APA(US:APA)2024-02-22 21:59Financial Data and Key Metrics Changes - For Q4 2023, APA Corporation reported consolidated net income of $1.8 billion or $5.78 per diluted common share, with adjusted net income of $352 million or $1.15 per share [24] - Free cash flow for the quarter was $292 million, with 68% returned to shareholders, and for the full year, 66% of free cash flow was returned [25][26] - General and administrative (G&A) expenses for the quarter were $75 million, significantly below guidance due to a decrease in APA share price [26] Business Line Data and Key Metrics Changes - Adjusted oil production increased by 4% from Q4 2022 to Q4 2023, driven by production growth in the Midland and Delaware Basins, which was up over 20% [10] - Upstream capital investment for Q4 was $520 million, slightly above guidance, with a strong performance from the U.S. oil production, which was up 12% compared to the same quarter last year [12] - In Egypt, adjusted production exceeded guidance due to higher natural gas production, although gross oil production was lower than expected due to workover rig capacity constraints [13][14] Market Data and Key Metrics Changes - The company anticipates a flat to lower price environment in 2024, establishing a budget based on $70 WTI and $75 Brent [16] - In the North Sea, production is expected to decrease by roughly 20% year-over-year due to reduced capital investment and planned maintenance [18] Company Strategy and Development Direction - The company emphasizes a strategic framework focused on long-term full-cycle returns, moderate sustainable production growth, and strengthening the balance sheet [8][9] - APA plans to redirect capital to the Permian Basin while reducing the drilling program in Egypt to manage workover rig capacity [16][17] - The acquisition of Callon Petroleum is expected to enhance scale and balance in the Permian asset base, with anticipated operational synergies exceeding initial estimates [20][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges in Egypt related to workover rig availability and early life failures of new electrical submersible pumps, which are being addressed [15][41] - The company maintains a constructive medium- and long-term outlook despite potential near-term commodity price weakness, committing to return at least 60% of free cash flow to shareholders [23][22] Other Important Information - The company has successfully appraised significant oil resources in Suriname, with plans for high-margin production beginning in 2028 [22] - APA has implemented over 70% of projects aimed at reducing CO2 emissions, aligning with its ESG goals [11] Q&A Session Summary Question: Outlook for Egypt's production and resolution of issues - Management indicated that the underlying issue is the ratio of workover rigs to drilling rigs, which has been below historical levels, and they are working to balance this [32][33][34] Question: Exploration program in Alaska - The exploration program in Alaska is seen as high-risk but with significant potential, with three wells planned for drilling [39][40] Question: Performance and productivity in Egypt - The new wells in Egypt performed well, but challenges with ESPs impacted overall production [44] Question: Integration of Callon assets - Integration teams are in place, and the company is focused on a smooth transition, with expectations to run a combined total of 11 rigs in the Permian [46][47] Question: Payment situation in Egypt - The company reported a decrease in past due receivables from the Egyptian government, indicating improved collection trends [68] Question: Abandonment cost impact on cash flow - Management clarified that abandonment costs are booked liabilities and do not go through the capital program [71]