APA (APA) 2 Nov 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the APA Corporation's Third Quarter 2023 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Gary Clark, Vice President of Investor Relations. Please go ahead.

you Financial us Call. and thank Third APA and XXXX Quarter Operational morning, for on joining Corporation's Good Results Conference

Operations. will Also Riney, with President, call further color CFO, begin by results provide We and and of Vice Development; Tracey our of Henderson, CEO outlook. will on the answer an to then John Vice of available Clay questions are Executive Vice Vice President Executive President overview Steve Exploration; call on and President Dave and and Bretches, Pursell, Executive Executive Christmann. the President

XX Our financial in conjunction prepared remarks and can be operational you've investor.apacorp.com. had our will be hour hope Q&A. I with about the remainder supplement, Relations In which allotted the release, for website on at minutes of found opportunity our the review Investor press yesterday's with length to

discuss that measures of these differences between we note A directly the measures. our GAAP in Please measures most production are website. adjusted previous practices, reconciliation may in today's reporting non-GAAP the be in the found tax comparable financial certain cited numbers to on non-GAAP information financial and can Egypt barrels. and exclude noncontrolling adjusted provided Egypt Consistent interest with supplemental call financial

remind assumptions that I'd based like and to contain expectations. and will everyone on today's views forward-looking estimates discussion reasonable our current

could our to I'll results full turn differ to call actual materially website. John. factors the that, we information cause located disclaimer is A over number discuss with what And of today. However, the a from supplemental with on

outlook a overview XXXX. plan anticipated Third will On us. quarter of our today's and Quarter in provide and we high-level morning Good joining fourth for production highlights, our discuss the you review capital and for thank call,

Permian end For the the row, execution well of and the third strong in oil our performance high adjusted in the this a trend. are primary range. exceeded guidance of Good drivers production quarter

Sea during the the of ramp end Storr from the guidance production the quarter, the achieved of also benefited our We which North in high well. North

volumes was by X,XXX company oil were On prior in the pleased with below gross reported which a approximately this XX% Egypt, expectations per year day quarter than and barrels quarter more third from bit volumes In oil basis, grew the we are same up as previously total disclosed. progress. a very

activity Activity in in drilling the the U.S. while Sea. suspended around North Egypt steady, we and remained midyear

management Our and program production North Sea now safety, investment integrity. is the and directed maintenance in towards asset base

completion drilling in we our XX eastern million achieved with an subsequent underpinned In proceed barrel very the at program during of successful oil for portion a XXX XXX,XXX resource a hub milestone to with FID Krabdagoe the a Suriname, per recoverable on at appraisal the FPSO plans TotalEnergies, estimated block. third of of announcement end by oil and by of important work is of Block partner, quarter by planned the and Sapakara Krabdagoe The FEED day the targeted the XXXX. barrels has and

result of which guidance, and oil North outlook. where yesterday's the a issued the Sea, to shut-in basis barrels quarter BOE production Bravo supplement, The X,XXX compared our to quarter. now financial temporary contributor slightly anticipates we of Beryl Turning fourth In the in volume day. primary lower equivalent at is operational on deferrals about will third in per

offset higher lower the North oil the gas flat to consisting and quarter, and the in production unchanged to completion combination gas. should not deliver of Egypt, downtime And will oil in small decline timing a BOE In natural in Sea. a relatively of U.S., enough volumes lead growth, a natural but fully

quarter. through XXX,XXX barrels our about We planned. associated bit to In now we oil which now quarter. the per barrels program fourth from day February, per Egypt. on established count number closer target in day more performing working After from a Let successfully gross that color drilling the to third me estimate operations will of be barrels provide XX X,XXX for a XXX,XXX production is with is XX, ramping as challenges the day, up our rig per

last have experienced we workover off-line. projects over a backlog of However, growing corresponding barrels quarters uptick and a the X in

which increase To our have address Q&A. we can discuss this, begun Dave to workover in further activity,

just into estimated a fourth Basin. This opportunistically rig X accelerating in bringing production. million the full sixth wells upstream and to the capital billion. result not December the on from will quarter, around have quarter a are I that will in these impact increase quarter adding in capital year $X we of January investments our upstream During Permian to completion under Delaware fourth fourth and $XXX material note an should

February. do planned Recall a with time our like of budget that of billion. XXXX outlook overview provide typically entered we $X.X at $X.X As year, in XXXX guidance I we upstream this formal billion we would high-level of a will follow with to to capital up which

As of in range XXXX, today, allocation. some albeit changes with similar we expect in regional a

low oil Permian more and increases Sea. next offsetting Egypt, North targeting growth single-digit the than are production declines in in We expected year the with

this calendar to at shareholders. to our committed remains cash least APA year XX% returning free of flow

This year. shareholders we flow, return for stock to of commitment $XXX During will XX% the of minimum fourth and full fulfill the more the do generated cash million dividends quarters of quarter, via first buybacks. the in leaves which we our and to XX% X we free year,

APA's principles over am X,XXX milestone our achieved devices pneumatic reducing an the is methane Permian emissions reduce recently important announce lower and to conversion to of the One to produce in we impact that and in technologies. I of with to of environmental pleased core gas oil emitting safely operations. the

and and and our asset to we identify them. to programs ongoing, Our continuously eliminate throughout seek global expand base improve are emissions

and other committed maintaining externalities. volatility are price we operational maintaining of a flexibility portfolio to closing, strategy quickly diversified respond our commodity In to to and

the Sea Egypt. Permian today capital reallocation are demonstrating the of We this the and through from North into

investment cycle that, with to committed of Steve portfolio have I the and the differentiated will projects, remain in turn potential And to a the drive which to economics. Riney. exploration competitive call also over future growth We full

you, and John, morning. good Thank

the Quarter, of net APA share. For generally income under common reported accounting million consolidated diluted $XXX $X.XX Third accepted per or principles,

items of outside these on deferred ownership loss offset results quarterly of a release core $XX of on and The was include was million usual, that earnings. unrealized Kinetic valuation This our of derivative are allowance As the our basis swaps. stock by significant most mark-to-market our on Waha a losses which tax assets. a

$X.XX items, for income smaller net other third $XXX per quarter and share. these the was adjusted million Excluding or

purposes changes in capital, dividends Through XX% this was external share returned for during which in the quarter. $XXX working of and million to flow, the excludes cash shareholders Free we quarter. repurchases, amount

have year-to-date, returned for any reconciliation needs. cash XX% of to indicated, John to of Please flow refer free shareholders. APA's published As we flow cash free definition

be earnings G&A expense would underlying higher rate $XXX we pre-release, which our our In anticipated run XQ costs significantly of around than million. is

G&A was of reported appreciation previously quarter, price impact mostly million, stock and on mark-to-market the APA because accrued the $XXX compensation. For share-based

mark-to-market reason. and the have impacts were As Thus, we the third in these higher explained LOE, of price the quarter CapEx movements during share expense. same items exploration for also also the past,

guidance Accounting they we in current revenue which but the cargo the in $XX reported occur, August. Sea impact on increases has Generally XQ million. provided Principles, tax was time also by was guidance anticipated Accepted North cargo taxes incremental the in we which came with recognized the and lifting accordance of expense, not quarter an liftings result In the This above late volumes. no at quarter in quarter, in production

tax income or Sea quarter To anticipated income is revenue tax revenue from quarter and be fourth the just year North impact clear, expense. though, movement and into this no on expense our of the has production a third full

our sales contributed contract in quarter. of X August noted, third free gas previously cash As Cheniere on the commenced months flow X and

in P&L will and the impact purchased find which oil for associated line items, capture this costs revenue You gas the X on and with resale. our

the contract million approximately full will for currently pretax the Cheniere We of anticipate XXXX. million. the in fourth and In quarter year cash quarter, third flow $XX contributed income $XXX it and free million $XX contribute the

as the half anticipated, for XXXX free is versus cash production flow of closing, In year. poised the and of half the second improving first

very year across metrics and of we to guidance the most our financial performance, improving tracking operational full close year. the With our for original key are

return much stronger call to is shareholders balance through a for years continue the further than reduction. to I Q&A. over capital will turn to and We dividends the we sheet will our while continue share debt operator progress ago, And And the that, few need repurchases. with for on recognize to

Leggate our Instructions] question [Operator comes Bank America. with first from And Doug of

my what you I where you there I got, getting color believe with Sea, the me old decline as think lost because free decline a decline be pronunciation, I'm little a I on of spending going so gas is, for capital. a name but And Gary curve North me actually to you're come money. flow guess not it you're the flow having will how cash and that the could on. is, in Sea. It And That's the a in production going the these I on. Guys, with North assets, back. you've strikes the platform on obviously, bit does question obviously, take higher. to this no the cash if any look bet can off are offer free But compressor, just declining wonder versus curve see thanks

year. the in right now flood. XXs compression you'll the do we've that [ be Yes, and We'll through onshore. North that barrel. Doug, water in next your got in ] good have Sea haul it's you quarter is We're XXXX to the working know ] both Clearly, had that we then process downtime plan. decline back announced we've sometime [ back And under XXs on as question. we a the a some early at get fourth for base

will have detailed back a barrel, integrity decline maintenance focus continue So We'll the the much plan. on it's but next do year projects. look a out rig. when with 'XX It not got lower early come we give to we than

that higher, it flow spending that free is to capital, John? be cash say when versus XXXX you were But fair could

early it's I think on the...

at -- yes, it's about we'll bit to I XXXX. know of looking better let's point as type John analysis for state on a detailed environment think what at possibility. But of a a get say, that and that February, was plan to have I we'll kind that time. It's And a Yes. price we'll think as in it's well. have early to Doug, certainly we're

on that understanding ]. you hull operator, Total's oil some And the assumes get [ I that year follow-up I question to timing. other I XXXX a know to All you're that right. time In been And selected FID. understand with Suriname. early be line John, around a Patrick, your get announcement, time has of wanted to I red on a those could this. but My to year. XX-month XX% perspective that wonder the first specific the but since at is is if not newbuild with for managed on Analyst or words, SBM very about any this confirm offer asked Day eye schedule my color I expected a an I FPSO, earlier points. contracted

I I the kind by they FID I 'XX would for do Yes. accelerate will now, to can oil that to is first official everything just of do mean, try motivation they that. would the there's to XXXX. And incentive so. and end But say and obviously, of expect by time line

that our John Raymond caller, for is and next by Freeman Stand James. with

Yes.

added on the plan potentially in Is the Alpine High? had Xth rig rig exclusively and I Delaware question the to in getting operate Permian that ]. the toggle [ that's or Delaware between first for role The

on plan to rig. we'll pad. It picking start February in a back up. little would some and that pads. spot how go sit. in then on It We're oil pad XXXX with detail, will flexibility, more obviously, kind and it's But a the John, will there's Delaware come of the

of And Okay. If the on And sort in question. follow-up then you outlook about my appreciate budget just kind the North And next largely think I versus with of CapEx rig, flattish reduction. of I what the then is of status the like previously being said Sea kind preliminary take about XXXX. I of Egypt, kind you've kind said that's Xth 'XX. year. funded quo

of kind commentary through us FID. was that you your kind the activity down on If you kind that a Does walk areas, is just year exploration -- it in of expiration ahead can in? where probably kind so about just include a there's side? a see how of step that Does and of exploration, the and like seems all the wildcards of operating that's flattish main of flattish your kind X budget. And turn in

Yes, John, it's includes of a exploration. great question. about $XXX million it Yes,

out I think you laid it accurately. pretty

] full drilling in you'll North Egypt. the year out in relatively drilling this will at terms stable XXX.X And You'll see Sea, of without Permian, an see you the sketching in we're that point. about in a increase see lines [ explorations

stable relatively investment program So years. done exploration we've over like several with continued last the

comes Bob question with Research. Brackett next from Our Bernstein

of sounds wells imply year strong you've of queue. XQ of of flat XX in like XX Does You XQ, about XQ. to in production terms talked net in And quarter. driving completions think the XX the following terms it we coming that sort next you Permian. the a completions of already rest about connected in Permian? the with the of cadence October net grow you're in XQ pretty kind and XX in allowed into Q-on-Q If

the the you plan completions This 'XX. you quarterly of finalized. completions more like provide Dave with be And Pursell, in Yes, that then still timing the way. be quarter it's And question, and is can there'll completions February will how we'll we in the as towards this weighted by what looks get we'll drives of provide The cadence cadence. some a lumpiness, once February imagine, production in December. good remaining

an change kind or error? of budget FID Suriname, that Okay. or it's CapEx of rounding A XX quick a is XX follow-up. If 'XX there in around that does

At No. we point, that this in, factored Bob.

from Neal Truist comes question with next Our Dingmann Securities.

development level of And question if in first continue success around, your Egypt. exploration sort and wondering should just if year? similar mean, on a is 'XX have my the sort drilling plans somewhere estimate, we activity? of so, assume will just of John, that around I to next I'm same

rigs And to a to next expect very to steady continue Yes. I show to in that in and be Egypt. Neal, do program growth will it both be Egypt, pretty year. of is development exploration be XX diet stable. running anticipate We're good we and able similar

would asked back just and Very on that gas bit if little good. go plans. a if And of activity, is it gas against economics? well but or when Southern that simply then my curious gassy just Delaware second those Midland based and I'm returns more drive Permian if just -- those the this, compete oil decision, on a Or rate John your economics return. how is to boost your on certain

a pricing. drilled a very oil. function mean stability have of the mean And we've think been very the competitive Permian year I $X it's I very, wells more in and Waha competitive. Waha, Yes. really this with they're strong I

we'll So -- infrastructure. but stability can you Waha it's into really more the them a function of there when produce we have believe that at

Our next comes Gruber Scott question from Citigroup. with

coming back Egypt. to Just

You do basis? growth on to exit as well? exit think going to a be that Is next up Or be the year. you year-over-year mentioned will

you in in Yes. we'll We'll give those details growth. roll plan growth details us the February. but show give we you We'll out when in the show likely most year-over-year but February, let exit,

will Total, Suriname. you so And be $X have the to impacts you that a carry the multiyear Okay. that from of portfolio project have And you years, then a capital forward or billion about still allocation moving Could obviously, next few rest of basis? speak thinking commitments. the have on the you whether just just across your in

it I the we carry keep where look we've mean plan, the been. is to the place Yes. going that's manageable it's very from at of beauty very, and multiyear

to basically and move on through that structured that we phases. we success, mean the So you'll follow I deal, see next start banking through if

project the So we to in. carry got But that's FID a first. kick for

Securities. with Read Our from Roger next Wells question comes Fargo

working little up. capital a follow capital of quarter. to Egypt, for this you release Just had --

in reasonable issues any to going related you to the Or of ], gas in they've that Med Egypt looks you in or from et had or do something a that's how assumption [ capacity, not there? have increase production given also 'XX that could gas forward? occur locations and takeaway fields is that cetera. think Egypt, pressure imports some given Just interest And really that

Egypt goes. can everything is flowing grid, gas I where we no gas mean into doubt the which needs there's We're production. our more

But program a there's per projects, anything work would some do oil Our term, gas we to on to are production, on increase but as higher gas price but longer-term we there. has not focused MMBtu there there. short XXX received been could need

capital, And working what... on

is working the this capital, On Steve.

in capital see did have will you we as the Egypt, So in in an supplement. working in increase quarter the

-- So first year, this think the quarter to receivables from And that so the from quarter, gone time in back receivables go up kind but quarter go third have quarter down in of EGPC to about the Since went due I results time, in did past when quarter surfaced during down concern the end point have the from the EGPC during with that the quarter. receivables we the first quarter, if first of from at EGPC. actually first receivables EGPC the May. of and payments the

in making says, Egypt think we're the We've balance. contact in with made I progress. always highest we're So constant John about progress. some level made receivable in as shape good And We've good that -- there. managing folks

So we're in making good some progress we're there. --

go, More but we're good progress. making to

I third and -- exporting selling because at went them think quarter. receivables the the reason during end have the gone end third-party to at cargoes second receivables up receivables issue quarter were quarter low were third-party the with the is in third were why third because the than those we higher the And parties. quarter of up more the or we of

normal from coming out of and in receivables Egypt paid cargoes. are normal that oil our credit-worthy those export of under So purchasers terms the just are paying on-time

situation, read in kind that, change, month-to-month of seasonal normal just or And presumably. into that to nothing

a just not taxes, payment quarter. around capital corporate payables one during comes and We level, at corporate things. meaningful just in increase the the quarter, at large -- a seasonal particular, there's the there's a third also see Egypt, working type in the a that level, you'll And the in some in U.K. that right. large and taxes had is but in Right, cash

And capital to movements so the a lot working a company whole. seasonality of for as

caller Johnson next Meade with Rice. our is And Charles

filling Furrow This Meade. in is Michael for actually Charles

that Suriname. I for you I regarding Total bit until Just the when could is and me occur know XX? one not might premature, question Block exploration a this is And FID think that XXXX, but do be recognize expected in within late here. operator further

APA Block on frame speak XX. even maybe explore like a would further be And So way when Block you be glad will maybe it could if to to better would it XX.

lot No, focus was it's program that Krabdagoe but Krabdagoe, getting that also we start a of of it into the partner. a our question. XX, a Block now. The the phase, at we're in great we in could that getting them no see in of lot with be those several through prospects. year 'XX working a terms appraised, low-risk and this appraisal position project do so moving We of There's in mind, will our derisked do high-quality, terms fairway in urgency to a of in next prospects to obviously

X over working XX We're point. I in look more prospectivity there's XX our with over would next I Waha. But the XX steps think at XX. we at in this when there blocks, And at more -- prospective we see the see various on partners

Scott RBC Capital And Hanold is our next Markets. question with from

and with you about for forward in that, farmed maybe Can But My just you other Uruguay position going you starting in of on more kind how question got you've prospects to APA? think of different moving us, in and just I tell on general, these and going in is top Republic. then got a on. exploration. Suriname you've Alaska Dominican mean, obviously, general be recently, Alaska things obviously, first,

to shareholder a high that about and state got sharing No. operator look acreage, the that a all We've a we to fits it's to value. the very, the in most create drill more in grade Alaska things February. on side proven and strategy, exploration exploration And trying build portfolio. something it's lands, portfolio prospective are to having and is very best and forward going high-quality choices our

be to peers U.S. the or where APA point? still where of, or maybe I bit there when mean, even like contrast looks of, take production a a So I seems E&P at Permian shale, going M&A bulk guess, your on I look, little lot focus I proven with think it just there's there it in areas some for of more, but guess, guess, you and I domestic angle desire even in up different this is to or do potentially APA's other a have

look and us in bolster to term, off Yes. the I to both avenues, mean think that acreage in Suriname and committed but last you're an the inorganic program, I longer the the stayed exploration seeing and think we some at saw and pay year we like both I also you organic Delaware.

diet well to your looking So to continue constantly both value can that what shareholders. the adding on it's got focus And as a create assets to of as you're at. for you've

Permian kind Basin, feel all So stuff? when of say, you do with look you'd the pace you've ample you inventory at rig X what of got, Tier the X, X

to to work. to I and from make up footprint. pretty I focused longer said always got of a end and decade where ways as find we've higher that's it There laterals, we the today, sit -- rigs, David continue mean X -- inventory quality, one high with Yes. all and into the category test of we're moving we nice grade easily, think always on were X

question from next Our David Deckelbaum TD Cowen. with comes

to year, you be that I how of about included tell earmarked guess, John, have next you much pointed are exploration us ex-Suriname to exploration? million I for ask, able more for wanted just $XXX the to is it,

be doing. this -- through. At on next other program. things back the we'll more year it's come are we're color and We've point, a There some placeholder, we'll working with

in some February. things, exploration but with and back in color always You've we'll Egypt other more we've come funded got that

follow Appreciate on just up that. Maybe if I Egypt. could

the alterations into more any now next a trajectory are made the this frequency I U.S. growth that and growing color certainly Or in being this year. happening in with there increased next be the greater is little And year? this won't is what's that? know anticipated that being bit have you a Can workover next rig just drag about oil year, factored with increased talked You on you driving What's count? activity? that give

mean I that a volume offline it, workover. where always call situation a we've requires Yes. it's I'll wells had, or

in [ We failures color, Egypt, the have a workover subforms and barrels lot up. ] into we've number in we've can areas, that the that some increase has few of just we a off-line addressing more to to but on get that. and need in some And had get more Dave got ticked side and we're

jumping it's something So we're all over.

Yes.

comment And cause so understand, we're run And well just root times from quarter represents barrels John just a -- day but on over what workover said, look increase on to about base on a we've X,XXX XX,XXX numbers We've and seen that. working John's to are follow time. that broader end reduction some on we're at seen a that in of day second doing of to We've seeing typically in a given at put production analysis structural the -- ESP through really a barrels level failures. the to a offline today. inventory, that's we of change any

a working so time. that and backlog things some to workover And we're we've added down over start rig, other doing

area. in to Or that right it you're developing just is the coincident Is across entire just where with now? circumstantial

identified any. we're that and entire any across working there we cause haven't on specifics. root understand, just are Western to Desert, But right the It's now, the

next with from our comes ROTH question Leo Mariani MKM. And Instructions] [Operator

up briefly here. wanted to on Egypt just I follow

recently. a you I rig added maybe guys think

earlier got were you right. XX the if it at of in I I year, think sort

that because bordering Israel just there area, kind -- general, that obviously, lower So of is just And North in guess, reallocating significant activity or kind here? there's curious, of just there. been Sea in then, Peninsula instability dollars I of Sinai just

With of have contact that's over guys been regarding the potential with the have Egyptian do you spill mean you with government Egypt in and conflict right that? I now, kind over happening any concerns

that interesting. of We're -- up coming XXth in it's Egypt. Yes. on being anniversary our It's something

-- been and time, We've of closely This a been it's there for long factors. through currency lot a we've So been we've through and there. history and those by more got watched been situation. of really year great We're difficult devaluation go Egypt them, has some inflation driven trying the monitoring and a times.

had the air from is not Western think into the are back history, interruption in to of operations. perspective our our major West thing go in I any good And spring, operations shut-ins or all Cairo we Desert. the if even our you over have

I good the government know And we've need they So in-country the watching and prioritize production. very, as the there is, to think closely. news continues operations, they things oil very gas been

Okay. of an in dead beat I a that open-ended don't proposition? of million does Suriname at terms in high year, include kind this of the in exploration mind, in still some $XXX next That's here then level, helpful. to look And of at a that dollars want as horse point? but you kind your Or is just sort

it's to [ things. ] a development that would want some the things do. other -- But the placeholder now, shot in being Suriname there's area, is where general, in we seismic right for be the It's in

year with So and more it will we'll capture our exploration spend next details in February. come for back

Energy Partners. next Geoff Daniel with our comes from [indiscernible] And question

is some completed it's up. around quarters more the a change step but XXs. taken oil obviously, of locked where it wells, looks you which impressive like pretty mean, question my production, was obviously, into Really, several just U.S. kind I

in a, I'm X,XXX of wondering, Delaware. there's this we've decision up changed Now add barrel another prompted the b, taken that's rig kind has And happened and in day something that QX. to a what step if this

locking drill to I continuous taken, a that. of given lines completions. and it's mean, the really continued just we've seeing deliberate mean the And time to a good laterals continuing the timing results. we're approach long It's team's We've to rig the of down the benefit the of you're really and function execute. we've I laterals, long and just have seeing we're No. on program. really been focused

little of capital of third And the fourth adding strong compared is flattish running it's running ahead allocation from we quarter -- look deliver lot continuing a of because is if results. quarter and Xth you In Sea really fourth to to look, versus that more North terms A rig, is third quarter. forward quarter the the but behind. to Permian into

level very the execution very, with pleased So U.S. the in

I questions at further this am showing time. no

the would now CEO, remarks. question-and-answer like session. for it John So this concludes President Christmann, I and back to turn closing to

our with for a to We've you FEED Sapakara project during through the this a program leave you will Krabdagoe thoughts. morning. at the appraisal call successful on in process and Thank completed want XXXX. and I Yes. following advance Suriname, participating

success in to production outstanding we we to momentum to results thank more of the which about for gross February, we've We you XXXX. enter the you continues the things rig, our deliver Xth program lastly, increase forward on the add and in to will a as Permian, call. continued telling added oil look In Egypt, where drilling and

And this the program. conclude does

You disconnect. may now