APA (APA) 1 Aug 24 2024 Q2 Earnings call transcript

APA Corporation's latest earnings call for the second quarter of 2024 provided a comprehensive overview of the company's financial and operational performance. The call, led by CEO John Christmann, President and CFO Steve Riney, and other key executives, highlighted several key themes and trends that underscore APA's strategic direction and financial health.

Strong Operational Performance

APA Corporation's second quarter results were marked by robust operational performance across its key operational areas. In the U.S., the company reported higher-than-expected production, driven by the integration of Callon's assets. Production in Egypt also exceeded expectations, with improved results from recompletions and new wells. The North Sea operations showed relative smoothness, while the company's activities in Suriname and Alaska demonstrated significant progress.

Strategic Integration of Callon Acquisition

The integration of the Callon acquisition was a major focus of the call. The integration is proceeding smoothly, with the company leveraging economies of scale to achieve substantial cost synergies. The operational changes, including drilling unit design and improved well performance, are expected to create substantial value on the Callon acreage. These efforts are already showing results, with the first APA-designed drilling unit spud on Callon acreage.

Optimistic Outlook for the Future

Looking ahead, APA Corporation is optimistic about its future prospects. The company expects strong oil growth in the second half of the year, driven by increased rig activity and capital efficiency improvements. The outlook for Egypt remains positive, with operational progress continuing to drive capital efficiency improvements. The company's activities in Suriname are on track for FID before year-end, while Alaska remains a promising area for exploration and development.

Financial Performance and Outlook

Financially, APA Corporation reported a strong quarter, with consolidated net income of $541 million. While there were significant non-GAAP items, such as a gain on divestitures and transaction reorganization costs, the company's adjusted net income of $434 million underscores its financial strength. The company also reported $200 million of free cash flow in the first half of the year, with plans to return more than half of it to shareholders.

Conclusion

APA Corporation's second quarter 2024 financial and operational results demonstrated a company in a strong position, with robust operational performance and a clear strategic direction. The integration of the Callon acquisition is progressing well, and the company's outlook for the future is optimistic. With a focus on operational efficiency, capital discipline, and strategic growth, APA Corporation is well-positioned to capitalize on opportunities in the energy sector.