Q1 2022 APA Corp (US) Earnings Call

May 5, 2022

[music].

Yeah.

Good day and thank you for standing by welcome to the <unk> Corporation first quarter 2022 earnings 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 on your tongue.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to Gary Clark Vice President of Investor Relations. Please go ahead Sir.

Good morning, and thank you for joining us on Apa's Corporation's first quarter 2022 financial and operational results conference call.

We will begin the call with an overview by CEO and President John Christmann, Steve Riney 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 senior Vice President of exploration.

And clay branches executive Vice President of operations.

Our prepared remarks will be around 20 minutes in length with the remainder of the hour allotted for Q&A.

Junction with yesterday's press release, I hope you've had the opportunity to review, our first quarter financial and operational supplement which can be found on our investor Relations website at Investor <unk> Corp Dot com.

Please note that we may discuss certain non-GAAP financial measures a reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website.

Insistent with previous reporting practices adjusted production numbers cited in today's call are adjusted to exclude Noncontrolling 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.

The first quarter brought a strengthening in both oil and gas prices to levels unseen since 2014.

This quickly shifted the prevailing energy narrative to questions about spare capacity energy security and whether producers could realistically deliver more reliable and affordable oil and natural gas.

These are all very good questions and hopefully represent a more powerful.

Outlook for our energy dialogue.

At IPA, we significantly increased our capital activity coming out of 2021.

And we will remain squarely focused on executing on our three year plan.

Generating strong free cash flow delivering on our shareholder return framework and continuing to deleverage our balance sheet.

Since the beginning of 2021, we have made tremendous progress with debt reduction, which enabled the initiation of our capital return framework.

In that timeframe, we have reduced our outstanding bond debt by $3 billion.

<unk> repurchased $1 $1 billion of API stock or roughly 10% of shares outstanding.

And increased the annualized dividend to <unk> 50 per share.

At current strip prices, we expect to generate approximately $2 $9 billion of free cash flow in 2022.

Based on our capital return framework this would imply a minimum of $1 $8 billion or return to shareholders.

Thus if commodity prices sustain at these levels you should expect an acceleration in the pace of share buybacks through the rest of the year.

With regard to our operational strategy and three year capital activity plan, we anticipate no material changes at this time.

In Egypt, we have been increasing our rig count over the past year investing in shorter cycle projects designed to deliver 8% to 10% compounded gross oil production growth over the next three years.

In the U S. A fourth rig which was contracted in September recently arrived and has begun operations.

This should help return U S oil production to a modest rate of growth as planned.

Given the substantial supply chain bottlenecks and scarcity of oil service equipment and field personnel any attempt to increase activity in the U S. We're being logistically challenging and capital inefficient.

In the North Sea, our plan calls for a stable drilling program with one floater in one platform rig which should be capable of broadly sustaining production over the next three years.

And lastly, we continue to explore and appraise, our two large blocks offshore Suriname, which.

Which we believe have the potential to deliver a significant new source of lower carbon intensity oil production.

Of equal importance to this investment activity is continuing to reduce emissions throughout our global operations and improving the health and welfare of our employees and the people in the communities where we operate.

Turning now to some details of the first quarter our results.

<unk> continued to demonstrate the power of our unhedged diversified global upstream oil and gas portfolio. Some of the key highlights for the quarter include free cash flow generation of $675 million.

Up 39% compared with $485 million in the preceding quarter.

In addition to strong operational cash flows we realized approximately $1 billion in proceeds from the sale of selected minerals acreage in the Delaware basin and the monetization of a portion of our shares in kinetic.

We continued to return cash to shareholders through the dividend and ongoing share buybacks.

During the first quarter, we repurchased $261 million of API shares.

Initiating the buyback last October we have repurchased more than 10% of the company's shares through the end of March at an average price of $29.

We believe our stock is a compelling value and remain committed to this program as an important part of our returns framework.

We also took another significant step forward in strengthening the balance sheet with $1 $3 billion of bond debt reductions during the quarter.

In terms of operational highlights we exceeded our oil production target in the Permian Basin and continued to deliver significant productivity improvements in both the Delaware and southern Midland basins.

We also announced an exploration discovery at Kraft bag on block 58 in Suriname.

Upstream capital investment in the quarter with approximately $360 million or $30 million below guidance, which was mostly driven by the delay of some activity into the second quarter.

Despite the lower first quarter span, we are increasing full year capital investment guidance by about 8% to $1 $75 billion.

<unk> half of this increase is associated with survival as we now plan to keep the noble Jerry D'souza drillship in country. Following conclusion of operations at the rash per well and block 53.

Non operated spending as well as some changes in our U S activity mix account for most of the remaining capital increase.

Total adjusted production in the first quarter was 322.

BOE per day, which was down about 3% from the fourth quarter and in line with expectations.

Total U S volumes decreased 7% from the fourth quarter, driven primarily by well completion timing in the Delaware Basin minerals divestiture in early March.

Oil production was nearly 70000 barrels per day and continues to exceed expectations with Permian basin wells demonstrating excellent performance.

This offset some softness in natural gas and NGL production caused by weather events and unplanned third party downtime.

We have been consistent in noting that U S production will bottom in the second quarter as an increase in the number of wells placed on production in the second half of the year and incremental activity from our fourth rig should drive volumes higher.

That fourth rig is now running in the Delaware Basin, where it is drilling out of previously unfinished six well pad at Dx sell in Reeves County.

Following this the rig will mobilize to alpine high to resume gas and NGL development drilling in the summer.

Outside the Permian Basin, one rig is currently delineating the Austin chalk in Brazos County, where we are in the early stages of flow back on the first three well pad.

Moving to international first quarter adjusted volumes increased 8% compared to the fourth quarter driven by the positive impacts of our recently modernized PSC terms in Egypt.

Adjusted production in Egypt was just over 68000 Boe's per day, consisting of 57% oil.

We've deferred a number of high rate uphold re completions from the first quarter into the second quarter as a producing zones in these targeted wells, we're still delivering at economic rates.

As a result first quarter, Egypt oil production was a bit below expectations. However.

However, we are now seeing a significant uptick as this re completion work is performed.

We are in the process of adding our 13th rig in the Western desert with the 14th and 15th rigs expected by mid year as planned.

Dave Purcell can provide more color on our Egypt operations during Q&A.

In the North Sea production of 43000 BOE per day was impacted by unplanned downtime at the forties Echo platform.

This resulted in the loss of $2 300 barrels of oil per day for approximately half of the first quarter and we expect required repair work, we'll keep these volumes offline through the end of the second quarter.

Scheduled turnaround repair and maintenance work will also be conducted at both barrel and parties through the summer. So we expect north sea production to decrease for the next two quarters before rebounding in the fourth quarter.

Moving on to <unk> and block 53, we spud the RASK for exploration well in late March and our drilling above the target zones at this time.

We will update the status of this prospect at the appropriate time.

And block 58, we are focused on drilling a prioritized list of exploration and appraisal wells in the central portion of the block to assess an appraised resource scope and scale to underpin and optimize a potential course development.

The previously announced crab Daegu discovery flow testing is complete and we are now in the buildup stage in both tested zones.

After we have obtained and analyze this data we will provide more details.

Following conclusion of operations at Kraft bag, the Maersk Valiant will mobilize to the nearby <expletive> up exploration prospect.

Before turning the call over to Steve I'd like to make a few remarks about our ESG progress.

We have multiple initiatives underway within our focus areas of air water and people and we're piloting and investing in a number of technologies to support the measurement understanding and reduction of our emissions footprint.

In Egypt, we recently completed two projects that are making an immediate and material contribution toward our goal this year of reducing upstream flaring in our western desert operations by 40%.

I will close by commenting on a frequent question that E&P companies are receiving from industry watchers.

That is how will capital investment programs and capital return framework change in the context of sustained higher oil and gas prices.

As I noted at the beginning of the call. We do not currently anticipate any significant changes to the activity levels set forth in our three year program.

<unk> remains committed to safe steady and efficient operations in all of our regions and to returning a minimum of 60% of our free cash flow to shareholders through dividends and share repurchases.

And with that I will turn the call over to Steve Riney.

Thanks, John .

For the first quarter of 2022 under generally accepted accounting principles API Corporation reported consolidated net income of $1 88 billion or $5 43 per diluted common share.

As is commonly the case our results include several items that are outside of Apa's core earnings. The most significant of these was $1 1 billion of after tax gains on the divestments of Altus midstream in the Delaware Basin minerals package.

Other material items included a $187 million benefit related to a release of tax valuation allowance to offset deferred U S income tax expense.

$153 million charge for early extinguishment of debt associated with our March bond tender <unk>.

Excluding these and some other smaller items adjusted net income for the first quarter was $668 million.

Or $1 92 per diluted common share.

And our financial and operational supplement you can find detailed tables for all of our non-GAAP financial measures, including one for adjusted earnings.

Our first quarter results underscore a strong free cash flow generating capacity.

The impact of the Egypt, PSC monetization on production volumes combined with a higher commodity price environment kind of a 39% increase in the first quarter free cash flow compared to the preceding quarter.

Cost inflation is becoming a popular topic and quarterly earnings calls and for good reason, we embedded a good amount of cost pressure into the budgets, we laid out in February and for the most part costs are tracking close to that plan.

However, one cost issue in the first quarter. It was not fully captured in the guidance is it related to equity linked to compensation. So let me go through a few details on that with you.

You may recall that we have multiple equity linked compensation plans that are denominated in API shares.

As these pools best similar paid out an actual shares and some are paid out in cash.

We accrued the anticipated cost of these plans each calendar quarter through their various vesting periods.

But the point is that pay out in cash the accounting is a little more complicated.

In the fourth quarter of 2021, and now again in the first quarter of 2022.

Plans had a significant impact on our results for three key reasons all related to improved underlying business performance and share price performance over the last several months.

First since we accrue the cost of these plans at quarter end share price, our quarterly cost accrual has been increasing substantially with a near doubling of our share price since the beginning of October .

Second the cumulative number of shares that are accrued, but not yet paid out most of the mark to market at the end of each quarter.

The first quarter results include a large mark to market impact again due to the significant share price increase since January one.

Third as a result of the improved business performance and relative share price the.

The variable payout plans now appear likely to pay out at a higher level than previously anticipated. So we are increasing the accrual levels accordingly.

These stock brands apply to nearly the entire employee base. So sim costs will slow to low and some of the capex.

But most will flow through G&A.

As a result, G&A is notably above our previous guidance and market expectations.

We have revised our G&A guidance for the remainder of this year accordingly.

That said stock price movement due its unpredictable nature will continue to impact quarterly results beyond our revised guidance.

We achieved a significant milestone during the first quarter with the closing of the Altus midstream Eco cloud business combination.

The monetization of a portion of our ownership in the resulting entity kinetic holdings.

Accounting rules require that we consolidate altice is profit and loss through the February 22nd merger date. So you will see a partial quarter for these items reflected on our income statement.

From a balance sheet perspective upon closing of the transaction and reduction of our ownership to a minority interest we will no longer consolidate <unk> balance sheet.

As a result, $1 $4 billion of debt and redeemable preferred equity from the 2021 at year end balance sheet are no longer consolidated.

This could have a significant positive impact on various HVA debt metrics, depending on how you calculate that.

Subsequent to the completion of the transaction.

<unk> sold 4 million shares of our kinetic common stock holdings in March for net proceeds of $224 million.

At quarter end the market value of Apa's remaining $8 9 million kinetic shares was approximately $580 million.

At this point, we view kinetic is a noncore holdings and following the expiry of our lockup period in February of 2023, we will evaluate the potential for further monetization of our position.

For the meantime, we continue to see this as an attractive investment with a leading Delaware basin footprint stable cash flows a strong dividend and attractive near term growth potential.

Turning now to the progress we've made during the quarter on our balance sheet.

In addition to the deconsolidation of kinetic ATK completed two important steps on the path to reducing leverage and maintaining strong liquidity.

First we initiated a tender offer in March for $500 million of outstanding bonds.

We upsized the tinder to $1 1 billion.

With a focus on repurchasing shorter maturity bonds.

This extended our average maturity to approximately 16 years and reduced our annual bond interest expense by approximately $50 million.

To accommodate the upsize tender, we temporarily drew on our revolver, which ended the quarter with a balance of $880 million.

By the end of April however, we've reduced the revolver balance to $680 million.

By the end of the year, we plan to use a portion of the free cash flow to pay off the revolver and to call at par $123 million of bonds maturing in January 2023.

We also recently refinanced Apache Corporation's revolving credit facility.

The new facilities, which have been moved up to the API Corporation level and had five year primary terms consist of a $1 8 billion revolving credit facility and a $1 5 billion pound Sterling letter of credit facility, which will be used for LC postings related to the abandonment obligations in the north sea.

<unk>.

These efforts along with our robust cash flow generation and the deconsolidation of kinetic have already been recognized by one rating agency Fitch.

Fitch recently upgraded Apache to investment grade with a triple B minus rating and a stable outlook.

I would like to close by discussing some changes to our 2022 production guidance, which can be seen in our financial and operational supplement.

Our full year U S production guidance is unchanged at this time with oil volumes continuing to perform well.

Reported production guidance for Egypt is down roughly 4% the majority of which is associated with the impact of higher oil prices on our PSC cost recovery volumes.

In the North Sea, we have reduced our full year production outlook by 1000 Boe per day, primarily to reflect first half unplanned downtime.

Outside of these production impacts and the activity changes that John spoke of the only other material change to our full year guidance is an $85 million increase in G&A expense, which reflects the equity linked compensation related accrual impacts previously discussed.

Please refer to our financial and operational supplement or follow up with Gary and his team for any questions related to our updated guidance.

And with that I will turn the call over to the operator for Q&A.

Thank you Sir.

To ask a question. Please press star one on your telephone keypad to ask a question simply press star one on your telephone keypad.

Your first question comes from the line of Doug Leggate from Bank of America. Your line is open. Please go ahead.

I think you asked me.

Good morning, everyone.

And in diagnostics.

So John I'm going to start to.

<unk> here.

On Suriname on the buyback.

The 60% of free cash flow.

Obviously fell quite a bit below that in the first quarter.

<unk>.

But my understanding is when you.

Nonpublic information on the test that you can actually.

Be in the market so.

I Wonder if my two thirds I wonder if you could give us a more fulsome update as to whether you feel like you are still making progress.

Towards a development this.

This year and whether at this point you are able to be back in the market.

Taking advantage of for example, today's share price weakness now called a follow up please.

Okay.

Good question.

First off I'll say, we are we are committed to the return framework of a minimum of 60% of our free cash flow to shareholders.

And we are committed to that and we are committed to that for the calendar year of 2022.

We do have periods, where you have material non public and we have to use other vehicles and have planned ahead with <unk> ones and so forth. So.

There are periods, where we have to rely on those and think ahead.

We have completed the flow test at <unk>.

We are now in the important buildup stage and as you know Doug and appreciate.

Sometimes the buildup can be is as important as a protest or more important.

So we're excited about where we are.

At this point, we're not going to dribble information out on <unk>.

We'll wait and come back with.

The report at the appropriate time, but I would say there's been no surprises.

As we think about.

Our path to <unk> in Suriname, we're kind of moving more towards.

What I'll call a central area hub concept and.

<unk>.

Something that we're excited about and starting to think about with total.

You've got a foundational piece at <unk> south.

We think crab Daegu can also be a foundational piece, but I'm going to hold comments there until were ready to talk about that.

And we prioritized.

List, both exploration and appraisal targets that we need to drill obviously the appraisal targets are helping us find connected volumes, which are critical to scope and scale and the exploration targets that are sizable we also need to drill to make sure you would get the scope and scale right.

Potential first fid's so.

Things are on track we're excited about.

How things are progressing.

We did say the Maersk Valiant will be moving to an exploration target next which is <expletive> up.

So we're excited about that and.

Quite frankly things are progressing nicely and.

In block 53, while I'm answering.

We're drilling rasper.

As we said in the.

The prepared remarks were above the target zones, but.

We are.

Excited about Rasper and we'll come back on it when we can talk about it and we also said we will be retaining the noble jewelry to Susa income.

In country in Suriname, which is one of the reasons why the Capex is going up.

And Doug This is Steve if I could weigh in on the second part of your question about the pace of buybacks and uses of cash.

So as John said in his prepared remarks, we anticipate at strip about $2 9 billion of free cash flow this year.

That would imply at least $1 8 billion as he said in returns to shareholders.

First quarter, we between dividends and share buybacks, we did just a little over $300 million. So we're a little bit above the 15%.

Payout at that implied pace of annual payouts.

I think there was some some activity that may have been limited due to NPI.

But I think also you don't you don't start the year with guns Blazing you start probably on a conservative pace.

We also as you know.

Chose to do something on the debt side.

But as John said, we absolutely remain committed to the full year payout of 60% of free cash flow.

And we actively plan around periods of MPI, so they understand what that does to us.

And there are other mechanisms, we can use from time to time to be able to be in the market and buying back shares.

Alright, Thank you cannot vote and hopefully my second my follow up I'll listen when I was thinking too.

<unk> I think it was two tests going on so I'm sure others will get into that but.

I wanted to ask you about the trajectory in Egypt. This is the first fortresses normalized modernization.

There's a few mixed <unk>.

But I think might have surprised some people. So certainly surprised me a little bit more gas.

The trajectory to how you see your <unk>.

Adjusted volumes after minorities.

Tox falls of tax molecules can you give us an idea level looks like.

Yes, I think if you step back big picture in Egypt, Doug.

We've been declining gross operated production for a number of years and the key to modernization was it facilitates the investment levels and so you've seen us really ramp the rig count.

Really in the back half of last year's second half. We went from five to 11 rigs were at 12 today, we're in the process of picking up a 13th and 14th rig fairly soon.

Likely go one or two higher than that.

I think when you look at modernization you have to look at the net so despite a rising oil price our net production was up 13% in Q1.

And thats really the benefits of modernization.

And thats with gross staying relatively flat as youre now starting to see that curve term.

April production is moving up quite a bit and I will let Mr. Brazil.

Jump in and provide some more details here.

Yes, and Doug So we'll get to your to your mix.

I'll answer the mix question, but it's important to give you the preamble before that and as John said April production is moving.

We're up to we're up 8%.

As we've exited April here relative to the first quarter. So we've got the oil production trajectory the way we like it.

And really that's driven by a couple of things continue to increase.

Drilling rig count we talked about will be up to 15 rigs by the middle of the year.

Those drilling rigs really focused on oil.

Have an oil focused as both exploration and production we talked in the supplement we've had a couple of nice exploration successes at pita and hasn't northwest or Petar West and hazard northwest our development drilling is on track. We did have some delays on re completions in the first quarter moved into the second quarter, but were.

We think we're on track.

To continue to grow oil production and that so the oil production mix will continue to improve or increase over time relative to gas.

And I'll, let Gary kind of offline and walk you through the the blood gets some feathers of this but when you think about the modernized terms. It's also a simplified.

Structure, and so we think over going forward that the adjusted and reported mix should mimic can track the gross mix very closely so.

Be that ambiguity and how you roll up into the <unk>.

Adjusted and reported numbers, so we think grow.

Gross is what you should focus on and that gross oil mix is going to improve.

As we continue to focus on oil development here over the next several years.

Thank you very much indeed.

Thank you Doug.

Yes.

Thank you.

And just a reminder to ask a question simply press star one on your telephone and please limit your question to one question and one follow up.

Next question comes from the line of John Freeman from Raymond James Your line is open. Please go ahead.

Hi, guys.

Hello, John .

The first question I had.

You mentioned that about half the Capex increase was related to the increased activity in Suriname.

The decision to keep it just seems that drillship, let's start on falling Rosberg and I'm just wondering if there's a way to maybe give a little bit more color on how exactly you will go about estimating the incremental capex there Kevin obviously your capex obligations are materially different either.

Appraise our exploration related activity in block 58, as well as under that rig Joseph May split time between block 15 block 53, obviously, there's just a lot of different scenarios and I'm just wondering kind of how you all kind of came up with some risk kind of capex number.

Well, John we're going to keep the d'souza theirs.

You could think about an exploration well on block 58, where we've got 50%.

Another well in block 53, where we've got 45% pretty similar obviously, if its appraisal wells in block 58, theyre going to be less because of the carry so and Theres also the ability to keep the d'souza for maybe more than one.

Well, so I'll just leave it at that it will stay in country.

And we're still working through details, but we felt like we ought to at least move it up.

We've moved it up and we think it's a good number.

So is it not to try and put words in your mouth, but is it fair to say that all of the incremental activity.

As soon as it ended up being appraisal at that.

Capex number might come down some.

Potentially could but I would anticipate we've got we've got risked exploration and appraisal wells, so theres going to be both okay.

Okay, and then just my follow up kind of sticking with the Capex side. So on the on the U S where it was due to the increase in non op activity and then you mix in the <unk> and.

Our next changing your activity some higher working interest.

Is it possible at all that sort of say of the incremental capex associated in the U S.

Kind of a split between it being due to kind of increased activity slash higher working interest stuff versus just cost inflation that we've been hearing about on these calls.

Yes, John I think as you know, we built him quite a bit of inflation into our capital numbers with what we laid out first quarter.

The majority of this is we do have some wells that are going to be higher working interest.

Then what we had originally planned and Thats just a function of.

Shifting some pads and moving some pads forward. So there will be some higher working interest and then we do have some increased non op capital.

Some of that could be increased activity and then some of that could be some inflation on the other operators too it's hard to dig in and understand that but it's really what we're just seeing on the non op side moving up and so those those two factors kind of come into play together there on that.

I think we've done a pretty good job of anticipating.

The inflation and the increases in our 2022 plan and I think thats, playing out kind of as it as we had as we budgeted and forecasted.

That's what I was looking for thanks, John I appreciate it.

Thank you.

Thank you and your next question comes from the line of Jay.

Gerard <unk> from Jpmorgan Chase. Your line is open. Please go ahead.

Yes. Good morning, John I was wondering if you could give us an update on your marketing agreement with Cheniere on stage three I believe you have the ability to sell a 140 <unk> to them, obviously very very good pricing environment. I was wondering if you could give us some deep.

<unk> on the timing of when that could kick in and perhaps the operating leverage there between your leverage to this in the North sea exposure.

Two global gas.

Yes, I'll, let I'll, let Steve Diavik I wish it was a bigger contract, but I'll, let Steve dive in.

On the details.

Yes, we wish it was bigger than we wish it was sooner.

So so that contract that's a 15 year contract you got the basic terms right.

<unk>.

And that one contractually begins on July one of 2023.

At any point in time now Cheniere does have the option.

With 30 days notice, our 90 days' notice sorry too.

Electric start that contract early they haven't given us that notice.

No.

So.

We would like to obviously get that one.

Any point in time.

But if.

If we do we'll start at 90 days later or any other timeframe that we might agree with them within that so it's at their option to be able to do that.

We obviously can't disclose the terms of that contract but.

This is to say what we do is we we select a mix.

Of Asian versus European pricing.

And we effectively sell our gas we deliver gas on the Gulf Coast, we sell it at this mix for a full year mix of Asian, and European pricing and then we net back through.

Liquefaction fees transport fees, and a marketing fee that we pay so we're we're in effect fully exposed to the <unk>.

European and Asian, LNG market pricing for that 15 year period.

Great and that starts mid of next year and less generic <unk> to early <unk>.

Exactly okay great.

And just as my follow up is on Egypt. John you guys have highlighted your the expectation to grow your oil volumes there by 8% to 10% per annum. I was wondering if you could maybe talk a little bit about.

How.

Early results are trending it does sound like things are.

When you got the re completions going that you are starting to see some growth there, but I was wondering if you can maybe dig down and give us a sense of.

The trajectory of growth.

Any supply chain headwinds in country. Obviously, you guys are are rapidly expanding activity, but give us a sense of what youre seeing on the ground in Egypt.

No.

Number one it's good to get back to work and kind of move our activity levels up to where we can grow that production base.

I think we've got a couple of key discoveries to build on I think the <unk> west and.

And between Pete on Mariner East is a nice early win it's going to give us some things that we can get on fairly quickly.

We did get some of the re completions underway and as Dave mentioned I think we're up about 8% in April over the first quarter already so it just takes a little bit of time, but things are progressing.

Then there is a couple of other discoveries that have been nice so we're going to be focused on oil drilling we're kind of prioritizing that.

We've got the northwest <unk>.

Concession that we shot seismic on it is kind of a new frontier for us. So we've got some nice exploration wells that we're also excited about but.

Lots of inventory or ruin and we feel good about.

The plans that we've laid out and we're kind of kind of getting our feet under us and getting going so.

You want to pile on Dave.

John John answered the supply question really well the trajectory. We're very we're still confident in the path that we laid out I think on the supply chain questions.

Question is remember in Egypt, where drilling relatively conventional yeah. These are conventional wells are vertical we don't have much if any hydraulic fracturing activity in countries. So these are I would call it kind of commodity sort of wells, but that said our supply chain team is.

All over it and making sure that we're we're not waiting on on parts. So.

We've.

As we ramp up one of the one of the nice things about having a visibility on our plan as it gives the supply chain folks lead time to really make sure that we have all the equipment necessary to keep the program moving forward and so far.

That's been the case.

Great. Thanks, a lot Dave.

Yes.

Thank you. Your next question comes from the line of Mike <unk> from Stifel. Your line is open. Please go ahead.

Hi, good morning, everybody.

Youre getting close to one times debt leverage now and Steve you said one of the agencies upgraded the debt rating to investment grade.

<unk> also done well this year, but it sounds like you are still focused on.

Debt reduction and share buybacks, so I guess with that in mind I wanted to see how you.

Do you the intrinsic value of the company relative to the current stock price and how you.

Weigh that versus <unk>.

Potentially increasing the dividend.

Yes, Michael Hey, how are you.

So a number of questions in there I think that the.

The key answer to your question would be are the key part of your question would be that we still see our share price is undervalued and.

And we like the buyback program and we like it quite a bit but your reference to the amount of debt reduction that we've done just to just to step back from.

Bit.

In the last nine months, we've done $3 billion of bond elimination, which is just phenomenal.

Compared to what you think we might have been able to do just.

12 months to 18 months ago.

Certainly the balance sheet is much much stronger today.

And Fitch.

The first one to recognize that.

And acknowledge it.

We are in conversations with all three rating agencies and we continue to to.

To work the debt rating hard with all three of them.

I think we will continue along the lines of balance sheet, strengthening but I think it's unlikely that youre going to see the large chunks of Av.

The debt tender activity that the $1 billion plus.

As long as we stay in this price environment, we're going to have a significant amount of free cash flow over the next three years.

And there will be continued balance sheet strengthening but there will be.

A significant focus on share buybacks as well as long as the share price and our view stays undervalued, which is what it is now.

We talk about the dividend.

All the time, we talk about it off and we've raised it twice in the back half of last year.

We will continue to look at that and as the balance sheet gets stronger.

As prices continue to play out the way they are.

And is share price improves.

On an absolute and relative basis, and we will certainly.

I think more seriously about the dividend, but for right now we're quite happy with the buyback program.

Great that helps.

Second question was a marketing question I guess with the deconsolidation of <unk> I believe you.

Retained year firm transportation for gas out of the Permian.

I wanted to see if you plan to use all of that or.

Thoughts on monetizing any excess capacity there.

Well as you know we did monetize some of that.

And in prior years.

And we have we have about round numbers, we have a little over 670 million a day of transport capacity.

On PHP and.

And Gulf Coast Express.

We have over there as we look forward to the next the remainder of this year and into next year, we have.

On average somewhere in the 200 to 225 million a day of excess capacity.

Would we be open to potentially.

Getting some of that.

We would entertain a conversation on that for sure but at the same time.

Differentials look good for the next two years.

Youll probably see in our.

And our results in our in our Posties that we have actually gone and we've now locked in those differentials on about 90% of that excess capacity all the way through the end of 'twenty three.

And in doing so there is a mixture we put in some hedges.

In earlier time periods that were not quite as attractive as they are these days that we've put in quite a bit just recently and we've locked in about.

Little under $50 million of cash margin on that transport capacity and in the rest of the capacity will be used.

We use all of it.

And effectively it gets.

Alf cause pricing on our on our equity volumes, but we sell all of our equity volumes in basin and then our marketing group buys 670 million a day.

Transports it in and then resells it on the Gulf Coast.

I appreciate that Steve.

Thank you moving on your next question comes from the line of Charles Meade from Johnson Rice. Your line is open. Please go ahead.

Good morning, John to you and the rest of your team there.

Good morning, Charles John I mentioned this is a question for you or perhaps for Tracy can you give us the kind of the background.

Yes.

Evidence of this stock up or I don't know exactly the way to pronounce it.

<unk> pick.

Pick up <unk>.

Prospecting.

Perhaps wrap into it whether.

Whether it kind of rising to the top of the pile here is connected to your <unk>.

<unk> central area hub.

Development concept.

Yeah, Charles I will tell you. It is something that would fall in that area, it's an exploration well and I'm happy to have Tracy.

I will say a few things about it so.

Sure Good morning Charles.

As John mentioned in <unk>.

The original comments, we're going to be testing sort of a range of different prospects with different attributes and a lift in support of <unk>.

Looking at our appraisal and exploration prospects. So I would say the kick up wells at the front of the schedule, it's a well that total really likes and with some potential meaningful reserves. So we see it I think is a bit higher risk higher reward because it does have some different.

Seismic attributes than we've tested but it has the potential to unlock I would say some additional follow on prospects that could could incrementally and substantially.

But more reserves. So I think it's one we're anxious to see but it is a bit of a different beast than what we've seen before but has potential.

To be meaningful for the appraisal.

Great. That's helpful detail. Thanks, Thanks, that's it for me.

Thank you Charles.

Your next question comes from the line of Scott Hanold from RBC capital markets. Your line is open. Please go ahead.

Yes. Thanks, a quick question on the D'souza rig in block 53, if it stays in country. It sounds like it's going to move to block 58.

Would you all continue to be the operator of that rig or would you hand that over to <unk>.

Scott It could it could stay in block 53, or we could move it to <unk> 58 in total I'll take it so there's optionality there and I'll just I'll leave it at that for now.

Okay, but just to clarify if it did go to 50, a day would take over operator ship is that right.

They are the operator in 58 and where the operator in 53 so.

There is a lot of things you could work out but.

We're not gonna it wouldn't be changing they've got the valiant working so.

Okay understood and then.

Alpine high obviously.

With where gas prices are it looks a lot more interesting you guys are moving a rig.

They're going to resuscitate those volumes.

When you think about big picture, obviously, Steve talked about the potential excess capacity you all have with your ft.

And I know in past.

In the beginning of the Alpine high history, I guess, you all talked about Mexico being an option there to gas, but as you think about gas prices optionality between LNG, maybe Mexico still yet.

How do you think about that longer term are you going to get to keep a rig there do you could you move more on there does it do the economics really warrant ramping up much just give a little color on that that'd be great.

No.

We started last September picking up a rig in the U S. It's going to be a Delaware basin focused rig.

It's now working in our <unk>, we had a pad there that was partially drilled and so.

So we wanted to drill that out first and then it will be moving to alpine high.

We're excited about.

What those economics look like right. If you look back at the Willow well.

We had some details on our supplement there. It was one of the best Wells, we brought on last year of all of our all of our Ducks.

This <unk> over nine Bcf and it's been on since really January of 'twenty one so.

We are excited about those economics, I think they compete well and we're anxious to get a rig back to work is there's plenty of infrastructure.

Thank you. Your next question comes from the line of Bob Brackett from Bernstein Research. Your line is open. Please go ahead.

Good morning, I'll try fishing offshore and on a bit in terms of the Jerry D'souza when does the decision to keep that rig occur did it occur after you'd spud rasper an unrelated question is there an obvious sidetrack to rasper.

We are above target zones in Rasper, Bob So I'll.

I'll just leave it at that.

Okay.

The Hill there how about a follow up if we talk about the crab to do flow test. The fact that you went on to the next step of buildup suggests that you've flowed oil through a sufficiently permeable reservoir that it makes sense to do a longer term test.

Getting the engineering right on that.

We're doing a buildup. So we're in the buildup phase and I said there were no surprises.

So I'll leave it at that.

And our final question would just be.

The restricted flow test at <unk>, South flow 4800 barrels of oil I think so that is that in the realm of no surprises.

I'll just I'll just say there were no surprises.

And we may not have expected there to be a restricted flow test, but I'll leave it at that.

Thank you much.

Okay.

Your questions are always fun, Bob Thank you.

And created.

Your next question comes from Paul Cheng from Scotiabank. Your line is open. Please go ahead.

Hey, guys good morning.

Good morning, Paul quick question John .

John .

Question can you tell us that how many wells do you expect to flow in.

Alpine high this year and secondly that I know you. So many early but given the inflationary environment and the activity level.

What is your prime, namely given take different components of the 2020.

But kick may look like and the direction that you can point too. Thank you.

In terms of number of wells today, Yes, Paul.

Paul This is Dave for sale number of wells at Alpine later this year it'll just be a handful because we're as John said, we're finishing up and.

And drilled uncompleted pad DSL.

Then we'll move to alpine.

We're all going to be longer laterals with relatively large.

Stimulation treatments.

It will be a handful of wells that are ready to come online at the end of the year.

And your second part of your question Paul It was hard to hear.

I don't think that I know, yes early fall of 2023.

And the tie up direction, you can point to on the premium rate uptick and activity levels.

Yes, I mean, I would say today as we look at 2023, our three year plan, we laid out this year looks pretty darn good to US right. We've added the fourth rig in the U S.

We will be at 15 rigs in Egypt.

So right now we're not envisioning any increases.

The three year plan that we laid out.

At the start of this year.

Okay, great and how plug in that budget given the inflation in that.

Personnel costs that we should be taking into consideration.

Yes.

Wait till.

Next February to come out with a hard number for 'twenty three but we did have an increase dialed in.

Additional inflation in 'twenty three.

In a position to really give you that number right now.

Okay. Thank you little early.

Yeah.

Thank you you bet.

Beth.

Your next question comes from Neal Matta from Goldman Sachs. Your line is open. Please go ahead, good morning, John and team.

The first question is around the North Sea and just wanted to get your perspective on the production cadence there.

Already indicated it can be a heavy turnaround schedule through the summer.

And how are you feeling about the exit rate of 50000 BOE a day and just any update around activity plans there. Thank you.

Yes.

We're still with the North Sea, we've got a heavy turnaround period coming up that were.

We are anxious to get on and get through I think.

Execute and that's going to be key.

I think we've got good news that the Ocean Patriot is back in the field are arriving today so.

It's been one of the other items that we basically lost an entire quarter with the drilling of the ocean Patriot, which when we're only running one floater and you lose it for a quarter. It had to go in that had a large anchor chain that had broke.

To be repaired.

So I think we feel good about the.

The prospects that are on that rig line and the work Thats ahead of us.

The repair work so we feel good about the exit rate, which should be around 50000. So.

Alright, and then.

Thanks, Shannon and then the follow up is <unk>.

You operate a global portfolio here I talk.

About the inflationary forces that youre seeing in the U S relative to international.

Thank you.

Fair to say, thus far a lot of your peers have reported more inflation.

And their U S business relative to international but how do you see that playing out over the next 12 months.

Well I mean, I think we.

Do operate a global portfolio I think it's a function of staying ahead.

We had a lot of our 20.

2022 program under contract and so we had cranked a lot of that into last quarter. When we announced the budget. So we feel good about what we dialed in and where that where that sits.

Think of a lot of it just depends on where you are and what the demand for that equipment is.

And do you are you typically do see higher increases in the U S and then more volatility and more stable.

Prices internationally, but.

I think the thing that's a little bit different this time.

We're not all just fighting over rig count rigs and which drives that hyperinflation, so but theres no doubt.

Commodities are going up fuels.

Fuel's going.

Steel sand.

So as you look out costs are going up and then the other thing.

If you look back over the last few years, there has not been a lot of equipment that was built and so a lot of the parts that were needed to keep.

Our rigs running and Frac crews running have been cannibalized.

Older equipment so.

Theres no doubt as you look out over the next couple of years, if the price deck holds.

Youre going to see some higher prices.

It makes total sense. Thanks, Jim David anything you want to add to that yes, I think I think when you look at inflation it's Pete.

People steel chemicals and diesel you can't I mean, that's.

Ubiquitous around the world when you look at the Permian relative to the rest of the global portfolio Youre running higher spec.

And kind of higher end equipment in the Permian, which will have and theres more competition for that equipment.

Both those things create more more pressure and you've got the pressure pumping.

And big Frac component of the wells in the Permian and that is.

It can be.

Significantly inflationary, which we don't see in either Egypt, or the North sea. So I think thats, the real kind of categorical breakdown yes.

Thanks, guys.

Thank you. Your next question comes from the line of Leo Mariani from Keybanc. Your line is open. Please go ahead.

Hey, guys just wanted to follow up on some of the prepared comments here.

You won't kind of described South Dakota, south as potential kind of foundational part.

Our project and instead kind of stay tuned on <unk> I think there is a plan for <unk> kind of talked about maybe hitting <unk> at the end of the year, but my reading some pretty good confidence out of you guys in terms of what you've seen so far that you think there is certainly a.

Sizeable viable economic project here.

At this point.

We have not announced.

Our project RFID I think we've said from the get go that <unk> South is a foundational piece.

We've shown has gotten bigger with the extended buildup time.

We raised that original estimate from connected volume just to the one well and I want to emphasize again thats just.

The one initial well was $3 25 to $3 75 million barrels, we raised that to greater than 400.

And.

That area continues to get bigger and there's more appraisal to do at <unk>. So.

I think we have confidence in what we have found and we'd like the program.

But there is still more work to do.

Okay, and then just on the North Sea certainly said you've got confidence on this 50000 Boe per day exit rate.

I guess are there some particular wells that you all need to kind of tie in I know, there's a bunch of downtime turnarounds here in the summer but.

Are there a project or two that are kind of chunky that you guys are going to be bringing on on the wealth side that gives you confidence in that number.

Yes, Theres a garden well that.

The Ocean Patriot was scheduled to drill when we've had to slide that back but.

Those garden wells have been high rate.

It's a very very good locations.

Okay. Thanks.

Thank you.

Thank you and there are no further questions over the phone line I'd like now to hand, the call over to John Christmann.

<unk>.

Please go ahead Sir.

Yes, thank you for participating on our call today.

I'd like to leave you with the following closing thoughts financially we have become a much stronger company.

We'll remain disciplined both financially and operationally.

Lastly, we are committed to our shareholder returns framework, returning a minimum of 60% of our free cash flow to shareholders through dividends and buybacks operator, I will now turn the call over to you. Thank you.

Thank you Sir Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

[music].

Good day and thank you for standing by welcome to the H B a corporation first quarter 2022 earnings 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 on your telephone if you require any further assistance. Please press star Zero I would now like to hand, the conference over to Gary Clark Vice President of Investor Relations. Please go ahead Sir.

Good morning, and thank you for joining us on API corporations first quarter 2022 financial and operational results conference call.

Tracy Henderson senior Vice President of exploration.

And clay branches executive Vice President of operations.

Our prepared remarks will be around 20 minutes in length with the remainder of the hour allotted for Q&A.

<unk> with yesterday's press release, I hope you've had the opportunity to review, our first quarter financial and operational supplement which can be found on our investor Relations website at Investor Dot Corp Dot com.

<unk> with previous reporting practices adjusted production numbers cited in today's call are adjusted to exclude Noncontrolling interest in Egypt, and Egypt tax barrels.

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.

The first quarter brought a strengthening in both oil and gas prices to levels unseen since 2014.

These are all very good questions and hopefully represent a more thoughtful outlook for our energy dialogue.

At <unk>, we significantly.

<unk> increased our capital activity coming out of 2021 and.

And we will remain squarely focused on executing on our three year plan generating strong free cash flow delivering on our shareholder return framework and continuing to deleverage our balance sheet.

This is the beginning of 2021, we have made tremendous progress with debt reduction, which enable the initiation of our capital return framework.

In that timeframe, we have reduced our outstanding bond debt by $3 billion.

Repurchased $1 $1 billion of API stock or roughly 10% of shares outstanding and increased the annualized dividend to <unk> 50 per share.

At current strip prices, we expect to generate approximately $2 $9 billion of free cash flow in 2022.

Based on our capital return framework this would imply a minimum of $1 $8 billion or return to shareholders.

Thus if commodity prices sustain at these levels you should expect an acceleration in the pace of share buybacks through the rest of the year.

With regard to our operational strategy and three year capital activity plan, we anticipate no material changes at this time.

In Egypt, we have been increasing our rig count over the past year.

Investing in shorter cycle projects designed to deliver 8% to 10% compounded gross oil production growth over the next three years.

In the U S. A fourth rig which was contracted in September recently arrived and has begun operations. This.

This should help return U S oil production to a modest rate of growth as planned.

In the North Sea, our plan calls for a stable drilling program with one floater in one platform rig which should be capable of broadly sustaining production over the next three years.

And lastly, we continue to explore and appraise, our two large blocks offshore Suriname, which.

Which we believe have the potential to deliver a significant new source of lower carbon intensity oil production.

Turning now to some details of the first quarter our results.

Up 39% compared with $485 million in the preceding quarter.

We continued to return cash to shareholders through the dividend and ongoing share buybacks.

During the first quarter, we repurchased $261 million of API shares.

Since initiating the buyback last October we have repurchased more than 10% of the company's shares through the end of March at an average price of $29. We.

We believe our stock is a compelling value and remain committed to this program as an important part of our returns framework.

We also took another significant step forward in strengthening the balance sheet with $1 $3 billion of bond debt reductions during the quarter.

We also announced an exploration discovery at Kraft bag on block 58 in Suriname.

Upstream capital investment in the quarter was approximately $360 million or $30 million below guidance, which was mostly driven by the delay of some activity into the second quarter.

Despite the lower first quarter spend we're increasing full year capital investment guidance by about 8% to $1 75 billion.

Approximately half of this increase is associated with <unk> as we now plan to keep the noble Jerry D'souza drillship in country. Following conclusion of operations at the rash per well and block 53.

Non operated spending as well as some changes in our U S activity mix account for most of the remaining capital increase.

Total adjusted production in the first quarter was 322000.

BOE per day, which was down about 3% from the fourth quarter and in line with expectations.

Total U S volumes decreased 7% from the fourth quarter, driven primarily by well completion timing in the Delaware Basin minerals divestiture in early March.

U S oil production was nearly 70000 barrels per day and continues to exceed expectations with Permian basin wells demonstrating excellent performance.

This offset some softness in natural gas and NGL production caused by weather events and unplanned third party downtime.

That fourth rig is now running in the Delaware Basin, where it is drilling out our previously unfinished six well pad at Dx sell in Reeves County.

Following this the rig will mobilize to alpine high to resume gas and NGL development drilling in the summer.

Outside of the Permian Basin, one rig is currently delineating the Austin chalk in Brazos County, where we are in the early stages of flowback on the first three well pad.

Moving to international first quarter adjusted volumes increased 8% compared to the fourth quarter driven by the positive impact of our recently modernized PSC terms in Egypt.

Adjusted production in Egypt was just over 68000 Boe's per day, consisting of 57% oil.

We've deferred a number of high rate uphold re completions from the first quarter into the second quarter as a producing zones in these targeted wells, we're still delivering at economic rates.

As a result first quarter, Egypt oil production was a bit below expectations. However.

However, we are now seeing a significant uptick as this re completion work is performed.

We are in the process of adding our 13th rig in the Western desert with the 14th and 15th rigs expected by mid year as planned.

Dave Purcell can provide more color on our Egypt operations during Q&A.

In the North Sea production of 43000 BOE per day, it was impacted by unplanned downtime at the <unk> Echo platform.

This resulted in the loss of two 300 barrels of oil per day for approximately half of the first quarter and we expect required repair work, we'll keep these volumes offline through the end of the second quarter.

Scheduled turnaround repair and maintenance work will also be conducted at both viral and <unk> through the summer. So we expect north sea production to decrease for the next two quarters before rebounding in the fourth quarter.

Moving on to Suriname, and block 53, we spud the Rasper exploration well in late March and our drilling above the target zones at this time.

We will update the status of this prospect at the appropriate time.

At the previously announced crab Daegu discovery flow testing is complete and we are now in the buildup stage in both tested zones.

After we have obtained and analyze this data we will provide more details.

Following conclusion of operations at Kraft bag, the Maersk Valiant will mobilize to the nearby <expletive> up exploration prospects.

Before turning the call over to Steve I'd like to make a few remarks about our ESG progress.

In Egypt, we recently completed two projects that are making an immediate and material contribution toward our goal this year of reducing upstream flaring in our western desert operations by 40%.

I will close by commenting on a frequent question that E&P companies are receiving from industry watchers.

That is how will capital investment programs and capital return framework change in the context of sustained higher oil and gas prices.

As I noted at the beginning of the call. We do not currently anticipate any significant changes to the activity level set forth in our three year program.

<unk> remains committed to safe steady and efficient operations in all of our regions and to returning a minimum of 60% of our free cash flow to shareholders through dividends and share repurchases.

And with that I will turn the call over to Steve Riney.

Thanks, Don.

For the first quarter of 2022 under generally accepted accounting principles API Corporation reported consolidated net income of $1 $88 billion.

Or $5 43 per diluted common share.

$187 million benefit related to a release of tax valuation allowance to offset deferred U S income tax expense.

$53 million charge for early extinguishment of debt associated with our March bond tender.

Excluding these and some other smaller items adjusted net income for the first quarter was $668 million or.

Or $1 92 per diluted common share.

And our financial and operational supplement you can find a detailed tables for all of our non-GAAP financial measures, including one for adjusted earnings.

Our first quarter results underscore apa's strong free cash flow generating capacity.

The impact of the Egypt, PSC modernization on production volumes combined with a higher commodity price environment paired with 39% increase in first quarter free cash flow compared to the preceding quarter.

Cost inflation has become a popular topic and quarterly earnings calls and for good reason, we embedded a good amount of cost pressure into the budgets, we laid out in February and for the most part costs are tracking close to that plan.

However, one cost issue in the first quarter that was not fully captured in the guidance is it related to equity linked to compensation. So let me go through a few details on that with you.

You may recall that we have multiple equity linked to compensation plans that are denominated in API shares.

As these pools best similar paid out an actual shares and some are paid out in cash.

We accrued the anticipated cost of these plans each calendar quarter through their various vesting periods.

For the players that payout in cash the accounting is a little more complicated.

In the fourth quarter of 2021, and now again in the first quarter of 2022.

These plans had a significant impact on our results for three key reasons all related to improved underlying business performance and share price performance over the last several months.

First since we accrue the cost of these plans at the quarter end share price.

Quarterly cost accrual has been increasing substantially with the near doubling of our share price since the beginning of October .

Second the cumulative number of shares that are accrued, but not yet paid out.

The mark to market at the end of each quarter.

The first quarter results include a large mark to market impact again due to the significant share price increase since January one.

Third as a result of the improved business performance and relative share price.

The variable payout plans now appear likely to pay out at a higher level than previously anticipated. So we are increasing the accrual levels accordingly.

These stock plans apply to nearly the entire employee base. So sim costs will slow to low and some of the capex.

But most will flow through G&A.

As a result, G&A is notably above our previous guidance and market expectations.

We have revised our G&A guidance for the remainder of this year accordingly.

<unk> stock price movement due its unpredictable nature, we will continue to impact quarterly results beyond our revised guidance.

We achieved a significant milestone during the first quarter with the closing of the Altus midstream Eco cloud business combination.

The monetization of a portion of our ownership and the resulting entity kinetic holdings.

Accounting rules require that we consolidate <unk> profit and loss through the February 22nd merger date. So you will see a partial quarter for these items reflected on our income statement.

From a balance sheet perspective upon closing of the transaction and reduction of our ownership to a minority interest we will no longer consolidate <unk> balance sheet.

As a result, $1 $4 billion of debt and redeemable preferred equity from the 2021 at year end balance sheet are no longer consolidated.

This could have a significant positive impact on various debt.

Debt metrics, depending on how you calculate that.

Subsequent to the completion of the transaction HPA sold 4 million shares of our kinetic common stock holdings in March for.

Net proceeds of $224 million.

At quarter end the market value of Apa's remaining $8 9 million kinetic shares was approximately $580 million.

At this point, we view kinetic is a noncore holdings and following the expiry of our lockup period in February of 2023, we will evaluate the potential for further monetization of our position.

For the meantime, we continue to see this as an attractive investment with a leading Delaware basin footprint stable cash flows a strong dividend and attractive near term growth potential.

Turning now to the progress we've made during the quarter on our balance sheet.

In addition to the deconsolidation of kinetic ATK completed two important steps on the path to reducing leverage and maintaining strong liquidity.

First we initiated a tender offer in March for $500 million of outstanding bonds.

We upsized the 10 gig to $1 1 billion.

With a focus on repurchasing shorter maturity bonds.

This extended our average maturity to approximately 16 years and reduced our annual bond interest expense by approximately $50 million.

To accommodate the upsize tender, we temporarily drew on our revolver, which ended the quarter with a balance of $880 million.

By the end of April however, we reduced the revolver balance to $680 million.

By the end of the year, we plan to use a portion of that free cash flow to pay off the revolver and to call at par $123 million of bonds maturing in January 2023.

We also recently refinanced Apache Corporation's revolving credit facility.

The new facilities, which have been moved up to the API Corporation level and have five year primary terms consist of a $1 8 billion revolving credit facility and a $1 5 billion pound Sterling letter of credit facility, which will be used for LC postings related to the abandonment obligations in the north.

<unk>.

These efforts along with our robust cash flow generation and the deconsolidation of kinetic have already been recognized by one rating agency Fitch.

Fitch recently upgraded Apache to investment grade with a triple B minus rating and a stable outlook.

I would like to close by discussing some changes to our 2022 production guidance, which can be seen in our financial and operational supplement.

Our full year U S production guidance is unchanged at this time with oil volumes continuing to perform well.

Our reported production guidance for Egypt is down roughly 4% the majority of which is associated with the impact of higher oil prices on our PSC cost recovery volumes.

In the North Sea, we have reduced our full year production outlook by 1000 Boe per day, primarily to reflect first half unplanned downtime.

Please refer to our financial and operational supplement or follow up with Gary and his team for any questions related to our updated guidance.

And with that I will turn the call over to the operator for Q&A.

Thank you Sir.

To ask a question. Please press star one on your telephone keypad to ask a question simply press star one on your telephone keypad.

Your first question comes from the line of Doug Leggate from Bank of America. Your line is open. Please go ahead.

I think you asked me.

Good morning, everyone.

And there are existing.

So John I'm going to start with maybe on <unk>.

Hi, Phil to slow here.

On Suriname on the buyback.

The 60% of free cash flow, you, obviously fell quite a bit below that in the first quarter.

But my understanding is winning new foundry nonpublic information on the test that you can actually be in the market. So so I wonder by two thirds I Wonder if you could give us a more fulsome update as to whether you feel like you are still making progress.

Towards.

This year.

At this point you are able to be back in the market.

Taking advantage of for example, today's share price weakness now called a follow up please.

Okay.

Great question.

First off I'll say, we are we are committed to the return framework of a minimum of 60% of our free cash flow to shareholders.

And we are committed to that and we are committed to that for the calendar year of 2022.

Do have periods, where you have material non-public and we have to use other vehicles planned to add with <unk> ones and so forth. So.

There are periods, where we have to rely on those and think ahead.

We have completed the flow test at <unk>, we are.

Now in the important buildup stage and as you know Doug and appreciate.

Sometimes the buildup can be is as important as opposed to us are more important.

So we're excited about where we are.

At this point, we're not going to dribble information out on <unk>.

We'll wait and come back with.

Report at the appropriate time, but I would say there's been no surprises.

As we think about.

Our path to <unk> in Suriname, we're kind of moving more towards.

What I'll call a central area hub concept and.

<unk>.

Something that we're excited about and starting to think about what hotel.

You've got a foundational piece itself of course out.

We think craft Daegu can also be a foundational piece, but I'm going to hold comments there until we are ready to talk about that.

And we've prioritized list of both exploration and appraisal targets that we need to drill.

Obviously, the appraisal targets are helping us find connected volumes, which are critical to scope and scale and the exploration targets that are sizable we also need to drill to make sure you would get the scope and scale right.

Potential first Friday so.

Things are on track, we're excited about too.

How things are progressing.

We did say that the Maersk Valiant will be moving to an exploration target next which is <expletive> up.

So we're excited about that.

Quite frankly things are progressing nicely.

Block 53, while I'm answering.

We're drilling rasper.

As we've said in the.

<unk> prepared remarks, we're above the target zones, but.

We are.

Excited about Rasper and we'll come back on it when we can talk about it and we also said we will be retaining the noble Jerry to Souza.

In country in Suriname, which is one of the reasons why the Capex is going up.

And Doug. This is Steve is that could weigh on the second part of your question about the pace of buybacks and uses of cash.

So as John said in his prepared remarks, we anticipate at strip about $2 9 billion of free cash flow this year.

That would imply at least $1 8 billion as he said and returns to shareholders.

First quarter, we between dividends and share buybacks, we did just a little over $300 million.

So we're a little bit above 15%.

Payout at that implied pace of annual payouts.

I think there was some some activity that may have been limited due to NPI.

I think also you don't.

Don't start the year with guns blazing you start probably on a conservative pace.

We also as you note.

Chose to do something on the debt side.

But as John said, we absolutely remain committed to the full year payout of 60% of free cash flow.

And we actively plan around periods of MPI. So we understand what that does to us.

And there are other mechanisms, we can use from time to time to be able to be in the market and buying back shares.

Thank you cannot fulfill my second my follow up I'll, let someone else digging too soon and I think it was two tests going on Assortments of all of those will get into that but.

I wanted to ask you about the trajectory in Egypt. This is the first quarter's normalized modernizations.

There's a few mixed <unk>.

I think might have surprised some people so certainly surprised me a little bit more gas.

The trajectory to how you see your adjusted volumes after minorities.

Tox falls of tax molecules can you give us an idea level looks like.

Yes, I think if you step back big picture in Egypt, Doug.

We've been declining gross operated production for a number of years and the key to modernization was it facilitates the investment levels and so you've seen us really ramp the rig count.

Really in the back half of last year's second half. We went from five to 11 rigs were at 12 today, we are in the process of picking up a 13th and 14th rig fairly soon.

Likely go one or two higher than that.

I think when you look at modernization you have to look at the net so despite a rising oil price our net production was up 13% in Q1.

And thats really the benefits of modernization.

And thats, where the growth staying relatively flat as yours now starting to see that curve turn.

April production is moving up quite a bit and I will let Mr per sale.

Jump in and provide some more details here.

Yes, and Doug So we'll get to your to your mix.

I'll answer the mix question, but it's important to give you the preamble before that and as John said April production is moving.

We're up to we're up 8%.

As we've exited April here relative to the first quarter. So we've got the oil production trajectory the way we like it.

And really that's driven by a couple of things continue to increase.

The drilling rig count we talked about will be up to 15 rigs by the middle of the year.

Those drilling rigs really focused on oil.

We think we're on track.

To continue to grow oil production and that so the oil production mix.

<unk> to improve or increase over time relative to gas.

And I'll, let Gary kind of offline and walk you through the the blood gets some feathers of this but when you think about the modernized terms. It's also a simplified.

Structure, and so we think over going forward that the adjusted and reported mix should mimic can track the gross mix very closely so there won't be that ambiguity and how you roll up into the to the adjusted and reported numbers. So we think.

Gross is what you should focus on and that gross oil mix is going to improve.

As we continue to focus on oil development here over the next several years.

Thank you very much indeed.

Thank you Doug.

Yes.

Thank you.

And just a reminder to ask a question simply press star one on your telephone and please do limit your question to one question and one follow up. Your next question comes from the line of John Freeman from Raymond James Your line is open. Please go ahead.

Hi, guys.

Hello, John .

The first question I had.

You mentioned that about half the Capex increase was related to the increased activity in Suriname.

The decision to keep it just seems that drillship, let's start on fallen roster and Im just wondering if there's a way to maybe give a little bit more color on how exactly you will go about estimating the incremental capex there Kevin obviously your capex obligations are materially different either appraisal.

Appraise, our exploration related activity in block 58, as well as under that rig.

It may split time between block 15 block 53, I mean, there's just a lot of different scenarios and I'm. Just wondering kind of how you all kind of came up with some risk kind of capex number.

Well, John we're going to keep the d'souza.

You could think about an exploration well on block 58, where we've got 50%.

Another well in block 53, where we've got 45% pretty similar.

<unk>, if it's appraisal wells in block 58, theyre going to be less because of the carry.

And Theres also the ability to keep the d'souza for maybe more than one.

Well, so I'll just leave it at that it will stay in country.

And we're still working through details, but we felt like we ought to at least move it up from the amount we've moved it up and we think it's a good number.

So is it not to try and put words in your mouth, but is it fair to say that all of the incremental activity.

As soon as it ended up being appraisal that that that capex number might come down some.

Potentially could but I would anticipate we've got we've got risked exploration and appraisal wells, so theres going to be both okay.

And then just my follow up kind of sticking with the Capex side. So on the on the U S where it was due to the increased non op activity and then you mentioned the.

And next changing your activity some higher working interest.

Is it possible at all and I sort of say the incremental capex associated in the U S.

Kind of a split between it being due to kind of increased activity slash higher working interest off of our system.

Cost inflation that we've been hearing about all these call opportunity.

Yes, John I think as you know, we built in quite a bit of inflation into our capital numbers.

What we laid out first quarter.

So the majority of this is we do have some wells that are going to be higher working interest.

Then what we had originally planned and Thats just a function of.

Shifting some pads and moving some pads forward. So there will be some higher working interest and then we do have some increased non op capital.

But I think we've done a pretty good job of it.

Anticipating.

The inflation and the increases in our 2022 plan and I think thats, playing out kind of as it as we had as we budgeted and forecasted.

That's what I was looking for thanks, John I appreciate it.

Thank you.

Thank you and your next question comes from the line of a.

Gerard <unk> from Jpmorgan Chase. Your line is open. Please go ahead.

Tails on the timing of when that could kick in and perhaps the operating leverage there between your leverage to this in the North sea exposure.

Two global gas.

Yes, I'll, let I'll, let Steve David I wish it was a bigger contract, but I'll, let Steve dive in.

On the details.

We wish it was bigger than we wish it was sooner.

So so that contract that's a 15 year contract you got the basic terms right.

And that contractually begins on July one of 2023.

At any point in time now Cheniere does have the option.

With 30 days notice our 90 days' notice sorry.

<unk>.

Electric to start that contract early they haven't given us that notice.

No.

We.

We would like to obviously get that one.

At any point in time.

But if.

If we do we'll start at 90 days later or any other timeframe that we might agree with them within that so it's at their option to be able to do that.

We obviously can't disclose the terms of that contract but.

Nice to say, what we do is we we select a mix.

The Asian versus European pricing.

And we effectively sell our gas we deliver gas from the Gulf Coast, we sell it at this mix for a full year mix of Asian, and European pricing and then we net back through.

Liquefaction fees transport fees, and a marketing fee that we pay so we're we're in effect fully exposed to the.

European and Asian, LNG market pricing for that 15 year period.

Great and that starts mid of next year and less generic <unk> to early <unk>.

Exactly okay great.

And just my follow up is on Egypt. John you guys have highlighted your the expectation to grow your oil volumes there by 8% to 10% per annum. I was wondering if you could maybe talk a little bit about.

How are.

Early results are trending it does sound like things are when you got the re completions going that you are starting to see some growth there, but I was wondering if you can maybe dig down and give us a sense of.

The trajectory of growth.

Any supply chain headwinds in country. Obviously, you guys are are rapidly expanding activity, but give us a sense of what youre seeing on the ground in Egypt.

No.

Number one is it's good to get back to work and kind of move our activity levels up to where we can grow that production base.

I think we've got a couple of key discoveries to build on I think the <unk> west.

Between Pizza on Mariner East is a nice early win it's going to give us some things that we can get on fairly quickly.

We did get some of the re completion is underway and as Dave mentioned I think we're up about 8% in April over the first quarter already so it just takes a little bit of time, but things are progressing and then theres. A couple of other discoveries that have been <unk>. So we're going to be focused on oil drilling work.

Prioritizing that.

We've got the northwest <unk>.

Session that were shot seismic on it is kind of a new frontier for us. So we've got some nice exploration wells that we're also excited about but.

Lots of inventory or ruin and we feel good about.

The plans that we've laid out and we're kind of kind of getting our feet under us and getting going so anything you want to pile on Dave.

John John answered the supply question really well the trajectory. We're very we're still confident in the path that we laid out I think on the supply chain.

Questions remember in Egypt, where drilling relatively conventional yeah. These are conventional wells are vertical we don't have much if any hydraulic fracturing activity in countries. So these are I would call it kind of commodity sort of wells, but that said our supply chain team is all.

All over it and making sure that we're we're not waiting on on parts. So.

We've.

As we ramp up one of the one of the nice things about having a <unk>.

Visibility on our plan as it gives the supply chain folks lead time to to really make sure that we have all the equipment necessary to keep the program moving forward and so far.

That's been the case.

Great. Thanks, a lot Dave.

Yes.

Thank you. Your next question comes from the line of Mike <unk> from Stifel. Your line is open. Please go ahead.

Hey, good morning, everybody.

Youre getting close to one times debt leverage now and Steve you said one of the agencies upgraded.

To investment grade.

Stocks also done well this year, but it sounds like Youre still focus on that.

Debt reduction and share buybacks, so I guess with that in mind I wanted to see how you.

View, the intrinsic value of the company relative to the current stock price and how you weight.

That versus.

Potentially increasing the dividend.

Yes, Michael Hey, how are you.

So yes, a number of questions in there I think that the.

The key answer to your question would be are the key part of your question would be that we still see our share price is undervalued and we'd like the buyback program and we like it quite a bit but your reference to the amount of debt reduction that we've done just to just to step back from a bit in the <unk>.

Last nine months, we've done $3 billion of bond elimination, which is just phenomenal compared.

With all three of them.

I think we will continue along the lines of balance sheet, strengthening but I think it's unlikely that youre going to see the large chunks of of that tender activity that the $1 billion plus.

As long as we stay in this price environment, we're going to have a significant amount of free cash flow over the next three years.

And there will be continued balance sheet strengthening but there will be.

A significant focus on share buybacks as well as long as the share price in our view stays undervalued, which is what it is now.

And we talk about the dividend.

All the time, we talk about it often and we've raised it twice in the back half of last year, and we will continue to look at that and as the balance sheet gets stronger.

As.

As prices.

Continue to play out the way they are.

<unk>.

As share price improves.

On an absolute and relative basis, and then we will certainly.

I think more seriously about the dividend, but for right now we're quite happy with the buyback program.

Great that helps.

Second question was a marketing question I guess with the <unk>.

Consolidation of Volta side I believe you.

Retained year firm transportation for gas out of the Permian.

Want to see if you plan to use all of that or.

Thoughts on monetizing any excess capacity there.

Well as you know we did monetize some of that.

And in prior years.

And we have we have about.

Round numbers, we have a little over 670 million a day of transport capacity.

On PHP and.

And Gulf Coast Express.

<unk>.

We have over there as we look forward to the next.

The remainder of this year and into next year, we have.

On average somewhere in the 200 to 225 million a day of excess capacity.

Would we be open to potentially marketing some of that yes, we would we would entertain a conversation on that for sure but at the same time the differentials look good for the next two years and.

As you will probably see in our.

And our results in our in our postings that we have actually gone and we've now locked in those differentials on about 90% of that excess capacity all the way through the end of 'twenty three.

And in doing so there is a mixture.

We put in some hedges.

In an earlier time periods that were not quite as attractive.

<unk> as they are these days that we've put in quite a bit just recently and we've locked in about a little under $50 million of cash margin on that transport capacity and then the rest of the capacity will be used.

We will use all of it.

And effectively it gets Gulf coast pricing on our on our equity volumes, but that we sell all of our equity volumes in basin and then our marketing group buys 670 million a day and.

In transports it and.

And then resells it on the Gulf Coast.

I appreciate that Steve.

Thank you moving on your next question comes from the line of Charles Meade from Johnson Rice. Your line is open. Please go ahead.

Good morning, John to you and the rest of your team there.

Good morning, Charles John I Imagine. This is a question for you or perhaps for Tracy can you give us that kind of the.

Background in.

Yes.

Evidence of this stock up or.

I don't know exact related payoffs at the new <unk>.

Cup.

Prospecting and perhaps wrap into it whether.

Whether it kind of rising to the top of the pile here is connected to your.

Your central area hub.

Development concept.

Yeah, Charles I will tell you. It is something that would fall in that area, it's an exploration well and I'm happy to have Tracy.

Two things about it so.

Sure Good morning Charles.

As John mentioned in <unk>.

The original comments, we're going to be testing sort of a range of different prospects with different attributes and a lift in support of <unk>.

Looking at appraisal and exploration prospects I would say the kickup wells at the front of the schedule, it's a well that total really likes and with some potential meaningful reserves. So we see it I think is a bit higher risk higher reward because it does have some different.

Seismic attributes than we've tested but it has the potential to unlock I would say some additional follow on prospectively.

Could incrementally and substantially.

But more reserves. So I think it's one we're anxious to see but it is a bit of a different beast than what we've seen before but has the potential to.

To be meaningful for the appraisal.

Great. That's helpful detail. Thanks, Thanks, and that's it.

Thank you Charles.

Your next question comes from the line of Scott Hanold from RBC capital markets. Your line is open. Please go ahead.

Yes. Thanks, a quick question on the D'souza rig in block 53, if it stays in country. It sounds like it's going to move to block 58 would you all continue to be the operator of that rig or would you hand that over to <unk>.

Scott It could it could stay in block 53, or we could move it to 58 and led total I'll take it so.

There is optionality, there and I'll just I'll leave it at that for now.

Okay, but just to clarify if it did go to 58, they would take over operator ship to that right.

They are the operator in 58 and where the operator in 53 so.

There's a lot of things you can work out but.

We're not gonna wouldn't be changing they've got the value in Oregon.

<unk>.

Okay understood and then.

Hi, obviously.

With where gas prices are it looks a lot more interesting you guys are moving a rig.

<unk> and.

Going to resuscitate those volumes can you think about big picture, obviously, Steve talked about the potential excess capacity you all have with your ft.

And I know in past.

At the beginning of the.

Alpine high history, I guess, you all talked about Mexico being a.

An option there too to discern gas, but as you think about gas prices optionality between LNG, maybe Mexico still yet.

How do you think about that longer term are you going to guys get to keep a rig there do you could you move more on there does it the economics really warrant ramping up much just give a little color on that that'd be great.

No.

We started last September picking up a rig in the U S. It's going to be a Delaware basin focused rig.

It's now working in our <unk> area, we had a pad there that was partially drilled and so we wanted to drill that out first and then it will be moving to alpine high.

We're excited about.

What those economics look like right. If you look back at the Willow well.

Had some details on our supplement there it was one of the best Wells, we brought on last year of all of our of all of our Ducks I think.

As <unk> over nine Bcf and it's been on since really January of 'twenty one so.

We are excited about those economics, I think they compete well.

We're anxious to get a rig back to work is there's plenty of infrastructure.

Thank you. Your next question comes from the line of Bob Brackett from Bernstein Research. Your line is open. Please go ahead.

Good morning, I'll try fishing offshore and a bit in terms of the Jerry as soon as when does the decision to keep that rig occur did it occur. After you had spotted rasper an unrelated question is there an obvious sidetrack to rasper.

We are above target zones in Rasper, Bob So I'll.

I'll just leave it at that.

Okay.

How about a follow up if we talk about the crab to do flow test. The fact that you went on to the next step of buildup suggests that you've flowed oil through a sufficiently permeable reservoir that it makes sense to do a longer term test.

Getting the engineering right on that.

We're doing a buildup. So we're in the buildup phase and I said there were no surprises.

I'll leave it at that.

And our final question would just be.

The the restricted flow test at <unk>, South flow 4800 barrels of oil I think so that is that in the realm of no surprises.

I'll just I'll just say there were no surprises.

And we may not have expected there to be a restricted flow test, but I'll leave it at that.

Thank you much.

Thank you.

Okay.

Your questions are always fun, Bob Thank you.

And created.

Your next question comes from Paul Cheng from Scotiabank. Your line is open. Please go ahead.

Good morning, good morning.

Paul quick question Joe.

Two quick question can you tell us how many wells do you expect to flow in.

Alpine high this year.

And secondly that I know, you're so early but given the inflationary environment.

At the <unk> level.

Walgreens neoprene, namely Kevin.

Different components of the 2020.

Uptake may look like any direction that you can quantify thank you.

Total number of wells today, Yes, Paul.

Paul This is Dave for sale number wells at Alpine later this year. It will just be a handful because we're as John said, we're finishing up and.

And drilled uncompleted pad DSL.

Then we will move to alpine.

These are all going to be longer laterals with relatively large.

Stimulation treatments so.

It'll be a handful of wells that are ready to come online at the end of the year.

And your second part of your question Paul It was hard to hear.

I have a saying that I know, yes earnings but for 2023.

And the tie up direction, you can point to on the preliminary budget and our quality levels.

Yes, I mean, I would say today as we look at 2023, our three year plan, we laid out this year looks pretty darn good to US right. We've added a fourth rig in the U S.

We will be at 15 rigs in Egypt.

So right now we're not envisioning any increases.

The three year plan that we laid out.

At the start of this year.

Okay, Okay and help us in that budget given the utilization.

Personnel costs that we said taking into consideration.

Yes.

Wait till.

Next February to come out with a hard number for 'twenty three but we did have an increase dialed in.

Additional inflation in 'twenty three.

Not in a position to really give you that number right now.

Okay. Thank you little early.

Yeah.

Thank you.

Beth.

Your next question comes from Neal Matta from Goldman Sachs. Your line is open. Please go ahead, good morning, John and team.

The first question is around the North Sea and just wanted to get your perspective on the production cadence there.

Already indicated it can be a heavy turnaround schedule through the summer.

And how are you feeling about the exit rate of 50000 BOE a day and just any update around activity plans there. Thank you.

Yes.

We're still with the North Sea, we've got a heavy turnaround period coming up that were.

We are anxious to get on and get through I think.

Execute and that's going to be key.

I think we've got good news that the Ocean Patriot is back in the field are arriving today so.

It's been one of the other items that we basically lost an entire quarter with the drilling of the ocean Patriot, which when they're only running one floater and you lose it for a quarter. It had to go in and had a large anchor chain that had broke.

Had to be repaired.

So I think we feel good about the.

The prospects that are on that rig line and it work Thats ahead of us.

The repair work so we feel good about the exit rate, which should be around 50000 or so.

Alright, and then thanks, Thanks, Shannon as a follow up is you.

You operate a global portfolio here I talk about the inflationary forces that youre seeing in the U S relative to international.

Is it fair to say, thus far a lot of your peers have reported more inflation.

And their U S business relative to international but how do you see that playing out over the next 12 months.

Well I mean, I think we do operate a global portfolio I think it's a function of staying ahead.

We had a lot of our 2000.

2022 program under contract and so we had cranked a lot of that into last quarter. When we announced the budget. So we feel good about what we dialed in and where that where that sits.

Think of a lot of it just depends on where you are and what the demand for that equipment is.

And do you are you typically do see higher increases in the U S and then more volatility and more stable.

Prices internationally, but.

I think the thing that's a little bit different this time.

We're not all just fighting over rig count rigs and which drives that hyperinflation, so but theres no doubt.

Commodities are going up fuels go on.

Steel sand.

So as you look out costs are going up and then the other thing.

If you look back over the last few years, there has not been a lot of equipment that was built in.

So a lot of the parts that were needed to keep.

Rigs running in Frac crews running have been cannibalized off of older equipment. So.

Theres no doubt as you look out over the next couple of years, if the price deck holds.

Youre going to see some higher prices.

It makes total sense. Thanks, John Dave anything you want to add to that I think I think when you look at inflation.

It's people steel chemicals and diesel you can't I mean.

Thats.

Ubiquitous around the world when you look at the Permian relative to the rest of the global portfolio Youre running higher spec.

And kind of higher end equipment in the Permian, which will have and theres more competition for that equipment, both those things create more more pressure and you've got the pressure pumping.

And big Frac component of the wells in the Permian that is.

Can be.

Our significantly inflationary, which we don't see in either Egypt, or the North sea. So I think thats, the real kind of categorical breakdown yes.

Thanks, Tom sense, Thanks, guys.

Thank you. Your next question comes from the line of Leo Mariani from Keybanc. Your line is open. Please go ahead.

Okay.

Hey, guys just wanted to follow up on some of the prepared comments here.

You won't kind of described <unk> south is a potential kind of foundational part.

Our project in <unk>.

Is that kind of stay tuned on crab to do I mean, I think there is a plan for <unk> kind of talked about maybe hitting at the end of the year, but my reading some pretty good confidence out of you guys in terms of what you've seen so far that you think there is certainly a.

Sizeable viable economic project here.

At this point.

Leo we have not announced.

Our project RFID I think we've said from the get go that <unk> South is a foundational piece.

We've shown has gotten bigger with the extended buildup time.

We raised that original estimate from the connected volume just to the one well and I want to emphasize again thats just.

The one initial well was $3 25 to $3 75 million barrels, we raised that to greater than 400.

And.

That area continues to get bigger and there's more appraisal to do at <unk>. So.

I think we have confidence in what we have found and we'd like the program.

But there is still more work to do.

Okay, and then just on the North Sea certainly said you've got confidence on this 50000 Boe per day exit rate.

I guess are there some particular wells that you all need to kind of tie in I know, there's a bunch of downtime turnarounds here in the summer.

Are there a project or two that are kind of chunky.

You guys are going to be bringing on on the wealth side that gives you confidence in that number.

There is a garden well that.

The Ocean Patriot was scheduled to drill when we've had to slide that back but.

Those garden wells have been high rate.

It's a very very good location.

Okay. Thanks.

Thank you.

Thank you and there are no further questions over the phone line I'd like now to hand, the call over to John .

<unk>.

Please go ahead Sir.

Yes, thank you for participating on our call today.

I'd like to leave you with the following closing thoughts financially we have become a much stronger company.

We'll remain disciplined both financially and operationally.

Thank you Sir Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now.

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