HOUSTON Aug 6, 2015 (Thomson StreetEvents) -- Edited Transcript of Apache Corp earnings conference call or presentation Thursday, August 6, 2015 at 6:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Gary Clark Apache Corporation - VP of IR * John Christmann Apache Corporation - President and CEO * Steve Riney Apache Corporation - CFO * Tom Voytovich Apache Corporation - EVP of International and Offshore * Tim Sullivan Apache Corporation - SVP of Operations ================================================================================ Conference Call Participants ================================================================================ * David Tameron Wells Fargo Securities, LLC - Analyst * Leo Mariani RBC Capital Markets - Analyst * Brian Singer Goldman Sachs - Analyst * John Freeman Raymond James & Associates, Inc. - Analyst * John Herrlin Societe Generale - Analyst * Doug Leggate BofA Merrill Lynch - Analyst * Pearce Hammond Simmons & Company - Analyst * Bob Brackett Sanford C. Bernstein & Co. - Analyst * Michael Hall Heikkinen Energy Advisors - Analyst * Charles Meade Johnson Rice - Analyst * Mike Kelly Global Hunter Securities - Analyst * James Sullivan Alembic Global Advisors - Analyst * Edward Westlake Credit Suisse - Analyst * Michael Rowe Tudor, Pickering, Holt & Co. - Analyst * Richard Tullis Capital One Securities - Analyst * Jeffrey Campbell Tuohy Brothers - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon. My name is Suzi, and I will be you conference operator today. At this time, I would like to welcome, everyone to the Apache Corporation 2015 second-quarter earnings conference call. (Operator Instructions) I would now like to turn the call over to Gary Clark, Vice President of Investor Relations. Mr. Clark, you may begin your conference. -------------------------------------------------------------------------------- Gary Clark, Apache Corporation - VP of IR [2] -------------------------------------------------------------------------------- Good afternoon, everyone, and thank you for joining us on Apache Corporation's second-quarter 2015 earnings conference call. Speakers making prepared remarks on today's call will be Apache's CEO and President John Christmann, and CFO Steve Riney. Also joining us in the room is Tom Voytovich, Executive Vice President of International and Offshore, as well as Tim Sullivan, Senior Vice President of Operations. In conjunction with this morning's press release, I hope you have had the opportunity to review our quarterly earnings supplement which summarizes our operational activities and well highlights across various Apache operating regions. The supplement also includes information on our revised full-year guidance, capital expenditures for the quarter, as well as a chart that illustrates cash sources and uses, and reconciles Apache's change in net debt during the second quarter of 2015. Our earnings release, the accompanying financial tables and non-GAAP reconciliations and our quarterly earnings supplement can all be found on our website at www.ApacheCorp.com. I'd like to remind everyone that today's discussions will contain forward looks for the estimates and assumptions based on our current views and most reasonable expectations. However, a number of factors could cause actual results to differ materially from what we discuss today. The full disclaimer is located with the supplemental data on our website. And I would now like to turn the call over to John. -------------------------------------------------------------------------------- John Christmann, Apache Corporation - President and CEO [3] -------------------------------------------------------------------------------- Thank you, Gary. Good afternoon and thank you all for joining us today. I'm very pleased with our second-quarter results and the tremendous amount of progress we have made refocusing our asset base, strengthening our balance sheet and restructuring our operational organization. Importantly, we are continuing to deliver on our cost initiatives and we are exceeding our previously established production goals. During the quarter, we closed on the sales of our LNG business and remaining oil and gas assets in Australia, which served to more strategically align our portfolio with our core competencies. In doing so, we do greatly enhance our balance sheet strength and liquidity position. Additionally, we reduced our drilling and completion activities and overall spending to a level that is more in line with the current commodity price environment. We also realigned our management and regional operating structure to drive greater efficiencies and we implemented meaningful new initiatives to reduce overall G&A costs. Finally, we delivered strong production, both domestically and internationally, which is prompting us to raise our 2015 production. Looking ahead, we anticipate having a production momentum as we exit 2015, and believe that we will have the flexibility to live within 2016 cash flow, while maintaining relatively stable year-over-year production levels. Now I'd like to review our operational results in greater detail. During the second quarter, onshore North American production averaged 317,000 BOEs per day and once again came in ahead of our expectations. This was driven by strong operational performance across the entire portfolio and, in particular, from new well contributions in the Permian and the Eagle Ford. Our performance internationally was also impressive. Excluding Australia, pro forma production from international and Gulf of Mexico was 172,000 barrels of oil equivalent per day. Egypt was the significant driver during the quarter as delineation of the Ptah and Berenice oil fields continued to drive gross production sequentially higher. In the North Sea, our production declined modestly from the first quarter as a result of two seasonal platform maintenance turnarounds, but was still above internal expectations due to production efficiencies. We have also had recent drilling success in the North Sea, which I will discuss in a few minutes. Our performance on the capital side during the quarter was in line with our expectations. Expenditures on continuing operations before leasehold acquisitions, capitalized interest and noncontrolling interest were $857 million, which was down 28% from the first quarter. In addition to realizing service cost reductions, Apache is delivering solid drilling and completion efficiency gains, which is critical in this low oil price environment. At the beginning of the year, we took aggressive steps to address our cost structure and establish a plan to reduce drilling and completion costs by at least (inaudible) 2014 levels. Year to date we've already achieved a 15% reduction and are on a run rate for an approximate 25% reduction for the remainder of the year. We now believe that there are potentially even more cost savings over and above the 25% if oil prices remain at current levels. Our lease operating expenditures for BOE were down 13% year over year in the second quarter. And our G&A run rate is following quickly as a result of the overhead initiatives that we're pursuing on multiple fronts. Steve Riney will provide some more details in a few minutes on those items as well as some forward-looking guidance. As noted in our press release this morning, we've raised our full-year 2015 onshore North American production guidance to between 305,000 and 308,000 BOEs per day, the midpoint of which is up approximately 5,000 BOEs per day from our prior implied guidance. We are also effectively raising our international guidance as we now see production in Egypt and the North Sea up 5% to 8% this year on a pro forma basis, which is a notable increase from our previous guidance of up slightly. Looking at our onshore North American production profile for the remainder of the year we expect third-quarter production will be down sequentially from the second quarter. This is due primarily to monthly well completion timing, planned downtime associated with offset fracking operations, and planned facility and plant maintenance in the Permian. In the fourth-quarter, however, we expect a strong production rebound and project that December will be our highest production month in the fourth quarter absent any adverse weather events. Overall, we feel very good about our performance to date and our projected production momentum as we enter 2016. It is important to note that we are in the process of developing our initial 2016 plan as well as our five-year plan. This will put us in a better position to provide more thoughts around next year's production and capital outlook on our third-quarter call. I'd like to now discuss some of our key operational areas and activity plans for the remainder of the year. During the second quarter we operated an average of 34 rigs Company-wide, with 15 in North America, 12 in Egypt and 7 in the North Sea. In North America we completed 63 gross operated wells during the quarter, which was a 51% decrease from the first quarter. Despite the significant drop in completion activity, our onshore North American production grew by 9,300 barrels of oil equivalent per day sequentially. The majority of this increase was driven by the Permian Basin where we delivered strong new well results and experienced a bounce back from the tough first-quarter weather conditions and shut-ins. We consider our Permian Basin to be advantaged in this current environment due to a relatively low base decline rate of approximately 22%. This is aided by our Central Basin platform and Northwest Shelf assets, which represent approximately half of our gross production from the Permian, and have a decline rate of roughly 14%. We have several production enhancement initiatives underway including various water flood activities and ESP installations that serve to protect our base decline rate at a fairly low capital cost. In the Delaware Basin, we saw strong oil performance in the Pecos Bend area and generated positive results from our delineation and target testing. Drilling at our seven-well Osprey pad confirmed good performance from 660-foot down space wells and also helped to confirm an additional landing zone in the third Bone Spring formation, which appears to be performing as well as our primary target in the third Bone Spring. In the Waha area we placed our first two wells online during the last week of June. Initial results look encouraging and we will update you on this area next quarter. At our North American update on November 20 of last year, we shared an average well costs for the Delaware Basin of $8 million. Today we are drilling those wells in the mid-to-upper $5 million range, and our target is to get down closer to $5 million, which would represent an approximate 35% reduction from November 20. In the Midland Basin we ran three rigs during the second quarter, with one in our Wildfire area, one in Powell-Miller and one at Azalea. Our first four wells at Wildfire in Midland County showed strong 30-day average IP rates of 1,090 BOEs per day in the middle Wolfcamp. We plan to complete an additional eight wells in this area during the second half of the year, three of which will be drilled to the lower Spraberry. During the second half of the year we will be completing 11 wells in the Powell-Miller and Azalea areas which we anticipate will contribute solid results. Lastly, at Barnhart we brought on four wells during the quarter, which exhibited some of the strongest results we've seen to date across the field. In the Central Basin platform and Northwest Shelf we see numerous opportunities across our acreage position to continue drilling wells with high rates of return. We are currently focusing on areas such as the Cedar Lake Yeso play and the Seth Campbell Clearfork play, which are highlighted in our quarterly supplement. These plays are off relatively inexpensive drilling and completion costs, thus yielding very attractive rates of return in today's low commodity price environment. Turning to the Eagle Ford, during the second quarter we made important progress in optimizing our completion techniques and significantly improving flow rates on the four new wells we brought online. Our current focus in the Eagle Ford has primarily been in Area A at Ferguson Crossing in Brazos County. During the second quarter we brought online four key wells, two on our Walker pad and two on our Rae pad. The 30-day average IP of the two Walker wells was 1,935 barrels equivalent per day, which significantly exceed Apache's Area A type curve, and represents our highest flow rates in the Eagle Ford play to date. Based on these results we plan to add a rig back into the Eagle Ford at Ferguson Crossing during the second half of 2015, which will help us continue optimization and delineation of this highly prospective area. In the Midcontinent, which was formerly our central region, production was down 7% sequentially from the first quarter as a result of natural declines and reduced activity. During the second quarter we completed only 6 wells compared to 24 wells during the first quarter. Apache's primary focus in the Midcontinent is delineating our Woodford/SCOOP acreage, and continued testing of the Canyon Lime play. In the Woodford, we have one rig drilling and delineating our 50,000-plus net acres, primarily in Grady County, and we plan to add another rig in the fourth quarter of 2015. We recently brought online our first Woodford well of 2015 with very good initial results. The Truman 28-6-6 number 1H, a 16-stage, 4,400-foot lateral tested a peak rate of 392 barrels of oil and 6.9 million cubic feet of gas per day on a 20/64ths choke. We plan to complete at least three more Woodford wells this year, including a two-well pad that is waiting on completion, and another well which is currently drilling. In Canada, we had very little drilling and completion activity during the quarter. However, our production declined less than expected due to minimal weather-related down time. The next significant activity scheduled is the completion of our seven-well Duvernay pad in the fourth quarter of this year. Turning to our international operations, in Egypt Apache's continued exploration and development success is driving better than expected production volumes year to date. As noted in our press release we experienced positive results during the quarter at our Ptah and Berenice oil fields in the Faghur Basin. We now have nine wells online at these new fields producing a combined gross rate of more than 23,000 barrels of oil equivalent per. During the second quarter the Ptah-5X exploration well appraised the northeast flank of the Ptah field and is flowing at a restricted rate of 3,000 barrels of oil per day. We also drilled and completed our first development well which flowed at a 30-day average IP rate of more than 3,000 barrels of oil per day. Apache has five wells drilled in the Ptah Field, all of which are currently producing. In the Berenice field, Apache drilled an additional development well during the quarter that logged 93 feet of pay and is now online. This marks the fifth well drilled to date in the Berenice field, four of which are currently producing. Our current 2P reserve estimate for the Ptah and Berenice fields is approximately 50 million barrels, which we believe will require a total of 20 to 25 wells to fully develop. During the quarter Apache achieved an exploration success rate in Egypt of 78%, which is significantly above the Company's historical average. In the North Sea, two seasonal platform maintenance turnarounds reduced output by approximately 3,300 barrels of oil equivalent per day, but production still exceeded our internal plan. We anticipate a strong second half of the year which has minimal scheduled maintenance downtime. As a result, we now project that pro forma North Sea production will be flat year over year compared to our previous expectation of down slightly. In the Beryl field area, we made a significant exploration discovery with a 9/19B/K well which we refer to as the K Prospect. The well encountered 235 feet of net pay in two Jurassic age sandstone reservoirs. Apache's predrilled mean unrisked reserve estimate for the K Prospect was approximately 7 million barrels of oil equivalent. And given our initial test results we believe recoverable reserves are likely to significantly exceed this estimate. The field will be developed as a subsea tie back into the existing infrastructure. The K Prospect well was our first exploration well and only our tenth well drilled in the Beryl area since acquiring the field in 2011. We look forward to demonstrating the future reserve and production growth potential at Beryl. Also in the Beryl area Apache brought its first subsea development well on production at the Nevis central field. The S67 well encountered 114 feet of net pay and achieved an initial production rate of approximately 11,500 barrels of oil equivalent per day. Egypt and the North Sea continued to provide excellent diversification of the Apache portfolio and reduced the overall volatility of our cash flow profile in this low oil price environment. Returns at $50 oil in these regions are very economic and we plan to provide more detail around the portfolio depth and quality of these two businesses in the future. At the beginning of 2015, we established a conservative budget that assumed a $50 WTI and $53 Brent oil prices. Although prices came in above these levels in the first half of the year, the recent retreat in oil prices underscores the importance of our conservative budget and capital spending approach. As we enter the back half of 2015, Apache's achieving efficiency gains and cost reductions that are enabling us to increase our planned drilling and completion. In North America we are now planning to run an average of 16 rigs in the second half of the year, 13 of which will be in the Permian Basin, 1 will be in the Eagle Ford, and 2 we'll be drilling in the Woodford/SCOOP play. We now expect to reach total depth on approximately 40 to 50 more wells than our original 2015 plan, and to complete approximately 30 to 35 more wells than originally planned. Internationally we plan to average 17 rigs in the second half of the year, which is down slightly from the second-quarter levels. However, we plan to complete approximately 15 to 20 more wells than previously planned, most of which are in Egypt. This incremental activity will positively impact our production trajectory as we enter 2016, while having only a minimal impact on our full-year 2015 production volumes. In conjunction with this activity increase, we're tightening our capital expenditure guidance range to between $3.6 billion and $3.9 billion. Apache is staying within our dramatically reduced capital spending budget while at the same time exceeding our production goals for the year. Our strategy in this low oil and gas price environment is to continue working on our cost structure, continue investing in acreage and 3-D seismic, and continue key play delineation and target testing such that when it is time to ramp up our drilling program we will be doing so in the most efficient manner possible, which will maximize program rates of return and net present value. To sum up, we made very good progress in the second quarter. We completed our major asset sales and put our balance sheet in excellent shape. We reduced our drilling and completion program to levels that are appropriately aligned with the current commodity price environment. We realigned our regional operations structure to drive greater efficiency and technical collaboration. We made significant reductions at our run rate G&A and overhead costs. And we delivered strong production both domestically and internationally which resulted in an increase to our 2015 guidance. And with that, I would like to turn the call over to Steve Riney. -------------------------------------------------------------------------------- Steve Riney, Apache Corporation - CFO [4] -------------------------------------------------------------------------------- Thank you, John. And good afternoon. As John said, we had a very good first-half 2015 and we are very well-positioned even if the current low oil price environment persists. I would like to take some time to highlight the financial positioning of Apache and what we have accomplished in terms of driving down our cost structure consistent with the current price environment, utilizing divestment proceeds to reduce debt and to improve near-term liquidity, extending our credit facility to ensure liquidity through to June 2020, and aggressively adjusting our activity level to live within our means on an ongoing cash flow basis. But first, let me highlight the second-quarter financial results. As noted in this morning's press release, Apache reported a GAAP loss of $5.6 billion, or $14.83 per common share. This includes after-tax charges for a ceiling test impairment of $3.7 billion, as well as $1.9 billion of other items, mostly after-tax losses and tax expense associated with the Company's assets sold during the quarter. Our earnings for the quarter adjusted for these items were $82 million, or $0.22 per share. As in the prior two quarters, we experienced a ceiling test impairment in second quarter resulting from the continuing low price environment. Under full cost accounting, our upstream assets are carried at historical costs. Each quarter we compare this cost basis to a PV-10 value calculated using trailing 12-month average oil and gas prices held flat into perpetuity. To the extent the net book value exceeds the PV-10 valuation, the result is a ceiling test write-down. We expect further ceiling test impairments in the second half of 2015, as outlined in more detail in our 10-Q based on June 30, 2015 forward strip prices. For the remainder of this year we would expect to incur an additional $3.5 billion post-tax impairment. One notable impact of the ceiling test impairment on our financial results going forward will be a reduction to our unit DD&A rate. For example, our DD&A per BOE during the second quarter was 20% lower than it otherwise would have been as a result impairments taken in 4Q 2014 and 1Q 2015. Forward-looking impacts are uncertain as they will depend on many factors beyond just ongoing impairments. Let me now turn to costs. The following oil price environment and subsequent activity reduction across the industry has resulted in significant downward pressure on service costs and we're generally seeing lower trends in most major cost categories. More specifically for Apache, much of the improvement in our cost structure is being driven by our belief that we should prepare ourselves for the extended period of lower prices. Accordingly, we have put considerable effort into pouring over every aspect of our cost structure. Since the end of 2014, we have reduced headcount by approximately 20%, consolidated certain regional offices and streamlined the organizational structure. These actions are generating significant savings in our overhead cost structure. The measured of overhead costs can be complex from an accounting perspective. A good proxy for our overhead cost structure is the gross cash spend for everything above the field. At the end of 2014, these costs were running approximately $1 billion annually. The combined effect of our portfolio changes and extensive efficiency efforts across the organization will bring our current run rate to below $750 million. Our goal is to enter 2016 at a run rate around $700 million. These overhead costs show up in our financial statements in various places. On average about 20% typically appears in lease operating expense, 45% in expensed G&A, and 35% in capitalized G&A. Thus, these savings will manifest in many different ways. The bottom line, though, is it represents cash savings of about $300 million per year which can now be better utilized to create shareholder value. On the lease operating expense side, our second-quarter LOE was just over $9 per BOE, which is 13% lower than second quarter 2014. As John indicated, we believe in this price environment there will be continued downward pressure on all costs and this includes lease operating expenses. Next I would like to make a few comments regarding our balance sheet position and liquidity. While we have certainly accomplished a lot in terms of focusing our portfolio, we have also improved our overall financial strength. In particular we have reduced debt levels, extended our credit facilities, and we are now eliminating certain nearer-term debt maturities. Our proceeds from divestments enabled us to pay off $2.7 billion of short-term debt in the second quarter. We ended the quarter with long-term debt of $9.7 billion, and nearly $3 billion of cash, and have recently initiated steps to pay off $900 million of outstanding 2017 bonds. Following this we will have no long-term debt maturing prior to 2018. As mentioned in our 1Q call, the sale of our foreign assets and the repatriation of the proceeds triggered a US income tax payable of $560 million. Actual cash payment of this liability will occur in the second half of 2015. So, I would like to point out that our current net debt of $6.7 billion should be considered as being closer to $7.3 billion. As of June 30, 2015, Apache held access to an undrawn commercial paper program backed by our $3.5 billion credit facility which was recently extended through to June 2020. Combined with our current cash position and the maturity profile of our long-term debt, our liquidity is in very good shape. Having established this position we're also working hard to protect it. As John has indicated many times, we are aggressively working to live within our means on a cash flow basis. Obviously that was a difficult task for the first half of the year as prices declined rapidly and activity took time to ramp down. John spoke previously about our activity level for the second half of 2015. We are positioning our second-half exploration and development activity at a pace that if continued would target cash flow neutrality for 2016. Our goal has been and continues to be to live within our means on a cash flow basis. We've taken significant actions to achieve this and it has proven to be prudent course. However, we want to balance these efforts with continued investment in an inventory of high-quality opportunities that still work in this price environment. We have made great strides to position the Company to be successful in a low commodity price environment. We knew that if we could be successful at $50 oil we would certainly be successful at higher prices. The Company is in a solid foundation with a healthy balance sheet, substantial liquidity, an improving cost structure commensurate with the price environment, and a capital activity plan to live within our means as we enter 2016. We will remain opportunistic but highly disciplined in the manner that we allocate capital in this challenging environment. I look forward to a successful second half of the year. And we'll now turn the call over to the operator for Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) David Tameron, Wells Fargo. -------------------------------------------------------------------------------- David Tameron, Wells Fargo Securities, LLC - Analyst [2] -------------------------------------------------------------------------------- Congrats on a good quarter. John, how do you think about the price level here when you're $45 versus $50 versus $40? At what level would you see yourself going the other way and pulling back a little bit? -------------------------------------------------------------------------------- John Christmann, Apache Corporation - President and CEO [3] -------------------------------------------------------------------------------- Dave, I think the first thing is we took a more conservative approach early in the year when we carved out a $50 budget back in February. It's put us in a position where we've been trying to get our heads around what $50 means and working harder on our cost structure. I think clearly when you look at the activity increase, while we're adding back three rigs in North America it's really going to be just one rig increase over what we ran in the second quarter. So, we're trying to streamline our activity with where we envision things would be in that price range, as you mentioned. I think the good news is we've got flexibility. And as we're working on our plans for 2016 right now, and we'll work on it even harder, but we've got flexibility to move up or down from this point. So, the first thing was to synchronize with this price environment and we'll maintain flexibility that we could ratchet down or ratchet up a little bit if necessary. -------------------------------------------------------------------------------- David Tameron, Wells Fargo Securities, LLC - Analyst [4] -------------------------------------------------------------------------------- Okay. And then as a follow-up, circling back to 2016, you mentioned within cash flow, you could show some, I think you said, modest growth or keep production level where it's at. Are you assuming the current strip? And what framework, what metrics should we think about for 2016? Is it going to be within cash flow? Is that the driver there? Can you just talk more about that? -------------------------------------------------------------------------------- John Christmann, Apache Corporation - President and CEO [5] -------------------------------------------------------------------------------- First of all, we've got a deep inventory of projects that work at low prices, so we feel good about the inventory. I think the key is we do, and we've said from the get-go this year, we had a heavy outspend Q1. I think we did an excellent job of getting in line in Q2. So, as we start to think about 2016 we do want to be in line within cash flow and living within our means. We're working through our planning process right now in great detail. And as that becomes a little bit more clear and we think about it as we work through it we'll be able to give a little bit more color on the next call. But in general I think the important thing is we've proven what we can do this year on a much slower decreased CapEx budget. We've proven that our dollars are going further. And I think with the initiatives we have and the way the cost structure, the G&A, we're going to be able to do more with even less capital in 2016, if necessary. -------------------------------------------------------------------------------- David Tameron, Wells Fargo Securities, LLC - Analyst [6] -------------------------------------------------------------------------------- All right. Thank you. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Leo Mariani, RBC. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [8] -------------------------------------------------------------------------------- I just want to see if I could get some comments on the current M&A market. I know you guys had talked previously in the year about trying to grab more acreage and looking at acquisition opportunities. -------------------------------------------------------------------------------- John Christmann, Apache Corporation - President and CEO [9] -------------------------------------------------------------------------------- Leo, two things. Number one, I think when you look at the acreage market out there, there's stuff off the beaten path I think we'd be interested in. We don't budget for that but we're clearly always looking for things that work in low price environment. I think when you step back and look at the bigger picture M&A market right now, some of the price decks that have been used to justify some of those transactions I think have been relatively high. And I think if you go back to our portfolio, at $80 we've got a lot of inventory that works. So, from my standpoint we would look at things incrementally. The good news is we've taken the steps to put our balance sheet in great shape so we've got capacity, we've got a credit facility in place, and we've outlined our cost structure and our activity levels to current. So, we've got lots of flexibility. I think the key is we've got a good portfolio and it would have to meet something that made sense incrementally to what we could add. I think in general the market's been a little pricey. These latter transactions have been using a pretty higher deck than I think what's bearing out right now. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [10] -------------------------------------------------------------------------------- Okay. Just thinking about your most resilient assets and where you have the deeper inventory, in the low oil price environment here, should we continue to think Egypt and Permian get the lion's share of capital as you work your way into 2016? -------------------------------------------------------------------------------- John Christmann, Apache Corporation - President and CEO [11] -------------------------------------------------------------------------------- As we look at the back half of the year, we'll run approximately 16 rigs in North America. 13 of those will be in the Permian. We'll have 5 in the Delaware, like we maintained all year. You'll have the other 8 in our Midland Basin and Central Basin platform Northwest Shelf. You'll see a sprinkle a few more rigs into the Midland Basin second half of the year. You'll also see 1 to 2 rigs from us in the Woodford, which is working quite well in the low price environment. And with the results that we mentioned on our Walker wells and the Eagle Ford we're pretty excited about that, as well. So, when I look at North America, you'll see most of the work being in the Permian. Internationally, quite frankly, both Egypt and the North Sea compete very well and have great rates of return in terms of those projects. We've scaled back there this year like we did in all the other areas. But we've got good inventory there. If you look at what we're doing with Ptah and Berenice, we've now got 10 wells on producing more than 23,000 barrels a day, and that's constrained with facilities. There's room for that number to go higher, and it's going higher as we speak. So I think we've got a lot of inventory at low prices that's going to keep us busy for a long time. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [12] -------------------------------------------------------------------------------- Okay. Thanks, guys. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Brian Singer, Goldman Sachs. -------------------------------------------------------------------------------- Brian Singer, Goldman Sachs - Analyst [14] |