APA Corporation

Good day and thank you for standing by. Welcome to the APA Corporation's second quarter 2025 Financial and Operational Results Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stefan Acca, Director of Investor Relations. Please go ahead.

Good morning and thank you for joining us on APA Corporation's second quarter 2025 Financial and Operational Results Conference call. We will begin the call with an overview by CEO John Christman. Ben Rogers, CFO, will then provide further color on our results and outlook. Steve Reiney, President, and Tracy Henderson, Executive Vice President of Exploration, are also on the call and available to answer questions. We will start with prepared remarks and allocate the remainder of time to Q&A. In conjunction with yesterday's press release, I hope you've had the opportunity to review a financial and operational supplement which can be found on our Investor Relations website at .apacorp.com. Please note that we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these measures and the most directly comparable GAAP 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 interests 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 on today's call. A full disclaimer is located in 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 provide an overview of our second quarter results, share an update on our cost reduction initiatives, and provide color on our outlook for the second half of the year. Overall, this was an excellent quarter for APA, showcasing strong operational and financial performance, continued capital returns to shareholders, and significant debt reduction. I want to first acknowledge the strides we continue to make in strengthening the balance sheet and improving our capital structure. We reduced net debt by more than $850 million during the quarter and returned approximately $140 million to shareholders through our dividends and buybacks. We remain firmly committed to shareholder returns and balance sheet strengthening through debt reduction. Ben will provide more color on this topic shortly. Turning specifically to second quarter operational performance, production volumes across the portfolio generally exceeded guidance while remaining on plan for company-wide capital investment. In the Permian, oil production exceeded guidance, primarily driven by faster turning lines enabled by efficient field execution. Capital investment came in slightly above guidance, largely due to the ongoing capture of efficiency gains across drilling and completions. Put simply, we are delivering more activity with fewer rigs and frac crews. Last quarter, we noted that these efficiency gains would allow us to keep Permian oil production flat with six and a half rigs instead of eight. As a result of further progress, we are currently delivering flat go-forward oil production with six drilling rigs. Our continued improvement in drilling performance is evident. Our DNC cost per foot are now among the lowest in the Midland Basin and in line with offset peers in the Delaware Basin. Our teams are committed to finding new ways to further improve efficiencies across the basin. In Egypt, we again exceeded our quarterly gas production guidance, driven by the strong performance of our recent discoveries and our ability to continue increasing utilization of existing infrastructure. Oil production declined modestly following our decision to shift rig activity toward increased gas development due to improved gas realizations. However, gross BOEs were consistent quarter over quarter. Reported volumes also exceeded guidance, but adjusted production was slightly lower than guidance due to the impacts of higher oil prices and lower operating costs on our allocated volumes under the production sharing contract. Our capital efficiency in Egypt is benefiting from small refinements across our drilling and infrastructure programs, which collectively result in meaningful time and cost savings. For example, on the drilling side, on average, we are delivering wells more than two days faster compared to last year. Lastly, North Sea production was ahead of guidance, a testament to the continued optimization of field operations and maximizing runtime as we manage these late life assets. Our focus remains on safety, operating efficiency, and cost management as we prepare for decommissioning. Turning now to our cost reduction initiatives. At the start of the year, we set forth some important goals for reducing controllable spend over the next three years. I just outlined some of the significant capital efficiency improvements we are making in the Permian and Egypt. Ben will provide further details on other cost initiatives, which have also advanced considerably since our last update. We now anticipate capturing at least $200 million in savings in 2025, up from our prior estimate of $130 million, and plan to exit the year at an impressive $300 million annual savings run rate. We are now on a path to achieve our $350 million run rate target sometime in 2026 versus year-end 2027. Moving forward over the next two years, we see considerable opportunities to further streamline our business and simplify the way we operate. Given the magnitude of these opportunities, it is clear we have upside to our three-year goal. As we begin implementing these initiatives, we will address the scale of that upside in the future. Looking ahead to the second half of 2025, our supplement released last night outlined our expected Permian activity and production for the third and fourth quarters, adjusted to reflect the recent asset sale that closed in mid-June. With continued efficiency gains, we are delivering our planned number of turn-in lines and expected production volumes, and we now expect to exit the year with a higher duck inventory than originally planned. We'll continue to optimize our drilling and completion cadence through the second half of the year to ensure we deliver our revised capital guidance and set 2026 up for success. As an additional benefit, these efficiency gains enable incremental resource development. As previously noted, we are moving toward denser well spacing with smaller frac sizes. While this may result in lower average well productivity, our new development patterns should deliver increased EURs at the spacing unit level and lower breakeven prices per barrel of oil. In turn, this expands economic inventory counts and increases both overall oil recovery and net asset value. This is a fantastic outcome. In Egypt, underscoring our long-term strategic commitment and the ongoing success of our development program, we have recently secured presidential approval for the award of approximately two million net prospective bakers in the Western Desert. This represents a greater than 35% increase in our acreage position and meaningfully enhances our already substantial footprint in the region. This acreage benefits from extensive 3D seismic coverage and considerable overlap with our existing operations, presenting compelling prospectivity for both oil and gas. We are currently in the final steps of the administrative process and plan to initiate drilling activity before the end of 2025. We expect to maintain current activity allocations with around one third of our turning lines expected to be gas focused for the remainder of the year. Based on our -to-date performance, we are once again raising our guidance for gross gas volumes for the next two quarters. This also increases our outlook for price realizations as a higher share of volumes will now be subject to the new price negotiated under last year's revised gas sales agreement. On the oil side, we expect production to stabilize for the remainder of 2025 and hold relatively flat to second quarter levels as our workovers, re-completions and water flow programs help mitigate base decline. Combined with the success in the gas program, Egypt is now poised for 2025 growth in both BOE volumes and free cash flow relative to our expectations at the beginning of the year. In Suriname, the Grand Morgue development continues to advance toward first oil in mid-2028. I would like to commend our partner Total on their execution of the project since announcing FID last fall. Manufacturing of the top sides for the FPSO is currently ongoing and Total was able to secure drilling contracts at very attractive rates earlier this year. We have updated our full year capital guidance to $275 million to reflect additional milestone and progress payments expected later this year. This just reflects a simple re-phasing of spin patterns and Total anticipated project costs remain unchanged. Lastly, we announced a discovery in successful flow tests at Sockeye II in Alaska earlier this spring. As a reminder, the Sockeye Prospect is amplitude supported across 25,000 to 30,000 acres and the discovery well encountered approximately 25 feet of net oil pay in one blocky sand. The subsequent flow tests validated rock properties much better than regional analogs now under development. Given the size and extensive prospectivity of the block, the next best step is to reprocess 3D seismic data across the majority of our acreage position. This will allow us to tie multiple surveys together to refine our technical understanding and provide regional context. This is a key step for both better characterizing additional exploration prospects and for optimizing an appraisal program for Sockeye as well as helping to prioritize between the two. Given the timing of the seismic reprocessing and subsequent technical data integration, we anticipate drilling activity will resume during the 2026 to 2027 winter season. In closing, I will leave you with the following. First, our operational and financial performance for the first half of the year was outstanding. This success is due to the collective efforts of our teams and strong alignment among all leaders in the organization. Our momentum is palpable and sets us up extremely well for the remainder of the year and into 2026. Second, our cost reductions initiatives are progressing very well and we are on the path to achieving significant and lasting improvements to our cost structure. On the capital side, we are capturing efficiency gains through structural improvements to our operations. This is allowing us to deliver our planned permanent oil production volumes at a reduced rig count and to grow BOE volumes in Egypt at lower capital. Our operating costs are also trending lower in both Egypt and the North Sea and we continue to capture significant overhead cost savings through our ongoing simplification efforts. Third, our progress in Suriname and our success in Alaska further underscores the value of our diverse portfolio of high quality exploration opportunities, which represent material catalysts for the future of the company. Finally, we are committed to our capital returns framework, which allows us to further strengthen our balance sheet while maintaining a competitive payout to shareholders. And with that, I will turn the call over to Ben.