At this time, I would like to welcome everyone to the Apache Corporation first quarter 2013 earnings release conference call. [Operator instructions.] At this time I would like to introduce your presenter for today Mr. Brady Parish, vice president of investor relations. Mr. Parish, you may begin your conference.

Thank you operator. Good morning everyone, and thank you for joining us for Apache Corporation's first quarter 2013 earnings conference call. On today’s call, we will have four speakers making prepared remarks prior to taking questions. I will start by giving a brief summary of the first quarter results, and then we will hear from Steve Farris, our chairman and chief executive officer; followed by Rod Eichler, president and chief operating officer; and finally, Tom Chambers, executive vice president and chief financial officer. We've prepared our quarterly financial supplemental data package for your use, which also includes the reconciliation of any non-GAAP numbers that we discuss, such as adjusted earnings, cash flow from operations, or pre-tax margins. In addition, we have prepared an operations supplement to summarize our activities across the various Apache operating regions. These can both be found on our website at www apachecorp.com/financialdata. Today’s discussions will contain forward-looking 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. A further disclaimer is located with the supplemental data package on our website. This morning, we reported first quarter 2013 earnings of $698 million, or $1.76 per diluted share. Adjusted earnings, which exclude certain items that impact the comparability of results, totaled $806 million, or $2.02 per diluted share. Cash flow from operations totaled $2.4 billion. In the first quarter, total net daily production averaged approximately 782,000 BOE per day with liquids production comprising 53% of the total. This represents an increase from the 769,000 BOE per day reported in the first quarter of 2012 and a decrease from the fourth quarter as we had guided on our year-end earnings call. Production in the first quarter was negatively impacted by 8,000 BOE per day of deferred production due predominantly to three cyclones, which impacted production in Australia and third-party gas plant downtime in Canada. This downtime was expected and incorporated within our full year guidance. With that, I’ll turn the call over to Steve.

Thank you, Brady, and thank all of you for joining us this morning. Apache did report solid financial results for the quarter. We generated over $800 million of adjusted earnings and $2.4 billion of cash flow from operations. I think of particular note, we generated outstanding production growth in our North American onshore regions at very attractive rates of return. Our onshore North American liquids production averaged 165,000 barrels of oil per day, which constitutes 21% of our total worldwide production, and is an increase of 6% quarter over quarter and nearly 45% versus the first quarter of 2012. In addition, our U.S. onshore asset base, which we bolstered over the last three year, continues to deliver sector-leading performance. Apache is currently the second most active U.S. onshore driller. During the first quarter, we averaged 206,000 barrels of oil equivalent per day from the Permian and central regions alone or 26% of our worldwide production. This represents a 50% increase over the first quarter of 2012, and a 40% increase if you adjust for the Cordillera acquisition. In addition, our central region in the Anadarko Basin grew production almost 9% from the fourth quarter of 2012 to the first quarter or nearly 36% on an annualized basis and increased liquids production over 28%. We’re currently running 42 rigs in the Permian Basin, 28 rigs in the Anadarko Basin, and so we expect this level to continue. Our exceptional onshore liquids growth was offset primarily by the deferred production that Brady mentioned in his opening remarks, a decrease of 5% in North American natural gas production, as we chose not to drill any dry gas wells during the first quarter, and some natural declines in fields in some of our international regions. As Brady pointed out, we’ve already incorporated these deferrals…

Thank you, Steve, and good morning. For the second straight quarter, we have compiled an operations supplement for your use, which highlights our activities by region during the first quarter. We received a very positive reaction to our first report, and we have incorporated many of the comments we received in an effort to further improve it, and we hope you find it useful. As Steve mentioned, we had an outstanding quarter drilling and completing wells, in particular in our North American onshore liquid plays. During the quarter, we averaged 119 rigs operating worldwide and drilled 412 total gross wells, of which 402 were development wells, with 355 of these wells, or nearly 90%, located onshore in North America. These wells were drilled with a success rate of 99%. In the Permian and Central regions alone, we drilled 263 gross development wells, or 65% of our total. Our production growth in North American onshore liquids of 6% during the quarter was driven predominantly by our Permian and Central regions. Combined, these two regions grew liquid production 10,000 barrels per day quarter over quarter, or 9%, to 129,000 barrels per day, which represented nearly 31% of total worldwide liquids production. Combined production from these regions was nearly 206,000 barrels of oil equivalent per day, or over 26% of total company production for the quarter. We have truly hit our stride in these two liquids-rich regions. In the Permian region, we produced 119,400 barrels of oil equivalent per day in the first quarter, 74% liquids, constituting over 15% of our total production. This represents more than 20% production growth over the first quarter of 2012. We further exploited our 3.8 billion barrels of oil equivalent in net resource potential by running an average of 37 rigs and drilling 187 gross wells, 36…

Thanks, Rod, and good morning everyone. I’ll repeat one more time, this morning we reported earnings of $698 million, or $1.76 per diluted share. Overall, our bottom line results reflected another solid quarter of production revenues and cash flows. Our production this quarter averaged 782,000 barrels of oil equivalent a day, our second-highest quarter ever. Oil and gas revenues totaled $4.1 billion for the quarter, of which nearly $3.3 billion, or 79% of the total, was oil revenue. Strong first quarter oil prices enabled us to generate $2.4 billion of cash from operations before working capital items. We’ve been able to routinely generate these cash flow levels given the fact that over 53% of our production base is oil and liquids, and that oil currently sells for over 20 times the price of North American non-GAAP. Our focused drilling program produced a 45% increase in liquids production in North America onshore properties from the prior year quarter, primarily driven by outstanding results in the Permian and Anadarko basins, as you just heard Rod indicate. Worldwide liquids production for the quarter averaged 416,000 barrels of oil equivalent per day, an increase of 9% from the comparative 2012 quarter. A key point worth emphasizing is that not all liquids are created equal, a fact that was driven home with the significant fall in NGL prices from year ago levels. For Apache, our liquids growth and drilling opportunities are primarily focused on crude oil. Over 85% of our first quarter liquids production is crude oil. In addition, our international gas portfolio has continued to bolster our realizations as natural gas prices in North America trailed our international realizations by 11% in the first quarter. For the fifth consecutive quarter, international gas price realizations outpaced those in North America. Although realizations in Egypt were…

Thank you, Tom. That concludes our prepared remarks. I will now turn the call over to the operator. Operator, we are ready to open the line to questions.

[Operator instructions.] Your first question comes from the line of Pearce Hammond with Simmons. Pearce Hammond - Simmons & Company : I guess my first question is you mentioned joint ventures. Is that separate from the $4 billion? Or is that included in that $4 billion worth of divestitures?

That would be included, but the proceeds have to be cashed, if you understand what I’m saying. Pearce Hammond - Simmons & Company : So it is included?

Yes. Pearce Hammond - Simmons & Company : Then you mentioned the $4 billion of the initial phase, does that imply that there’s a second phase beyond the $4 billion?

Well, what I can say is the asset list that we have generated at today’s prices, and what our market expectations are, would exceed that $4 billion. Pearce Hammond - Simmons & Company : Then my last question is, I think the share buyback plan is a great idea, especially given how cheap the stock is. I guess I wondered why not use the full $4 billion to buy back the stock, rather than pay down the debt, because you have a very good balance sheet?

Two things. One is we want to make sure we retain our flexibility and our A rating. The other one is that it also gives us financial flexibility to invest that money in our ongoing business.

Your next question comes from the line of Harry Mateer with Barclays.

You just touched on it, but perhaps if you could just highlight for us again the importance of single-A ratings, and [unintelligible] S&P for your long term vision for the company. And then second, the $2 billion of debt reduction, as you mentioned, you have $9 million of short term debt. Where does the other $1.1 billion of debt reduction come from?

The other debt reduction comes from we’re going to pay off some commercial paper.

And what was that commercial paper number at the end of the first quarter?

End of the first quarter, it was $619 million.

And then on the single-A ratings? That is of importance to you guys longer term?

We’ve historically tried to be finally fiscal, and we want to continue that. It’s given us great flexibility over the years, and we continue to think it will give us flexibility in the future.

Your next question comes from the line of Amir Avif with Stifel Nicolaus.

A clarification on the repurchasing of shares. Will that only begin after you have the first $2 billion of asset sales done, or will you start doing that again at the current share price, given where it is?

Our first priority is to pay down debt. And we would have a goal to get that done this year, the $4 billion.

Okay, so only after you have the first $2 billion, then we’ll start buybacks? That’s fair?

Yeah, we want to give ourselves a little flexibility.

And then a follow up question on Egypt. The free cash flow you’re generating in Egypt, are there any restrictions on moving that money back to the U.S., outside of repatriation tax?

No. We move it in all of our international regions.

Your next question comes from the line of Bob Brackett with Bernstein Research. Bob Brackett – Sanford Bernstein : Following up on theses asset sales, is Kitimat included in part of that $4 billion target, or is that already done and finished?

It’s not in the target. Obviously we’re going to have to size Kitimat as we go forward. Right now we are in a position to have taken something from raw materials to wholesale, and there will be a time when it will be retail.

And then I understand you don’t want to talk about the specifics of what potentially is for sale, but can you lay it out in terms of you prefer international versus domestic sales? Is it gas versus oil? Is it production versus acreage?

I think what we said in our release is that our goal is to come out of this with assets that we think have the potential to grow long term or short term, and that we also have assets that have great generating power to fund those programs.

Not sure that answers the question. Is it looking for assets that are mispriced by the market, where you keep the stuff that’s undervalued, and you trim the stuff that’s potentially overvalued by the global market?

No, we have an asset base that are growth generators, and we have assets that are cash generators. We want to balance our cash generators with our growth generators.

Your next question comes from the line of John Freeman with Raymond James.

Sorry to keep beating the same dead horse here, but just to clarify on the last question, when he asked if the $400 million you got from the Kitimat transaction, that’s not included in the planned asset sales that you’ve got? So you’ll be doing $4 billion above and beyond the $400 million you got from Kitimat?

That’s correct.

And then just a follow up on a question that Pearce asked earlier, on the JV front. So when you view things in terms of, it would have to be cash, does that mean if you did any JV that had a drilling carry, that joint carry would not count towards your asset goal?

That’s correct.

Okay, and then on Alaska, are you all still on schedule to complete that first onshore well in the second quarter?

I’ve got to check when the timing is. I don’t know when the timing of that is.

Your next question comes from the line of John Herrlin with Societe Generale. John Herrlin – Société Générale Americas Securities: How tax-efficient will the sales process be? Have you thought about that?

We have. And it all depends on what the assets are that we sell. John Herrlin - Société Générale Americas Securities : In terms of a strategic change, does this mean you’ll be reducing your expiration exposure at all?

Well, certainly if you look at our portfolio today, we’re still going to have a joint venture group that has an exploration bent. But in terms of the amount of funding that they get for the next two or three years, it’s going to be less than they’ve gotten in the past.

Your next question comes from the line of Eliot Javanmardi with Capital One.

I apologize for splitting hairs here, but just want to make sure I’m clear. Are these share buybacks, if things go well, do you expect to have it completed this year, in 2013? Or could we expect it to kind of start in the second half and then perhaps just lead into ’14?

Well, the share buybacks will be obviously opportunistic. We have a goal to have asset sales of $4 billion by the end of this year, and the first $2 billion are going to pay down debt, and the next $2 billion are going to buy back stock. What the timing of the stock buyback is, based on how soon we get the transactions done and closed, and have the cash available.

You talked about your composition and how it helps you right now. What are you guys targeting, do you think, as far as maybe after you go through this process, initially, and perhaps in another phase, where do you like to be portfolio-wise on your composition mix?

I’m not following the question, sorry. What will the company look like? What will the assets look like?

The production [unintelligible] oil and gas mix, kind of what would you be targeting still, close to a balance of 50-50?

Yeah, we intend the portfolio balance to stay relatively the same.

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

Looking at the region-by-region production in your earnings supplement, I noticed that one thing that stands out to me is Egypt oil volumes were down about 12,000 barrels quarter over quarter. And I’m curious if you could characterize what that is. Is that natural decline? Or was that some facilities related downtime? And give some guideline on what you expect for the rest of the year there.

We’re going to try to do a better job of our guidance on Egypt going forward. If you look at the numbers, our gross production was down 2%. And the most important thing to look at in Egypt is cash flow, frankly. But what we’re going to try to do in the future, and I don’t want to confuse everybody on the line, is we’re going to start showing, basically, net of tax. Because Apache is not responsible for the tax in Egypt, and we basically gross up the volumes for the effective tax rate. And it adjusts numbers. If we had done it on a net basis, it would have been down about 5,000 barrels a day, or 6,000 barrels a day, rather than 12,000 barrels a day. So we’re going to try to clean that up going forward. In terms of the actual production decline, the 2% on the gross, that’s more timing than anything.

That’s great clarity. I think I understand you. That just kind of introduces some noise that’s not really there. On the flipside of that, I’m also looking at the NGL production you had in your central region in the U.S., and that almost doubled, up 10,000 barrels a day quarter over quarter. And I’m curious, is that just well performance? Or is that also some midstream issues and perhaps ethane rejection that was going on in Q4? Those ethane volumes coming back in Q1?

No, that’s just well performance.

Your next question comes from the line of Joe Magner with Macquarie.

I’ll take another stab at the thoughts or the framework around the asset sale program. With the goal of repaying assets [unintelligible] to drive the near term and long term growth, what should we think about in terms of the growth potential of what could be retained relative to the current five-year, 6-9% growth objective. Is it going to be higher? Lower? Willing to comment?

It’s premature. We have an asset list that exceeds our target. And how we approach that going forward in the next few months, or six months, will really determine what comes out of the back of it. I’d be premature to answer that question right now. Our whole goal is to be more profitable and more predictable growth.

And on Kitimat, could you provide us the updates on the [offtake] agreement discussions? And then also, whether there’s a plan in place to exercise the pipeline right away that’s outstanding?

Well, with respect to to the market, obviously we are in the market. We’re in the market now with our new partner, Chevron, who is leading that charge. Before we got into the current relationship, it was pretty strong then, and I would venture to say, with Chevron as part of the partnership, it is stronger today. In terms of the pipeline right of way, we’re proceeding forward on all those issues.

Your next question comes from the line of Joseph Allman with JPMorgan.

In terms of the asset sales, when you made the list of non-core assets that made up that robust list, what are the parameters that defined, for you, the non-core assets?

Whether they had long term growth potential, short term or long term growth potential, or do they generate significant excess cash. That’s it.

Was rate of return one of the parameters? Lower relative rate of return?

Well, yeah. I think if you look at those raw definitions of which ones are on either side, rate of return is our primary focus. So it would fit those categories.

And then when you guys sit around and think about the stock’s underperformance relative to the group, to what would you attribute the reason for the underperformance?

I think two things. I think we haven’t done what we said we were going to do in 2012. And I think that as we get further into the process with Egypt in terms of the continuity of Egypt, I think that will help. We’ve got 26 rigs running in Egypt. We continue to get paid every day. It generates a tremendous amount of cash. And I think over time people will get more comfortable with that.

And when you look at the underperformance of the stock, are you focused mostly on over the past year or so, are you focused on underperformance over a longer period of time?

No, if you look at our stock performance truthfully, through 2010, it’s been very competitive with any of our peer companies. If you look at 2011 and 2012, we’ve really digressed.

Is a lot of the problem just concerns about Egypt, do you think? The market’s perception, with the headline risk about Egypt? Do you think that’s the reason for the underperformance?

Well, I think you can make your own assessments. We think that has some impact on our stock price.

And then lastly, just the process, have you opened data rooms yet in the asset sales process? And why not define the assets at this point? What is it about the process that makes you just want to keep the assets you want to sell confidential or secret?

Well, we have a pretty broad asset list, number one. Number two, we started the process about four months ago, and I think the best thing we can do is do it, and then announce it, as opposed to advertising what we’re doing as we go forward, both from a competitive stand and from a market standpoint.

Your next question comes from the line of Brian Singer with Goldman Sachs.

Steve, you’ve never been shy about opportunistically acquiring assets from the majors or others. Are you as interested as you have been in acquisitions that can improve predictability of growth? And does the resulting stronger balance sheet open up that opportunity? Or are you going to be more focused on the assets that you have?

We’ve had this discussion before. I think companies, people, go through lifecycles, and right now our lifecycle is to give us a portfolio that we can grow organically. We certainly have been very successful in the acquisition market. That’s not one of our focuses at the present time.

And we’ve seen volatility in Apache’s production, which has been in part a function of a number of items, weather, other disruptions. Yet you mentioned earlier you’re interested in having more predictable growth. Would the assets that you’re planning to sell have reduced the volatility that we’ve seen in production, say in the first quarter of 2013, or in 2012?

Long term, what we want to do is have a more predictable growth profile.

And I guess if you look back on, let’s say the last quarter and the last year, and the assets that you’re looking to sell, if we would have sold those a year ago, year and a half ago, would that have made that more predictable, less volatile?

When we announce what we are going to sell, then we can have this discussion.

And then lastly, just a single asset question. In your Permian Basin update, you mentioned a couple of strong Wichita Albany wells that had some pretty good rates. I just was wondering if that’s an area that you see running room in what the production mix is between oil and gas and natural gas liquids.

Yeah, Wichita Albany is largely oil. We do have some running room in that area. Those wells have been, like a lot of the wells in the Tonkawa in Oklahoma, those Wichita Albany wells have far exceeded our expectations. We’ve got wells that make 900 barrels a day and are still making 800 barrels a day. It’s been a very good play for us. And we do have running room in that play.

[Operator instructions.] Your next question comes from the line of [Kyle Rose] with RBC. [Kyle Rose] - RBC: How should we think about Egyptian gas prices for the rest of the year?

I think Egyptian gas prices, that number will be the same number going forward really forever. That is our gas price now. And the reason is, and I’m sure you’ve heard this before, we had a gas contract that rolled off at the end of 2012 that was one of our higher-priced gas contracts in Egypt. That’s the last one of those kind.

Your next question comes from the line of Doug Leggate with Bank of America.

I apologize, I was a little late getting on the call, so I hope none of these have been asked. My first question, I guess on the portfolio high-grading, or the asset sales I guess you could call it, there’s been a lot of chatter about the Gulf of Mexico discoveries being in that package or in that process. And I guess my question isn’t so much about is that true or not, but it’s really more about your philosophy on exploration and bringing longer-dated projects… You know, you make a discovery, it’s a five year out to development type of situation, is your decision to go down a more aggressive asset sales route impacting your view of exploration as a kind of core strategy for the company?

I think if you look at our portfolio today, from where it was in 2010, we have now invested in the [Wheatstone] project, which is a long term project that is basically oil-related. It will come on in late 2016 and effectively be 35,000 barrels of oil a day for 20 years. That’s about 270 million barrels of oil production. So if you look at our long term projects that we have, we’ve got 50 Bcf in Liard that is associated with our Kitimat project. Those are long-lead items that take capital, that also provide steady future revenues for years to come. So in terms of what we look at selling, are the things that have high cost right now, that have lumpy production in the future.

Are you happy with the balance? Because obviously these up front long term large projects are dilutive to your core goal, which is I guess return on capital. So are you happy that you’ve got the right balance of short term and long term currently? Or do you see that as…

We do right now, because Wheatstone, we have 13%, we’ve got one more year of capital associated with it, and frankly, with Wheatstone, we’ll just have to see how that goes. We haven’t reached FID yet with Kitimat, and we’ll have to make that decision when we get there.

And I guess my follow up Steve, and I know this comes up a lot, and I apologize in advance, but Egypt, I think they just had their credit rating downgraded by a third party earlier this morning. It doesn’t seem to be getting any better. And I guess when you think about discount rates applied to your cash flow, which obviously operationally things are going well, but the value doesn’t seem to be [unintelligible]. Is there any updated thought as to how you address the exposure issue? Is it just getting too big a part of the portfolio, given the escalating risk profile? Or are you still happy to hold things as they stand currently?

Well, I think you’ve got to look at the results. They have gone through a number of quarters now, and almost two years, and we continue to be very profitable there. We continue to think that that will level out over time. My opinion is, Egyptians are Egyptian-first, and then that part of the world. We were just there a month and a half ago, and I feel very good about the forward plan in Egypt. How we convince our U.S. investor base that that is the way it is another matter.

Should we think about Argentina as being been a long term part of the portfolio?

Truthfully, Argentina’s got a lot of great resources. Right now they’re troubled politically. How that fits in our program long term we’ll just have to see.

Your next question comes from the line of Amir Avif with Stifel Nicolaus.

A follow up question on the Permian sequential growth. It was a little slower this quarter. Is that just due to the facility downtime? And can you just [inaudible] you might be running into there’s in the Permian, as you start wrapping up activity?

Yeah, we had some facility downtime, but we also had some capacity constraints. As we’ve been ramping up our drilling activity and associated production volumes, we’ll be out in front of the ability to hook up the wells and move products out of there. There’s about a 2.5% on the first quarter.

And that should be alleviated by Q2?

That will be an ongoing challenge throughout the year.

And a follow up question, if you could give us an update on your drilling of your acreage in the Miss Lime and the Bakken?

We have not drilled any wells in the Bakken, nor the Miss Lime, in this last quarter.

Your next question comes from the line of Harry Mateer with Barclays.

A follow up on my earlier questions about the debt reduction. You mentioned $900 million of short term debt, and then $600 million change of [CP], but that gets you to a little over $1.5 billion. So if I could just ask a minor point on how we get to the $2 billion, is it because you think you’re going to be slightly free cash flow negative through this year, so you’ll add some debt? And then that will be paid down? Or is there something else that I’m missing?

Typically what happens in the first half of the year is when we get off to a quick start, which we have this year, in all of our regions, we usually run a little cash flow negative for the first half, and that’s our plan. We’re actually tracking on that now, so we’ll be able to pay down some debt, [unintelligible] will come from that.

So relative to first quarter debt balances, debt reduction is not going to be quite $2 billion, it will be less than that? Is that fair? Because it’s going to go up a little bit next quarter?

Yeah, based on balance, that’s correct.

Your last question comes from the line of Nathan Churchill of Societe Generale

Just back on the asset adjustments, wondering if there are any particular constraints that you have in the portfolio as far as investing some of this additional cash that you have coming in. I know your share price has been a little bit depressed, and I think the buyback makes sense, but just wondering how you think about weighing the buyback versus maybe increasing capex, and also if you’ve considered maybe an MLP of the assets if they’re high cash-generative and low growth.

I will tell you, in terms of the share buyback, I think, from a board standpoint, and from a management standpoint, we find ourselves in a unique position, because we have relatively high commodity prices, at least on the oil side, and our stock has got a lot of upside in it. So I consider stock buyback [an event], but this is a very good event to buy your stock back. I can assure you, we have, over the last several months, looked at a number of combinations of an asset base that we want to come out of this going forward.

On the buyback, it wasn’t really explicitly said, but are these shares cancellation?

We have no one in here that answers that question. [laughter]

Okay, maybe switch gears for a second. Can you give us some insight as to what you’re seeing on the service cost side? Has it hit an inflection point as service costs started to bottom, domestically that is?

I think as we all learn, not just Apache, but I think as our industry learns ways to reduce cost, I think service costs will continue to come down for a while. I don’t think we’ve hit the bottom yet, for all kinds of reasons, because of the different ways you’re sourcing things now, and the different services major service companies provide versus what they used to provide. That’s all changing, as I’m sure you’re aware.

Of course. And there is the learning curve benefit and then there’s the actual price of the curve, so I was just trying to tease out how I should think about the moving pieces there.

Well, drilling rates in the Permian Basin, for example, have been increasing since 2008. However, the curve is flattening. If you look at the day rate increases, the increased from 2012, to what we’re seeing in 2013, it’s only about a 5% increase on average for the 42 rigs we’re running out there. So we’re starting to see that curve starting to turn over. Rig availability is not an issue. As I mentioned in my remarks, we have a large number of programs in place to reduce costs in all elements of drilling and completion. In fact, some of the cost reductions have been rather dramatic that we’ve experienced in the last 12 months through these efforts.

And at this time, presenters, there are no further questions. Do you have any closing remarks?