Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- APA Corp (APA, Financial) reported higher-than-expected production across all three operational areas in Q2 2024.
- Oil volumes increased by 67% from the first quarter, reaching 139,500 barrels per day.
- The company achieved significant cost savings from the Callon acquisition, raising the estimate of annual synergies from $225 million to $250 million.
- APA Corp (APA) is on track for FID in Suriname by year-end 2024, with first oil expected in 2028.
- The company is realizing greater-than-expected cost savings and has a clear pathway to improving capital efficiency in its assets.
Negative Points
- The company faces potential volume impacts in Egypt due to a decrease in rig count.
- There are ongoing maintenance and turnaround activities in the North Sea, which may affect production volumes in Q3 2024.
- APA Corp (APA) is subject to the U.S. alternative minimum tax, introducing new guidance for current U.S. tax accruals.
- The company has experienced significant curtailments in natural gas and NGL production, impacting overall production volumes.
- There is uncertainty regarding the long-term inventory and productivity improvements from the Callon acquisition, as the integration process is still in early stages.
Q & A Highlights
Q: Your CapEx run rate for the fourth quarter looks like it will be around $600 million. Is the objective to hold that flat into 2025?
A: (Stephen J. Riney, President & CFO) Be careful using the fourth quarter as a run rate. It's better to look at the full year, excluding the first quarter, and divide by three quarters. This gives a number close to $675 million per quarter, excluding exploration.
Q: What is your current view on inventory depth in the Lower 48 after the Callon acquisition?
A: (John J. Christmann, CEO & Director) We are working on this daily. We have visibility to the end of the decade with our current rig rate. There is more upside if we can drive productivity improvements on Callon acreage.
Q: Can you maintain volumes in Egypt with the reduced rig count in the second half of the year?
A: (John J. Christmann, CEO & Director) The reduced rig count has freed up workover rig time, which is critical for recompletions and water injection projects. We are seeing significant impacts from these projects.
Q: Does your fourth-quarter guidance assume any gas curtailments?
A: (Stephen J. Riney, President & CFO) No, the fourth quarter does not have any curtailments built in. We had significant curtailments in the second quarter and expect some in the third quarter.
Q: Are there any material changes in completion or other strategies for Callon acreage development?
A: (John J. Christmann, CEO & Director) We are seeing an impact from supply chain and well design. We think we can drill a standard two-mile lateral for about $1 million less than Callon was spending last year.
Q: What is your approach to shareholder returns for the remainder of 2024 and into 2025?
A: (Stephen J. Riney, President & CFO) We aim to return at least 60% of free cash flow to shareholders through dividends and share buybacks. We are ahead of this target for the first half of the year and will balance this with the need for balance sheet strengthening.
Q: Are there any plans for additional asset sales, particularly in areas like the Central Basin Platform?
A: (John J. Christmann, CEO & Director) We are always looking at non-core assets and areas where we are not deploying capital. There may be other opportunities for asset sales.
Q: Can you provide more details on the gas curtailments in the Permian?
A: (Stephen J. Riney, President & CFO) We can curtail quite a bit more gas than what we have done. We have specific pricing mechanisms for shutting in different tranches of gas, from lean to richer gas.
Q: What are your high-level thoughts on activity and spending in Suriname for 2025?
A: (John J. Christmann, CEO & Director) We remain on track for FID by year-end 2024 and first oil by 2028. Teams are working well together, and we are looking to accelerate timelines.
Q: What is your appetite for further consolidation in the Permian?
A: (John J. Christmann, CEO & Director) We are very comfortable with our current inventory and believe there is more to do than what we have visibility into today. We will continue to have a high bar for transactions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
