APA(US:APA)2024-08-01 19:27Financial Data and Key Metrics Changes - APA Corporation reported consolidated net income of $541 million, or $1.46 per diluted common share for Q2 2024, with adjusted net income of $434 million, or $1.17 per share after excluding certain items [14][15] - Free cash flow generated during the first half of the year was approximately $200 million, with $311 million returned to shareholders, nearly half through share repurchases [15] - The company anticipates a substantial increase in free cash flow for the second half of the year compared to the first half [13] Business Line Data and Key Metrics Changes - In the U.S., oil production volumes reached 139,500 barrels per day, up 67% from Q1 2024, largely due to the integration of Callon [6][10] - Oil now comprises 46% of total U.S. production following the Callon transaction, with cash flow sensitivity to a $5 per barrel change in oil price estimated at approximately $300 million annually [7][10] - Production in Egypt exceeded expectations, benefiting from new wells and improved recompletion results [7][11] Market Data and Key Metrics Changes - The North Sea operations experienced better-than-forecast facility runtime, contributing to higher production [8] - In Suriname, the company remains on track for a final investment decision (FID) before year-end 2024, with first oil expected in 2028 [8][55] - The company raised its full-year estimate of income from third-party oil and gas purchased and sold by $120 million to around $350 million, driven by favorable pricing differentials [20] Company Strategy and Development Direction - The integration of Callon is expected to yield annual cost synergies of $250 million, with operational synergies projected at $120 million annually [16][17] - The company is focused on improving capital efficiency and well performance on Callon acreage, with a preliminary estimate indicating a $1 million reduction in drilling costs per standardized two-mile lateral [9][36] - APA Corporation is committed to maintaining a strong balance sheet while balancing shareholder returns and capital expenditures [15][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in operational progress in Egypt and the U.S., with expectations for continued strong base production performance [11][12] - The company anticipates a strong oil growth trajectory in the second half of 2024, with increased production guidance for Q4 [10][12] - Management highlighted the importance of safety and environmental goals, as well as ongoing discussions regarding potential gas projects in Egypt [13][72] Other Important Information - The company is now subject to the U.S. alternative minimum tax, introducing new guidance for current U.S. tax accruals of $95 million for the year [20] - The Callon acquisition closed on April 1, 2024, and the full-year 2024 guidance reflects combined results from APA and Callon [4] Q&A Session Summary Question: CapEx run rate and future guidance - The CapEx run rate for Q4 is expected to be around $600 million, with a potential decline year-over-year [21][22] Question: Inventory depth post-Callon acquisition - Management is working on understanding inventory depth and believes productivity improvements could increase inventory visibility [24][25] Question: Rig count impact on production in Egypt - The reduction in rig count is expected to free up workover rig time, allowing for significant recompletion projects [28][29] Question: Shareholder return strategy - The company aims for at least 60% of free cash flow to be returned to shareholders through dividends and buybacks [38][39] Question: Future opportunities in Suriname - The company remains on track for FID in Suriname by year-end 2024, with ongoing collaboration with partners [55][56] Question: Alaska exploration activities - The company is excited about exploration opportunities in Alaska, particularly following the King Street Discovery [64][65]