APA Corporation

Good morning, my name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2019 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star and the number one on your telephone keypad. It is now my pleasure to hand the conference over to Mr. Gary Clark. Please go ahead, sir.

Good morning and thank you for joining us on Apache Corporation's third quarter financial and operational results conference call. We will begin the call with an overview by CEO and President John Christmann. Due to a personal matter, Tim Sullivan is unable to join us today, so Dave Purcell, Executive Vice President of Planning, Reserves, and Fundamentals, will provide additional operational color. Following that, Steve Riney, Executive Vice President and CFO, will summarize our third quarter financial performance. Our prepared remarks will be approximately 20 minutes in length with the remainder of the hour allotted for Q&A. In conjunction with yesterday's press release, I hope you have had the opportunity to review our third quarter financial and operational supplement, which can be found on our investor relations website at investor.apachecorp.com. On today's conference call, we may discuss certain non-GAAP financial measures Thank you for joining us. A full disclaimer is located with the supplemental information on our website. And with that, I will turn the call over to John.

Good morning, and thank you for joining us. On today's call, I will discuss Apache's approach to delivering value in the current environment, Provide high-level direction on our 2020 capital budget and conclude with some comments on our third quarter performance and fourth quarter outlook. The market has come to view the lower oil and gas price environment that has been in place since 2014 as structural in nature and unlikely to improve for the foreseeable future. Compounding this, investors are frustrated with excessive capital investment by U.S. producers in pursuit of growth, which has come at the expense of both return on and return of capital. For these and other reasons, the broad energy sector is out of favor and there is very little investor interest in publicly traded E&P companies. In response, as an industry, we must generate more free cash flow Thank you for watching. As we have done for the last several years, Apache will budget using a conservative price tag and flex our capital program in response to price volatility. We have taken a number of steps to adapt to the lower commodity price environment of the last five years. These include streamlining our portfolio, making substantial improvements to our capital allocation process, and significantly reducing overhead costs. Apache has historically employed a decentralized, region-focused approach to operations. In recent years, we have centralized certain key activities and today see an opportunity to capture greater efficiencies by taking further steps in that direction. To accomplish this, we have initiated a comprehensive redesign of our organizational structure and operations that will position us to be competitive for the long term. This process, which began in late summer, Thank you for joining us today. We anticipate a 2020 upstream capital budget that would be 10-20% below this year's program of $2.4 billion. This will enable Apache to generate organic free cash flow that covers the dividend and puts us on pace to fund a multi-year debt reduction program while also delivering modest year-over-year oil production growth. We anticipate directing the vast majority of our Permian capital in 2020 to more oil-weighted projects in the Midland and Delaware basins. In Egypt, we have taken significant steps to build and enhance our drilling inventory and are assessing the potential for increased investment in the future. And in the North Sea, we intend to maintain a consistent level of activity year over year. Returning to Suriname, we have retained the noble Sam Croft to drill the second and third wells on Block 58 in 2020 with an option still outstanding on a fourth well. We are planning to drill these wells at 100%, but that may change should we choose to farm down our interest. As we progress through the 2020 planning process, we continue to monitor commodity fundamentals and evaluate multiple capital allocation scenarios under a number of different price decks across our diverse portfolio. We look forward to providing details on our outlook in February.