Apache Corp. is reducing its 2019 capital spending plans by 23% year/year, but it still is guiding U.S. natural gas and oil production to increase by 8%, the Houston independent said.

Ahead of its quarterly report, scheduled for Feb. 28, Apache set its 2019 upstream budget at $2.4 billion, almost one-quarter lower than in 2018.

“Our 2019 plan is designed to optimize value for Apache shareholders through long-term, returns-focused development of oil, natural gas and natural gas liquids (NGL), while advancing certain high-impact exploration projects,” CEO John J. Christmann IV said. “Apache is committed to delivering this planned activity set and production outcome, while maintaining a strong returns focus, continuing our dividend payment and remaining cash flow neutral at plan prices.”

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Up to three-quarters (70-75%) of this year’s spend is tagged for the United States, while international spend and volumes are set to decline slightly.

Apache is targeting “cash flow neutrality” at an assumed Henry Hub gas price of $2.80/Mcf and a West Texas Intermediate crude price of $53/bbl. Plans are to return at least half of the generated free cash flow this year to shareholders.

“In a flat oil price environment, we believe we can deliver a combination of sustainable production and operating cash flow growth, strong returns, a stable dividend that currently yields more than 3%, and return at least 50% of any free cash flow to our shareholders,” the CEO said. “Additionally, Apache offers significant upside value potential” overseas, “as well as its portfolio of unconventional exploration projects in the Lower 48.”

To the extent that commodity prices change, “we have the flexibility and intention to reduce our activity set to preserve returns and target cash flow neutrality.”

In spite of the drawdown in spending, domestic output is guiding higher, with total output forecast at  410,000-440,000 boe, which at the midpoint also would be 8% higher than in 2018. Last November Apache raised its full-year 2018 production guidance, propelled yet again by Alpine High development in the Permian, where natural gas volumes had climbed 86% from 2017. Total U.S. production averaged 272,000 boe/d in 3Q2018, and nearly all of that output, or 222,000 boe/d, came from the Permian, where year/year volumes were up 38%.

Total adjusted production growth between 4Q2018 and 4Q2019 is projected to be 12-16% in the United States, with 5% growth from Permian Basin oil. The budget for this year excludes Altus Midstream LP activity, which handles most of Apache’s Permian volumes.

Since the start of 2015, Apache noted that it has paid out more than $1.5 billion in dividends to shareholders and reduced debt and future asset retirement obligations by $4.2 billion. Additionally, the company initiated a share repurchase program in the second half of 2018, under which it repurchased to the end of the year 7.8 million shares at an average price of $39/share.