APA Corporation

Good day and welcome to the APA Corporation second quarter 2023 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Gary Clark, Vice President of Investor Relations. The floor is yours, sir.

Good morning, and thank you for joining us on APA Corporation's second quarter 2023 financial and operational results conference call. We will begin the call with an overview by CEO and President John Christman. Steve Reine, Executive Vice President and CFO, will then provide further color on our results and outlook. Also on the call and available to answer questions are Dave Purcell, Executive Vice President of Development, Tracy Henderson, Executive Vice President of Exploration, and Clay Bratches, Executive Vice President of Operations. Our prepared remarks will be less than 15 minutes in length, but the remainder of the hour allotted for Q&A. In conjunction with yesterday's press release, I hope you had an opportunity to review our financial and operational supplement which can be found on our investor relations website at investor.apacorp.com. Please note that we may discuss certain non gap financial measures today. A reconciliation of the differences between these non gap financial measures and the most directly comparable gap financial measures can be found in the supplemental information provided on our website. Consistent with previous reporting practices, adjusted production numbers cited in today's call are adjusted to exclude non-controlling interest in Egypt and Egypt tax barrels. I'd like to remind everyone that today's discussion will contain forward-looking estimates and assumptions based on our current views and reasonable expectations. However, a number of factors could cause actual results to differ materially from what we discussed today. A full disclaimer is located with the supplemental information on our website. And with that, I'll turn the call over to John.

Good morning, and thank you for joining us. On today's call, we will review second quarter highlights and discuss our outlook for the rest of the year. APA delivered strong results and made notable progress on a number of fronts during the quarter. most specifically with regard to drilling and completion efficiencies in the U.S. and Egypt, a reduction in year-over-year per unit LOE and G&A costs, working capital improvements in Egypt, and the appraisal of Crab Dagu in Suriname. We also delivered on our production goals with total adjusted production of 325,000 BOE per day coming in at the high end of our guidance range. This was driven by good Permian Basin and Egypt oil performance, partially offset by price-related dry gas curtailments in the Permian and unscheduled compressor downtime in the North Sea. Total adjusted oil production of 154,000 barrels per day exceeded our guidance by 4,000 barrels per day, driven mostly by the U.S. Capital investment during the period was in line with guidance as our average operated drilling rig count remained steady at 17 in Egypt, five in the Permian Basin, and one semi-submersible in the North Sea. As previously planned, we released the Ocean Patriot in the North Sea at the end of June. U.S. oil production increased by 6% compared to the first quarter, and we are projecting a similar percentage increase in the third quarter. Our steady drilling program in the Permian is delivering substantial efficiencies and oil production increases, which we expect will continue, though the timing and size of pad completions can result in a lumpy production profile. APA's Permian rig activity is directed toward oil development in the southern Midland Basin, where we currently have two rigs operating, and oil weighted development in the Delaware Basin, where we currently have three rigs operating. As we noted on our last call, we are deferring additional drilling and completion activity at Alpine High until natural gas and NGL prices improve. That said, the most recent wells placed online at Alpine High are performing in line with expectations, and we look forward to returning to work there in the future. Turning now to Egypt. gross oil production of 141,000 barrels per day was in line with our guidance. Drilling efficiencies, new oil connections, re-completions, and exploration success were all consistent with our expectations for the quarter. As a result, we are projecting gross oil production will be up 5% in the third quarter to 148,000 barrels per day and we are making good progress toward our fourth quarter guide of 154,000 barrels per day. In the North Sea, second quarter production of 42,000 VOEs per day was well below our guidance due to the previously mentioned compressor downtime. We expect volumes to increase in the third quarter to a range of 46 to 48,000 VOE per day, driven by higher operating efficiency and the positive impact of our Store North well, which went on production in late June. In Suriname Block 58, we are currently focused on appraising last year's Crab Dagu discovery. As previously noted, we have completed testing at Crab Dagu 2, and results were consistent with our pre-drill expectations. At Crab Dagu 3, we are in the pressure buildup phase, and data collected thus far is very encouraging. The DD3 semi-submersible rig is still on location and will be released upon completion of operations. We believe that no additional appraisal or exploratory drilling is necessary in the Sapakara and Crab Dago area at this time. Looking ahead to the second half of the year, we expect drilling programs to remain constant in both the U.S. and Egypt. as a steady operational cadence in these areas enables more efficient operations. That said, we have reduced our four-year upstream capital investment outlook to reflect previously noted North Sea platform drilling reductions, no additional drilling in Suriname this year, and some minor service cost declines. We are also reducing our four-year LOE outlook from $1.5 billion to $1.4 billion. which reflects our ongoing success in actively managing these costs down, as well as some price decreases associated with shorter cycle items such as diesel and chemicals. APA remains committed to returning at least 60% of our free cash flow this calendar year to shareholders. During the first half of the year, we generated $366 million of free cash flow, 94% of which we returned to shareholders via dividends and stock buybacks. Since the commencement of our share repurchase program in October of 2021, we have repurchased nearly 20% of total shares outstanding at an average price of just under $34 per share. In closing, we believe the investment case for APA and the EMP industry is strong and that the longer term outlook for hydrocarbon prices is very constructive. APA has a diversified portfolio and the operational flexibility to quickly respond to commodity price volatility and other externalities. We are committed to our shareholder returns framework into allocating capital for the long-term benefit of investors. APA seeks to produce oil and gas safely and to reduce the environmental impact of our operations. Last month, we issued our 2023 sustainability report, which highlights recent achievements on these fronts, as well as our current ESG goals and initiatives. I encourage all of you to review this report, which you can find on our website. And with that, I will turn the call over to Steve Reidy.