John J. Christmann
Chief Executive Officer at APA
Good morning and thank you for joining us. On the call today, I will review our first quarter performance, discuss the compelling opportunities we are seeing after the closing of the Callon acquisition and review our activity plan and production expectations for the remainder of 2024. During the first quarter, upstream capital investment of $568 million was below guidance due primarily to the deferral of some planned facility leasehold and exploration spend. We continue to deliver excellent results in the Permian Basin with the first quarter marking our fifth consecutive quarter of meeting or exceeding US oil production guidance. US oil volumes were up an impressive 16% compared to the first quarter of 2023, and we expect organic growth to continue through the year as we integrate talent.
On the natural gas side, we chose to curtail a substantial amount of production at Alpine High, primarily in March in response to extreme Waha basis differentials. This dynamic has continued into the second quarter. In Egypt, gross production was in line with our expectations, while adjusted volumes were just shy of guidance due to the PSC impact of higher than planned oil prices. As discussed previously, we are in the process of rebalancing our drilling rig to workover rig ratio in Egypt to further optimize capital efficiency. In the first quarter, we averaged 17 drilling rigs and 21 workover rigs. While the workover rig count will remain flat, we will reduce the drilling rig count over the next three quarters, allowing workover rigs to be redirected. The amount of oil production temporarily off-line and waiting on workover remained at around 12,000 barrels per day during the quarter.
We expect to make progress on this as the drilling rig count comes down and freeze up workover resources. The challenges we experienced in the fourth quarter 2023 with faulty new electrical submersible pumps have now been fully remediated through vendor change out and design modifications. Turning to the North Sea. First quarter production was impacted by a decrease in average facility run time at Barrel in March. As a reminder, this type of downtime tends to occur more frequently and is less predictable when managing late-life assets like those we have in the North Sea. On the exploration front, we recently concluded our three-well Alaska exploration drilling program. As a reminder, our 275,000 acre position lies on state lands, roughly 70 to 90 miles east of analogous industry discoveries.
Our King Street number one well confirmed a working petroleum system on our acreage, discovering oil in two separate zones. The other two wells, SAGA number 1 and Voodoo number 1, were unable to reach their target objectives in the allotted seasonal time window due to a number of weather and operational delays. We are currently analyzing all of the data and we'll come back later with more commentary on next steps in Alaska. Lastly, in Suriname, we are progressing the FEED study on our first development project, which we hope to FID before the end of the year. Turning now to the Callon acquisition, which closed on April 1. We are one month into the integration process and are making very good progress.
As anticipated, we are finding tremendous opportunities to reduce costs, improve efficiencies, leverage economies of scale and create value by applying our operational expertise and unconventional development workflows to the Callon acreage. Accordingly, we have increased our estimate of annual cost synergies by 50% from $150 million to $225 million. Steve will comment further on the timing and nature of these synergies in his remarks. The most exciting and compelling value capture opportunity we see with Callon still lies ahead. That will come from capital efficiency improvements which will enhance overall development economics and potentially expand the development inventory that form the basis of our transaction value.
For the remainder of 2024, we will be revising most of Callon's operational practices and workflows. This includes everything from contracting and logistics to well planning and design, drilling and completions, facility construction in many aspects of daily operations. At a high level, you will see wider well spacing, fewer discrete landing zones and larger fracture stimulations. Improvements in capital efficiency will manifest in fewer wells to deliver the same amount of incremental production volumes. While it will take some time to realize the full benefit of these changes, the implementation has already begun. In the meantime, we are modifying many aspects of Callon's previous 2024 plan to capture as much near-term benefit as possible.
Turning now to our activity plans and outlook for 2024. In yesterday's release, we provided guidance for the second quarter and full year 2024, along with our expected oil production rates for the fourth quarter. In the US, we have been running 11 rigs in the Permian since April 1. We expect to average approximately 10 for the remainder of this year as we actively manage changes to the combined 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.
In terms of oil volumes, we noted in our first quarter materials that we expect US oil production in the fourth quarter to be around 152,000 barrels per day, which represents an 11% growth rate from our second quarter guide of 137,000 barrels per day. Switching now to Egypt. In February, we commented that adjusted production would remain relatively flat in 2024. Today, we anticipate adjusted production will decrease slightly as a function of the PSC impacts of higher-than-planned oil prices. And in the North Sea, production guidance for the full year is unchanged with an expected dip mostly in the third quarter as we conduct scheduled platform maintenance.
In closing, we continue to manage our business with a clear and consistent strategy and deliver on our capital return commitments and financial objectives. The Callon acquisition is complete and the path to value creation is clear and well underway. Post Callon, our Permian Basin unconventional acreage footprint has increased by approximately 45% and our Permian Basin oil production has increased by more than 65%. The Permian Basin will represent an estimated 73% of APA's total company adjusted production in the second quarter and will approximate 75% of our upstream capital this year. Notably, our oil production weighting in the US will increase to projected 46% in the second quarter from 39% on a standalone basis in the first quarter.
Finally, Steve will discuss our priorities around debt reduction, but I want to emphasize that our shareholder return framework has not changed, and we will continue to return at least 60% of our free cash flow via dividends and share repurchases.
And with that, I will turn the call over to Steve Riney.
