Houston-based APA Corp. will curtail some natural gas and NGL production in the US in the second quarter 2024 owing to weak Waha prices, company executives said during a May 2 quarterly webcast.
“Waha experienced severe basis differentials in March and April, we expect this will continue through much of May,” APA President and CFO Steve Riney said.
Constrained natural gas takeaway capacity out of the basin has forced Waha prices in West Texas into negative territory during the first quarter.
“As a result, we have continued to curtail gas into the second quarter and our second quarter guidance now reflects an estimated impact of 50 MMcf/d of gas and 5,000 bbl/d of NGLs related to the weakness at Waha Hub,” Riney said during his opening remarks during the webcast.
APA, with oil and gas production, joins gas-focused E&Ps that have cut back on production and well completions to weather the dismal gas price environment. CNX Resources, EQT Corp., Range Resources, Chesapeake Energy and Aethon Energy have all taken steps to reduce volumes or cut rigs.
On the gas said, APA curtailed substantial production at Alpine High — primarily in March in response to the extreme Waha basis differentials, APA CEO John Christmann said during the webcast.
“This dynamic has continued into the second quarter,” Christmann said.
APA recently completed the $4.5 billion acquisition of Callon Petroleum, which allows the company to build greater scale in the Permian Basin. The transaction was approved by APA and Callon shareholders in March and closed on April 1.
With the Callon merger complete, the Permian Basin will make up around 75% of APA, Christmann said.
“And we’ve been executing at a high rate on the Apache side. We’re anxious to provide those workflows on the Callon side. We have added a little bit of capital, which is going to work down some of the DUCs in the fourth quarter of this year,” Christmann said, which will give the company strong momentum to exit 2024 with a very strong fourth quarter.
“So, we’re very anxious to demonstrate that, and we’re very confident in what we can deliver from the Permian,” Christmann said.
Christmann said APA had been running 11 rigs in the Permian (four in Delaware and seven in Midland) since April 1 but that it would average 10 rigs for the remainder of 2024 as the company actively manages changes to the combined APA and Callon rig fleet.
“You will see the rig count change as we drop some rigs when their term ends and pick up other rigs more suitable for the planned drilling program. Similarly, we will be making a number of adjustments to our combined frac schedule,” Christmann said. “In terms of oil volumes… we expect US oil production in the fourth quarter [2024] to be around 152,000 barrels per day which represents an 11% growth rate from our second quarter [2024] guide of 137,000 barrels per day.”
APA’s standalone combined US production averaged 214,050 boe/d in the first quarter 2024. In the second quarter 2024, including production from Callon, APA expects its US production to average 303,000 boe/d and average 293,000 boe/d in 2024, reflecting the curtailments .
RELATED
APA’s Permian to Pick up Production Slack Amid Overseas Headaches
APA Alaska wells
APA set off on an Alaskan exploration plan in first-quarter 2024 to drill three wells.
“Our King Street #1 well confirmed a working petroleum system on our acreage, discovering oil in two separate zones,” Christmann said. “The other two wells, Sockeye #1 and Voodoo #1, were unable to reach their target objectives in the allotted seasonal time window due to a number of weather and operational delays.”
Christmann said APA was pleased with the early data from the wells, but said the company needed to get the rock data into the lab for analysis.
Although King Street was the smallest and most-risky of the three projects for APA, “there is a very positive read through in the Upper Zone at King Street for the big target in Voodoo, so it’s very exciting. And if anything, it has us feeling even better about the program and the acreage going forward,” Christmann said.
Christmann said the Alaska acreage is “truly wildcat area” and APA has provided up the petroleum system.
“I mean we’ve moved 70 miles to 90 miles east of [a] working hydrocarbon system,” he said. “We’ve proven oil, and there’s also very high-quality sand there. So, a lot to get pretty excited about going forward in Alaska.”
Christmann said it’s highly likely the company will re-drill both prospects.
“It’s something we’ll be working through with the partners over the next several weeks. But at this point, it’s something that could be done in 2025,” Christmann said. “It doesn’t have to be done in 2025, but we’ll be working through the partners with that.”
