Q1 2024 APA Corp Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the APA Corporation's first quarter 2024 Financial and Operational Results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Each person is limited to one question and one follow-up to ask a question during the session. You will hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Gary Clark, Vice President of Investor Relations.
Good day, and thank you for standing by and welcome to the a P. A corporation first quarter 'twenty 'twenty four financial and operational results conference call.
Gary Thomas Clark: The Corporation's First Quarter 2024 Financial and Operational Results Conference Call. We will begin the call with an overview by CEO John Christmann.
Gary Thomas Clark: Steve Riney, President and CFO, will then provide further color on our results and outlook. Also on the call and available to answer questions are Tracey Henderson, Executive Vice President of Exploration, and Clay Bretschis, Executive Vice President of Operations. Our prepared remarks will be about 15 minutes in length, with the remainder of the hour allotted for Q&A.
Gary Thomas Clark: In conjunction with yesterday's press release, I hope you have had the opportunity to review our financial and operational supplement, which can be found on our investor relations website at investor.apacorp.com. Please note that we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website.
Gary Thomas Clark: At this time all participants are in a listen only mode.
Gary Thomas Clark: After the Speakers' presentation, there will be a question and answer session. Each person is limited to one question and one follow up.
Gary Thomas Clark: To ask a question during the session.
Gary Thomas Clark: Well hear an automated message advising that your hand is raised to withdraw your.
Gary Thomas Clark: Your question. Please press star one one again.
Gary Thomas Clark: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, the conference over to your first speaker for today.
Gary Thomas Clark: Clark Vice President of Investor Relations. Thank you.
Speaker Change: Good morning, and thank you for joining us on a P. A corporation's first quarter 2024 financial and operational results conference call.
Gary Thomas Clark: We will begin the call with an overview by CEO, John Christmann, Steve Riney, President and CFO will then provide further color on our results and outlook.
Gary Thomas Clark: Also on the call and available to answer questions are Tracy Henderson.
Gary Thomas Clark: Decorative vice president of exploration and Clay breakfast executive Vice President of operations.
Gary Thomas Clark: Prepared remarks will be about 15 minutes in length with the remainder of the hour allotted for Q&A.
Gary Thomas Clark: Conjunction with yesterday's press release I Hope you have had the opportunity to review, our financial and operational supplement which can be found on our investor Relations website at Investor Dot Corp Dot com.
Gary Thomas Clark: Please note that we may discuss certain non-GAAP financial measures a reconciliation of the differences between these measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website.
Gary Thomas Clark: Consistent with previous reporting practices, adjusted production numbers cited in today's call are adjusted to exclude non-controlling interest in Egypt and Egyptian tax barrels. I'd like to remind everyone that today's discussion will contain forward-looking estimates and assumptions based on our current views and reasonable expectations. However, a number of factors could cause actual results to differ materially from what we discussed on today's call. A full disclaimer is located with the supplemental information on our website.
Gary Thomas Clark: Consistent with previous reporting practices adjusted production numbers cited in today's call are adjusted to exclude Noncontrolling interest in Egypt, and Egypt tax barrels.
Gary Thomas Clark: 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.
Gary Thomas Clark: However, a number of factors could cause actual results to differ materially from what we discuss on today's call.
Gary Thomas Clark: A full disclaimer is located with the supplemental information on our website.
Gary Thomas Clark: Please note that the first quarter 2024 results reflect APA Corp only, as the Callan Acquisition was subsequently closed on April 1st. Accordingly, our full year 2024 guidance reflects first quarter APA results on a standalone basis plus three quarters of APA and CALIN combined. And with that, I will turn the call over to John. Good morning, and thank you for joining us.
Gary Thomas Clark: Please note that the first quarter 2024 results reflect <unk> Corp, only as the Catlin acquisition was subsequently closed on April one.
John: Accordingly, our full year 2024 guidance reflects first quarter results on a standalone basis, plus three quarters of API and Cowen combined.
Gary Thomas Clark: And with that I will turn the call over to John Good morning, and thank you for joining us on the call today I will review, our first quarter performance discuss the compelling opportunities. We are seeing after the closing of the Catlin acquisition and review our activity plan and production expectations for the remainder of 2024.
John J. Christmann: On the call today, I will review our first quarter performance, discuss the compelling opportunities we are seeing after the closing of the Callon Acquisition, and review our activity plan and production expectations for the remainder of 2024. During the first quarter, upstream capital investment of $568 million was below guidance, due primarily to the deferral of some planned facility, leasehold, and exploration spend. We continue to deliver excellent results in the Permian Basin, with the first quarter marking our fifth consecutive quarter of meeting or exceeding U.S. Oil Production Guidelines.
John J. Christmann: During the first quarter upstream capital investment of $568 million was below guidance due primarily to the deferral of some planned facility lease hold and exploration spend.
John J. Christmann: We continue to deliver excellent results in the Permian basin with the first quarter, marking our fifth consecutive quarter of meeting or exceeding U S oil production guidance.
John J. Christmann: U.S. oil volumes were up an impressive 16% compared to the first quarter of 2023, and we expect organic growth to continue through the year as we integrate callus. On the natural gas side, we chose to curtail a substantial amount of production at Alpine High, primarily in March, in response to the extreme Oahu Basis Difference. This dynamic has continued into the second quarter.
John J. Christmann: Oil volumes were up an impressive 16% compared to the first quarter of 2023, and we expect organic growth to continue through the year as we integrate Cowen.
John J. Christmann: On the natural gas side, we chose to curtail a substantial amount of production at Alpine high primarily in March in response to extreme Warhol basis differentials. This dynamic has continued into the second quarter.
John J. Christmann: In Egypt, gross production was in line with our expectations, while adjusted volumes were just shy of guidance due to the PSC impact of higher-than-planned oil prices. As discussed previously, we are in the process of rebalancing our drilling rig to work-over rig ratio in Egypt to further optimize capital efficiency. In the first quarter, we averaged 17 drilling rigs and 21 workover rigs. While the workover rig count will remain flat, we will reduce the drilling rig count over the next three quarters, allowing workover rigs to be redirected. The amount of oil production temporarily offline and waiting on workover remained at around 12,000 barrels per day during the quarter.
John J. Christmann: In Egypt gross production was in line with our expectations. While adjusted volumes were just shy of guidance due to the PSC impact of higher than planned oil prices.
John J. Christmann: As discussed previously we are in the process of rebalancing, our drilling rig to Workover rig ratio in Egypt to further optimize capital efficiency.
John J. Christmann: In the first quarter, we averaged 17 drilling rigs and 21 workover rigs, while the Workover rig count will remain flat, we will reduce the drilling rig count over the next three quarters, allowing workover rigs to be redirected.
John J. Christmann: The amount of oil production temporarily offline and waiting on Workover remained at around 12000 barrels per day during the quarter, we expect to make progress on this as the drilling rig count comes down it frees up Workover resources.
John J. Christmann: We expect to make progress on this as the drilling rig count comes down and frees up work over resources. The challenges we experienced in the fourth quarter of 2023 with faulty new electrical submersible pumps have now been fully remediated through vendor change out and design modification. Turning to the North Sea, first quarter production was impacted by a decrease in average facility run time at Barrel in March. As a reminder, this type of downtime tends to occur more frequently and is less predictable when managing late-life assets like those we have in the North Sea.
John J. Christmann: The challenges we experienced in the fourth quarter 2023, with faulty new electrical submersible pumps have now been fully remediated through vendor change out and design modifications.
John J. Christmann: Turning to the North Sea first quarter production was impacted by a decrease in average facility run time at barrel in March as a reminder, this type of downtime tends to occur more frequently and is less predictable when managing late life assets like those we have in the north sea.
John J. Christmann: On the exploration front, we recently concluded our three-well Alaska Exploration Drilling Program. As a reminder, our 275,000-acre position lies on state lands roughly 70 to 90 miles east of analogous industry discoveries. Our King Street No. 1 well confirmed a working petroleum system on our acreage, discovering oil in two separate zones. The other two whales, Sokka No. 1 and Voodoo No.
John J. Christmann: On the exploration front, we recently concluded our three well Alaska exploration drilling program as a reminder, our 275000 acre position lies on state lands roughly 70 to 90 miles east of analogous industry discoveries.
John J. Christmann: Our King Street number one well confirmed a working petroleum system on our acreage discovering oil in two separate zones. The other two wells Sakai number one and vudu number one were unable to reach their target objectives, and the allotted seasonal time window due to a number of weather and operational delays.
John J. Christmann: 1, were unable to reach their target objectives in the allotted seasonal time window due to a number of weather and operational delays. We are currently analyzing all of the data, and we'll come back later with more commentary on next steps in Alaska. Lastly, in Suriname, we are progressing the feed study on our first development project, which we hope to FID before the end of the year.
John J. Christmann: We are currently analyzing all of the data and we'll come back later with more commentary on next steps in Alaska.
John J. Christmann: Lastly in Suriname, we are progressing the feed study on our first development project, which we hope to be before the end of the year.
John J. Christmann: Turning now to the Catlin acquisition, which closed on April one.
John J. Christmann: We are one month into the integration process and are making very good progress. As anticipated, we are finding tremendous opportunities to reduce costs, improve efficiencies, leverage economies of scale, and create value by applying our operational expertise and unconventional development workflows to Cal and Acre. Accordingly, we have increased our estimate of annual cost synergies by 50% from $150 million to $225 million. Steve will comment further on the timing and nature of these synergies in his remarks.
John J. Christmann: We are one month into the integration process and we're making very good progress as anticipated we are finding tremendous opportunities to reduce costs improve efficiencies leverage economies of scale and create value by applying our operational expertise in unconventional development workflows to the callan acreage accordingly.
John J. Christmann: We have increased our estimate of annual cost synergies by 50% from $150 million to $225 million, Steve will comment further on the timing and nature of these synergies in his remarks, the most exciting and compelling value capture opportunity. We see with caliber still lies ahead that will come from capital efficiency.
John J. Christmann: The most exciting and compelling value capture opportunity we see with Callum still lies ahead. That will come from capital efficiency improvements, which will enhance overall development economics and potentially expand the development inventory that forms the basis of our transaction value. For the remainder of 2024, we will be revising most of Calum's operational practices and workflows. This includes everything from contracting and logistics to well-planning and design, drilling and completions, facility construction, and many aspects of daily operations.
John J. Christmann: Improvements, which will enhance overall development economics, and potentially expand the development inventory that formed the basis of our transaction value.
John J. Christmann: For the remainder of 2024, we will be revising most of <unk> operational practices and workflows. This includes everything from contracting and logistics to well planning and design drilling and completions facility construction in many aspects of daily operations at a high level, you will see wider well spacing.
John J. Christmann: At a high level, you will see wider well spacing, fewer discrete landing zones, and larger fracture stimulation. Additionally, improvements in capital efficiency will manifest in fewer wells to deliver the same amount of incremental production volume. While it will take some time to realize the full benefit of these changes, the implementation has already begun.
John J. Christmann: Fewer discrete landing zones, and larger fracture stimulations improvements in capital efficiency will manifest in fewer wells to deliver the same amount of incremental production volumes.
John J. Christmann: While it will take some time to realize the full benefit of these changes the implementation has already begun.
John J. Christmann: In the meantime, we are modifying many aspects of Calum's previous 2024 plan to capture as much near-term benefit as possible. Turning now to our Activity Plans and Outlook for 2024. In yesterday's release, we provided guidance for the second quarter and full year 2024, along with our expected oil production rates for the fourth quarter. In the U.S., we have been running 11 rigs in the Permian since April 1st. We expect to average approximately 10 for the remainder of this year as we actively manage changes to the combined rig fleet.
John J. Christmann: In the meantime, we are modifying many aspects of challenged previous 2024 plan to capture as much near term benefit as possible.
John J. Christmann: Turning now to our activity plans and outlook for 2024 and.
John J. Christmann: You will see the rig count change as we drop some rigs when their term ends and pick up other rigs more suitable for the planned drilling program. Similarly, we'll be making a number of adjustments to our combined FRAC schedule. In terms of oil volumes, we noted in our first quarter materials that we expect U.S. oil production in the fourth quarter to be around 152,000 barrels per day, which represents an 11 percent growth rate from our second quarter guide of 137,000 barrels per day. Switching now to Egypt.
John J. Christmann: In yesterday's release, we provided guidance for the second quarter and full year 2024, along with our expected oil production rates for the fourth quarter.
John J. Christmann: In the U S. We have been running 11 rigs in the Permian Since April one we expect to average approximately 10 for the remainder of this year as we actively manage changes to the combined rig fleet you will see the rig count changes, we dropped some rigs when their term ends and pick up other rigs more suitable for the planned drilling program. So.
John J. Christmann: Surely we will be making a number of adjustments to our combined frac schedule.
John J. Christmann: In terms of oil volumes, we noted in our first quarter materials that we expect U S oil production in the fourth quarter to be around 152000 barrels per day, which represents an 11% growth rate from our second quarter guide of 137000 barrels per day.
John J. Christmann: Switching now to Egypt and February we commented that adjusted production would remain relatively flat in 2024 today, we anticipate adjusted production will decrease slightly as a function of the PSC impacts of higher than planned oil prices.
Stephen J. Riney: In February, we commented that adjusted production would remain relatively flat in 2024. Today, we anticipate adjusted production will decrease slightly as a function of the PSC impacts of higher than planned oil prices. And in the North Sea, production guidance for the full year is unchanged with an expected dip, mostly in the third quarter, as we conduct scheduled platform maintenance. In closing, we continue to manage our business with a clear and consistent strategy and deliver on our capital return commitments and financial objectives.
Stephen J. Riney: And in the North Sea production guidance for the full year is unchanged with an expected dip mostly in the third quarter as we conduct scheduled platform maintenance.
Stephen J. Riney: In closing, we continue to manage our business with a clear and consistent strategy and deliver on our capital return commitments and financial objectives. The Cowen acquisition is complete and the path to value creation is clear and well underway.
Stephen J. Riney: The Cowan acquisition is complete, and the path to value creation is clear and well underway. Post Cowan, our Permian Basin unconventional acreage footprint has increased by approximately 45%, and our Permian Basin oil production has increased by more than 65%. The Permian Basin will represent an estimated 73% of APA's total company adjusted production in the second quarter and will approximate 75% of our upstream capital this year. Notably, our oil production weighting in the U.S. will increase to a projected 46 percent in the second quarter from 39 percent on a standalone basis in the first quarter.
Stephen J. Riney: Post cow on our Permian basin unconventional acreage footprint has increased by approximately 45% and our Permian basin oil production has increased by more than 65%.
Stephen J. Riney: The Permian Basin will represent an estimated 73% of Apa's total company adjusted production in the second quarter and will approximate 75% of our upstream capital this year.
Stephen J. Riney: Notably our oil production weighting in the U S will increase to a projected 46% in the second quarter from 39% on a standalone basis in the first quarter.
Stephen J. Riney: Finally, Steve will discuss our priorities around debt reduction, but I want to emphasize that our shareholder return framework has not changed, and we will continue to return at least 60% of our free cash flow via dividends and share repurchase. And with that, I will turn the call over to Steve Riney.
Stephen J. Riney: Finally, Steve will discuss our priorities around debt reduction, but I want to emphasize that our shareholder return framework has not changed and we will continue to return at least 60% of our free cash flow via dividends and share repurchases and with that I will turn the call over to Steve Riney.
Stephen J. Riney: Thank you, John, and good morning. For the first quarter, under generally accepted accounting principles, APA reported consolidated net income of $132 million, or $0.44 per diluted common share. As usual, these results include items that are outside of core earnings, the most significant of which was a $52 million after-tax addition to the provision for costs associated with the Gulf of Mexico abandonment liability. Excluding this and other smaller items, adjusted income for the fourth quarter was $237 million, or 78 cents per share. The resultant adjusted earnings for the quarter includes some significant exploration dry hole expenses. Specifically, we took a $59 million charge for the two exploration wells in Alaska, which were unable to reach their targets.
Stephen J. Riney: Thank you John and good morning for.
Stephen J. Riney: For the first quarter under generally accepted accounting principles.
Stephen J. Riney: Additionally, we wrote off the remaining $42 million we were carrying for the Bambani Exploration Well in Suriname, which was drilled in 2021, as we now have no active plans for further exploration in the northern portion of Block 58. The total after-tax impact of these items on adjusted earnings was $88 million, or $0.29 per share. In the first quarter, we returned $176 million through dividends and share repurchases. As John indicated, we remain committed to returning a minimum 60% of free cash flow to shareholders.
Stephen J. Riney: Reported consolidated net income of $132 million.
Stephen J. Riney: Was <unk> 44 cents per diluted common share.
Stephen J. Riney: As usual. These results include items that are outside of core earnings. The most significant of which was a $52 million. After tax addition to the provision for costs associated with Gulf of Mexico abandonment liabilities.
Stephen J. Riney: Excluding this and other smaller items adjusted net income for the fourth quarter was $237 million or <unk> 78 per share.
Stephen J. Riney: The resulting adjusted earnings for the quarter includes some significant exploration dry hole expenses.
Stephen J. Riney: Specifically, we took a $59 million charge for the two exploration wells in Alaska, which were unable to reach their targets.
Stephen J. Riney: Additionally, we wrote off the remaining $42 million, we were carrying for the bond money exploration well in Suriname, which was drilled in 2021 as.
Stephen J. Riney: As we now have no active plans for further exploration in the northern portion of block 58.
Stephen J. Riney: The total after tax impact of these items on adjusted earnings was $88 million or 29 cents per share.
Stephen J. Riney: In the first quarter, we returned $176 million through dividends and share repurchases.
Stephen J. Riney: As John indicated we remain committed to returning a minimum 60% of free cash flow to shareholders.
Stephen J. Riney: We are also cognizant of the need to strengthen the balance sheet, and we are looking at non-core asset sales as a source of debt reduction, in addition to the 40% of free cash flow not designated for shareholder return. Our priorities for debt reduction will be the three-year term loan we use to refinance the Callen debt and the revolvers.
Stephen J. Riney: We are also cognizant of the need to strengthen the balance sheet and we are looking at noncore asset sales as a source of debt reduction. In addition to the 40% of free cash flow not designated to shareholder return.
Stephen J. Riney: Our priorities for debt reduction will be the three year term loan we used to refinance the cowen debt and the revolver.
Stephen J. Riney: Finally, we incurred roughly $20 million of costs associated with the Callen transaction in the first quarter and expect to incur an additional $90 million of such costs, the vast majority of which will be in the second quarter for professional services, departing Calen employees, and other closing costs. Now, let me turn to progress on the Kellen integration. One month into the process, we were on track to realize more cost savings than originally projected.
Stephen J. Riney: Finally, we incurred roughly $20 million of costs associated with the Cowen transaction in the first quarter.
Stephen J. Riney: And expect to incur an additional $90 million of such costs. The vast majority of which will be in the second quarter for professional services departing Cowen employees and other closing costs.
Stephen J. Riney: Now, let me turn to progress on the <unk> integration.
Stephen J. Riney: One months into the process, we are on track to realize more cost savings than originally projected as.
Stephen J. Riney: As John noted, we have revised our annual synergies from $150 million up to $225 million. Recall, we put expected synergies into three categories: overhead, cost of capital, and operational. Annual overhead synergies have been revised up from $55 million to $70 million. This is moving quickly, and we will capture approximately 75% of this on a run rate basis by the end of the second quarter. We expect by year end, nearly all of these synergies will be realized, and our go forward GNA run rate will be around $110 million per quarter. Estimated annual cost of capital synergies are unchanged at $40 million.
Stephen J. Riney: As John noted, we have revised our annual synergies from $150 million up to $225 million.
Stephen J. Riney: Recall, we put expected synergies into three categories overhead.
Stephen J. Riney: Cost of capital and operational.
Stephen J. Riney: Annual overhead synergies have been revised up from 55 million to $70 million. This is moving quickly and we will capture approximately 75% of this on a run rate basis by the end of the second quarter.
Stephen J. Riney: We expect by year end nearly all of these synergies will be realized in our go forward G&A run rate will be around $110 million per quarter.
Stephen J. Riney: Expected annual constant capital synergies are unchanged at $40 million the.
Stephen J. Riney: The initial refinancing of the Calendet realized a portion of these synergies, and they will be fully realized when the debt is turned out or paid off. We're seeing the greatest amount of opportunity in operational synergy. Our original estimate for this category was $55 million, which we have revised upward to $115 million.
Stephen J. Riney: The initial refinancing of the Cowen that realized a portion of these synergies and they will be fully realized when the debt is termed out or paid off.
Stephen J. Riney: We're seeing the greatest amount of opportunity in operational synergies. Our original estimate for this category was $55 million, which we have revised upward $215 million.
Stephen J. Riney: We are making extremely good progress in this area. Some of the more impactful items that we are working on include recontracting of frac services in RIG High Grady, artificial lift optimization, which will lower LOE and reduce downtime, supply chain synergies for casing and tubing, sand, chemicals, and other items. Compression Fleet Optimization and Economies of Scale, and well-designed improvements that eliminate extra casing strings and reduce drilling days. Further down the road, we see additional potential in areas like gas marketing and transportation and water handling, disposal, and recycling. To reiterate, these cost synergies estimates do not include capital productivity effects associated with improvements in well type curves and economics through well spacing, landing zone optimization, and frac size.
Stephen J. Riney: We're making extremely good progress in this area some of the more impactful items that we are working on include re contracting of Frac services and rig <unk>.
Stephen J. Riney: Artificial lift optimization, which will lower LOE and reduce downtime.
Stephen J. Riney: Ply chain synergies for casing and tubing sand chemicals and other items.
Stephen J. Riney: Compression fleet optimization and economies of scale.
Stephen J. Riney: And well design improvements that eliminate extra casing strings and reduced drilling days.
Stephen J. Riney: Further down the road, we see additional potential in areas like gas marketing and transportation and water handling and disposal and recycling.
Stephen J. Riney: To reiterate these cost synergy estimates do not include capital productivity effects associated with improvements in well type curves and economics through well spacing landing zone optimization and Frac size.
Stephen J. Riney: Turning to our 2024 outlook, John has already discussed our activity plans and production guidance, so I will just touch on a few other items of note. Other than reflecting the Kellen acquisition in our outlook, the most material change to guidance is associated with gas pricing in the Permian and its impact on expected near-term production and third-party gas marketing activity. As most of you are aware, Oahu experienced severe basis differentials in March and April.
Stephen J. Riney: Turning to our 2024 outlet John has already discussed our activity plans and production guidance.
Stephen J. Riney: I will just touch on a few other items of note.
Stephen J. Riney: Other than reflecting the Catlin acquisition and our outlook. The most material change to guidance is associated with gas pricing in the Permian and its impact on expected near term production and third party gas marketing activities.
Stephen J. Riney: As most of you are aware <unk> experienced severe basis differentials in March and April we expect this will continue through much of May.
Stephen J. Riney: We expect this will continue through much of May. As a result, we have continued to curtail gas into the second quarter, and our 2Q guidance now reflects an estimated impact on the quarter of 50 million cubic feet per day of gas and 5,000 barrels per day of NGLs related to the weakness at Oaxaca. Our income from third-party oil and gas purchased and sold, including the Cheniered gas supply contract, is expected to be around $230 million for the full year, which is up significantly from our original guidance of $100 million.
Stephen J. Riney: As a result, we have continued to curtail gas into the second quarter and our <unk> guidance now reflects an estimated impact on the quarter of 50 million cubic feet per day of gas and 5000 barrels per day of Ngls related to the weakness at one hub.
Stephen J. Riney: Our income from third party oil and gas purchased and sold including the Cheniere gas supply contract is expected to be around $230 million for the full year, which is up significantly from our original guidance of $100 million.
Stephen J. Riney: You will also see that we have removed <unk> from our guidance at this time, we are still.
Stephen J. Riney: Working the Cowen purchase price allocation and aligning our reserve booking practices, we will reinstate D&A guidance with our second quarter results.
Stephen J. Riney: Finally, as a reminder.
Stephen J. Riney: It will be subject to the U S alternative minimum tax starting in 2024.
Stephen J. Riney: We incurred no A&P in the first quarter and do not expect to in the second quarter.
Stephen J. Riney: Just on current strip prices, we will likely incur these costs in the second half of the year.
Speaker Change: With that I will turn the call over to the operator for Q&A.
Operator: Thank you. We will now conduct our question and answer session at this time. As a reminder, all participants are limited to one question and one follow-up. To ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A rough. Our first question comes from the line of John Freeman of Raymond Jones. Raymond James, I apologize. Your line is now open.
Stephen J. Riney: You will also see that we have removed DD&A from our guidance at this time. We are still working on the Calend purchase price allocation and aligning our reserve booking practices. We will reinstate D&A guidance with the second quarter results. Finally, as a reminder, APA will be subject to U.S. Alternative Minimum Tax starting in 2024. We incurred no AMT in the first quarter and do not expect to in the second quarter. Based on current strip prices, we will likely incur these costs in the second half of the year. And with that, I will turn the call over to the operator for Q&A. Thank you. We will now conduct our question and answer session at this time.
Speaker Change: Thank you we will now at this time conduct a question and answer session.
Stephen J. Riney: As a reminder, all participants are limited to one question and one follow up to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
Stephen J. Riney: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Stephen J. Riney: Our first question comes from the line of John Freeman of Raymond Jones Ramon. Thanks, I apologize your line is now open.
Speaker Change: Good morning, guys.
Speaker Change: Good morning, John.
John Christopher Freeman: The first question I had was just to make sure that I understood sort of the moving parts in Egypt. So last quarter, y'all had about 13,000 that were offline. I think normally, I think you cited that that would be close to probably 8,000. I'm sorry, 5,000 would normally be offline.
Speaker Change: Yes. The first question I had just to make sure that I understand sort of the moving parts in Egypt. So so.
John Christopher Freeman: Last quarter, you had about 13000 that was offline I think normally I think you all cited that that would be closer to probably 8000.
John J. Christmann: And so you've worked it down a little bit. And I see how the rigs, you know, keep coming down; the work of a rig level stays level. But I think historically, John, you said that you used to be sort of two to three times the number of workover rigs to drilling rigs. So even as the rig cadence kind of goes down the rest of the year, you still stay kind of well below that level.
John Christopher Freeman: I'm, sorry, 5000 would normally be offline CE marked it down a little bit and I see how our rigs keep coming down the work of a rig level stays level, but I think historically John you. All said that used to be sort of two to three times the number of workover rigs to drilling rigs so even as the rig cadence kind of comes down the rest of the year.
John J. Christmann: Are you still staying kind of well below that level. So maybe just help me understand how you can kind of you get that that backlog of what's offline work down despite still being a good bit below that historical ratio like maybe why that historical ratio maybe doesn't apply anymore just any additional color there.
John J. Christmann: So maybe just help me understand how you can kind of get that backlog or what's offline worked down despite still being a good bit below that historical ratio, like maybe why that historical ratio maybe doesn't apply anymore, or just any additional color there.
John J. Christmann: No, it's a great question and, you know, as you acknowledge, historically, we have run a higher ratio of workover rigs or drilling rigs. You know, today we're going to average 13 to 15 on the drilling rig side this year, and we're going to run right at 20 workover rigs. So it's going to take a little bit more time to kind of chisel away at that, but we're on it. It's coming down a little bit.
Speaker Change: No that's a great question.
John J. Christmann: As you acknowledge historically, we have run a higher ratio of Workover rigs are drilling rigs.
John J. Christmann: We're going to average 13 to 15 on the drilling rig side this year and we're going to run right at 20, Workover rigs. So it's going to take a little bit more time to kind of chisel away at that but we're on it is coming down a little bit.
John J. Christmann: There are also things we're doing with the drilling rigs to be able to complete some wells, which will also help with some of that pressure. So it's just going to take a little bit longer, which is why you'll see a gradual move down on that number.
John J. Christmann: There is also things we're doing with the drilling rigs to be able to complete some wells, which will also help.
John J. Christmann: Some of that pressure, so, it's just going to take a little bit longer.
John J. Christmann: Which is why you'll see a gradual move down on that number.
John J. Christmann: Got it. And then just shifting gears, you know, nice to see the 50% increase in the in account synergies and obviously making a lot of progress on the cost side. Y'all had put out previously a presentation just sort of showing your Permian results relative to legacy Calend results. And, you know, I guess in four, it won't be till 4Q, and we get to see, you know, basically, well, you kind of started, you know, design drill completed from the get go, show up in numbers.
Speaker Change: Got it and then just shifting gears.
John J. Christmann: Nice to see that the 30% increase in the in a calendar synergies.
John J. Christmann: Obviously, making a lot of progress on the cost side.
John J. Christmann: You all had put out previously a presentation just turn of showing yours.
John J. Christmann: Permian results relative to legacy calendar results and.
John J. Christmann: In our guests and I'm sure it won't be until <unk>, when we get to see basically well you all kind of started design gel completed from the get go shopping in our numbers.
John J. Christmann: And you mentioned some of the things that could drive you to better well productivity, wider spacing, etc. Just to be clear, your guidance just assumes legacy Calend well results, right? Like it doesn't assume any uplift. Is that correct in our current guidance? Yeah, today, the guidance is what's in front of us.
John J. Christmann: And you mentioned some of the things that could drive better well productivity wider spacing et cetera.
John J. Christmann: To be clear you all guidance just assumes legacy Cowen well results right like it doesn't assume any uplift in that credit from our current guidance today.
John J. Christmann: Yeah, today the guidance is what's in front of us, right? And it's going to, you know, obviously Calum has drilled a lot of wells. We're immediately making changes on the completion side to the extent we can. But there are more wells drilled per section than we would drill. There are more landing zones.
John J. Christmann: Today, the guidance is what's in front of us right and it's going to obviously calendar drove a lot of wells were.
John J. Christmann: We're immediately making changes on the completion side to the extent we can.
John J. Christmann: But there are more wells drilled per section that we would drill well theyre more landing zones, and so we're going to have to pump similar sized fracs in terms of sand loads I think the big thing will be changing as the fluid volumes will go up.
John J. Christmann: And so, you know, we're going to have to pump similar-sized cracks in terms of sand loads. I think the big thing we'll be changing is the fluid volumes. But we're doing things, you know, with, it's kind of a work in progress, right? We start with what Calum has, and we modify what we can and what we think is going to be impactful.
John J. Christmann: We're doing things with it's kind of a work in progress right. We start with what Calvert as we modify what we can and what we think is going to be impactful.
John J. Christmann: But by the time, you get to the fourth quarter Youll start to see.
John J. Christmann: How we plan things and what will be full Apache workflow on that.
John J. Christmann: And then by the time you get to the fourth quarter, you'll start to see, you know, how we plan things and what will be, you know, full Apache workflow on that. Just a little color in terms of where the rig count sits and things today. We're running 11 rigs. There are four in the Delaware. There are actually seven in the Midland.
John J. Christmann: Just a little color in terms of where the rig count sits in things a day, we're running 11 rigs there is for the Delaware Theres actually seven in the Midland.
John J. Christmann: We've actually moved one of the Calum rigs to some Apache acreage that was ready and, you know, kind of planned as we want to drill it. So, we've accelerated some there. So, it's going to be in flux as we work through this. But yeah, we're anxious to get to fully Apache planned workflow and execution. And it's going to be a kind of transition over the next two quarters till we get there in the fourth quarter.
John J. Christmann: We've actually moved all of our Cowen rigs to some Apache acreage that was ready.
John J. Christmann: Plan like we want to drill it so we've accelerated some there so it's going to be in flux as we work through this.
John J. Christmann: But yes were anxious to get to fully Apache planned workflow.
John J. Christmann: Execution and.
John J. Christmann: And it's going to be a kind of a transition over the next two quarters do we get there fourth quarter.
John J. Christmann: Thanks, John. You bet. Thank you. Thank you. Please.
Speaker Change: Thanks, John.
Speaker Change: You bet. Thank you.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Neal Dingmann of Truist Securities. Your line is now open.
Speaker Change: Thank you please standby for our next question.
Operator: Our next question comes from the line of Neal Dingmann of true with Securities. Your line is now open.
Neal David Dingmann: Morning John, thanks for taking my question. I just had a quick one first on the permeant gas play. You know, it's interesting the acreage and the potential returns there. I'm just wondering what it would take for you to bring some of that back? Strictly, it needs to compete against, you know, your now more oily play given the count and the larger footprint.
Neal David Dingmann: Good morning, John Thanks for taking my question.
Neal David Dingmann: I just had a quick one first on the Permian gas play.
Neal David Dingmann: Interesting that the acreage and the potential returns there I'm just wondering what would it take for you to bring some of that back or is it just strictly it needs to compete against you are now.
Neal David Dingmann: Now more oily play given the Cowen and the larger footprint.
John J. Christmann: Well, I mean, that is the big driver. It needs to compete internally on the oil side.
John: Well I mean that is the big.
John J. Christmann: The big driver it needs to compete internally on the oil side.
John J. Christmann: And really, we measure that through WHAHA. So you know, right now, you've had very, very weak WHAHA. Obviously, we've got Matterhorn coming on, but you know, we're going to need to see much stronger WHAHA. And it's going to need to compete internally with our oil projects.
John J. Christmann: And really we measure that through <unk>. So right now <unk> had very very weak Whitehall.
John J. Christmann: Obviously, we've got matterhorn coming on but.
John J. Christmann: We're going to need to see much stronger warhol.
John J. Christmann: And it's going to need to compete internally with our oil projects.
John J. Christmann: No, that totally makes sense. And then, maybe last one for you, Steve, just when it comes to shareholder return, you guys have continued and maybe sometime towards the end of the year, stepped a bit more into the buybacks and all. I'm just wondering, will that plan change? Or should we just think sort of more of the same when it comes to shareholder return?
John J. Christmann: No.
Speaker Change: Totally makes sense and then.
John J. Christmann: Again, maybe last one for you or Steve just when it comes to shareholder return you guys have continued and maybe sometime towards the end of the year stepped a bit more into the buybacks at all I'm. Just wondering will that plan change or should we just think sort of more of the same when it comes to shareholder return.
John J. Christmann: No, I mean, in the big picture, we're committed to the 60%, right? We've shown that it's a minimum of 60%, and we will lean into that when we believe there's weakness, you know, which we've historically done and will continue to do in the future. That gives us the other 40% for debt reduction. We do have some non-core asset sales that we're targeting, as we do believe we need to make some progress on the debt side with what we have brought on with Callan. But, you know, you'll see us aggressively approaching both.
Steve: No I mean, I think big picture, we're committed to the 60% right. We've shown that it's a minimum of 60% and we will lean into that.
John J. Christmann: And we believe there is weakness.
John J. Christmann: We've historically done and we'll continue to do in the future.
John J. Christmann: It gives us the other 40% for debt reduction we.
John J. Christmann: We do have some non core asset sales that we're targeting as we do believe we need to make some progress on the debt side with what we brought on with Cowen but.
John J. Christmann: You will see us aggressively approaching both.
John J. Christmann: Okay.
John J. Christmann: Very good, thanks, John.
Speaker Change: Very good thanks, Sean.
Operator: You bet. Thank you. Thank you. Please stand by for our next question.
Speaker Change: You bet. Thank you.
Operator: Thank you please standby for our next question.
Operator: Okay.
David Adam Deckelbaum: Our next question comes from the line of David Deckelbaum of TD Cohen. Your line is now open.
Operator: Our next question comes from the line of David Beckel, Bob of TD Cowen. Your line is now open.
Stephen J. Riney: Thanks for your time, guys. I wanted to ask a couple questions around the capital program this year and your preliminary thoughts getting into 25 as you further integrate the Calen assets. One, can you just talk about how many ducks you're intending to work down this year and what you would carry going into next year? And as a follow-up to that, if we think about the combined company this year, should we be assuming improved capital efficiencies into next year that would sort of have you on this glide path of combined companies spending in and around $3 billion a year?
David Adam Deckelbaum: Thanks for the time guys.
Stephen J. Riney: I wanted to ask a couple of questions around the capital program. This year and your preliminary thoughts getting into 'twenty five as you further integrate the cowen assets.
Stephen J. Riney: One can you just talk about in this year, how many ducks, you're intending to work down and what you would carry going into next year.
Stephen J. Riney: A follow up to that if we think about the combined company this year.
Stephen J. Riney: Should we should we be assuming improved capital efficiencies into next year that would sort of have you on this glide path of combined companies spending in and around $3 billion a year.
Stephen J. Riney: Yeah, David. This is Steve. Okay. [inaudible] You know, in terms of the capital program and the treatment of ducks, you know, what we've done is we've added some frack capital in order to come up with the $2.7 billion of capital that we have in the plan for this year now. We basically just combined the final three-quarters of Cowan's remaining capital program with ours. But then we added some FRAC capital in the second half of the year because we did see that both of us were building ducks.
Stephen J. Riney: Yes, David this is Steve so.
Stephen J. Riney: In terms of the capital program in the treatment of Ducks.
Stephen J. Riney: What we've done is we've added some frac capital in order to come up to the $2 7 billion of capital that we have in the plan for this year now.
Stephen J. Riney: We basically just combine the two.
Stephen J. Riney: Final three quarters of <unk> remaining capital program with ours, but then we added some frac capital in the second half of the year, because we did see the both of US were building ducks.
Stephen J. Riney: Now, I think it's probably best that we not get into numbers at this point simply because the program is still, I'd say, very much in flux as you go out towards the back half of the year. We're working our way through it. As John said, we are changing a lot of the activities. There's hardly any activity that's going on on the Cowan Acreage later this year that we're not changing from the Cowan plan.
Speaker Change: I think it's probably best that we not get into numbers at this point simply because.
Stephen J. Riney: The program is still I would say very much in flux as you go out towards the back half of the year.
Stephen J. Riney: We're working our way through it and we as John said, we are we are changing a lot of the activity. There is hardly any activity that's going on on the Cowen acreage later this year that we're not changing from the Cowen plan and so you can imagine after four weeks that that's still a bit in flux.
Stephen J. Riney: And so you can imagine after four weeks that that's still a bit in flux. And so maybe we can share some more clarity on things like that during the second quarter earnings call in August. I think that would be better just so we can be through a bit of this, and we can solidify the remaining plan for the year. But just as a general statement. We don't believe that it's good capital efficiency in general to be carrying a lot of ducks.
Stephen J. Riney: And so maybe we can share some a bit more clarity on things like that with the second quarter earnings call. In August I think that would be better just so we can we can be through a bit of this and we can solidify the remaining Cleveland for the year, but just as a general statement.
Stephen J. Riney: We don't believe that it's.
Stephen J. Riney: It's good capital efficiency in general to be carrying a lot of <unk>. There are some value to having some ducks and theres some.
Stephen J. Riney: So, you know, there is some value in having some ducks, and there is some just basic need because of the logistics of matching up frack schedules with drilling schedules, but we don't believe in the capital efficiency of having a tremendous amount of duck inventory.
Stephen J. Riney: There's some just basic need because of the logistics of matching up frac schedules with drilling schedules, but we don't believe in capital efficiency.
Stephen J. Riney: Having a.
Stephen J. Riney: A tremendous amount of DUC inventory.
Stephen J. Riney: And the only thing I would add is obviously we believe the capital productivity will improve on the Calen portion, especially as we go to our modifications and our workflows back half the year. So the combined company is going to improve. And we're, you know, we're seeing that productivity on the Apache side right now, and we'll get the Calen assets there towards the back half of the year.
Speaker Change: Yes, the only thing I would add is obviously, we believe the capital productivity will improve all mccowan portion, especially as we go to our modifications in our work flows back half of the year. So combined company is going to improve.
Stephen J. Riney: And we're seeing that productivity on the Apache side, right now and we'll get the Cowen assets there towards the back half of the year.
Stephen J. Riney: Appreciate that. If I could make those first two questions, I guess, into one and ask another one, I'm just curious if you can share any targets that you might have in mind on proceeds or timing from non-core asset sales.
Speaker Change: I appreciate that.
Speaker Change: If I could make those first two questions I guess until wanted to ask another one just curious if you can share any.
Speaker Change: Any targets that you might have in mind on proceeds or timing from noncore asset sales.
Stephen J. Riney: No, we don't have any specific targets in mind. But, you know, we recognize that even after the progress that we made in 21 and 22 on debt for Apache Corp, we knew that we needed to make more progress. And we didn't make as much as we might have wanted to during the intervening time, but we just feel like we need to get on with that and get it down. And now that we've added some debt through the Callen acquisition, we're going to just try to focus on that this year.
Speaker Change: No we don't have any specific targets in mind, but.
Stephen J. Riney: We recognize that even after the progress that we've made in 'twenty, one and 'twenty two on debt for Apache Corp.
Stephen J. Riney: We knew that we needed to make more progress and we didn't make it.
Stephen J. Riney: Much as we might've wanted too during the intervening time, and we just feel like we need to get on with that.
Stephen J. Riney: Get that down and now that we've added some debt through the <unk> acquisition, we're going to just try to focus on that this year. We think it's a good time to be doing that.
Stephen J. Riney: We think it's a good time to be doing that. The market seems to be strong for some of these non-core assets. We'll see if we can get some of those off and get some good prices, and they will be focused on debt reduction. We're optimistic about that. We think that it's a good time to be doing that. Ultimately, the target is to get debt to a point where we have kind of a solid triple B type of rating on our debt so that you're not kind of dancing around the edge of investment grade and non-investment grade.
Stephen J. Riney: The market seems to be strong for some of these noncore assets and we'll see if we can get some of those off and get some good prices and they will be focused on debt reduction.
Stephen J. Riney: We are optimistic about that we think that it's a good time to be doing there.
Stephen J. Riney: And the Doj ultimately ultimately the sorry, all ultimately.
Stephen J. Riney: The target is to get that to a point, where we are sort of a solid triple b type of rating.
Stephen J. Riney: On our debt so that.
Stephen J. Riney: Youre not kind of dancing around the edge of investment grade and non investment grade.
Stephen J. Riney: We slid into non-investment grade in 2020 with a massive downturn in oil prices, and we haven't been able to climb back out of that even though we have the metrics of a lot of investment grade companies. We're still not investment grade with everybody. We've gotten there with two, but not all three.
Stephen J. Riney: We slid into non investment grade in 2020 with the with the massive downturn in oil price.
Stephen J. Riney: And we haven't been able to climb back out of that even though we are we have the metrics of a lot of investment grade companies were still not.
Stephen J. Riney: Not investment grade with everybody.
Stephen J. Riney: We've gotten there with two but not all three.
Stephen J. Riney: Do you think there's a path to getting there within the next couple of years? That's what we're trying to achieve.
Stephen J. Riney: And do you think there is a path to getting there within the next couple of years.
Stephen J. Riney: Okay.
Stephen J. Riney: That's what we're trying to achieve, yes, and I think it's possible, and we're going to certainly give it a try. Good luck, guys, thank you.
Speaker Change: That's what we're trying to achieve yes, and I think it's possible.
Stephen J. Riney: And we're going to certainly give it a try.
Speaker Change: Good luck guys. Thank you.
Operator: Thank you for your questions. As a reminder, to ask a question, please press star 11 on your telephone. To remove yourself from the queue, press star 11 again. Please stand by for our next question. Our next question comes from the line of Betty Jang of Barclays. Your line is now open.
Speaker Change: Thank you for your question.
Operator: As a reminder to ask a question. Please press star one one on your telephone.
Betty Jang: Move yourself from the queue Crestar one one.
Betty Jang: Please standby for our next question.
Operator: Okay.
Operator: Okay.
Betty Jang: Our next question comes from the line of.
Betty Jang: Jang of Barclays. Your line is now open.
Betty Jang: Good morning, thank you for taking my question. I really appreciate the color or the guidance that you have given for 4Q Performa production for U.S. oil. If we think out to 2025, like Apache is delivering double-digit organic growth in the Permian this year, do you expect it to see continued growth on the combined assets going forward? Just thinking about the overall strategy, like approach from a growth outlook perspective.
Betty Jang: Good morning, and thank you for taking my question.
Betty Jang: Really appreciate the color.
Betty Jang: Or the guidance that you've given for <unk> pro forma production for.
Betty Jang: U S oil.
Betty Jang: If we think out through 2025.
Betty Jang: <unk> is delivering double digit organic growth in the Permian. This year do you expect to see continued growth on the combined assets going forward.
Betty Jang: About the overall strategy like approach.
Betty Jang: Graph.
Betty Jang: Outlook perspective thanks.
John J. Christmann: Yeah, Betty, what I'll say is, post the Callen merger, our Permian now makes up roughly 75% of the company, and we've been, you know, executing at a high rate on the Apache side. We're anxious to provide those workflows on the Callen side. We have added a little bit of capital, which is going to, you know, work down some of the ducks in the fourth quarter of this year.
Speaker Change: Yes Betty.
Betty Jang: And what I'll say is post the <unk> merger, our Permian now makes up roughly 75% of the company and we've been.
John J. Christmann: Executing at a high rate on the Apache side, we're anxious to provide those workflows on the column side.
John J. Christmann: Have added a little bit of capital, which is going to work down some of the docs in the fourth quarter of this year.
John J. Christmann: I mean, it's early to comment on 2025, but it is going to give us a lot of strong momentum.
John J. Christmann: So, I mean, it's early to comment on 2025, but it will give us a lot of strong momentum as we exit 2024 with a very strong fourth quarter. So, you know, we're very anxious to demonstrate that, and we're, you know, we're very confident in what we can deliver from the Permian.
John J. Christmann: As we exit 2024, with a very strong fourth quarter. So.
Stephen J. Riney: [inaudible] Sorry.
John J. Christmann: We're very anxious.
Stephen J. Riney: To demonstrate that.
Stephen J. Riney: We're very confident in what we can deliver from the Permian.
Stephen J. Riney: Alright.
Speaker Change: Thanks, Dan.
Stephen J. Riney: Sorry, Betty. I was just going to add one thing to that. One of the reasons why we added the FRAC capacity in the second half of this year, you know, number one is FRAC is pretty inexpensive these days, so it's a good time to be doing that, but also just with the scale of the operation now that we have in the Permian Basin, as John said, 75% of our company now, with that kind of scale and the amount of activity that we're carrying on, we ought to be able to plan activity to where we don't have these big lulls, a big rush of completions and turning lines, and then a big lull of activity, and we ought to be able to plan it, maintaining capital efficiency, but plan it in a way that creates a bit smoother profile to production volume, and that's one of the things that we're trying to achieve as we bring this FRAC capacity into the back half of this year is to get a little more smoothness to that, because we felt like we may have been setting ourselves up for yet another, you know, downturn in first quarter on volume, a little bit of a lull or a flat spot, and we don't need to be doing that, and we can do better than that.
Speaker Change: Alright, sorry, Barry I was just going to add one thing to that.
Stephen J. Riney: One of the reasons why we added the frac capacity in the second half of this year number one is frac is pretty inexpensive. These days. So it's a good time to be doing that but also just.
Stephen J. Riney: With the scale of the operation now that we have in the Permian Basin as John said, 75% of our of our company now.
Stephen J. Riney: With that kind of scale and the amount of activity that we're carrying on.
Stephen J. Riney: We ought to be able to plan activity to where we don't have these these big loans, a big rush of completions and turned in lines and then a bigger level of activity and we ought to be able to planet maintaining capital efficiency, but planted in a way that creates a bit smoother profile to production volume.
Stephen J. Riney: And that's one of the things that we're trying to achieve as we as we bring this frac capacity into the back half of this year is to get a little more smoothness to that because we were we felt like we may have been setting ourselves up forget another.
Stephen J. Riney: Downturn in first quarter on volume, a little bit of a lull or a flat spot and we don't need to be doing that and we can we can do better than that.
Stephen J. Riney: Alright.
John J. Christmann: Great. I appreciate that color. Thanks.
Betty Jang: Great I appreciate the color. Thanks.
John J. Christmann: Amit maybe shifting gear to Egypt.
John J. Christmann: A similar question held this year.
John J. Christmann: Shifting gears to Egypt, a similar question. This year, seeing that gross Egyptian volume is down a little bit, a lot of that related to the work over rig shortage. If we look out post the PSC contract renegotiation, there was the expectation of Egypt growing at a single digit range. Do you expect to go back to that type of profile? When do you think that asset will be ready to do that?
John J. Christmann: Seeing that gross <unk> is down a little bit, but a lot of that related to the work over rig shortage.
John J. Christmann: We look out.
Speaker Change: Hello, Steve.
John J. Christmann: PSC contract renegotiation, there was expectation of eject crawling.
John J. Christmann: I will take your range do you expect to go back to that type of profile.
John J. Christmann: Do you think the Asa will be ready to do that.
John J. Christmann: Yeah, I mean, you've got one factor in Egypt is that, you know, Kosher, big picture gas has been declining. So the, you know, gross DOEs have been declining because of that, and we've been growing oil. You know, we're in a place today where we're working to rebalance the workover rigs and the drilling rigs and find a good level there where we can, you know, drive that production base. You know, we'll monitor that over the year and come back later this year with projections in terms of what we'll do next year, and quite frankly, how Egypt continues to compete with what we're doing in the Permian will play into that as well.
Speaker Change: Yes, I mean, you've got one factor in Egypt as costs or Big picture gas has been declining so the gross Boe.
John J. Christmann: Have been declining because of that and we've been growing the oil.
John J. Christmann: We're in a place today, where we're working to rebalance the workover rigs and drilling rigs and find a good level and there where we can drive that production base. So.
John J. Christmann: We'll monitor that over the year and come back later.
John J. Christmann: Later this year with projections in terms of what we'll do next year and quite frankly, how Egypt continues to compete with what we're doing in the Permian will play into that as well.
John J. Christmann: Great, thank you for that. Thank you. Please stand by for our next question.
Speaker Change: Great. Thank you for that.
John J. Christmann: Thank you please standby for our next question.
Operator: Our next question comes from the line of Leo Mariani of Roth MKM. Your line is now open.
John J. Christmann: Our next question comes from the line of Leo Mariani of rock.
Leo Paul Mariani: M K Ann your line is now open.
Leo Paul Mariani: I wanted to follow up a little bit here on Egypt. I wanted to just kind of get a sense from you folks what the situation is with receivables there in-country. I saw that Egypt recently got an IMF loan a little bit ago. I'm not sure if that's kind of improved the state's financial well-being there, so maybe you could just kind of, you know, speak to that.
Leo Paul Mariani: I wanted to follow up a little bit here on Egypt.
Leo Paul Mariani: Wanted to just kind of get a sense from you folks what the situation is with receivables there in country you saw that Egypt recently got an IMF loan little bit ago Im not sure. If that's kind of improve the state of financial well being there. So maybe you could just kind of.
Stephen J. Riney: And also, could you speak a little bit about kind of your expectations for gross Egyptian oil volumes? I know we talk a lot about sort of net, but it looks like growth has come down in the last few quarters. How do you expect the growth trajectory of gross volumes to trade over the next couple of quarters?
Leo Paul Mariani: Speak to that and also could you just speak a little bit to kind of your expectations for gross Egypt in oil volumes I know you talked a lot about sort of net.
Stephen J. Riney: Looks like growth has come down the last few quarters, how do you expect growth trajectory on the on the gross volumes to trade over the next couple of quarters here.
Stephen J. Riney: Okay.
Stephen J. Riney: Okay, yes. So, sorry, this is Steve.
Stephen J. Riney: Okay, Yes, so sorry this is Steve.
Stephen J. Riney: Leo, yeah, on receivables. So, as we've always said, we work very closely with the Egyptian government on things like that. We've received two payments during the first quarter of this year. But despite that, receivables, especially with the oil price and all, receivables increased slightly in the first quarter of 2024. We kind of made good progress through 2023, bringing it down most quarters. It increased slightly in the first quarter of 24, but it's still below the average of where we were last year.
Speaker Change: Again on receivables so.
Stephen J. Riney: As we've always said we worked very closely with the Egyptian government on things like that we've received two payments.
Stephen J. Riney: During the first quarter of this year, but despite that receivables, especially with oil price and all.
Stephen J. Riney: Receivables increased slightly in the first quarter of 2024, we had kind of made good progress through 2023, bringing it down most quarters. It increased slightly in the first quarter of 'twenty four but it's still below the average of where we were last year.
Speaker Change: But more importantly, I think you hit on the point I think Egypt on a very good path right now.
Stephen J. Riney: But more importantly, I think you hit on the point that I think Egypt's on a very good path right now. They've floated their currency, devalued it, and floated it. And with that, you know, they had to raise interest rates to control inflation. But with that, their bonds are up, and the ratings outlook is improving. The IMF loan, as you talked about, they increased their loan program from $3 billion to $8 billion.
Stephen J. Riney: They've floated their currency devalued and floated it.
Stephen J. Riney: And with that they had to raise interest rates to control inflation.
Stephen J. Riney: But with that their bonds are up and the ratings outlook is improving.
Stephen J. Riney: <unk> as you talked about the increase their loan program from 3 billion to $8 billion, they've gotten a significant amount of investment coming in from other Gulf States, mostly around some real estate opportunities.
Stephen J. Riney: They've gotten a significant amount of investment coming in from other Gulf states, mostly around some real estate opportunities. And they've got pledges now from both the World Bank and from the EU to offer support as well. But that doesn't mean that it's going to be an easy ride.
Stephen J. Riney: And they've got pledges now from both the World Bank and from the EU to offer support as well. So I think all of the all of the all of the signs for Egypt are pointing up now.
Stephen J. Riney: That doesn't mean that it's going to be an easy ride and it's not going to be a quick ride, but things are certainly improving liquidity is improving.
Stephen J. Riney: It's not going to be a quick ride, but things are certainly improving. Liquidity is improving. It's just a big positive step in the right direction, and that's going to help as we go forward. And we have had indications from the Egyptian government that we will get a large payment in the second quarter of this year, and we'll actually be in Egypt visiting with them around that same time. So that's where we are on the receivables.
Stephen J. Riney: It's just a big positive step in the right direction and that's going to help as we go forward.
Stephen J. Riney: And we have we have had indications from the.
Stephen J. Riney: The Egypt government that we will get a large payment in the second quarter of this year. So we're.
Stephen J. Riney: We'll be and we'll actually be in Egypt visiting with them.
Stephen J. Riney: Around that same time, so so thats, where we are on the receivables it hasnt changed a whole lot in the first quarter, but certainly all of the all of the signs of things going on in Egypt are pointing up and improving.
Stephen J. Riney: It hasn't changed a whole lot in the first quarter, but certainly all of the signs of things going on in Egypt are pointing up and improving. Um, in terms of gross volume, we haven't declined for two quarters in a row. And if you look back to 2023, gross oil volume was pretty flat for a while and then rose. We're declining now from the fourth quarter to the first quarter.
Stephen J. Riney: In terms of gross volume.
Stephen J. Riney: Haven't declined for four.
Stephen J. Riney: Two quarters in a row, we've actually if you look back to 2023 gross oil volume was pretty flat for a while and then rose.
Stephen J. Riney: So we are declining now from fourth quarter to first quarter a lot of that is around completion timing.
Stephen J. Riney: A lot of that is around completion timing. We actually completed 27 new wells in the third quarter last year, 26 in the fourth quarter, and then we completed 17 in the first quarter of this year. So that's not necessarily a surprise that volume, oil volume, might be declining a bit in this quarter.
Stephen J. Riney: We actually completed 27, new wells in the third quarter last year 26 in the fourth quarter and then we completed 17 in the first quarter of this year.
Stephen J. Riney: So that's not necessarily a surprise that volume oil volume might be declining a bit in this quarter, we will see where we go going forward. We are continuing to reduce the drilling rig count. So that is going to have an effect on on the number of wells that will be available for completion, but we'll see as we go quarter to quarter through the year on gross oil.
Stephen J. Riney: We'll see where we go going forward. We are continuing to reduce the drilling rig count, so that is going to have an effect on the number of wells that will be available for completion, but we'll see as we go quarter to quarter through the year on gross oil volume and, you know, and then as we approach year, You know, we've got to work through this, this issue of the balancing of work over rig and work over capacity with, with our drilling capacity and because it's not a very efficient use of capital to be drilling new wells when work over is so much more capital product productive than drilling new wells.
Stephen J. Riney: Volume and then as we approach year end and as John said in the prior question.
Stephen J. Riney: There's nothing wrong with drilling new wells, but workover is cheap and normally returns quite a bit of production volume to the line. So you've got to make sure you have the capacity to stay on top of the workover program. And we've got a lot of ideas on how we can work through that. Ultimately, there is the possibility, in the longer term, that you could bring more workover rigs into the country. But there are a lot of other things that we can try to work through before we get to that.
Stephen J. Riney: We've got to work through this this issue of the balancing of Workover rigs and workover capacity with with our drilling capacity in because it's not a very efficient use of capital to be drilling new wells within Workover is so much more capital project productive than drilling new wells, nothing wrong with drilling new wells, but workovers.
Stephen J. Riney: Is cheap and normally returns quite a bit of production volume to underline.
Stephen J. Riney: So you've got to make sure. Your you have the capacity to stay on top of the Workover program and we've got a lot of ideas on how we can work through that ultimately there is longer term the possibility you could bring more workover rigs into the country, but there are a lot of other things that we can try to work through before we get to that so we've got a lot to do in 2024.
Stephen J. Riney: So we've got a lot to do in 2024, to get things balanced properly and functioning properly between drilling new wells and working over and working our way through that backlog. And then as we roll into 2025, we'll give a better view of where Egypt is going.
Stephen J. Riney: Sure.
Stephen J. Riney: To get things balanced properly.
Stephen J. Riney: And functioning properly between drilling new wells and working over and working our way through that backlog.
Stephen J. Riney: And then as we roll into 'twenty, five we'll give a better view to where Egypt is going.
Speaker Change: Alright that was very helpful. Harry.
Stephen J. Riney: All right. That was very helpful; a very good explanation there.
Speaker Change: Good explanation, there and I guess, just maybe turning to Suriname very quickly here just wanted to kind of get a better sense.
Leo Paul Mariani: And I guess maybe turning to Suriname very quickly here, just wanted to get a better sense of where things stand. I know you're still working towards FID. What's your confidence level with your partner on achieving that later this year? And it sounds like there's still no drilling happening in 24, but does Apache anticipate some drilling there in 25?
Leo Paul Mariani: Where things stand I know you're still working towards.
Leo Paul Mariani: Kind of what's your confidence level with your partner on achieving that later this year and it sounds like there is still no no drilling happening in 'twenty, four but does Apache anticipate some drilling there in 'twenty five.
John J. Christmann: Yeah, I'd just say we're, you know, we're very confident in the FEED, and we would anticipate an FID by year end. So, you know, it's all moving forward there, and then, you know, that's going to dictate timing in terms of drilling. We've got until 2026 to start the exploration program, so there's nothing pressing on the 25 side, but, you know, we could be back to drilling in 25. Okay, thank you. You bet. Thank you, Leo. Thank you for your service; please stand by for our last.
Speaker Change: Yes, I would just say, we're we're very confident.
Speaker Change: Page is still underway and we would anticipate in <unk> by year end so.
John J. Christmann: Yes.
John J. Christmann: It's all moving forward there and then that's going to dictate timing in terms of drilling.
John J. Christmann: We've got till 2026 to start the exploration program. So there's nothing pressing on the 25 side, but we could be back to drilling in 'twenty five.
Speaker Change: Okay. Thank you.
Speaker Change: You bet. Thank you Leo.
John J. Christmann: Thank you for your question. Please stand by for our last question. Our last question comes from the line of Neal Mehta of Goldman Sachs. Your line is now open.
Speaker Change: Thank you for your question. Please standby for our last question.
Neil Singhvi Mehta: Our last question comes from the line of Neil Mehta.
Neil Singhvi Mehta: Oldman Sachs. Your line is now open.
Neil Singhvi Mehta: Good morning, team. John, I wanted to spend a little bit of time talking about the Calend cost synergies, and specifically on the operational side, you're talking about high-grading service providers, stuff around casing, surface economics, so can you just spend some time getting us on the ground and giving us a little bit more granularity around some of those cost synergies on the operational side?
Neil Singhvi Mehta: Good morning team.
Neil Singhvi Mehta: John.
Neil Singhvi Mehta: Wanted to spend a little bit of time talking about the cowen cost synergies and specifically on the operational side.
Neil Singhvi Mehta: You're talking you're talking about high grading of service providers the Frac casing.
John: Surface economics. So can you just spend some time getting us on the ground.
Neil Singhvi Mehta: Giving us a little bit more granularity around some of those cost synergies on the operational side.
John J. Christmann: Yeah, I'll jump in. I'll let Steve, you know, add a little bit more color. But in general, you know, we're changing the program. So, you know, you're going to see fewer wells per section, fewer landing zones, you know, larger fracs, you know, in general. The other thing is when you look at the well count in terms of how they complete their wells, Talon was putting a third of their new wells on ESPs and 30% on gas lift. You know, we've been running outside of Alpine High about 3% ESPs and 60% gas lift.
John: Yeah, I'll jump in and then I'll, let Steve.
Steve: Add a little bit more color, but in general.
John J. Christmann: We're changing the program, so youre going to see fewer.
John J. Christmann: Fewer wells per section to your landing zones.
John J. Christmann: The larger fracs.
John J. Christmann: In general the other thing is when you look at the well count in terms of how they complete their wells Talon was putting a third of their new wells are on ESP.
John J. Christmann: 30% on gas lift we've been running outside of alpine high about 3% ESP and 60% gas lift. So that's the other place in terms of just how we're equipped equipping the wells that were flowing the wells and producing the wells and then obviously the power that is needed to drive.
John J. Christmann: So, you know, that's the other factor in terms of just how we're equipping the wells, how we're flowing the wells and producing the wells. And then obviously, the power that is needed to drive those sub pumps is another big factor. I'll also say that, you know, they turnkeyed a lot of their stuff. I mean, they turnkeyed a lot of their, you know, their frack operations. And, you know, we're going to self-source and do a lot of stuff there.
John J. Christmann: Those sub pumps.
John J. Christmann: It was another big factor.
John J. Christmann: I'll also say that.
John J. Christmann: Turnkey to allow their stuff I mean, they turn keto out of there.
John J. Christmann: They are frac operations, and we're going to self source and do a lot of stuff. There. So there's a lot of low hanging fruit on the operation side.
John J. Christmann: So there's a lot of low-hanging fruit on the operations side. You know, those are some of the big ticket items. And we've already seen a lot of that, which is why you've seen us increase a lot on the operations side.
John J. Christmann: So those are the some of the big ticket items and we've already seen.
John J. Christmann: A lot of that which is why you've seen us increase a lot on the operational side.
Stephen J. Riney: Yeah, and Neil, I'd just add, if you went back to the Permian slide deck that we published in February, we specifically pointed out three areas where we felt like Cowan was significantly kind of off the mark in terms of where we would want to be on LOE per BOE, work over costs per BOE, and downtime percent. And those Cowan has a history of a much higher well failure rate, and including for new wells, they have a higher rate of ESP failures than we do. And many of those are around us, we feel, around their equipment choices.
Speaker Change: Yes, Neil I'd, just add a few.
Stephen J. Riney: If you went back to the Permian slide deck that we published in February.
Stephen J. Riney: We specifically pointed out three areas, where we felt like Cowen.
Stephen J. Riney: Was significant with significantly kind of off the mark in terms of where we would want to be.
Stephen J. Riney: <unk>.
Stephen J. Riney: LOE per Boe.
Stephen J. Riney: Workover costs per Boe.
Stephen J. Riney: <unk> downtime percent.
Stephen J. Riney: Cowen has a history of a much higher well failure rate and including for new wells.
Stephen J. Riney: They have a higher rate of ESP failures than we do.
Stephen J. Riney: Many of those are around we feel around their equipping choices and we're already making some changes on a proactive basis and that even on some of the wells that <unk> already drilled and completed and equipped.
Stephen J. Riney: And we're already making some changes on a proactive basis in that, even on some of the wells that they've already drilled and completed and equipped. There was a lot of inefficiency around compression and the use of their compression fleet, and we're making, you know, across a larger set of operations, we can make more economies of scale around compression optimization and even on the rate negotiations for compression costs. They, as John pointed out, have a tendency to use a lot of ESPs, for which they purchase power.
Stephen J. Riney: There was a lot of inefficiency around compression and the use of their compression fleet and we are making.
Stephen J. Riney: Across a larger set of operations, we can make more economies of scale around compression optimization, and even though the rate negotiations for compression costs.
Stephen J. Riney: They as John pointed out they have a tendency to use a lot of ESPN for which they purchase power.
Stephen J. Riney: That's very expensive, and a big contributor to their LOE per BOE. [inaudible] They use a lot of contract labor, a lot of our supply chain aspects of using APA rates around services and around product, using volume discounts that we get across the larger operations, and just reducing overall usage. They have a very high water handling and disposal cost, which we believe we can do much better at.
Speaker Change: That's very expensive.
Stephen J. Riney: And a big contributor to their LOE per Boe.
Stephen J. Riney: They use a lot of ease a lot of contract labor.
Stephen J. Riney: A lot of a lot of our supply chain aspects of using IPA rates.
Stephen J. Riney: Around.
Stephen J. Riney: Around services and around product.
Stephen J. Riney: Easing volume discounts that we get across the larger operations in just reducing overall usage.
Stephen J. Riney: They had a very high water handling and disposal costs, which we believe we can do much better at say at a high rate of rental rentals of ESP rental of compressions, where we think we.
Stephen J. Riney: They had a high rate of rental, rentals of ESPs, and rental of compressions, where we think we can do better at that as well. On the capital side, we'll use more technology to decrease average drilling days on wells. We'll get better rig rates. We'll do a better job of rig moves because we're not moving rigs across the basin between the Delaware and the Midland Basins. We will generally use sputter rigs generally for a lot of the wells that we drill. They did not have a practice of doing that normally.
Stephen J. Riney: We can do we can do better at that as well.
Stephen J. Riney: On the capital side.
Stephen J. Riney: We will use more technology to drill to use to decrease average drilling days on wells will get better rig rates will do a better job of rig moves because we are not moving rigs across.
Stephen J. Riney: The basin between.
Stephen J. Riney: Delaware and the Midland Basin.
Stephen J. Riney: We will use spudder rigs generally for a lot of the wells that we drill they did not have a practice of doing that normally.
Stephen J. Riney: Frack rates will get better at, profit costs, again, more supply chain type of stuff. And then on facilities, we, they typically built facilities on spec. We typically try to modularize that. We will typically go to multi-phase flowing through a single line. They like to use test separators and meter, you know, three products in three different lines. So, we think there's just a whole lot, whole bunch more of stuff that we're going to be looking at and doing to reduce. LOE for BOE and downtime and the work over cost.
Stephen J. Riney: Frac rates will get better at proppant costs again, more and more supply chain type of stuff.
Stephen J. Riney: And then on facilities, we typically built facilities spec, we typically try to modularize that.
Stephen J. Riney: We will typically go to multi phase flowing through a single line they like to use test separators.
Stephen J. Riney: Meter three products in three different lines. So we think there's just there's just there's just so much whole bunch more of stuff that we're going to be looking at and doing to reduce LOE.
Stephen J. Riney: LOE per Boe.
Stephen J. Riney: Downtime in the Workover costs.
Stephen J. Riney: That's a very thorough and helpful explanation, thank you, and good luck as you bring the asset. Thanks, Neal. Thank you for your question. We'll be taking one more.
Stephen J. Riney: That's a very thorough and helpful explanation. Thank you Tim and good luck as you bring the asset into the fold.
Stephen J. Riney: Yes.
Speaker Change: Thanks Neil.
Operator: Thank you for your question. We'll be taking one more question. Please stand by. We now have a question from Paul Cheng of Scotiabank.
Speaker Change: Thank you for your question, we will be taking one more question. Please standby.
Operator: Okay.
Operator: Okay.
Operator: We now have a question from Paul Cheng.
Operator: Scotiabank.
Paul Cheng: Hey, guys good morning.
Paul Cheng: Good morning, Paul. I have to. Good morning, John.
Paul Cheng: Good morning, Paul I have to.
Paul Cheng: Good morning, John Steve I have to apologize when you talk about July holes I sort of missed that can you repeat it I think you're saying that you have.
Stephen J. Riney: Steve, I have to apologize. When you talk about dry hose, I sort of missed that. Can you repeat that? I think you're saying that you have a way off in the share name on DOC 52. That's, I think, 40 some odd million. So what's the remaining amount with the dry hose expense at one hundred and twenty three? The question is that. Yeah, go ahead, please.
Stephen J. Riney: Why you off in Sharron named $1 52.
Stephen J. Riney: I think 40 somewhat million so what's the remaining with the dry hole expense at that 123.
Stephen J. Riney: Yes.
Stephen J. Riney: <unk>.
Speaker Change: Yes go ahead please.
John J. Christmann: I'll jump in. There's one dry hole in Surinam which is related to Bon Boni up in the north. It was one that we held and waited because we didn't know how the north would factor in on the future exploration site, and so that's why we took that one now. And then we went ahead in Alaska and rode off the two wells that we failed to reach TD on simply because the decision was made that it would be easier to go back and re-drill those prospects with brand new wells, and so that's what the dry hole expenses were for.
Speaker Change: Well I'll jump in.
John J. Christmann: There is one dry hole in Suriname, which was related to bond body up in the north It was one that we held in.
John J. Christmann: Weighted because we didn't know how the north would factor in on the future exploration side and so that's why we took that one now and then we went ahead and Alaska.
John J. Christmann: Wrote off the two wells that we failed to reach TD on simply because the decision was made that would be easier to go back and re drill those prospects within the brand new wells and so that's what the dry hole expenses were four.
John J. Christmann: I see. And John, on Alaska, in King Street, Discovery, can you share what's the thickness of the pay zone, that you have two units, so how thick are they, and that do you have any data about the permeability or any other information that you can share?
Speaker Change: Hi, Thanks.
Speaker Change: John on Alaska in.
John J. Christmann: Street Discovery can you say it that was the thickness of the peso that you have to use the point that I would think that they in that do you have any data about the permeability or debt.
Speaker Change: The information that you can share.
John J. Christmann: Well, it's very preliminary, Paul, but, you know, we're excited about both. I mean, these are not shallow wells in the Brookian play for high-quality oils.
John: Well, it's very.
John: Preliminary Paul but.
John J. Christmann: We're excited about both I mean, these are not shallow wells and the broker and play two high quality oils.
John: We were also very pleased with the early data, but we need to get the rock data back into the lab and analyze that and go through all that before we really share anything I think all of the big read throughs on King Street, though it was the smallest and the most risky or the three prospects even though it's the one we got down all the way.
John J. Christmann: We were also very pleased with the early data, but we need to get the rock data back into the lab and analyze that and go through all that before we really share anything. I think one of the big read-throughs on King Street, though, was that it was the smallest and the most risky of the three prospects, even though it's the one we got down all the way. But there is a very positive read-through in the upper zone at King Street for the big target in Voodoo.
John J. Christmann: But there is a very positive read through in the upper zone at King Street.
John J. Christmann: So, you know, it's very exciting, and if anything, it has us feeling even better about the program and the acreage going forward. I mean, we've moved 70 to 90 miles east of the working hydrocarbon system, a truly wildcat area, and now we have a proven petroleum system, we have proven oil. And there's also, you know, very high quality sand there. So there is a lot to get pretty excited about going forward in Alaska.
John J. Christmann: For the big target and Vudu so.
John J. Christmann: Yes.
John J. Christmann: It's very exciting and if anything it has us feeling even better about.
John J. Christmann: The program on the acreage going forward I mean, we've moved 70 90 miles east.
John J. Christmann: A working hydrocarbon system truly wildcat area and now we've proven petroleum system, we proven oil.
John J. Christmann: There is also a very high quality sand there so.
John J. Christmann: A lot to get pretty excited about going forward in Alaska.
John J. Christmann: And, John, you're saying that you're going to re-drill the two new wells for Soft Eye and Weedle. Um, Yes. Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Um, Is that going to be done or is this going to be during the next drilling season or that you guys have not decided and may get pushed out further? I'll just say it's highly likely that we
John J. Christmann: And John Youre, saying that Youre going until we drill with two Meanwhile for salt life.
John J. Christmann: We do.
John J. Christmann: <unk>.
John J. Christmann: Yes, that's going to be done or that you say is going to be Julian that mixed joining season or that you guys have not decided and may get pushed out further.
John J. Christmann: I'll just say it's highly likely that we re-drill both prospects, but it's something we've got to work through the partners and, you know, we don't have to make decisions yet on the 2025 drilling program, so it's something we'll be working through with the partners over the next several weeks. But at this point, it's something that could be done in 2025. It doesn't have to be done in 2025, but we'll be working with the partners on that.
John J. Christmann: I'll just say, it's highly likely that we re drill both prospects.
John J. Christmann: But it's something we've got to work through the partners and we don't have to make decisions yet on the 2025 drilling program. So.
John J. Christmann: It's something we'll be working through with the partners over the next several weeks.
John J. Christmann: But at this point, that's something that could be done in 25, it doesn't have to be done in 'twenty five, but we'll be working through the partners without.
Speaker Change: Okay. Thank you.
Speaker Change: You bet.
John J. Christmann: <unk>.
John J. Christmann: Thank you. This does conclude our question and answer session. I would now like to turn the call back over to John Christmann for closing remarks.
John J. Christmann: Thank you. This does conclude our question and answer session I would now like to turn the call back over to John Christmann for closing remarks.
John J. Christmann: Yes, thank you. In closing, our Permian is performing extremely well, and we've just bolstered it with the addition of Kallen. It is now approximately 75% of the company. We will be integrating Calen over the next couple of quarters, and by the fourth quarter, you should start to get a good picture of what we can do with the Calen asset. We have pulled in some frac capital into the second half of the year, which should really give us strong momentum as we head into 2025.
John J. Christmann: Yes, thank you in closing our.
John J. Christmann: Permian is performing extremely well and we've just bolstered with the addition of Cowen and is now approximately 75% of the company.
John J. Christmann: We will be integrating cowen over the next couple of quarters and by the fourth quarter, you should start to get a good picture of what we can do with the Cowen assets. We have pulled from some frac capital end of the second half of the year, which should really give us strong momentum as we head into 2025.
John J. Christmann: On the cost synergy side, we have increased our expectation by 50% and will capture most of these by year-end, and we believe there is even more to do beyond that. And lastly, we'd like to make more progress on debt reduction by the end of the year while also meeting our 60% shareholder return commitment. Thank you very much for joining us today.
John J. Christmann: The cost synergy side, we have increased our expectation by 50% and will capture most of these but by year end and we believe there is even more to do beyond that.
John J. Christmann: And lastly.
John J. Christmann: I would like to make more progress on debt reduction by the end of the year, while also meeting our 60% shareholder return commitment.
John J. Christmann: Thank you very much for joining us today.
Speaker Change: Thank you Nick.
Operator: Thank you. This does conclude today's conference. You may now disconnect.
Speaker Change: This does conclude today's conference you may now disconnect.
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