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Apa (APA) Q3 2023 salary call Transcript | Killexams.com Resources

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Apa (APA -0.seventy three%)Q3 2023 income CallNov 02, 2023, 11:00 a.m. ET

Operator

first rate day and thank you for standing by using. Welcome to the APA organisation's third-quarter 2023 results convention call. at present, all participants are in a pay attention-handiest mode. After the audio system' presentation, there should be a question-and-reply session.

[Operator instructions] Please be suggested that cutting-edge conference is being recorded. i might now want to hand the conference over to your first speaker these days, Gary Clark, vp of investor relations. Please go forward.

Gary Clark -- vice president, Investor members of the family

respectable morning and thanks for becoming a member of us on APA business enterprise's third-quarter 2023 financial and operational consequences conference name. we can start the name with an overview with the aid of CEO and president, John Christmann. Steve Riney, govt vp and CFO, will then give extra color on our outcomes and outlook. also, on the call and accessible to answer questions are Dave Pursell, executive vice chairman of building; Tracey Henderson, executive vp of exploration; and Clay Bretches, government vice president of operations.

Our organized remarks will be about 10 minutes in length with the the rest of the hour dispensed for Q&A. along side yesterday's press free up, i'm hoping you might have had a chance to overview our fiscal and operational complement, which can also be found on our investor relations web page at investor.apacorp.com. Please observe that we might also discuss definite non-GAAP fiscal measures . A reconciliation of the adjustments between these non-GAAP economic measures and probably the most directly comparable GAAP financial measures will also be present in the supplemental tips provided on our web page.

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in keeping with previous reporting practices, adjusted production numbers referred to in cutting-edge call are adjusted to exclude noncontrolling pastime in Egypt and Egypt tax barrels. i'd like to remind all and sundry that brand new discussion will contain forward-searching estimates and assumptions in keeping with our latest views and cost-efficient expectations. youngsters, a number of components may cause actual outcomes to vary materially from what we focus on these days. the total disclaimer is discovered with the supplemental suggestions on our web site.

And with that, i could flip the name over to John.

John Christmann -- President and Chief government Officer

decent morning and thanks for joining us. On modern call, we are able to exam third-quarter highlights, talk about our outlook for the fourth quarter, and provide a high-stage overview of our capital plan and expected production in 2024. For the third quarter in a row, adjusted oil production surpassed the excessive end of our counsel latitude. first rate execution and robust well efficiency within the Permian are the primary drivers of this fashion. We additionally achieved the excessive end of our tips within the North Sea all through the quarter, which benefited from the construction ramp of the Storr North well.

In Egypt, gross oil volumes grew by means of approximately 4, 000 barrels per day, which turned into a bit of under expectations as prior to now disclosed. On a complete company basis, third-quarter suggested oil volumes have been up more than 15% from the equal quarter within the prior yr, and we are very joyful with this growth. undertaking within the U.S. and Egypt remained regular whereas we suspended drilling recreation around midyear within the North Sea.

Our funding application in the North Sea is now directed toward defense, base creation management, and asset protection, and integrity. In Suriname, we carried out a really vital milestone all the way through the third quarter with the completion of a a success appraisal drilling application at Krabdagu on Block 58 and the following announcement through our companion, TotalEnergies, of plans to proceed with FEED work for a 200,000 barrels per day FPSO within the eastern component of the block. The deliberate oil hub is underpinned via an estimated seven-hundred million barrels of recoverable oil aid at Sapakara and Krabdagu and is centered FID through the end of 2024. Turning now to our outlook. In the day prior to this's financial and operational complement, we issued fourth-quarter assistance which anticipates slightly lessen construction on a BOE groundwork in comparison to the third quarter. The basic contributor is in the North Sea the place the transient shut-in at Beryl Bravo will effect in volume deferrals of about 5,000 barrels of oil equal per day. in the U.S., completion timing will lead to a comparatively flat quarter consisting of unchanged oil production and a small decline in herbal gas.

And in Egypt, a combination of greater oil and reduce natural gasoline volumes should convey BOE increase but no longer ample to thoroughly offset the downtime within the North Sea. Let me supply a bit of greater colour on creation operations in Egypt. In February, we based a gross oil goal of 154,000 barrels per day for the fourth quarter. We now estimate that quantity should be nearer to one hundred fifty,000 barrels per day, which is up about 5,000 barrels per day from the third quarter. After efficaciously working throughout the challenges associated with ramping our rig count number from eleven to 18, our drilling application is now performing as planned. besides the fact that children, we've skilled a growing to be backlog of workover tasks over the last two quarters and a corresponding uptick in barrels offline.

To address this, we've begun to boost our workover endeavor, which Dave can focus on further in Q&A. all through the fourth quarter, we are opportunistically accelerating the completion of eight Permian wells from January into December and adding a sixth rig in the Delaware Basin. this could effect in an increase in our estimated fourth-quarter upstream capital to round $500 million and bringing full-yr upstream capital to simply beneath $2 billion. I should observe that these investments will not have a cloth affect on fourth-quarter construction. As we typically do at the present of 12 months, i need to deliver a high-stage overview of our 2024 outlook, which we can comply with up with formal suggestions in February.

do not forget that we entered 2023 with a deliberate upstream capital funds of $2.0 billion to $2.1 billion. As of these days, we predict an identical latitude in 2024, albeit with some adjustments in regional allocation. we are concentrated on low single-digit oil construction boom next year with anticipated increases in the Permian and Egypt greater than offsetting declines in the North Sea. APA continues to be dedicated to returning as a minimum 60% of our free money circulate this calendar year to shareholders. all over the first three quarters of the yr, we generated $673 million of free cash stream, 65% of which we return to shareholders by way of dividends and stock buybacks. This leaves greater to do in the fourth quarter, and we will fulfill our minimal 60% dedication for the whole year.

one of APA's core principles is to supply oil and fuel safely and to cut back the environmental have an effect on of our operations. i'm completely satisfied to announce that we recently achieved a crucial milestone in decreasing methane emissions with the conversion of over 2,000 pneumatic devices in the Permian to decrease-emitting technologies. Our courses to identify and dispose of emissions throughout our world asset base are ongoing, and we continuously are looking for to expand and improve them. In closing, we are committed to our strategy of retaining a varied portfolio and keeping operational flexibility to reply right away to commodity expense volatility and other externalities. we're demonstrating this nowadays during the reallocation of capital from the North Sea into the Permian and Egypt. We also continue to be committed to investment in a portfolio of exploration tasks which have the abilities to force differentiated future growth and aggressive full-cycle economics.

And with that, i will turn the name over to Steve Riney.

Steve Riney -- executive vice chairman, Chief economic Officer

thank you, John, and good morning. For the third quarte, below generally approved accounting ideas, APA pronounced consolidated net profits of $459 million, or $1.49 per diluted typical share. As regular, these outcomes include objects that are outdoor of our core salary, essentially the most colossal of which turned into a $ninety three million release of a valuation allowance on deferred tax assets. This was offset through a loss on the quarterly mark to market of our Kinetik stock possession and unrealized by-product losses on our Waha groundwork swaps. except for these and other smaller gadgets, adjusted web earnings for the third quarter turned into $410 million, or $1.33 per share.

Free cash move, which, for external purposes, excludes adjustments in working capital, become $307 million in the quarter. via dividends and share repurchases, we lower back 32% of this quantity to shareholders all over the quarter. As John indicated, 12 months so far, we have lower back 65% of free cash move to shareholders. Please refer to APA's published definition of free cash circulation for any reconciliation wants. In our 3Q salary pre-unencumber, we expected G&A rate can be vastly better than our underlying run cost of charges, which is round $a hundred million.

For the quarter, suggested G&A became $139 million usually as a result of APA stock price appreciation and the mark-to-market impact on in the past accumulated share-primarily based compensation. As we've defined in the past, the mark to market of share rate actions also affects LOE, capex, and exploration expense. hence, these gadgets had been also better throughout the third quarter for a similar cause. North Sea taxes also got here in above tips in the quarter by using $forty six million. This became the influence of an incremental cargo lifting late in the quarter, which became no longer predicted at the time we supplied 3Q guidance in August.

in keeping with often approved accounting principles, we recognize cargo liftings within the quarter they turn up, which increases revenue and existing tax expense but has no impact on said construction volumes. To be clear, even though, this is just a move of profits and earnings tax cost from the fourth quarter into the third quarter and has no influence on our expected full-12 months North Sea creation, earnings, or profits tax cost. As previously noted, our Cheniere gasoline revenue contract commenced on August 1st and contributed two months of free money move in the third quarter. you are going to discover this have an effect on on our P&L within the two line items which seize the profits and costs associated with oil and gas bought for resale. within the third quarter, the Cheniere contract contributed free money circulation and pre-tax salary of $32 million. We at the moment count on it will make contributions about $90 million within the fourth quarter and $375 million for the full-12 months 2024.

In closing, as anticipated, the 2d half of 2023 is poised for improving production and free money circulation versus the first half of the 12 months. With the improving performance, we're tracking very close to our customary full-12 months tips across most of our key economic and operational metrics for the yr. we can proceed to come capital to shareholders via dividends and share repurchases. And while our balance sheet is lots improved than a few years ago, we continue to respect the want for additional progress on debt reduction. And with that, i'll turn the call over to the operator for Q&A.

Operator

thanks. [Operator instructions] And our first query comes from Doug Leggate with bank of the usa. Doug, your line is open. Please go forward.

Doug Leggate -- bank of the us Merrill Lynch -- Analyst

thank you. I believe Gary just lost a bet on name pronunciation, however thanks, thanks. Thanks for getting me on. Guys, the North Sea, i'm wondering in case you can offer a bit bit of color on what your -- what you see is the decline curve there with out a capital.

And where i go with here is, without doubt, you have got got, I agree with, the gas compressor, you comprehend, these are all of your assets. I guess you might be having to take it off the platform etc. that is going to come back. and obviously, production will decline because you're not spending any cash.

but my query is, how does the decline appear versus the free cash stream within the North Sea? It strikes me that the free cash stream and a declining curve may basically be bigger.

John Christmann -- President and Chief executive Officer

Yeah, Doug, it's a -- it's a fine question. You be aware of, we're in the procedure at this time working in the course of the 2024 plan. You be aware of, certainly, we have got some downtime that we now have announced within the North Sea in the fourth quarter as we do have a compressor that we had to haul, you be aware of, onshore. we are going to get that again on, you understand, sometime early subsequent yr.

after which, you're going to be lower back at your -- you recognize, your base decline, you recognize, both for 40s and barrel. Forties, you be aware of, these underwater floods which received, you know, a lot lower decline than barrel. but we would not have the rig. we are going to proceed to, you understand, focus on renovation, integrity initiatives, and we are going to come lower back early next yr with -- you understand, with a detailed look once we give out the '24 plan.

Doug Leggate -- bank of the united states Merrill Lynch -- Analyst

however is it reasonable to assert that, versus 2023, should you were spending capital, that free cash stream could be higher, John?

John Christmann -- President and Chief government Officer

I consider or not it's early on the --

Steve Riney -- govt vice president, Chief financial Officer

Yeah, Doug, appear -- yeah, I believe as -- as John became about to assert, I feel or not it's a little early to -- to state that for 2024, or not it's definitely a opportunity. but let's -- let's get to February, we will have a detailed plan. and then, we will -- and we are going to recognize kind of what -- what class of price atmosphere we're as smartly, and we'll have a better -- improved analysis on that at that element in time.

Doug Leggate -- financial institution of the us Merrill Lynch -- Analyst

All appropriate, thank you. John, my comply with-up is in Suriname. I managed to get a red eye to complete's analyst day there this year. and that i requested Patrick a very selected query about timing, and i wanted to get your standpoint on this.

What my realizing is that the 2028 time table for first oil assumes a 42-month newbuild FPSO. however considering that announcement, I take into account that SBM has been chosen with an early haul. In other words, a yr previous on that timeline with some 70% expected to be shriveled on the time of FID. i do know you might be not the operator, however i ponder in case you might confirm or present any color round these -- those points.

John Christmann -- President and Chief executive Officer

Yeah, i'd simply say, for now, I imply, you comprehend, form of the reputable timeline is FID through the conclusion of '24 and, you know, first oil by way of 2028. but most likely, you know, there is incentive and motivation to are attempting to speed up that. and that i would expect that they will do every little thing they could to achieve this.

Doug Leggate -- bank of the usa Merrill Lynch -- Analyst

fair ample. Thanks, guys.

John Christmann -- President and Chief govt Officer

thanks.

Operator

Stand by for our next caller. and that's John Freeman with Raymond James. John, your line is open. Please go forward.

John Freeman -- Raymond James -- Analyst

decent morning, guys.

John Christmann -- President and Chief government Officer

decent morning, John.

John Freeman -- Raymond James -- Analyst

Yeah, the primary question I had, on the six rigs, it's -- it is getting brought in the Permian rule, is the plan for that rig to operate exclusively in the Delaware or potentially toggle between Delaware and Alpine high?

John Christmann -- President and Chief govt Officer

John, it be a -- it be a spot rig we're deciding on up, it should kind of go pad to pad. it is going to birth in the Delaware on, you understand, some oil pads, but then there is flexibility, and, you recognize, we'll come lower back in February with a bit greater aspect definitely on the -- you comprehend, the 2024 plan and the way that could take a seat.

John Freeman -- Raymond James -- Analyst

ok, and then, simply my follow-up query, I respect the -- the preliminary sort of outlook on 2024. If I take sort of what you noted concerning the price range being in a form of flattish versus -- versus '23 and that i suppose about like, you recognize, the six rigs it really is -- that is largely type of funded with the North Sea capex reduction, and then, Egypt, you might have pointed out previously is sort of reputation quo subsequent yr, and so it looks like just of your -- your three main working areas, it really is kind of flattish within the wild playing cards variety of exploration. become your commentary about form of a flattish finances, does that -- is that all? And does that encompass the exploration aspect? in case you can sort of just walk us via variety of how you see the exploration in a -- in a 12 months the place there's likely a step-down in activity and Suriname FID?

John Christmann -- President and Chief govt Officer

Yeah, John, it's a very good query. sure, it -- it comprises about $a hundred and fifty million of exploration. I feel you laid it out pretty precisely. you are going to see, you be aware of, a full 12 months with out drilling within the North Sea.

you're going to see a rise within the Permian; noticeably, you be aware of, reliable drilling strains in Egypt; and you'll see 100 and -- about 100 and half in terms of exploration is what we're sketching out at this factor. So, you be aware of, extraordinarily good software with persisted exploration funding like now we have completed over the -- you recognize, the last a couple of years.

John Freeman -- Raymond James -- Analyst

Thanks, John. I recognize it.

John Christmann -- President and Chief executive Officer

You wager. thanks.

Operator

Our next query comes from Bob Brackett with Bernstein analysis. Bob, your line is open. Please go ahead.

Bob Brackett -- AllianceBernstein -- Analyst

Yeah, first rate morning. You observed -- in terms of the Permian, if we think about 12 net completions in 3Q, you might be sort of riding flat creation Q on Q and 4Q; 20 web completions in 2Q allowed you to grow right here quarter. And it sounds like you've already connected 12 wells in October with 18 coming in the rest of the Q. Does that indicate a good looking mighty cadence into variety of 1Q of next yr in terms of the Permian?

Dave Pursell -- government vice president, construction

Yeah. it's a -- it be an excellent question. You understand how -- how timing of completions drives the quarterly production cadence. here is Dave Pursell, incidentally. The -- the final completions this quarter could be weighted extra toward December, after which we'll -- we'll supply you in February with what the -- the cadence of completions appears like in -- in '24. And as that you can think about, the -- they may nonetheless be some lumpiness. And we will give that in February once we get the plan finalized.

Bob Brackett -- AllianceBernstein -- Analyst

ok, quick comply with-up. If there's an FID in '24 around Suriname, does that alternate that capex budget of 2.0 billion or 2.1 billion, or it be variety of a rounding error?

John Christmann -- President and Chief govt Officer

No. At this aspect, we now have factored that in, Bob.

Bob Brackett -- AllianceBernstein -- Analyst

ok, very clear. thank you.

John Christmann -- President and Chief executive Officer

thank you.

Operator

Our subsequent query comes from Neal Dingmann with Truist Securities. Neal, your line is open. Go forward.

Neal Dingmann -- Truist Securities -- Analyst

Thanks for the time. So, my first query is just on Egypt. i am simply wondering if the '24 plans will continue to have form of an analogous level of exploration and building recreation. And if so, you be aware of, should still we assume someplace around -- I suggest, for your estimate, around that variety of identical drilling success next year?

John Christmann -- President and Chief government Officer

Yeah, Neal, program, it might be, you comprehend, pretty solid. We're running 18 rigs in Egypt, and also you be aware of, it's a steady eating regimen of each construction and exploration and expect that to be very an identical subsequent year. And we do, you comprehend, expect to be able to proceed to display decent growth in Egypt.

Neal Dingmann -- Truist Securities -- Analyst

Very respectable. Then my 2nd, John asked a bit bit on this, however simply on the Permian gasoline plans, i am simply curious in case your choice, you know, if and when to move lower back and boost that activity, is that primarily based greater on how these gassy well economics compete in opposition t your oily Southern, Midland, or Delaware economics? Or is it simply without problems if these gas returns deliver, you recognize, a certain -- definite fee of return?

John Christmann -- President and Chief executive Officer

Yeah, I imply, it be truly greater a function of, you recognize, balance within the Waha pricing. And, you know, the -- the wells we've drilled this 12 months were robust and, you know, very competitive. I mean, I think at $three Waha, they're very very aggressive with Permian oil. So -- but it's actually extra a characteristic of, you know, after we consider we will have balance there at Waha that, you know, that you would be able to produce them into the infrastructure.

Neal Dingmann -- Truist Securities -- Analyst

best. Thanks, John.

John Christmann -- President and Chief government Officer

Mm hmm.

Operator

Our subsequent question comes from Scott Gruber with Citigroup. Scott, your line is open. Go correct forward.

Scott Gruber -- Citi -- Analyst

Thanks. just coming lower back to Egypt, you outlined growth subsequent year, is that going to be on a year-over-yr foundation, or do you suppose the exit -- exit can be up as well?

Steve Riney -- government vice chairman, Chief fiscal Officer

Yeah, we will give you the -- the details after we -- we roll out the plan in February. however we are going to -- we will exhibit growth -- we will reveal increase absolutely 12 months-over-12 months and subsequent. however let us -- allow us to give you those particulars in February.

Scott Gruber -- Citi -- Analyst

adequate, and then, you recognize, just feel concerning the next few years, you've got a project that should be relocating ahead in Suriname and obviously have the elevate from complete at the least a $1 billion or so of commitments. are you able to just communicate as to whether that affects your capital allocation across the leisure of the portfolio on a multiyear basis?

John Christmann -- President and Chief govt Officer

Yeah, I suggest we seem at the multiyear plan. and that's the great thing about the lift is it's going to maintain it in a very very manageable place from the place we've been. So, you be aware of, I mean, we in fact structured that deal, you know, banking on success, and you may see that, you understand, delivery to comply with through if we move through the subsequent phases. So, we've got to FID a undertaking first, however -- however that's the place the raise will kick in.

Scott Gruber -- Citi -- Analyst

acquired it. admire it.

John Christmann -- President and Chief executive Officer

thank you.

Operator

Our subsequent query comes from Roger read with Wells Fargo Securities. Roger, your line is open. Go forward.

Roger read -- Wells Fargo Securities -- Analyst

Yeah, thanks. respectable morning. only a comply with-up. Egypt had a little release of capital or working capital this quarter. simply how do you feel that appears going forward? And also, in Egypt, since they've had some gasoline concerns involving imports in the Med, any interest or drive from Egypt to have you ever raise gasoline production there? Or is that whatever that -- that could ensue in '24, it's now not definitely a reasonable assumption given places of fields and, you know, takeaway means, and so forth.?

John Christmann -- President and Chief government Officer

there may be little doubt Egypt, you be aware of, needs extra gas creation. We're -- we're flowing everything we will into the grid, which is where our gasoline goes. You understand, our application has been focused on oil as we get hold of 2.65 per MMBtu there. but, you know, brief time period, there is not anything we might do to increase gasoline construction. but there are some longer-time period initiatives, but we would need to work on a more robust gasoline fee there.

Roger read -- Wells Fargo Securities -- Analyst

and then, on working capital --

Steve Riney -- executive vice chairman, Chief economic Officer

Yeah, on the working capital, here is -- here's Steve. So, we did have a rise in working capital in the quarter in Egypt as you'll see within the complement. So, the receivables did go up all over the quarter, but receivables from EGPC basically went down all over the quarter. And if we go lower back to first quarter of this year, after I think the -- the -- the situation concerning the -- the funds from EGPC variety of surfaced at that factor in time with the primary quarter results in may, since that point, you understand, from first quarter -- in the first quarter to the conclusion of the third quarter, EGPC receivables have long past down and so have the late receivables from EGPC.

So, I consider we're in good shape there. we now have made -- making progress. we now have made some decent progress. And as John always says, we're -- we're in consistent contact with the maximum-degree individuals in Egypt concerning the -- managing that receivable stability. So, we're -- we're making some respectable progress there.

extra to move but we're making respectable progress. I suppose the -- the -- the concern with -- or the reason receivables went up within the third quarter is as a result of we have been exporting greater cargoes and promoting them to third parties. and people third-celebration receivables have gone up all through the quarter as a result of we had been -- third-birthday celebration receivables had been low at the end of the 2nd quarter and higher on the end of the third quarter. So, those -- these are receivables that are only paid beneath regular terms from our usual, you be aware of, creditworthy and on-time-paying valued clientele of the oil coming out of Egypt in export cargoes.

Roger study -- Wells Fargo Securities -- Analyst

and that's -- in that condition, simply ordinary seasonal or month-to-month sort of adjustments, nothing to study into that possibly?

Steve Riney -- government vice president, Chief financial Officer

correct, appropriate. And -- and you will see there may be a -- you understand, at the company level -- no longer simply in Egypt, on the corporate stage, there may be a meaningful enhance in working capital throughout the quarter. And that also is simply seasonal-category issues. We -- we had some payables, in specific, a huge one round taxes, significant money charge and taxes in -- in the U.ok.

that comes in the third quarter. And so, loads of seasonality to working capital movements for the business as an entire.

Roger examine -- Wells Fargo Securities -- Analyst

appreciate the clarification. Thanks.

Operator

And our next caller is Charles Mead with Johnson Rice. Welcome, Charles. Your line is open.

Michael Furrow -- Johnson Rice and company -- Analyst

hi, decent morning. here's Michael Furrow truly filling in for Charles Mead.

John Christmann -- President and Chief executive Officer

hello, Michael.

Michael Furrow -- Johnson Rice and enterprise -- Analyst

adequate, only 1 question for me concerning Suriname. i know FID's not anticipated till late in 2024. And this might possibly be a little premature, but when do you believe that additional exploration may occur inside Block fifty eight? I appreciate that total is the operator right here. So, perhaps an improved method to body it will be when would APA want to further explore Block fifty eight, and maybe in case you may even talk on Block 53?

John Christmann -- President and Chief government Officer

No, it be an outstanding question. You recognize, the focus this 12 months become appraisal of Krabdagu so we might birth a undertaking when it comes to getting it entering into the subsequent phase, and you be aware of, we're competent to do this now. We do see, you understand, a few first rate, low-risk prospects in Block fifty eight, a lot of the application at Krabdagu that, you be aware of, without doubt appraised that fairway additionally de-risked, in our mind, loads of prospects. there isn't any urgency when it comes to getting to them, you know, in '24, but we might be working through these, you understand, with our associate. And after I look at the two blocks, we see extra prospectivity in 58 over 53.

You be aware of, we're working with our a considerable number of companions there on, you know, the next steps at Baja. however, you recognize, I suppose there is -- you comprehend, we might see more prospectivity in 58 over fifty three at this aspect.

Michael Furrow -- Johnson Rice and enterprise -- Analyst

All correct, I appreciate that colour. Thanks for your time.

John Christmann -- President and Chief executive Officer

Yep.

Operator

Please stand via for our next question. And our next question is from Scott Hanold with RBC Capital Markets. Scott, your line is open.

Scott Hanold -- RBC Capital Markets -- Analyst

Yeah, thanks. My question is going to be on just generic exploration. I suggest, surely, you got Suriname occurring, but you understand, greater recently, you've type of farmed competent in Alaska. And on true of that, absolutely, you might have got various things in Uruguay and Dominican Republic.

can you tell us in widely wide-spread, simply first might be beginning with Alaska after which how you believe about these other potentialities, you understand, moving ahead for APA?

John Christmann -- President and Chief government Officer

No, it -- you comprehend, Alaska fits our exploration method, and that's attempting to construct an exceptional portfolio. we have now received a proven operator in state lands, very very prospective acreage, and it be whatever thing we seem to be forward to, you know, sharing extra in February. And or not it's all about, you be aware of, a portfolio on the exploration facet and having decisions to high grade and, you know, drill the greatest things, you recognize, which are going to create essentially the most shareholder cost.

Scott Hanold -- RBC Capital Markets -- Analyst

So, once I feel of APA, and appear, I mean, it looks to be in distinction with, you recognize, some of, I guess, your U.S. or even simply E&P friends, where, you understand, there is loads of, I wager, M&A occurring there for, you comprehend, home shale. however seems like EPA has taken a little bit diverse attitude, or, you understand, there's nonetheless a want to probably probably even bulk up in the Permian or different focus areas, you recognize, where you do have, you be aware of, more, I bet, you understand, confirmed production at this element.

John Christmann -- President and Chief govt Officer

Yeah, I suggest I feel we want to look at, you be aware of, each avenues, both the organic and inorganic. And, you comprehend, we stayed dedicated to an exploration software, and also you recognize, you are on account that payoff in the, you understand, Suriname and long term. however I additionally believe you saw us ultimate year bolster, you understand, some of -- you comprehend, some acreage in the Delaware. So, you know, or not it's a -- it's a food regimen of each that you're constantly taking a look at. And, you be aware of, you will have acquired to proceed to focal point on adding to the property, as well as, you comprehend, what can create, you comprehend, price to your shareholders.

Scott Hanold -- RBC Capital Markets -- Analyst

So, for those who seem to be at the Permian Basin, do you all think with -- at a eight -- or 5-, six-rig tempo, you might have got, you comprehend, what you'll say, plentiful inventory of form of tier 1 stuff?

John Christmann -- President and Chief government Officer

sure. I suggest, I think with where we take a seat today, 5 to six rigs, you comprehend, Dave would say --

Dave Pursell -- government vice president, development

conclusion of the decade.

John Christmann -- President and Chief government Officer

end of the last decade, pretty with no trouble. and that is the reason concentrated on better-pleasant and longer laterals. And we're at all times -- you know, we've got obtained a nice footprint that we're always moving inventory from one class of, you understand, up into the high grade as we -- as we continue to test and, you recognize, discover tips on how to make all of it work, so.

Scott Hanold -- RBC Capital Markets -- Analyst

recognize the colour. Thanks.

John Christmann -- President and Chief government Officer

You guess.

Operator

Our next question comes from David Deckelbaum with TD Cowen. David, your line is open.

David Deckelbaum -- TD Cowen -- Analyst

Thanks for taking my questions, guys. John, i wished to just ask, are you capable of tell us, the one hundred fifty million you've got earmarked for exploration subsequent year, I guess to be extra -- more pointed about it's, how a great deal of it is protected for ex-Suriname exploration?

John Christmann -- President and Chief govt Officer

At this element, you comprehend, we will come again with extra colour subsequent 12 months on the program. we now have -- it's a placeholder. And, you be aware of, we're working via -- there may be some other issues we'll be doing. you might have obtained exploration in Egypt that now we have always funded as -- and a few different things.

however we will come lower back with extra colour in February.

David Deckelbaum -- TD Cowen -- Analyst

admire that.

John Christmann -- President and Chief govt Officer

Mm hmm.

David Deckelbaum -- TD Cowen -- Analyst

If I might just observe up on -- on Egypt, you talked concerning the increase trajectory within the subsequent yr, and i definitely recognize that U.S. oil is expected starting to be next 12 months. can you give a little bit extra colour just on what's going on with the multiplied workover endeavor? What's driving that? And, you be aware of, are there any variations being made that this may not be a drag into subsequent 12 months? Or is that this being factored in with improved frequency now that you have this -- this extended rig count number?

John Christmann -- President and Chief executive Officer

Yeah, I mean, or not it's a condition where now we have at all times had a, you know -- i'll call it a wells or a volume offline that requires workover. we now have a lot of sub-pumps in Egypt, and we've had some increase in the failures in -- in just a few areas, and that quantity's ticked up. and that they can get into some greater color, however you be aware of, we've simply received greater barrels offline that we should get to on the workover side. And we're addressing that. So, it be -- you comprehend, it be some thing we're leaping in every single place.

Steve Riney -- govt vp, Chief fiscal Officer

Yeah, and so, just to comply with on what John pointed out, we now have -- we're engaged on a root cause analysis simply to have in mind, are we seeing a structural trade in smartly failure -- smartly failures. we've got considered a discount in ESB runtimes, and we're -- we're doing a broader -- a broader analyze that. And to put some numbers on -- on John's touch upon -- on base stage of workover inventory, that usually represents about 5,000 barrels a day of creation it really is offline at any given time. we have now considered that enhance to over 10,000 barrels a day in reality from the conclusion of the 2nd quarter through these days. So, we have introduced a workover rig.

We're doing some other issues to birth working that -- working that backlog down, you comprehend, over time.

David Deckelbaum -- TD Cowen -- Analyst

Is that in -- coincident with where you're constructing presently, or is it just variety of, you comprehend, simply circumstantial to just throughout the total enviornment?

Dave Pursell -- govt vice president, development

it's -- or not it's across the whole Western desert, and we're working the basis trigger on that simply to be aware are there any specifics. but right now, we haven't identified any.

David Deckelbaum -- TD Cowen -- Analyst

thank you, guys.

Dave Pursell -- govt vice president, construction

Uh-huh.

Operator

[Operator instructions] And our subsequent query comes from Leo Mariani with ROTH MKM. Leo, your line is open. Go forward.

Leo Mariani -- ROTH MKM -- Analyst

hi there, guys. simply desired to follow up briefly on -- on Egypt here. I suppose you guys may have delivered a rig currently. I suppose you were at 17 prior in the 12 months if I kind of acquired it correct. So, simply curious, is that simply as a result of, you be aware of, lower North Sea recreation, you might be simply sort of reallocating greenbacks right here? and then, I wager just in ordinary, obviously, there is been colossal instability there type of in that Sinai Peninsula area bordering, you know, Israel there with the -- the conflict it really is happening at the moment. I suggest, do you guys have any considerations over talents spillover, you recognize, into Egypt? And have you ever been kind of in touch with the Egyptian government regarding that?

John Christmann -- President and Chief govt Officer

Yeah, it be something that -- you understand, it be enjoyable. We're coming up on our thirtieth anniversary of being in Egypt. So, you know, now we have received a great background there. we've been there a long time, and we have been via -- you be aware of, watched Egypt go through loads of making an attempt times.

You recognize, this year has been complex for them. And it's basically been driven more by way of inflation and forex devaluation and some of those factors. You be aware of, we're closely monitoring the circumstance. You recognize, I think the decent component from our viewpoint is our operations are all west to Cairo into the Western wilderness. And if you go back in background, even over the Arab Spring, you know, we haven't had any, you comprehend, shut-ins or primary interruption in our operations. So, I feel the decent information there is -- is the executive continues to prioritize oil and fuel operations.

They be aware of they need the in-nation creation, and you understand, we've been gazing things very very carefully, so.

Leo Mariani -- ROTH MKM -- Analyst

good enough, that's constructive. after which, you comprehend, when it comes to the $a hundred and fifty million in exploration next yr, I don't wish to beat a useless horse here, however as you form of searching at the excessive degree, to your mind, does that encompass some greenbacks in Suriname at this point? Or is that just sort of variety of nonetheless an open-ended proposition.

John Christmann -- President and Chief executive Officer

or not it's in ordinary -- you recognize, right now, it's a placeholder for the issues we want to do, but you comprehend, there is -- there's seismic that'll be, you know -- is being shot in Suriname in the -- within the -- where would be the building area, any other things. So, you understand, it can catch our exploration spend for next yr. And, you recognize, we are going to come returned with extra particulars in February.

Leo Mariani -- ROTH MKM -- Analyst

adequate, thanks.

Operator

And our -- our next query comes from Geoff Jay with Daniel energy partners. Go forward, Jeff.

Geoff Jay -- Daniel energy companions -- Analyst

good day, guys, thanks for taking the query. Yeah, truly my query is round, you comprehend, U.S. oil production, which seems like it's taking a pretty astounding step-exchange up. I suggest, most likely, you have got achieved some extra wells, however you comprehend, definitely, a number of quarters the place it become just kind of locked into the 70s.

Now, we've got taken this eight,000 barrels a day step-up in Q3, and that i'm questioning, you understand, A, what modified; and B, if there is anything it really is happened that has variety of triggered this choice so as to add another rig in the Delaware. Thanks.

John Christmann -- President and Chief government Officer

Yeah, I mean, it's actually just a continual software. I imply we're seeing the benefit of the -- you be aware of, the deliberate strategy we've taken. we've been focused on lengthy laterals and truly locking the -- you be aware of, the rig strains down and giving the teams time to execute. And, you understand, you're due to the fact.

we now have continued to drill long laterals and we're continuing to have first rate consequences. And or not it's in fact just a function of the timing of the completions. You know, when it comes to including the sixth rig, it's in fact greater allocation of capital from the North Sea into the Permian. And, you recognize -- but, you know, we seem to be forward to carrying on with to carry mighty effects. And if you look, fourth quarter is a little flattish compared to third quarter. loads of it's as a result of third quarter is running forward, you know, versus fourth quarter running at the back of.

So, you understand, very very pleased with the -- the execution stage within the -- in the U.S..

Geoff Jay -- Daniel power companions -- Analyst

amazing. Thanks, guys. I appreciate it.

Operator

i am displaying no additional questions at the moment. So, this concludes the query-and-reply session. i would now like to turn it back to John Christmann, president and CEO, for closing remarks.

John Christmann -- President and Chief executive Officer

Yeah, thanks for taking part on our call this morning. I need to leave you with the following concepts. we now have achieved a a hit appraisal software in Suriname at Sapakara and Krabdagu and will boost a undertaking during the -- during the FEED system all the way through 2024. In Egypt, gross oil construction continues to increase on the success of our drilling software. And lastly, we continue to carry fantastic consequences in the Permian the place we have now brought a sixth rig, so that it will add to the momentum as we enter 2024.

We seem to be ahead to telling you extra about things in February, and thank you for the name.

Operator

[Operator signoff]

period: 0 minutes

Gary Clark -- vice chairman, Investor family members

John Christmann -- President and Chief govt Officer

Steve Riney -- govt vice president, Chief economic Officer

Doug Leggate -- financial institution of the united states Merrill Lynch -- Analyst

John Freeman -- Raymond James -- Analyst

Bob Brackett -- AllianceBernstein -- Analyst

Dave Pursell -- executive vice chairman, building

Neal Dingmann -- Truist Securities -- Analyst

Scott Gruber -- Citi -- Analyst

Roger study -- Wells Fargo Securities -- Analyst

Michael Furrow -- Johnson Rice and enterprise -- Analyst

Scott Hanold -- RBC Capital Markets -- Analyst

David Deckelbaum -- TD Cowen -- Analyst

Leo Mariani -- ROTH MKM -- Analyst

Geoff Jay -- Daniel energy partners -- Analyst

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