processes, Apache has managed to cut well costs significantly and enhance productivity, particularly in the Midland Basin. He expresses excitement over the outcomes and potential improvements in operations due to the integration of Callon's strengths.

The paragraph discusses the approach to evaluating and potentially modifying development scenarios related to spacing, fracking, and landing zones in oil and gas operations. Steve Riney emphasizes the importance of questioning established methods rather than assuming existing processes are optimal. Although benefits from these assessments are yet unquantified, there is an expectation of identifying meaningful synergies, particularly in capital productivity. The speaker mentions anticipated synergy targets and plans to reevaluate and report on these in 2025.

The paragraph is a transcription of a conversation involving a company representative, John Christmann, addressing questions from analysts about the company's activities and strategies. Paul Cheng asks if the company is returning to the same wells in Alaska or targeting a new prospect. John Christmann clarifies they are returning to the Saki prospect but experiences a technical audio interruption. After the connection is restored, another analyst, Neal Dingmann, questions the company's production targets in the Permian and Egypt regions. Christmann responds that the current plan is to maintain stable production levels, with specific targets for Permian oil and Egyptian production, noting a slight decrease on the oil side in Egypt.

The company started the year with 18 drilling rigs, but reduced to 12 by year-end, with 11 focused on oil and one on gas. There's a slight decline in oil production rates, from 138,000 barrels per day in Q1 to 137,000 in Q3, with a continuation expected unless drilling activity changes. Previously, in 2023, production was in the mid-140s with 18 rigs, but the company has found a stable operational rhythm with 11 rigs. The additional 12th rig is targeting gas exploration with a mix of appraisal, development, and exploration wells, and while there is optimism about gas prospects, the potential remains uncertain. Additionally, the company aims to enhance waterflood management with planned improvements by 2025.

The paragraph discusses strategies for maintaining production volumes in Egypt, emphasizing decline mitigation over drilling new wells. Neal Dingmann asks about shareholder returns amid current stock pricing. John Christmann responds that while the share price is appealing, the focus is on using proceeds from asset sales primarily for debt reduction. The conversation shifts to Steve and Arun Jayaram discussing gas production, specifically in the Caesar field, which has been in decline but has undergone compression stages. Caesar is a significant portion of their gas production, alongside casing head gas from oil wells, with the field experiencing double-digit decline rates.

In the paragraph, John Christmann discusses the company's energy portfolio, highlighting its strong positions in the Permian Basin and Egypt, which are expected to remain stable and productive. He mentions the impending start of the Suriname project in 2028, which will significantly boost growth alongside these core assets. Additionally, exploration efforts in Alaska are noted as part of the company's ongoing strategy, underscoring a commitment to enhancing the portfolio with the help of a skilled team.

In the paragraph, John Christmann and Charles Meade discuss the Suriname Block 58 project during a call. John highlights the significance of the project by explaining how it adds shareholder value and provides visibility to production volumes expected in 2028. A slide in their presentation, featuring a mockup of the development layout, is intended to bring the project to life visually. It shows the arrangement from deepwater in, including the FPSO (Floating Production Storage and Offloading) unit's placement and different areas of potential development and exploration, such as Krabdagu and Sapakara. Christmann emphasizes the project's material importance and potential for future prospects in exploration and tiebacks.

During a discussion between John Christmann and Leo Mariani, Leo inquires about expected activities in the US, noting that despite recent growth and the acquisition of Callon assets, there seems to be a pullback due to a softer oil price outlook. John explains that they are adapting to this softer price environment by maintaining volumes with fewer rigs and improving efficiencies, especially looking ahead to 2028 with developments in regions like Suriname. In the context of Egypt, John mentions anticipating slight declines in gross oil production but maintaining flat net production, potentially due to adjustments in production sharing contracts given expected lower prices.

The paragraph discusses expectations for gas production in Egypt, mentioning a slight decline in overall gross gas production despite operating 11 rigs. A strong waterflood program is underway to flatten the oil production decline. On the gas side, a one-rig program with quick prospects is set to bring new volumes and potentially larger future projects, though the exact scale is yet to be determined. The conversation then shifts to a question from Betty Jiang about the North Sea ARO, where she inquires about the $1.2 billion liability on a present value basis and its impact on free cash flow calculations for tax returns. Steve Riney responds, indicating he has provided multiple numbers regarding the liability.

The paragraph discusses a company's $2 billion liability on its balance sheet under US GAAP standards, which requires estimating the cost of abandoning assets and adjusting for inflation and discount rates. The estimated current cost is $2.5 billion, and there is a tax benefit with a present value of $800 million, resulting in a net present value liability of $1.2 billion. In a discussion with Betty Jiang, it's clarified that organic free cash flow will account for these costs. Despite focusing on abandonment costs, the company's operating assets in the North Sea continue to generate free cash flow, even with a high tax rate, aiding in covering these future costs. Additionally, Jiang notes the unexpectedly strong performance in gas marketing despite a weak Waha gas environment.

In this paragraph, Steve Riney discusses the potential for continuing above-normal marketing benefits dependent on the price spread between Waha and Gulf Coast gas hubs versus transportation costs. He explains that the profitability is determined by the difference between the market price spread and the transportation cost. As an example, if there's a $2.50 price spread and a $1.00 cost to transport, a profit of $1.50 can be made. Prices can be volatile, sometimes going negative, meaning they could be paid to take gas on certain days. Betty Jiang asks for clarification on the Gulf Coast benchmarks, which John Christmann confirms are mainly based on the ship channel. Finally, the operator introduces Jeoffrey Lambujon from TPH & Company for a follow-up question.

In this paragraph, Steve Riney discusses the company's focus on managing operations for free cash flow, particularly in the North Sea, given the current economic situation where capital investments are not viable. He explains that details on operating expenses (OpEx) and other financial specifics, like the breakdown of revenue and costs, will be addressed more thoroughly in a call scheduled for February. Riney emphasizes the importance of scrutinizing operating costs without compromising safety or environmental standards, aiming to ensure that expenditures are justified as they concentrate on maximizing free cash flow. The Q&A session is then concluded, and John Christmann, the CEO, is set to provide closing remarks.

The speaker apologizes for an earlier internet disconnection and highlights the company's progress in their portfolio, mentioning streamlined operations in the Permian and a new gas program in Egypt. They emphasize a clear path to production in Suriname and express a focus on sustaining core business, reducing costs, and generating free cash flow amid potentially lower oil prices in 2025. The company plans to operate eight rigs in the Permian and twelve in Egypt to maintain oil volumes with reduced capital expenditure and will provide more details in February. The operator then closes the conference.

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