Good day, everyone, and thank you for standing by. Welcome to APA Corporation's Third Quarter 2024 Financial and Operational Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Now, I will pass the call over to the Vice President of Investor Relations, Gary Clark. Please go ahead.

Good morning, and thank you for joining us on APA Corporation's third quarter 2024 financial and operational results conference call. 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. Also on the call and available to answer your questions are Tracy Henderson, Executive Vice President of Exploration; and Clay Bretches, Executive Vice President of Operations. Our prepared remarks will be less than 20 minutes in length with the remainder of the hour allotted for Q&A. In conjunction with yesterday's press release, I hope you've 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. Consistent with previous reporting practices, adjusted production numbers cited in today's call are adjusted to exclude non-controlling interest in Egypt and Egypt tax barrels. I'd like to remind everyone that today's discussion will contain forward-looking estimates and assumptions based on our current views and reasonable expectations. However, a number of factors could cause actual results to differ materially from what we discuss on today's call. A full disclaimer is located with the supplemental information on our website. And please note that our full year 2024 guidance reflects first quarter APA results on a standalone basis, plus three-quarters of APA and Callon combined. 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 discuss our key strategic accomplishments in the core areas of the portfolio, review third quarter highlights and results, and outline our preliminary capital, production, and cost outlook for 2025. Over the past several years, APA has delivered a number of strategic initiatives designed to enhance the portfolio and create shareholder value. In the U.S., since 2020, we have executed more than $5 billion of acquisitions and over $2.5 billion of divestitures, effectively transforming our asset base into an unconventional pure play Permian operation. This activity has three primary benefits. First, it has added scale to our unconventional Permian position, increasing unconventional acreage by more than 40% and enabling us to roughly double our unconventional production. Second, it has increased drilling inventory and extended inventory duration is the rig count today is lower than APA and Callon on a standalone basis. And third, it rationalized our portfolio by eliminating assets that did not compete for capital and significantly reduces per unit LOE. Our primary strategic accomplishments in Egypt are two-fold, both of which drive APA shareholder value and benefit the Egyptian people over the life of the PSC. In late 2021, we modernized and extended our PSC terms, paving the way for more efficient capital allocation, more operational flexibility and greater free cash flow generation. And we recently reached an agreement to increase the contractual price for incremental natural gas production in country making gas exploration and development more economically competitive with oil development. Shifting to Suriname. We are now seeing the culmination of our strategic efforts that began more than 10 years ago, when we made a countercyclical investment in long-cycle offshore exploration. The recently announced GranMorgu project FID gives us visibility into strong future oil…

Thank you, John. For the third quarter, under generally accepted accounting principles, APA reported a consolidated net loss of $223 million or $0.60 per diluted common share. As usual, these results include items that are outside of core earnings, the most significant of which was a $571 million after-tax impairment of North Sea assets and non-core Permian assets held for sale. Excluding these and other smaller items, adjusted net income for the third quarter was $370 million or $1 per share. John noted in his remarks that we have revised the expected timetable for cessation of production and abandonment of our assets in the North Sea. This decision had three primary impacts this quarter. The previously mentioned after-tax asset impairment, of which $325 million was related to the North Sea, a $17 million barrel of oil equivalent write-down of reserves that we no longer expect to produce, and a $116 million increase in the net after-tax present value of abandonment obligations on our balance sheet. We now carry an after-tax present value liability of $1.2 billion for all of our North Sea ARO. We are planning to incur this liability between now and 2038. Approximately half of this liability will be incurred between now and the end of 2030. While there will be some overlap, the next five years will consist of mostly wellbore abandonment while the remaining eight years will focus mostly on facility abandonment. We expect Beryl Bravo will be the first facility to cease production likely in late 2027 or early 2028. Moving over to Egypt. We continue to make good progress on past due receivables. And during the quarter, both total and past due receivables decreased. When payments on past due receivables are made, there is a counterintuitive impact on our stated free cash flow for…

Thank you so much. [Operator Instructions] And it comes from the line of Doug Leggate with Wolf Research. Please proceed.

Thanks, guys. Good morning. A lot this quarter. So I'm going to hit two. One is Egypt, and one is the oil guide. So first of all, in Egypt, you've obviously -- you haven't given any color whatsoever around the gas price other than the fact that you got better pricing. So to what extent can you help us frame the impact of this? I guess it costs you about , I don't know, $25 million net for that additional rig. How do we think about the incremental free cash flow based on your current visibility on that gas price? That's my first one. My second one is, clearly, the oil guide has got a lot of moving parts, not least the sale of the Central Basin platform. So can you just walk through the moving parts on the apples-for-apples acquisition versus disposals to get us to kind of net number just to make sure that the Street is looking at it on an apples-for-apples basis. And I'll leave it there.

Yeah. Two really good questions, Doug. I'll step in first on Egypt and let Steve follow up, and then we can come back to the Permian and the oil guide. But if you step back in Egypt in the Western Desert, we've historically always explored for oil. Obviously, the country of Egypt is now in a position where they need gas. And so we've been working on a framework, which would bring gas exploration wells up to parity with oil wells. It is on incremental volumes. We're not in a position to get into a lot of detail on how that is calculated, but you will be able to see it showing up on our income statement going forward. We've allocated 1 rig. We've got a lot of low-hanging fruit, as you know. If you step back and look at the Western Desert, while we've always run oil exploration programs, we found Caser, which is a 3 Tcf field back in the early 2000s. So there's tremendous potential for gas in Egypt. We've got a lot of low-hanging fruit. This will be on incremental gas volumes, and it's going to put our exploration program on par with an oil program.

Yes. So what we mean by incremental gas volumes is as part of the agreement, we've agreed with EGPC what our PDP decline looks like till for the full development or the full remaining life of the concession. So gas PDPs, a decline curve. And for every quarter, we'll look at how much gas was produced and any gas over that decline curve in that quarter gets the new price. It doesn't have to be from new wells. It doesn't have to be from new fields. So gas compression can bring on more gas volumes, enhanced recovery, step-outs, infield step-outs and infill, things like that, all qualify for incremental gas volume. As John said, we're -- we've priced it to where we're indifferent economically drilling an oil well or drilling a gas well. And as part of that agreement, we agreed to add 1 rig. As we've said, we have already done that. And I would just say we've got -- just to build on what John was saying, we've got 5 million acres of hydrocarbon-rich resource here. There's been, as John said, no gas-focused exploration. So we believe that there's quite a bit of prospectivity. We've actually got some previously discovered gas-focused resource. Some of that may need some appraisal, but there's quite a bit that's still -- that's ready for appraisal and development investment. infrastructure is in place because we do produce a lot of gas today. There is some haulage in that infrastructure. And to the extent that we might need it in the future, any further build-out of infrastructure was contemplated in the price that we negotiated. And I don't know, Tracy, if you want to talk about maybe a little bit about prospectivity for gas in Egypt.

Sure, Steve. As John and Steve said, we've really focused our exploration program on oil. So gas is really underexplored relative to oil, but we see significant potential. We have a good understanding of the geology and the source rocks having been there for two decades. And we know the areas that are more gas prone and the basins that are more gas prone. So we do have a known inventory of low-risk resource potential with material volumes. And in addition, we will be testing some exploration gas prospects and concepts to continue to grow that inventory over time. So we see a lot of potential in those opportunities, and we're excited to have a gas-focused program, and it's a great opportunity to grow the inventory and add value to our business in Egypt.

And Doug, just to wrap that point up, that question. So we're not going to share specifics about the gas price agreement with Egypt. We're just -- we're not going to do that at this point in time at their request. You will start to see this show up in results. We'll think about -- I understand your point about wanting to get to how do we forecast free cash flow. I don't know a price. We'll start thinking about how -- between now and February when we give a final plan for 2025 and possibly beyond. We'll give some help in being able to figure out what this means for free cash flow. We understand the point.

And if I can take the second question, Doug, on the Permian oil, we've been running nine rigs. We've scaled back. We're at eight rigs, and that's what we plan to run for next year. If you take our Q3 numbers, which we just put out 143 on the oil side for Permian and you subtract the upcoming asset sales of 13,000 barrels a day. That's going to put you around 130,000. And we believe we can maintain that or hold that flat with a rig count that's down about 20%, turn in lines that are down 20% and CapEx, which is in line with that. So we think it's actually pretty strong. But for next year, you're looking at -- and this is obviously the preliminary view, as you know. We're looking at about 130,000 barrels a day of oil in the US that we can hold flat with eight rigs.

Got it. Thanks guys. I appreciate the answers.

Thank you. One moment for our next question is from John Freeman with Raymond James. Please proceed.

Good morning, guys.

Good morning, John.

First topic, just a little bit more infill on the North Sea. So I just want to make sure that I'm understanding. So the way that you laid it out, Steve, of the ARO, you said about half would potentially be spent between now and the end of 2030. And I guess I'm just trying to understand in terms of just outflow of capital, as you all like ratchet down the CapEx in the North Sea over the next several years and then factoring the AROs, just sort of how I should think about just capital being spent in total in the North Sea over these next 10 full years. When I know the -- it's a minimal spend CapEx-wise in the North Sea next year, but just any color on that front would be helpful.

Yeah. So the spend on the ARO won't show up as capital. You'll actually see a number in the -- the costs incurred, where we provide some reconciliations to GAAP versus non-GAAP reconciliations in our supplement, and you'll see a number in there for the North Sea for the addition to the ARO. So from a GAAP accounting purposes, the increase in the ARO is considered costs incurred which is a GAAP kind of equivalent or somewhat equivalent to capital spending. So it shows up when you add to the ARO, it doesn't show up as capital spending in the CapEx program as we spend that capital or those dollars in the years in which we incur the ARO. And John, just to give maybe a little bit more color on the spend patterns. So as I said, the -- if you were to combine two numbers because there's a there's a gross obligation on the liability side on our balance sheet, and then there's a deferred tax asset because there's a 40% tax savings for every dollar that you spend on ARO. So there's two numbers on our balance sheet. Those two numbers net to $1.2 billion. It's -- with a 40% tax rate, you could probably figure out pretty quickly, it's about $2 billion of liability. It's about an $800 million tax asset on the balance sheet. And that $1.2 billion, as I said, roughly 50% of that will be spent between now and the end of 2030. A lot of that is being spent on wellbore abandonment. And so you figure out -- you figure okay, that's about $100 million a year for six years. And what I would say is the pattern grows through the period of time. So it's going to be way less than $100 million next year in 2025, starts kind of ramping up a little bit in 2026. The first three years are below $100 million a year, the last three years are above $100 million a year.

That's perfect. I appreciate all the color on that. And then on the LOE, which you all are indicating a pretty big decline next year, 10% to 15% decline. And you mentioned the drivers, and there's obviously a lot of moving parts with the account synergies, the noncore Permian divestitures or curtailed volumes. Is there any way to give maybe just sort of a rough kind of idea of just ballpark, like the magnitude of each of those from like a driver of that decline year-over-year, just some way you think about.

Yes. I mean, John, we really haven't thought about how to break that out. I mean what we've tried to do is just look at the stand-alone business next year as you're going into that and roll everything up. Obviously, a big chunk of that is on the Callon side is the synergies we've been able to drive out, but a lot of it comes to just a change in the portfolio changes that we've made in the US, selling the higher cost, declining waterflood assets on the Central Basin platform, which are typically much, much higher costs, and we handle a lot of water. So it's really a recharacterization of our unconventional Permian Basin business is what you're going to see. And I can also tell you, there's -- we're working hard on how to do more than what we've laid out at this point.

Yes. And I'd just add, John, we'll provide quite a bit more detail around that when we roll out the detailed plan in February. What we're trying to -- what we always try to do at this point in time in the year just kind of give a shape to the capital program and what that means to production volume more than anything else, kind of the meat of the direction of the firm. But there is that one chart in the supplement. And it's got multiple elements in it. You might want to just give Gary a call later today or sometime and he might take be able to take you through some of the details behind that.

Understood. Thanks guys.

Thank you, John.

Thank you. Our next question comes from the line of Bob Brackett with Bernstein Research. Please proceed.

Good morning. I had a question around the cadence of the cash return strategy and the timing. There's a big moving part around your disposals and getting that cash in the door and 3Q percent of free cash flow return came down a bit. Should I think of that as timing versus anything else?

I mean, definitely, it's just timing, Bob. We came into the year. We're running a little bit ahead. And then you look at Q3, we've had a lot of material things that were in the works that can sometimes prevent you from being able to get in the market at times. But in general, yes, it's more just timing that was out of our control.

Very clear. A quick follow-up on gas curtailment and your latest thoughts are on the ground intelligence around Matterhorn. Matterhorn feels slow, but it's coming. Is that your expectation that we'll get some takeaway out of the Permian, realizations will improve, and that's when the curtailment ends? And what's your latest that you hear happening in the basin?

Yeah. I believe most of the price extremes, if you want to call them that right now are not related to Matterhorn, but are related to some downtime on other pipelines coming out of the Permian and to the Gulf Coast. And I think that's impacting the pricing extremes as we see them today. That maintenance activity, I believe, is planned to be completed in the next week or so. So I think this is a matter of perhaps just days first of month for December a couple of days ago, was $1.40, so not a great price, but at least better than negative $3 or $3.50.

Very clear. Thank you.

Thank you, Bob.

Thank you. Our next question comes from the line of Roger Read with Wells Fargo Securities. Please proceed.

Yeah, thank you. Good morning. I guess, I'd like to come back on the lowering of the cost. I mean, it looks obviously a piece of an LOE, but a lot of the G&A, and what is that? Or is that in addition to the synergy you anticipated from the Callon merger? I mean, I would think so, given the way it's laid out here. But I just wanted to understand what was driving some of these opportunities.

I think, Roger, it's clearly synergies on the Callon side, but it's also some of the simplification on our business with the asset sales.

Yeah. And the other thing I would just add, in our synergies around the Callon transaction, we said that around $90 million of that would be related to G&A and Callon had a G&A cost structure of around $110 million a year. Our G&A right now is running basically flat with where we were prior to the Callon acquisition. So I think some of the G&A synergies are going to be around just growing the -- increasing or exceeding the amount of synergies that we thought, we basically -- it's not all Callon people because we actually have a number of Callon people here in the company, but we've equivalently eliminated the full Callon G&A. There were some one-off costs in G&A in 2024 around the transaction as well.

Yes. No, I appreciate that. And then, John, my question for you since you got the Alaska exploration well. And obviously, all those decisions had to be made preelection. In terms of regulatory outlook, certainly, it looks easier to do business in Alaska with the federal government at this point, just wondering, how you're looking at that. Assume good or bad with this particular well, but as you think about the overall Alaska opportunity.

Yes. I think the main thing there, I'll remind you, Roger, is we've got about 300,000 acres in our position, but it's state lands. And so we're in a position where you're fairly close to pipeline, and we're state land. So, you don't really have to bring the federal side in, but just on a few things. So we feel good about that. We're excited about Alaska. We had a discovery earlier this year on the well that we did get down. And we're going back to 1 of the 2 that we attempted last winter, but we're very excited about it. So it will be early, early next year when we spud, and we have added some capital to start building ice roads and stuff for this winter.

I Appreciate that. But one federal roadblock is sometimes more than enough. So I just wanted to check on that.

Thank you. One moment for our next question that comes from the line of Paul Cheng with Scotiabank. Please proceed.

Hi. Good morning team. John, you guys done the Callon deal, even though I think Apache probably do better than Callon. But when you go through that, have you found there's anything that you learned from them saying that they're actually doing better than us and where that they probably have done the worst?

Yes. I mean, obviously, Paul, when you integrate 2 companies, you take good from both and try to replicate. I think Callon had some good people that we've integrated into the organization. Obviously, they've got some good acreage that we're excited to get after as well. And then we've been digging into a lot of their technical assumptions as well. But I think in general, you've seen us be able to cut costs just from our supply chain and some of our processes. We've cut almost $1 million per well in terms of the well cost side, we're anxious on the spacing, and we've got 2 wells flowing back or actually 4 now, but 2, we've got pretty good results on in the Midland Basin. And we're seeing some pretty good uplift on those 2. So we're pretty excited about Callon in general.

No, I was just asking that. Is there anything that from a technology or process that Callon you actually find that they are doing well, and then you will be able to adopt their process or technology and enhance your operations?

Yes. I would say on the spacing side, I mean, we're looking hard into the data and how they were approaching the development scenarios, and how we take -- how we designed it versus how they were and how do you modify that to what we think is a better answer.

Yes. And if I could just add to that. That's what I was going to say earlier was that it'd be really simple just to bring all of that acreage into the Apache process and just assuming, well, we're right, we've got everything figured out, and we're going to do it exactly the way we do everything else. Instead, I think it's always a good idea to just step back and think, okay, well, do they have any aspects of spacing and fracking and landing zones, and what's in communication, what's not in communication. So, it's good just to take the opportunity to step back and question what we believe and our fundamental beliefs there as well, and we're doing that. And I think it's worth doing. We will come to some conclusions in due course. But it's worth asking ourselves those questions.

Steve, can you quantify what's the benefit? Because I assume those is not in your original synergy target?

No. At this point, I'd say I can't quantify the benefits of that. But we'll do that in due course. I think we'll -- I think we've got to get more wells drilled, completed and online and get some history to those. And we've talked about it in the past, at some point in time in 2025, we have the $250 million of annual cash operating -- operational and overhead type cost synergies, but we do believe that there are some meaningful synergies around the capital productivity or capital efficiency, whichever you want to call it. And we've said in the past, we will come back sometime in 2025 with a recap of where we think we are there. And that will include -- just like the synergies have included, that will include things that we've learned from the combination with Callon, and how that helps even the Apache approach to the rest of our acreage as well.

Okay. The second question is on Alaska. John, you guys are going back? And can you tell us that you guys essentially going back to the same two wells that you suspend in last year program, and you're just going to redo that or that you are targeting a total new prospect?

No, Paul, it's actually going back to the Saki prospect. [Technical Difficulty]

Please stand by, we have some technical audio difficulties. Please stand by, ladies and gentlemen. And you may continue. Thank you for standing by.

Yes.

Yes, you are live.

We're back up. I apologize. We had an internet disconnect, but we're back. So.

So one moment for our next question, please. And it comes from the line of Neal Dingmann with Truist. Please proceed.

Good morning. Thanks for the time, John. My question, maybe just around Permian Egypt production, specifically, you all -- the target you talked about for next 8 Permian and 12 Egyptian rigs. I'm just wondering, is that, again, kind of the plan to maintain. You think that's about appropriate to maintain stable production in both those areas. And I'm just wondering when it comes to base production. Has that changed much in either area? So I'm trying to get a sense of how we should think about sort of maintaining the flat production.

Yes. We've designed that -- the early look design is a program to sustain Permian oil, Neal, around the 130 that I mentioned earlier with Doug's first question. And then in Egypt, it's really our reported production, but the gross has been coming down slightly. If you look at on the oil side with 11. Right now, you've got 12 rigs, 11 to the oil program, one to the gas is what we've got in there. At 11, we're slightly underinvesting in Egypt, but it's close.

Yes. If I can just add to that briefly. I mean we started the year with -- as people know, we started the year with 18 drilling rigs. We ended the year with 12. We went down to 11 at one point in time. If you just look back at the -- when we said that gross oil volume would slightly decline as we go through the year. Well, first quarter was 138,000 barrels a day. Second quarter was 139,000. In third quarter, it was 137,000. So we're on a slight decline. I would emphasize the slight aspect of that. And I think that, that's probably going to just continue into fourth quarter and on into 2022, absent a change in the drilling activity. But that's that if people go back to 2023, we were in the mid-140s with 18 rigs running for quite some time, and we were kind of struggling to maintain production volume or to grow it from there. So as we've commented a few times, we've actually -- with 11 rigs, we've achieved kind of a nice, very smooth operational cadence that's working really well. We have increased that to 12. The thing I would say about 2025 is that the 12th rig is drilling gas-focused wells, and some of those will be appraised. Some will be development wells, some will be low-risk appraisal type of step outs, some of them will be exploration, looking for bigger, better prospects, which we believe there are -- they are out there. And so the potential for gas, I would say, is unknown at this point in time. We're certainly optimistic. We believe there's good prospectivity, but the potential is still a bit unknown. The other thing I would say is that we've -- in the last, I would say, in the last 1.5 years, we've learned a lot about what we can be doing around improving our focus on waterflood management, and we've got a lot of plans in 2025 for working that. And I think the potential for that we have yet to really see what that can do on a decline mitigation basis, the best way to maintain production volumes in a country like Egypt is to mitigate decline, not to be trying to drill too many wells. So we're working on both fronts, and we'll see what 2025 brings. But if everything is kind of equal with 2024, we'll probably just continue on this pattern of just a slight decline.

Got it. And then just second, you've talked a bit about this already today, but just with shareholder return, I mean, you guys in other periods where the stock has gotten here, have been very opportunistic coming in pretty aggressively. I'm just wondering given recent pricing is that potentially in the cards?

And I think clearly, we've got our time periods fastest. We're running ahead Neal, but we do think that share price is obviously attractive. We've got the proceeds coming in from the asset sales. The majority of that is going to go to debt reduction as we're also working to get debt paid down as well.

Thanks, John.

Thank you. One moment for our next question. And it comes from the line of Arun Jayaram with JPMorgan. Please proceed.

I wanted to go back to Egypt and gas. Steve, you mentioned that over time that you can make up, call it, the PDP wedge with incremental volumes where you get the higher gas price I was wondering if you could help us think about what the PDP decline rate looks like for gas in Egypt and obviously in the Caesar field specifically?

Yes, Arun, I'll take that one. Caesar's been on decline. We've gone through some stages of compression. It is the big portion of our gas is Caesar, but we also produce a lot of casing head gas with a lot of the other oil wells. So Caesar has been in the double-digits there. And obviously, we'll have to see with the new program can we fill the overall gas decline, but I think we've got an opportunity to add some incremental volumes that could be pretty material.

Understood. Understood. And then just maybe a follow-up. John, with the North Sea now in kind of a late cycle stage in terms of the life cycle of that development of the field. And then obviously, Suriname starting up in 2028, how are you thinking about – thinking about another leg to the stool in terms of the portfolio, obviously, you sold some assets recently. But how are you thinking about just the broader portfolio? And obviously, given the North Sea where it's at, adding another leg to the stool?

Yes. I mean, I think if you step back, we've got what we believe are two really strong long-term legs of the stool with both Permian or kind of our reshaped and reworked Permian unconventional business. We think we can hold that flat at a very efficient rig count for the foreseeable future. Egypt is a large asset. We've been there now for over three decades. We see a lot of running room in Egypt as well. Suriname will start to come on in 2028 and will be very material. And so if you step back and look at that, and we just maintain the two large onshore positions. 2028, Suriname's going to put in some pretty nice growth relative to those two assets. So I mean I think portfolio is in pretty good shape. We're always looking to how we improve it. But I think we've got with Suriname stepping in and coming on in 2028, it's going to be a nice add to what are two really nice core positions, both in the Permian and the US and Egypt.

Understood. Plus the exploration in Alaska near...

Absolutely. And I think the key there, Arun, is we've stayed committed. We've been spending a small portion of our budget in exploration. I think we've got a wonderful staff. And as I said in the prepared remarks, with successful exploration, you can add real shareholder value and Suriname Block 58 is a perfect example of that. So we've got a nice portfolio. We're excited about it. We'll continue to fund a little bit. But we also know where we make our real money is in our core assets and driving our free cash flow from Permian and Egypt.

Great. Thanks a lot John.

Thank you so much. One moment for our next question, that comes from the line of Charles Meade with Johnson Rice. Please proceed.

Good morning, John to you and your whole team there.

Good morning, Charles.

Thank you. I wanted to ask a question about Suriname, and you put this slide in your supplement on slide 11, and I always -- I like these kind of mockup cartoons that give a sense of the development layout. But what -- when you guys decided to include this, what are you -- besides the numbers on the right side of the slide, what do you really hope people take away from this when they see this? And what's the -- so what you want people to get about the GranMorgu?

Well, I mean I think it's just given -- it's a real project today, right? So I mean, we've got visibility now to volumes in 2028. And so I think it's time that you put some slides out there that bring it to life. And that's why we put the picture out there. You can see this is kind of looking from deepwater in. You'll see where the FPSO will be placed. This is a total slide. You see with Krabdagu, it's a fairway, as we've talked about in terms of the development opportunities that we've appraised there. And looking over at Sapakara, it's more of a field. The thing I would also say along that fairway is there will be more exploration prospects and potential tiebacks as well. So it's something we're excited about. It's material. It's large. But I think it's just bringing this project to life, because it's real today, and we're looking forward to 2028.

That’s great. That’s it from me. Thank you, John.

You bet, Charles. Thank you.

Thank you so much. One moment for our next question that comes from the line of Leo Mariani with ROTH. Please proceed.

Hi. Thanks. Just wanted to inquire a little bit about the kind of activity plan in the US, it sounds like you guys are basically kind of pulling back there. Oil is roughly at 70. You guys are kind of citing a softer oil outlook. Just kind of curious, are you expecting kind of oil prices to be lower next year? I mean, obviously, you just bought the Callon asset. You saw some pretty nice organic growth the last couple of quarters on a combined basis, and now you're kind of choosing to pull back. Can you just provide a little bit more color on sort of the thinking there as we roll into next year?

Yes. Leo, I just think we're in a softer price environment. We've got an asset base that we can sustain volumes with eight rigs. We're going to work on efficiencies. It's always easy to pick up those rigs up. But I think with where we're moving into 2025, it feels like a good place to be initially. And the nice thing is, like I said, if we can sustain Permian and roughly sustained Egypt. You've got Suriname coming in the next -- 2028 from an overall corporate level.

Okay. And then maybe just jumping over to Egypt here, so I think you guys made a comment there on the call that you expect that we could see some very modest declines on Egyptian gross oil, but I know you're expecting to keep adjusted or net production on oil, relatively flat. So maybe you're expecting to get a slightly higher share of that oil. I don't know if that's just related to expectations for lower prices in the PSCs for next year. I was hoping you could address that quickly. And then also just on Egypt Gas, you got the gas rig going. What's your expectation there on gas production in Egypt for next year? Can that start to flatten out, maybe in the second half? Do you see any growth in Egypt gas as we get towards the end of the year or next year?

Yeah. I'd just say, if you look in Egypt at 11 rigs, as Steve mentioned, we've been declining slightly at the top line. It's been very, very slight over the last four quarters. So at 11, it's about where we probably are on the gross oil side. We're actually getting after some of the waterflood projects as well, which the benefit those have is they flatten your decline. So then it's -- with the strong waterflood program, then you can improve that. And then on the gas side, our overall gross gas is declining. But with this program and we've got a one-rig program laid out and some nice quick prospects to get after that we can get to infrastructure. We'll bring new volumes on and then we'll -- we've got some bigger prospects to drill and then we'll see. So I think the key there is we're getting started with that. And after we get some prospects down, we'll have a better clue of scale on the gas side in the future.

All right. Thanks.

Thank you.

Thank you. Our next question comes from the line of Betty Jiang with Barclays. Please proceed.

Good morning. Thank you for taking my questions. I want to go back to the North Sea ARO conversation. So I think the $1.2 billion is on a present value basis. So wondering, if you could give the total liability on an absolute basis? And I think the as we think about the cash outflow related to this, does your free cash flow calculation include this outflow as you think about the capacity for tax returns in any given year? Thanks.

Yeah. So I'll give you -- I've already given you two numbers. I'll give you a third number as well. So again, the two numbers I've given are that we've got about a $2 billion liability on our balance sheet. US GAAP requires that we take what we think the current cost is of abandoning all of those assets as if we had to abandon them today. We inflate that into the future and then we discount that back at prescribed inflation and discount rates. So we've got that -- when you take the cost today, inflate them and then discount them back, you get $2 billion. Today cost estimate is $2.5 billion. So obviously, the inflation rate is lower than the discount rate that we have to use for that, which is our borrowing rate, for that 10 to 15-year timeframe. Then there's the tax benefit of all of that. The present value of that tax benefit is $800 million. So that's offsetting the $2 billion present value getting to the $1.2 billion net, which is a net after-tax present value liability on our balance sheet today. Two different numbers on the balance sheet, $2 billion liability, $800 million deferred tax asset. What was the second part of the question?

Just on the free cash flow calculation, when you think about the organic free cash flow is related to cash return, does this cash outflow gets netted out of that?

Yes, it will. And just I think …

Appreciate it…

…and let's just remember, we've talked a lot, and I understand why we talked a lot and kind of focused on the abandonment activity that's ahead of us and the costs associated with that. Let's just not forget that we still have operating assets in the North Sea. Those continue to generate free cash flow even after a 78% tax rate. And those -- that free cash flow will help us pay for a lot of those costs here in the next several years.

Understood. Thank you for that. My follow-up is on the gas marketing piece. This year, really surprised with how powerful the benefit on the gas marketing side in a weak Waha gas environment. Can you give us a flavor of under the current features, price on Waha spread, would you be able to continue to capture above normal marketing benefit next year as well?

Yeah, that's just going to depend a lot on what happens with Waha as we go through next year. And it's really -- it's not absolutely Waha prices. It's the differential between Waha and Gulf Coast versus the cost to transport fairly simple. If there's a $2, if -- I use fake numbers, if there's a $2.50 spread, and there's a dollar cost to transport, then you're making $1.50 on nearly 750 million cubic feet a day that we buy and transport to the Gulf Coast. And if it will all depend on what are those spreads for 2025, and as we've experienced here in 2024, they can be extremely volatile. Even over short periods of time, like for a weekend, we can find for a weekend, prices can go negative for three or four days as much negative as like negative $5, which means when we're purchasing gas over the weekend, people are paying us $5 to take to take gas and then we transport it for our transport costs, which we can't disclose, but you could probably figure out what it is, and we sell that on the Gulf Coast for what would normally be a positive price, a little less volatile pricing on Gulf Coast than you get on at Waha.

It's certainly nice to have that pipeline right now. Just to clarify, the Gulf Coast benchmark are you looking at Houston share, or it's a combination of different hubs?

Yes. It's -- it would be looking at mainly ship channel or depending on where the pipe takes you back to.

Okay. Got it. Thank you.

You bet. Thank you, buddy.

Thank you. Our last question comes from Jeoffrey Lambujon with TPH & Company. Please proceed.

Good morning guys, and thanks for squeezing me in here. Really just a quick follow-up to your commentary on the North Sea. A couple of questions ago, just around the free cash flow generation that you mentioned. Can you also help us understand what your outlook is for OpEx from that asset as production declines in the next year, or will just kind of help us dominate it along with the ARO dynamic that you already walked through. Thanks.

Yes. We'll probably go into more detail on that in the February call. We're just not -- at this point in time, we're -- like we say, we normally at this time of year, give a view to the capital program and production volumes and the general overall direction of the company. And that, as we've highlighted with this conversation is generally dominated by the longer-term oil price outlook. So that's all we really typically look to accomplish on the November call. We'll give more details around country-by-country specifics, and the line items between revenues and LOE and breakdown of capital and things like that in February. I can tell you, though, that the North Sea because of the situation we're in, in the North Sea, and we talk about it openly that we're in the business now managing operations -- day-to-day operations for free cash flow now. We -- practically any type of capital investment is not economic under the current situation. And so we manage that for free cash flow, and we will look hard at operating costs, and we are looking hard at operating costs. We never do so in a way that sacrifices or puts at risk, either human safety or the environment, but there's a lot of stuff that we spend money on that could be looked at and examined just to make sure that we're spending properly in an environment where we're just focused on free cash flow for the remaining life of the asset. So we'll get into more detail of that in the February call.

Thank you.

Thank you. And with that, I will close the Q&A session for today and turn it back to John Christmann, our CEO, for closing remarks.

Yes. Thank you. And first of all, I want to apologize for the Internet disconnect that we had during Paul's question. But in closing, as we've outlined, we've made great progress on the portfolio, and the assets are performing at a very, very high level. We have significantly scaled and streamlined our Permian unconventional position. We're adding a potentially very valuable gas program in Egypt and now have a clear time line to significant production and cash flow in Suriname. Going into 2025, we are looking at a potentially softer oil price environment and are focused on sustaining our core business, reducing costs and generating free cash flow. We provided an early look at a plan of eight rigs in the Permian and 12 rigs in Egypt, which should broadly sustain oil volumes at reduced capital levels. We will continue to work this plan and look forward to coming back to you in February with a lot more details. Thank you for joining us.

And with that, ladies and gentlemen, we thank you for participating in today's conference. You may now disconnect.