The paragraph is an introduction to APA Corporation's fourth-quarter and year-end 2024 financial and operational results conference call. Hosted by Ben Rogers, the call includes presentations by CEO John Christmann and CFO Steve Riney, who will provide details on the company's results and future outlook. Other executives, Tracy Henderson and Clay Bretches, are available for the Q&A session. The speakers will discuss non-GAAP financial measures, and listeners are referred to the company's investor relations website for additional information. The discussion may include forward-looking statements based on current expectations.

In the call, APA's John Christmann discussed the company's 2024 achievements, highlighting strategic developments in key areas. The company enhanced its core portfolio in the Permian Basin and Egypt, focusing on sustainability and returns. Key moves included acquiring Cowen, selling non-core assets, and securing a new gas price agreement in Egypt to boost drilling opportunities. A significant investment decision was reached for oil development in Suriname, and APA achieved a BBB- investment grade rating. APA's strategic shift has strengthened its position in the Permian, now predominantly unconventional, accounting for over 75% of adjusted production and offering a stable business model. The company's scale in the Permian now rivals many independent US shale peers.

The paragraph outlines the company's recent achievements and activities in various regions. In Egypt, improved water flood strategies have enhanced oil production predictability. In Suriname, a significant project milestone was reached with Total's FID on the Grand Morgue project. Gas trading activities in 2024 yielded nearly half a billion dollars in net gains, with 2025 expected to be similarly strong. The company returned 71% of free cash flow to shareholders through dividends and share repurchases, indicating confidence in their share value. In the fourth quarter, production exceeded guidance across all regions, and capital costs were reduced, particularly in the Permian Basin, generating $420 million in free cash flow. A new gas-focused drilling program in Egypt is promising, with anticipated growth in gas production. The company also completed the sale of non-core assets in the Permian Basin.

The paragraph discusses the acquisition of Cowen to enhance scale and inventory, achieving synergies and improving efficiencies to lower breakeven oil prices from $78 to $61 per barrel by the end of 2024. In the Midland Basin, early results exceeded expectations, prompting plans for tighter well spacing on future pads to increase inventory and resources. The 2025 plan involves an eight-rig program in the Permian and a twelve-rig program in Egypt, with a combined development capital budget of $2.2 to $2.3 billion, marking a 20% reduction compared to Cowen's first quarter 2024 spending. Including development and exploration capital in Suriname and Alaska, the total capital budget is projected at $2.5 to $2.6 billion, aiming for higher production in 2025.

The paragraph discusses a company's strategic efforts to enhance capital efficiency and reduce costs, highlighting initiatives like integrating Cowen and stabilizing Egypt volumes. The company has launched a cost-saving analysis targeting capital, LOE, and overhead, beginning with a reduction in corporate officers and further streamlining efforts to save $350 million annually by 2027. These measures aim to expand free cash flow from 2025 to 2027, ahead of a significant project in Suriname in 2028, contributing to long-term shareholder value growth. The speaker concludes by handing over to Steve Riney.

In the fourth quarter, APA reported a consolidated net income of $354 million, or $0.96 per diluted share, including significant non-core items such as a $224 million U.S. deferred tax benefit and a $190 million liability increase related to former Fieldwood properties. Excluding these, the adjusted net income was $290 million, or $0.79 per share. Depreciation, depletion, and amortization (DD&A) expenses were higher than expected due to accelerated depreciation at Alpine High, where reserves were written off because of negative gas prices. Lease operating expenses were also slightly above guidance due to an extra North Sea cargo lifting. The company generated $420 million in free cash flow during the fourth quarter, the highest in 2024, and returned 46% of it to shareholders. For the entire year, APA generated $841 million in free cash flow, with 71% returned to shareholders. The company made progress in improving its balance sheet and is nearing pre-acquisition debt levels.

In October, S&P upgraded the company's credit rating to BBB-, with a goal of achieving a BBB or better rating. The company addressed a $190 million increase in net contingent liability for Fieldwood properties, which is not due to changes in anticipated costs for plugging wells or removing infrastructure but is instead attributed to high cash costs managed by a third party post-Fieldwood bankruptcy. The company plans to actively manage these costs to reduce liabilities. For 2025, capital spending will be concentrated in the first half of the year, driven by projects in Suriname and exploration in Alaska, as well as Permian Basin facility expenditures. US oil production, adjusted for asset sales and first quarter output, was 128,000 barrels per day in 2024, with an expectation of 125,000 to 127,000 barrels per day in 2025 due to an eight-rig program in the Permian.

The paragraph discusses anticipated production and pricing trends for the company's US and Egyptian operations. US production is expected to increase modestly, while Egyptian production will slightly decrease. Gas production is projected to grow, with average realized prices rising from $2.96 per Mcf in the fourth quarter to around $3.40-$3.50 per Mcf for the year. Looking toward 2025, the success of the gas program will dictate future growth and infrastructure needs. The US lease operating expense (LOE) in the Permian is expected to be 20% lower than in 2024, due to improved efficiency and synergies from an acquisition. Despite increasing general and administrative (G&A) expenses in 2025, total overhead costs are projected to decrease by at least $25 million, driven by allocation methods and compensation impacts.

The paragraph discusses the strong performance of the third-party gas trading business in 2024 and the positive outlook for 2025, predicting a net gain of $600 million for that year due to favorable market conditions. Additionally, the company aims to achieve $350 million in annual cost savings by 2027 through a comprehensive cost-reduction strategy. This strategy involves focusing on short-term overhead and field operating costs, intermediate-term capital and operational efficiencies, and longer-term IT and infrastructure improvements. In 2025, the company targets run-rate savings of $100 to $125 million, with an anticipated actual savings capture of $60 million. These cost reductions are integrated into the organization's incentive compensation programs.

The company has made significant progress in restructuring by reducing its officer count and cutting global overhead by more than 10%, resulting in annual savings of approximately $35 million. These efforts aim to enhance the quality and sustainability of its core portfolio and improve free cash flow over the next three years. The upcoming Suriname First Oil in 2028 is expected to continue free cash flow growth into the following decade, further boosted by share buybacks as part of the capital returns framework. The call is transitioned to a Q&A session, where an analyst, Doug Leggett, questions the executive team about the company’s share performance and a perceived crisis of confidence related to guidance frequently being missed.

The paragraph discusses the company's focus on optimizing its cost structure and capital allocation over recent years, particularly emphasizing its assets in the Permian and Egypt. The company has successfully met its targets and aims to continue generating free cash, now preparing for a new project in Suriname by 2028. It plans to reduce capital expenditure to ensure sustainable and predictable operations, involving programs with specific rig allocations in Egypt and Permian. With a committed cost-reduction goal of $350 million over three years—$35 million already identified—the company is confident in its ability to meet these targets. Additionally, it aims to deliver significant shareholder value by returning 60% of its free cash flow, with a yield of nearly 5%.

The paragraph features a discussion about a company's capital structure, focusing on its approach to managing debt and share buybacks. Despite the company's debt approaching 45%, John Christmann and Steve Riney explain that they are working on reducing both debt and outstanding shares, asserting progress in both areas. Doug Leggett questions the strategy, suggesting that fixing the capital structure would normalize the discount rate given business volatility. The conversation then transitions to Charles Meade from Johnson Rice, who begins to inquire about the asset base.

In the article paragraph, John Christmann provides an update on their Alaska operations, specifically the Sockeye exploration well, mentioning that everything is proceeding smoothly and on track, although they have yet to reach the pay zones and cannot comment on specific results yet. Christmann also addresses questions from Charles Meade regarding the Permian operations in Howard County, where they have observed better productivity due to wider spacing and are exploring future downspacing options. Christmann notes positive results in the northern boundaries of Howard County, expressing excitement about the outcomes.

The paragraph is a conversation from an earnings call, involving John Christmann and Scott Hanold, about the company's activities in the Permian Basin. John Christmann expresses satisfaction with the results from some offset acreage and excitement about future potential, mentioning plans to space the wells more tightly. Scott Hanold asks about the delineation of zones in the Permian and the allocation of capital towards it. He also inquires about the softer guidance compared to earlier indications. John Christmann explains they are running eight rigs, focusing on testing new zones to build future inventory, particularly mentioning Howard County. Steve Riney adds more details about the changes in rig count over the past year, emphasizing stability at eight rigs after previously operating eleven.

The paragraph discusses the directional guidance provided for the Permian activities, emphasizing that the results in 2025 are expected to resemble the third quarter rather than the fourth quarter of the reference year. Initially, eleven rigs were operational with an average of seventeen wells turned in per month, but this number dropped to eight rigs and eleven wells by the year's end due to a reduction in drilling activity. Peak oil production in October was 140,000 barrels per day, averaging 134,000 barrels in the fourth quarter but declining to an exit rate of 128,000 barrels in December. Due to adverse weather, first-quarter production is expected to average between 125,000 and 127,000 barrels per day.

The paragraph discusses a production strategy involving eight rigs that the company has been running since September, leading to a sustainable production volume of 125 to 127,000 barrels per day for the year. Scott Hanold asks about the balance between oil and gas drilling in Egypt, where the company plans to run twelve rigs. He also inquires about the infrastructure needed for future gas growth. John Christmann responds by explaining that they have started strong, added a rig in November dedicated to gas, and are targeting lower-risk projects with high gas yields and some liquids and condensate.

The paragraph discusses the company's progress in drilling high-pressure gas wells, leading to increased confidence in their gas program and plans to shift more rigs to gas exploration. They've encountered strong gas flow and have successfully integrated new wells into their infrastructure, causing gas prices to rise. The company has a solid infrastructure over their five million acres, allowing them to flatten or increase their gas production curve for the first time in years. There are considerations for overcoming infrastructure bottlenecks and treating gas in new areas, especially in regions rich in gas where they previously focused on oil exploration. The overall outlook is positive, with promising results in the Western Desert.

In the conversation, Leo Mariani inquires about the status of receivables in Egypt and the prospects for cash recovery by 2025. John Christmann mentions that the past due balance has remained stable over the past two years, but there is an expectation for improvement, as there is a commitment from Egypt to address the issue. Steve Riney adds that despite a non-GAAP reconciliation indicating an increase in receivables, this is not accurate, as receivables remained flat. The perceived increase was due to an accumulation of drilling inventory as part of the working capital movement in Egypt. Subsequently, Leo shifts the discussion to the purchased oil and gas sales, noting their guidance of $600 million for 2025, considering strip prices.

The paragraph is a transcript of a conversation from an earnings call where various speakers discuss financial breakdowns and cost-cutting initiatives. Steve Riney explains that for 2024, $330 million of revenue is expected from domestic gas optimization efforts related to pipeline trading, and $170 million from an LNG contract with Cheniere, totaling $500 million. A similar ratio is anticipated for 2025, with $600 million overall expected – $400 million from gas trading and $200 million from the LNG contract. Betty Jiang from Barclays inquires about the company's cost-cutting strategies aimed at expanding free cash flow, questioning changes in organizational structure and the breakdown between capital, operating, and G&A savings. John Christmann responds, suggesting that while the largest savings opportunity is in capital, immediate impacts can be made by addressing G&A expenses first.

The paragraph discusses strategies for reducing costs and improving efficiency within a business over a three-year period. It highlights past actions like reducing officer and support staff count and emphasizes the focus on General and Administrative (G&A) expenses. The company plans to enhance synergies, leverage technology, and make capital program efficiencies to drive cost reductions. A target of at least $350 million in savings has been set, based on rigorous benchmarking. The savings are expected to primarily come from capital expenditures, with remaining savings from Operating Expenses (LOE) and G&A. The three-year timeline is set because some initiatives will take longer to implement.

The paragraph discusses the confidence of DosMetrix's leaders in their inventory and growth prospects in the Permian Basin, particularly after incorporating Cowen assets. Betty Jiang asks about the inventory duration if operations continue at the current pace, with John Christmann responding that they can maintain operations through 2029 and possibly beyond. He emphasizes that they usually add more locations than they drill annually, which augments their inventory. Steve Riney adds that their free cash flow per share projections, which assume stable Permian production, extend to 2029 and potentially further.

The paragraph discusses the company's ongoing efforts to assess and characterize their acquired Cowen acreage in the Permian, with plans to provide a detailed portfolio and inventory overview later in the year. They express confidence in the longevity of their assets beyond their current free cash flow projections. Bertrand Donz from Truist asks about the company's strategy concerning the 60% shareholder return program and potential share repurchases, inquiring how they plan to balance growing free cash flow with possible increased activity or acquisitions. Steve Riney responds by highlighting the assumptions behind their free cash flow per share projections, including $350 million in after-tax cost reductions and production volumes from Suriname's block 58 beginning in 2028.

The paragraph discusses the company's financial plans and assumptions over a five-year period. Permian volumes are expected to remain stable, while Egypt's production is declining. The company plans to allocate $300 million annually to third-party trading and the Cheniere contract, maintain a 60% capital returns framework, and pay down $0.2 billion of debt. Additionally, they plan to distribute $1.7 billion in dividends and conduct share buybacks of around 52 million shares at an average price of $33.65, amounting to $1.75 billion. The strategy is to continue stock buybacks unless there's a change in share price response, with a potential consideration for production or external growth through acquisitions.

The paragraph discusses a financial and operational update from a company, focusing on their Asset Retirement Obligation (ARO) costs. For the current year, the company has allocated $100 million for ARO, divided among legacy Gulf of America abandonment ($40 million), North Sea ($30 million), and onshore US projects ($30 million), alongside an additional $70 million for Fieldwood. The ARO expenses in the North Sea are expected to increase over the next few years, while the other regions are anticipated to remain relatively stable. The conversation then shifts to the Egypt gas agreement, which pertains to new drilling activities. The company views gas opportunities in Egypt as economically comparable to oil, motivational for reallocating drilling rigs to capitalize on gas resources, especially since Egypt is experiencing a gas shortfall.

The paragraph is a discussion among industry professionals about the strategy and logistics of balancing gas and oil exploration, particularly in Egypt. They mention that gas prices are being considered on par with oil prices, considering infrastructure costs. There is an acknowledgment of logistical constraints such as rig counts, but they feel they're managing well with the current rigs and workover projects. The focus is on optimizing the current opportunities and planning infrastructure developments for the future, while also gearing up for exploration in regions like Suriname.

The paragraph discusses the company's strategy and progress in different development areas. John Christmann notes that they are making good progress in securing long lead items and managing developments for 2025, with Total doing an excellent job. In the Permian, the company is maintaining a flat production profile, operating eight rigs instead of the previous eleven to drive cost efficiencies and improve free cash flow. Christmann assures that the company is well-positioned and focused on execution, and Steve Riney is set to provide additional comments.

The paragraph discusses a company's strategic focus on exploration rather than growing base production in the Permian or Egypt, aiming to achieve future growth. It highlights a period from 2025 to 2027 where the company's cash flow is expected to be flat, prompting cost initiatives to enhance cash flow per share before anticipated growth from Suriname in 2028. CEO John Christmann emphasizes the transformation of their portfolio, sustainability in foundational assets, and future free cash flow growth potential, mentioning significant cost reduction targets.

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