Thank you for standing by, and welcome to the APA Corporation's Fourth Quarter 2024 Financial and Operational Results. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star one one on your telephone.

If your question has been answered and you'd like to remove yourself being recorded. And now I'd like to introduce your host for today's program, Ben Rogers, Senior Vice President of Finance and Treasurer. Please go ahead, sir. .

Good morning, and thank you for joining us on APA Corporation's fourth quarter and year-end 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 questions are Tracy Henderson, Executive Vice President of Exploration and Clay Bretches, Executive Vice President of Operations. Our prepared remarks will be about twenty 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 with that, I'll turn the call over to John..

capital, LOE, and overhead. We are focused on identifying opportunities to streamline the business, improve the way we operate, and control our costs. The first step in simplifying the organization was announced in January when we reduced our corporate officer count by over one-third.

Earlier this month, we initiated additional overhead decreases as part of a broader streamlining effort across the organization. These initial reductions, coupled with the targeted savings in capital, LOE, and additional overhead spend, are expected to generate at least $350 million in annualized savings by year-end 2027.

These efforts will drive free cash flow expansion over the next several years. In closing, APA made significant continued progress in 2024 to streamline our portfolio and establish a core asset base that can underpin a sustainable activity set and predictable production profile from the Permian and Egypt for the long term.

In the short to medium term, we will work to reduce our controllable spend. This is our path to meaningful free cash flow growth in the 2025 to 2027 time frame, ahead of Suriname First Oil in 2028, which will underpin a further step change in free cash flow into the next decade.

We believe that this cash flow growth profile, coupled with our high-quality exploration portfolio, is differentiated from many of our peers and will drive growth in long-term shareholder value. And with that, I will turn the call over to Steve..

Thank you, John. For the fourth quarter, under generally accepted accounting principles, APA reported consolidated net income of $354 million or $0.96 per diluted common share.

As usual, these results include items that are outside of core earnings, the most significant of which was a $224 million US deferred tax benefit related to the write-off of APA's investment in our UK subsidiaries and a $190 million increase in our net liability on the former Fieldwood properties.

Excluding these and other smaller items, adjusted net income for the fourth quarter was $290 million or $0.79 per share.

Fourth quarter DD&A expense was higher than guidance primarily due to accelerated depreciation at Alpine High, with negative Waha gas prices for the second and third quarters of 2024, SEC reserve guidelines required that substantially all of the Alpine High reserves be written off.

As a result, one-third of the Alpine High carrying value was depreciated in the fourth quarter, and there will be a similar impact in the first quarter of 2025. Fourth quarter lease operating expense also came in slightly higher than guidance largely due to an extra North Sea cargo lifting in the quarter.

The timing of North Sea cargo liftings has no impact on reported production, but it does affect the recognition of both sales revenue and LOE. APA generated $420 million of free cash flow in the fourth quarter, the highest of any quarter in 2024. Through dividends and share repurchases, we returned 46% of this amount to shareholders in the quarter.

For the full year, we generated $841 million in free cash flow, of which we returned 71% to shareholders. Please refer to APA's published definition of free cash flow for any reconciliation needs.

In 2024, we made significant progress in strengthening our balance sheet and are close to returning to pre-calendar debt levels only nine months after closing the acquisition. Recognizing the lower net debt levels and increased scale achieved last year, S&P upgraded our credit rating to BBB- in October.

Our ultimate objective is to achieve BBB or better ratings, one notch above our current ratings at all three rating agencies. Wrapping up commentary on 2024, let me address the $190 million increase in the net contingent liability for the Fieldwood properties.

This increase does not reflect any change in the anticipated cost to plug and abandon wells or to remove facilities and seafloor infrastructure. In 2021, as a result of the Fieldwood bankruptcy ruling, an independent third party was required to own and manage the assets.

In this capacity, the third party operates the producing assets and maintains and monitors the non-producing assets awaiting abandonment. We believe the third party's cash cost for these activities remains too high.

Until we take actions to directly reduce these costs, the resultant reduction in future net cash flows increases the contingent liability on our balance sheet. With a large portion of the security utilized, we are now free to explore all avenues to manage these assets and to enable a more prudent cost management system.

We expect resolution to this later this year. Turning to our 2025 outlook, let me provide a few more details with respect to our guidance for the year. Starting with our capital spending cadence, you should expect our spending to be front-half weighted primarily due to the timing of Suriname capital calls and our exploration activities in Alaska.

Despite a planned steady activity level, the Permian is also first-half weighted, primarily due to the timing of facility spend in the basin. Looking at production, 2024 oil volumes for the US, adjusted for the effects of asset sales and the first quarter Cowen production, were 128,000 barrels of oil per day.

With the eight-rig program planned in the Permian for 2025, US oil volumes should be in the 125,000 to 127,000 barrels per day range. Total US volumes should increase mid-single digits as we do not anticipate any price-related production curtailments this year.

In Egypt, adjusted production is expected to grow slightly year over year, with a modest decline in gross volumes. On the gas front, we initiated drilling activity in the fourth quarter and have seen very encouraging results. As John indicated, we now expect gross gas production to grow year over year.

Our average realized gas price is expected to increase from $2.96 per Mcf in the fourth quarter to at least $3.15 per Mcf in the first quarter. The average realized price will continue to grow through the year, with the full-year average expected in the $3.40 to $3.50 range.

As we look beyond 2025, success in the gas program will determine our ability to continue growing gas production and will highlight any need for additional infrastructure investment. Moving to lease operating expense, for the US, we expect operated LOE per BOE in the Permian to be about 20% lower than 2024.

This step change in operating efficiency reflects the progress we have made streamlining our US portfolio and harvesting synergies from the acquisition of Cowen. The return of curtailed gas volumes also contributes to the improvement in our per-unit LOE.

In terms of our guidance related to G&A, it may appear that overhead costs are increasing significantly in 2025. Total overhead costs are, in fact, going down, but it is difficult to see that comparing 2024 actual G&A expense to 2025 guidance. Recall that overhead costs are allocated to multiple areas, including investment, exploration, LOE, and G&A.

The relationship between G&A expense and total overhead costs is impacted most significantly by allocation methodology and the mark-to-market impact for long-term incentive compensation. These items are causing G&A expense to increase despite our plans to decrease overhead costs by at least $25 million in 2025.

2024 was a strong year for our third-party gas trading business, and 2025 is shaping up to perform at a similar level. This year, the Waha basis spread remains advantageous, and we have seen appreciation in international LNG prices benefiting APA through our Cheniere gas supply contract.

Given current strip prices, we anticipate generating a combined net gain of $600 million for 2025. Lastly, I would like to end with some additional color around our cost reduction initiatives. We are targeting $350 million in annualized cost savings by the end of 2027.

Our goal is not just to capture some quick-hit opportunities to lower costs, although that is certainly a near-term focus. Our goal is to right-size our entire cost structure to achieve a long-term, purposeful, and sustainable outcome. In the near term, this will naturally focus on efforts which are simply a matter of choice and discretion.

Much of this is in our overhead cost structure and in day-to-day field operating practices. In the intermediate term, it will address our capital cost structure, things like drilling and completions, and facilities, as well as operating practices such as life-of-field resource management and field automation.

For the longer term, it will address more deeply ingrained structures like IT systems and infrastructure and accounting applications and procedures. This is why we have set longer-term targets out to 2027. Some of these things are happening quickly, and others will take more time and effort.

In 2025, our objective is to achieve run-rate savings of $100 to $125 million by the end of this year. At this point, we anticipate an in-year capture of around $60 million of actual savings, which is something we hope to improve upon as we go through the year.

Our cost reduction targets are an important effort for the entire organization and are therefore included in both our short-term and long-term incentive compensation programs. Already this year, we have made good progress on restructuring our organization, starting with the reduction in our officer count that John mentioned.

This was followed by a greater than 10% reduction in our global overhead structure in February. The combined annual run-rate savings with these two simplification steps is approximately $35 million per year of salaries and benefits.

In closing, the ongoing enhancement in the quality and sustainability of our core portfolio, combined with the right-sizing of our cost structure, will lay a foundation for growing free cash flow over the next three years. Suriname First Oil in 2028 will then carry that free cash flow growth into the next decade.

Over that same time period, free cash flow per share increases even more significantly as a result of the share buybacks built into our capital returns framework. And with that, I will turn the call over to the operator for Q&A..

Certainly. And ladies and gentlemen, we'd ask that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows. And one moment for our first question. Our first question comes from the line of Doug Leggett from Wolfe Research. Your question please..

Thanks. Good morning, everybody.

John and Steve, I think, looking at your share performance, whether we take 2025 year to date, 2024, or 2023, something's clearly not clicking in terms of, you know, the $420 million of free cash flow in the fourth quarter, the $600 million of gas trading, the cost-cutting, it all adds up to big numbers, but yet your share price continues to frankly get decimated relative to your peer group.

It seems to us at least that there's a crisis of confidence in the guidance that is persistently getting missed.

And I'd like to ask you what confidence do you have through these cost-cutting measures that control over your guidance and visibility is gonna get better?.

Doug, I appreciate you jumping on. Appreciate the question.

I think if you, you know, you back, number one, you know, if you look at what we're doing on the cost structure side and you look at the portfolio, over the last several years, we've really transformed our two anchor assets, Permian and Egypt, into two businesses that we believe now have sustainable and durable inventory and future with them.

Right? So and if you look back over the last seven, eight quarters, we've actually done pretty well on hitting targets on the guidance. As far as the cost reductions, you know, you go back to the middle of last year, we're always focused on the cost structure and what can we do to generate more free cash.

Now that we've got two businesses that, quite frankly, we don't feel like you need to grow with Suriname now coming on in 2028. We started looking at how do we moderate and put some sustainability and predictability in those, which is why you saw us ratchet the capital down in the back half of the year.

We've now got programs in Egypt with twelve rigs in Permian with eight that we feel like we can deliver. And it's all about cost structure. And so we started stepping back and looking at that hard and took a very deliberate starting at the top of the organization. I think we've laid out $350 million over the next three years. We're getting after it.

We've already got $35 million of it kind of already identified and captured. And so I feel really confident that we set meaningful targets we will deliver. I think we've got the asset base in a place today where it will also deliver..

No. I know it's a tricky one to answer, Jamal. We're all gonna have to watch what happens. But my follow-on is and, you know, you and I and Steve have talked about this often, but if I could kinda replay back to you a couple of things you said in your opening remarks about believing your stock is compelling value.

You're gonna return 60% of your free cash flow to shareholders. Your yield is almost 5%. Your capital structure is getting close to 45% debt. I don't really care too much about what the rating agencies say about it. Your equity holders are, you know, there was left after net debt.

Why are you continuing to prioritize share buybacks when you can easily confirm transfer value from debt to equity by paying down your debt because you've been buying back shares for three years. Your share price is down 57%..

Yeah. I would say, Doug, we've also, I mean, you look at the returns framework, we've also been buying back debt. And I think we've made meaningful progress on both fronts. And I think with the framework that we have in place today, you know, we will make progress on both fronts, both on the share side and the debt side..

Yeah. I Doug, I'd just say the same thing. We're working both sides of that. And, you know, you have a forty dollar price target on us, and you know, with that kind of potential appreciation, buying back shares is leveraging to our current shareholder base and a number of our shareholder base actually support the buyback pretty heavily..

Yeah. I gotta defend myself very quickly. Let me just say one thing, and that assumes a normalized discount rate, Steve. Which you're not gonna get with this capital structure given the volatility in your business. So if you don't fix the capital structure, your discount rate is not gonna normalize. That's kinda the thesis, but I'll leave it there.

I appreciate you answering the questions. I know it's not easy, but thanks for your time. Thank you..

Our next question comes from the line of Charles Meade from Johnson Rice. Your question please..

Good morning, John and Steve and the rest of the APA team there..

Good morning, Charles..

John, I wanna ask a couple of questions about what's going on with the asset base.

And I guess the first one would be, can you give us an update on what's going on in Alaska, specifically with the Sockeye exploration well, where you are on the progress, what you've seen, and particularly how that, you know, kind of, I guess, interacts or or or have it in reference to the to the activity you guys did in the last drilling season?.

Yeah. What I would say, Charles, is think the big difference is the operations are going extremely well and going very smoothly. You know, we are not in a position yet to comment on anything as we're not into the pay zones yet, but I can tell you things are on track.

And, you know, things are going extremely well operationally, and has been very smooth from that standpoint. So, you know, obviously, we're anxious to see the results and, you know, they'll be forthcoming. So, far, so good..

Got it. So just stay tuned there. And then John, going back to some of your prepared comments about the Permian specifically Howard County, I think you said that you guys have seen you're seeing better productivity in some zones and you're looking at some future downspacing.

My understanding of Howard County, you know, of course, it varies as you go from West to East, but that's the zones you have are good, but there's not as much, you know, stacked potential up and down the column. And in general, the spacing needs to be wider in Howard to get the same kind of EURs.

But wonder if you could talk about what you know, where in Howard County, what more specifically you're seeing with these with the higher productivity, whether just related to longer longer laterals, and perhaps, you know, if this is a different zone up or down the column that where you're seeing these positive results..

Charles, what I would just say is you're starting to press the northern boundaries. You know, and we did space these a little wider and quite frankly, the results have been fantastic. So we're excited about that.

I don't want to comment too much but, I mean, we've got some offset acreage so there's some other ramifications there, but we're very pleased with the results. They've been fantastic. And like I said, we'll be coming back and fortunately, we're gonna be able to space the wells on tighter spacing. But we'll come back with that.

Right? But we're very, very excited about the potential up there..

Okay. Well, stay tuned on that too. Thanks, John..

You bet, Charles..

Thank you. And our next question comes from the line of Scott Hanold from RBC. Your question please..

Yeah. Thanks. If we could stick with the Permian for a minute, could you talk to a couple of things? One, I guess, in your presentation deck, talked about delineating some zones there.

Can you just give us a sense of exactly what you're looking at and how much capital you're allocating to that this year? And secondarily, just in your Permian guidance, it does seem a little softer than sort of initial indications during the third quarter conference call. Just help me square the circle on that..

No. Scott, I would just say in Permian now, we've got eight rigs. They're lined out pretty well. That's why we will come back. There are some areas, you know, as always is the case, you're testing new zones and landing zones because we're always trying to build, you know, future inventory. So those the tests up in Howard County were two of those.

You know, later last year, and, you know, we always sprinkle a few of those in. In terms of, you know, the overall guide with Permian, you know, we were we were looking high level. As you looked at last year. You know, you were you're coming off of us and Cowen. Combined running eleven rigs. We ran those. We started to drop down in the third quarter.

You've seen us now level off at eight rigs..

Yeah, Scott. If I could maybe give a little bit more detail. And John was right. We weren't typically in the third quarter results. We give directional guidance. We weren't trying to give guidance for 2025 for the Permian, but I understand why some people may have taken it that way.

What we were basically saying is that 2025 wasn't since we had already come down to eight rigs by that time, 2025 was not gonna look like the fourth quarter. It was gonna look more like the third quarter. We were just kind of we were trying to give some directional view on that as opposed to precise guidance.

But if I think it for you to be able to understand what's going on in our Permian assets, you kinda have to understand the pattern of activity and the volumes associated with that. And John talked about it. In the first half, we were running eleven rigs, and we were turning in line on average seventeen wells per month.

Some of that included a little bit of duck activity, and some of it was drilling complete. In June, we started dropping rigs. We dropped one in June. We dropped one in July. Pretty quickly, we were down to eight rigs.

And by the time we got to the end of the year, we'd finished the duck population and we've gotten down to where we were turning in line eleven wells per month. And so what the we came into the fourth quarter at a really at a peak of production volume.

And if I talk about numbers that are that exclude our central basin platform that we sold on December 31st. We've peaked at production in the US at 140,000 barrels of oil a day in October. And then we began declining. We averaged 134 for the quarter, and the exit rate in December rather balanced between those two numbers, was 128. We exited that.

So that that's the 134 average, which was the average for the fourth quarter. So the 128 was where we entered the first quarter. We've had some weather some uncharacteristic amount of weather downtime so far in the quarter. That brings us down to, you know, we believe our first quarter is probably gonna average 125 to 127.

With that, though, I think what we've gotten to is we've gotten to a base of production volume with the eight rigs running for the most part since about September. That we're at a base production volume that we believe is sustainable through the year.

And that's why our average guidance for the year for the full year is 125 to 127,000 barrels a day as well. So, hopefully, that gives a little bit more of the color behind why that's the why that's the case..

Yeah. No. No. I appreciate that. It's good color. I mean, a lot of tough questions you guys are answering today, but you I think you guys know what you need to do. Let me turn my second question to Egypt. Obviously, you know, the gas opportunity is encouraging.

And can you give us a sense of when you when you look at your think it's twelve rigs you're gonna be running this year there.

How do you balance those between oil and gas drilling? And is that going to change? And maybe a little color around what kind of infrastructure do you need to support the growth that could occur over the next couple years in gas?.

Scott, we had to cut out when you said how do you balance I'm assuming how do you balance the rig count and then at the tail end, I heard you reference infrastructure.

Can you can you just reframe that real quickly to make sure we answer the right question?.

Yeah. I'm sorry if it went out. Yeah.

The question was, how do you balance your twelve rig activity this year between oil and gas drilling and what kind of infrastructure do you need to add to really get a lot more gas growth going forward if the returns are pretty strong under the new contract?.

Yeah. I'll step back. And number one, we're off to a really good start. And with the twelve rigs, we mentioned we picked up a rig in November. We dedicated that to gas and we kind of went after some things that were lower risk, that were high gas yields, with also some liquids and condensate. And so we've been able to drill a couple of really good wells.

We've been able to bring them into infrastructure, which is why we're running pretty strong on the gas side. We are because they're high pressure, we have backed out some lower pressure gas in some areas because of the infrastructure requirements right now. But it's got us very confident in the gas program.

And what you're likely to see us do is shift another rig or two to gas this year. So we'll probably maintain the twelve rigs, but we could run, you know, two to three rigs on the gas program. And quite frankly, we're anxious to get to some of the exploration targets as well.

But the first thing to do is let's go ahead and go after some of the targets that we know we can get online. Get those flowing through, and that's why you're seeing the you know, our kind of our average gas price starting to creep up as we're bringing on some of that new strong gas. So the nice thing is you step back across the five million acres.

We've got good infrastructure. At times, we've delivered. You know, this is the first time in a dozen years, really, where we've been able to start to flatten or bring our gas curve up. So there is infrastructure. But you know, it's gonna depend on what we find and how successful the program is.

As to where we need to, you know, eliminate the what I'll call, bottlenecks or capacity or find ways to pipe the gas into areas where we can treat it. Or if we do have to build new infrastructure.

So but in general, a good backbone of infrastructure very promising results, and quite frankly, we found a lot of gas in the Western Desert when we were looking for oil. So I'm really anxious to see as we start looking into some of the areas that we avoided because we knew they were gas rich, just what the capability would be..

Appreciate it. Thank you..

You bet..

Thank you. And our next question comes from the line of Leo Mariani from Roth. Your question please..

Hi. I want to follow-up a little bit more on Egypt. I just want to get a sense of what the receivable situation is these days.

Have you started to see a little bit more substantial pay down of that? And what's the kind of outlook you know, for that in 2025 in terms of getting some of your cash out?.

Yeah. Leo, we were just in Cairo, and we're fortunate enough for the Egypt show I did a keynote there, and we were able I was actually able to meet with the president. So you know, if you go back and look over the last two years, the past due balance has been moving within a pretty tight band with due to timing.

And so when you step back and look at it, they've been pretty much staying current on what they owe when the past due has not been really growing or shrinking. But we do have, you know, reason to believe that we'll make some progress on that. They're committed to making some progress on that.

And, you know, so I think we should see some progress made this year..

Yeah. And, Leo, if I could just add one thing to that. Some we in our supplement, we have a number of non-GAAP reconciliations in the back, and some people tend to look at those for working capital movements. It's not a pure working capital movement analysis, but it's somewhat it's characteristic of working capital movements.

And if you look at the Egypt portion of that non-GAAP reconciliation, you might believe there was a big increase in receivables in the quarter. That is not correct. Receivables were basically flat in the quarter. What happened was we had an increase in drilling long leads. So it's just inventory for the drilling program.

That's the working capital movement in Egypt..

Okay. Appreciate that. Wanted to jump over to the purchased oil and gas sales here. You guys are guiding to $600 million in 2025. Obviously referenced, you know, strip prices.

Was hoping maybe you could kind of give a little bit of breakdown there in terms of you know, roughly how much is from the Cheniere contract, versus how much is kind of from your domestic gas optimization business?.

Yeah. No problem. So if we look at 2024, the actual if I've round round up maybe slightly, the pipelines that the trading of gas around the pipelines from Permian Basin to the Gulf Coast was about $330 million and the LNG contract was about $170 million for a total of $500 million for 2024.

Pretty similar ratio for 2025 at this point according to strip prices, and there's lots of strip prices you gotta watch and all of that, obviously. The $600 million breaks down to about $400 million on the gas trading around the pipeline contracts, and about $200 million on the Cheniere LNG contract..

Okay. Thank you..

Thank you. And our next question comes from the line of Betty Jiang from Barclays. Your question please..

Hello. This is good morning. I want to go back and talk about the cost-cutting initiative because that's really a big part of the free cash flow expansion for us in the next few years. Just wanna understand.

Is there anything structurally changing how the organization is being run or the milestones that's being set to just give us a bit of comfort around your ability to hit on these targets? Like, how much the breakdown between capital cost savings versus operating G&A savings and maybe just give us a bit more color on how you are thinking about executing on those targets..

Yeah. I'd say, Betty, if you step back, and you look at, you know, our three buckets, the biggest bucket is obviously gonna be the capital. The next one's gonna be the LOE, and then the next one's gonna be the G&A.

And when you look at immediate impact that you can address, it's kind of in the reverse order, but you can address the G&A first and foremost. And so there's a lot of confidence in those numbers we've already gotten off to a pretty darn good start. As we mentioned in early January, we reduced the officer count by one-third.

We followed that on here recently with some of the support staff, you know, as well. I think the G&A piece is one that we're getting on to. And then some of the other ones take more time. As you really get into how we run the business, how we, you know, leveraging synergies, and how are you driving the cost out.

And some of that's with changes in technology and things that are taking place, you know, as you're seeing across corporate America today, you know, with this data and infrastructure and software, we spend a lot of money on those types of things.

And so I mean, it takes a little bit longer on some of those, and then the efficiencies on the capital program are the ones that also take a little bit of time. But I you know, we're dead set on, you know, on the benchmarking side and what do we need to do to drive us up into top quartile, you know, on the cost performance..

Yeah. And Betty, if I could just add a few things to that. You know, where did the $350 million target come from? I would emphasize it's at least $350 million. And as John alluded to, it did come from some fairly rigorous both internal and external benchmarking efforts. So we didn't just make the number up. It's actually got some science behind it.

And we do believe it is something that we should be able to attain at least. But some of that is going to take longer than just a year. That's why we've set this up as a three-year program.

We are not, at this point, providing a breakdown of that between capital and LOE and G&A, but as John said, by the time we get to the end of the three-year period, most of it's gonna come from capital. And then LOE and G&A will probably be competing for second and third probably somewhat similar amounts.

We do believe that the $350 million is probably on the conservative end. But we're gonna be talking about this pretty much every quarter now for the next three years. As we go through this process. So there's still a lot to unfold here, and we'll give more and more detail as we go through quarter after quarter, especially during 2025..

That's great. I'll look forward to that. Dos at DosMetrix. My follow-up will be on the inventory duration that you see in the Permian. As you start fully incorporating the Cowen assets.

What is your current assessment of your years of inventory life in both the Delaware and Midland today? Like, how many years you have of similar quality development if you continue at the current eight-rig pace..

Yeah. Betty, if we look at that today, we're confident we can see through 2029, you know, right into the next decade. And I think the track record and quite frankly, there's still a lot of stuff to characterize that we're working through. So, you know, we're confident that, you know, each year, we tend to add more locations than we drill.

And that's something that we're working on and, you know, you're starting to see a lot of the results come in on Cowen, which have been good. And so we're confident that we'll continue to add to that. This is always the case. But we've got really, really good visibility, you know, to the end of this decade. With the program that we're running today..

Yeah.

And again, if I could just add a bit to that, you know, the reason why John alluded to 2029 is on the free cash flow per share chart that we provided in the supplement, and, basically, what we've got embedded in the assumptions underneath that growing free cash flow per share is that Permian roughly holds flat through that time period, and we're very confident we can do that and probably beyond 2029.

We still have a lot of work to do on the Cowen acreage and for that matter, on our own acreage and getting fully characterized all of the acreage that we have and all of the potential landing zones. So and we know that the market is wanting to hear more about that. We're working on that.

Still kind of fully digesting the Cowen acquisition in that regard. And we'll come back probably later this year with a more detailed look at our full view of what our portfolio looks like and inventory looks like in the Permian and how long that will last.

But we're confident certainly beyond the it'll last beyond the range of that free cash flow chart..

That's great. Look forward to that. Thank you..

Thank you. And as a reminder, ladies and gentlemen, if you do have a question, please press star one one on your telephone. And our next question comes from the line of Bertrand Donz from Truist. Your question please..

Hey, morning, guys. Just following up on slide four. Assuming you keep the 60% shareholder return program in place, which I believe is the plan, it looks like this could result in, you know, repurchasing a substantial portion of the shares.

Just wanna understand how we should think about that, you know, that level of growing free cash flow versus the probably the natural desire to maybe increase activity a little bit or look externally to grow through, you know, acquisition? Just how do you balance those two?.

Yeah. So maybe I just take this opportunity to go through a number of the underlying assumptions on that free cash flow per share chart because I think they're important. It does assume that we capture and sustain $350 million of cost reductions.

And frankly, 2025 and 2026 through to 2027, free cash flow per share is driven primarily through that $350 million of cost reductions. It is after-tax cost reductions. And then, obviously, 2028 begins Suriname block 58 production volumes. And as I indicated, Permian volumes are held relatively flat through that five-year time frame.

Egypt, though, is actually on decline, similar to what we saw in 2024 and similar to what we're giving guidance to for 2025. And, actually, it does not include the Egypt production volumes in that do not include any of what we're seeing on the gas side right now because that's kind of fresh pretty fresh data. It includes all ARO and decom spend.

It includes exploration spend. As it's clear on the chart, we assume $300 million per year annually for the third-party trading activity and the Cheniere contract. We do stay and we build into that chart. Built into that is the 60% capital returns framework.

And to get to the answer of your on your question, the underlying assumptions in there are that we would in that five-year period, we would pay down $0.2 billion of debt. That's just the term loan that's existing now. Anything on the revolver and it includes bond debt that is. It would include $1.7 billion in dividends during that time frame.

And it would include share buybacks of around 52 million shares. We have a price expectation that's underlying in that chart that says we trade at a constant a fixed multiple of free cash flow. So those with the free cash flow increasing over time, those 52 million shares are bought back at an average price over the five years of $33.65.

So that's about $1.75 billion of share buyback during the five-year period..

That's helpful.

I guess the more to the question is, you know, if you're staring down, you know, this kind of free cash flow and if you don't see a price response in the shares, do you continue to buy back shares, or do you shift your strategy towards, you know, either production growth or external growth through acquisition?.

I mean, today, you're gonna continue to buy back stock and, you know, as we believe in the asset base and you look at what's coming on in the free cash flow. So you know, I think you continue to invest in yourself under those circumstances..

Understood. And then, just shifting gears, I appreciate the ARO disclosure for about $100 million this year. Just wondering if you could walk us through how that changes over time. Maybe your ARO and decommissioning costs over the next few years just directionally if that's all you can share? Thanks..

Yeah. So the $100 million of ARO this year is it's broken down. It's about $40 million in legacy Gulf of America abandonment. It's about $30 million of North Sea, and it's about $30 million of onshore US. That's the hundred. And then in addition to that, we'll spend about $70 million this year on Fieldwood.

I expect, other than the North Sea, I expect most of those to stay relatively flat. You'll spike from time to time just based on activities. But I think the North Sea will grow over time. We've talked about the profile of that. I think we talked about that extensively on the third quarter call.

And so the North Sea will grow and others will stay relatively flat here for the next year. Four, five years..

Thanks, guys..

Thank you. And our next question comes from the line of David Deckelbaum from TD Cowen. Your question please..

Thanks for taking my questions, guys. I just wanted to follow-up just on that. Appreciate it. I just wanna follow-up just for clarification on the Egypt gas agreement. Just to confirm, this pertains to new drilling activity. And I'm just wanna get a sense of, you know, the comparative economics that you see relative to oil opportunities there.

And how long the duration of this contract is for?.

No. It is on new gas and it's set up, David, to where it's on par. Right? We put gas on par with oil. And that's why we're comfortable shifting the rigs. And, you know, quite frankly, Egypt's short gas. We've been, you know, on decline on the gas side. And so it truly is a win-win, and you're seeing that impact. So it puts gas on par with oil.

It's on an incremental gas above an agreed decline curve. And, you know, you're seeing the impacts of that new gas, you know, come into our weighted average price..

Yeah. And I'd just add to that that when we say it's on par with oil, that's on a full cycle basis. So it does have built into it into that price. It has built into it the anticipated cost of any infrastructure build-out that we might need to do if we were to be meaningfully successful on the gas exploration program..

I guess it's still like I guess my follow-up is just to confirm. I know in the past, we've looked at sort of logistical constraints in Egypt around, you know, kind of big getting beyond the current rig counts.

So should we think of this, like, overall as the line real quick count and that you'll just be allocating between gas and oil opportunities here..

I mean, I don't think so. I think we're in a good place today. Where we've been able to work the, you know, the workover projects and recompletions down to kind of a steady state. With the twelve rigs we're running a day and the twenty workover rigs we're running pretty darn good place. That's not the concern constraint here would be top-line rig count.

It's really just gonna be getting to the opportunities. And initially, what we can do with the infrastructure. Right? So know, what we need to do is do exactly what we're doing.

Bring on the low-hanging fruit, which we're going after, then we need to get some of the, you know, the nicer prospects drilled, which would give us some clues into what we wanna do on the infrastructure. In the future..

Thanks, John..

Thank you. And our final question for today comes from the line of Neil Mehta from Goldman Sachs. Your question please..

Yeah. Good morning, John and team. I just want to spend some time on Suriname. And I guess this year is more about securing some long lead time items and recognizing the operator probably has a little bit more color here, but are you focused on, John, in terms of the milestones at that development for 2025 specifically..

No. I mean, I think we're off to a good start. As we said, CAP first quarter is a little heavy. Just because of some of the long leads that we've already purchased, some of the things with the FPSO and things. So we're tracking things well. Total's doing a fantastic job.

You know, we're digging in on the development plan and those things and continuing to look at the block's future potential in terms of, you know, exploration and those things. So in general, you know, it's gonna be a year of good progress. Let's say, yeah, Total is off to a really good start and doing an excellent job..

And then John, on the Permian, you've talked about a pretty flattish profile in terms of the production here.

Is there a scenario where you could accelerate production in that time horizon, do you feel like you have the inventory depth to do it or do you wanna run this business at plateau?.

I mean, you know, Neil, there's no doubt. I mean, you look at what we were doing last year with eleven rigs, it was at a much, much higher rate. And we feel like, you know, ratcheting down, running this at eight, we can run it relatively flat, which is the plan for, you know, for more than just, you know, 2025.

So it puts us in a pretty good spot, and that's why we've kinda rushed it down to this level. Clearly, there's inventory that you could ramp up.

But quite frankly, you know, we wanna get in here and get into execution mode and deliver we can drive some of the cost efficiencies out of the cost curve and really improve the free cash flow while running it flat..

Yeah. I could just add a bit to that. The thing that we talked about last year, probably on the third quarter call, was that strategically, we have a differentiated strategy around exploration, and with that type of a strategy and the investment that it requires, you don't need to be growing the base production volume in the Permian or in Egypt.

If you're successful on the exploration side, the exploration provides the growth for the future.

We just have this period of time 2025 to 2027 now that seems to be if we're producing flat from our core foundational portfolio, then our free cash flow is gonna be flat for three years and that's part of the impetus around the cost initiatives was to get that free cash flow per share moving up during that time frame as opposed to just waiting for Suriname growth to come across the hill in 2028..

Yep. That makes sense. And then driving your share count down in the process. Thanks, guys..

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to John Christmann for CEO for any further remarks..

Yeah. Thank you. Over the last several years, we have transformed the portfolio by building sustainability and duration in our two foundational assets, the Permian and Egypt. Will be complemented by our world-class development in Suriname with first oil expected in 2028.

We have set meaningful cost reduction targets we are confident we can deliver and see the potential to exceed these targets over time. This puts us on a path for substantial free cash flow growth in both the near and long term. With that, I will turn it back to the operator..

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day..