Q4 2019 Earnings Call
I want to congratulate the noble energy and Noble Midstream teams are partners and shareholders for all that. We accomplished last year many of our accomplishments can be seen on slide 3 months beginning of the year. We lowered on Capitol expectations 17% from 2018 levels while anticipating 5% volume growth.
We're actually drove nearly 7% total production growth on 25% less Capital combined our Capital Savings of $240 and operating cost reduction of life and twenty million improved our total Cash Flow by $360 million from where we expected when we started 2019.
And are you unsure business? We deliver 10% total equivalent and 10% oil growth over 2018 while achieving record safety performance for the year.
We promise to have Leviathan on production by year-end and did so it more than $200 under budget.
Also on our Eastern Med business, we substantially expanded the total quantities of our gas sales contracts into Egypt while securing a pathway through the acquisition of interest in the EMG package.
In West Africa monetization project and first production remains on scheduled for early 2021 driving incremental cash flow and volumes next year.
We also commenced production from the same six oil well, which is producing in excess of expectation.
2019 with an exceptional year for reserves as we replaced 233% of our production it just over $7 per equivalent Barrel development cost you suck on short proved developed reserves were added an attractive cost of under eight dollars per equivalent Barrel on the portfolio side. We continue to build long-term value potential phone no energy with an exploration Farm in offshore Columbia, and we added to our low-cost unconventional acreage position now totaling over 200,000 Acres primarily in the powder and grew up in Wyoming.
We targeted five hundred million to a billion dollars in portfolio proceeds for 2019 were able to achieve that outcome with full-year proceeds of over $800 including six and seventy million from the noble Midstream transaction. This helped us close the close out the year with 4 and 1/2 billion dollars in financial liquidity.
I was also pleased that our board approved a 9% increase in our dividend last year reflecting confidence in the significant cash flow increase that is occurring in 2028 on the EFG front. I mentioned earlier our record on Shore safety performance in 2019. We noted other advancements in our eighth annual sustainability report and our first climate-resilient report which utilized the tcsd framework. We also welcomed Martha Wash to our board in December or third new member in the last two and half years.
Greatest single achievement in 2019 was successfully bringing Leviathan offshore Israel on production the safe and successful execution of this unique development has been world class wage continuing our exceptional track record of major project delivery. We're already delivering volumes into Israel Jordan and Egypt making it the first time in Israel's history to have significant efforts to Regional customers will provide more details on the fields ramp up and sales Outlook, but I am extremely pleased with the early production history and Reservoir performance package ocean that world-class Fields get bigger and better certainly applies to Leviathan.
An essential part of nobles competitive Advantage comes from the blend of short-cycle onshore unconventional assets with world-class offshore conventional assets wage companies have this combination in their portfolio.
This asset mix provides us investment options. Ality, a top-tier corporate decline rate and the ability to build the company in a capital efficient manner manner focused on generating returns home.
You've seen slide 9 before and we've updated it to highlight a real differentiator for Noble energy.
With Leviathan now on production we expect our total company annual production decline rate to be in the low 20% range.
You can see how well that positions us compared to the decline profiles of key us on short basis.
This year we expect over 30% of our production and nearly 40% of our operating cash flows to come from our conventional load decline assets.
This provides more certainty of cash flows lower maintenance capital and ultimately positions us to make the right Capital allocation decisions for our shareholders in all macro environments.
We've also updated slide ten which represents our multi-year Capital allocation framework as compared to last year 2020 s model reflects a substantial improvement in our main capital needs from one point six billion dollars projected annually to one point four billion dollars going forward.
the improve
Primarily reflects the significant reduction and well cost from our onshore business.
This framework remains highly focused on generating strong returns through commodity cycles and driving sustainable free cash flow.
As mentioned many times before our planning targets the following one plan the business for a long-term WTI oil price of fifty to sixty dollars per barrel to generate a competitive free cash flow yield annually was significant returned to investors focus on delivering at least $500 in Upstream free cash flow this year with the potential to continue to grow going forward.
Three maintain a strong balance sheet flexibility to 10%
We've set our capital budget at one point eight billion dollars at the Upstream level as we prioritize our free cash flow generation and balance sheet Support over additional growth month.
For 2020 is estimated down 25% from last year while production volume should grow 10% and operating cash flow grows even higher.
This occurs is our margins improved with Leviathan start up, but also from the allocation of capital within the US on Shore business unit.
Brent will touch on this more later, but even with level year-on-year onshore equipment volumes, we expect us onshore oil growth.
Use of free cash flow will continue to be prioritized for return to investors through dividend growth and balance sheet Improvement.
With everything we've delivered in 2019 and recognizing commodity price volatility. I'm even more confident now in our ability to generate sustainable free cash flow while continuing to build our business.
This year, we've also modified or short-term and long-term compensation programs to further highlight our focus on organic free cash flow and ESG Improvement.
These changes reflect an increased waiting in the short-term bonus pool towards Define metrics with Organic free cash flow being the highest waited metric for 2020.
And we have modified our long-term incentive plans moving away from solapur relative total shareholder return performance and incorporating cash return on Capital employed and DSG measures.
I believe these changes for further align our interests with those of our shareholders.
But hand over to Brent I went to highlight three key factors were Noble energy is distinguishing itself.
First outstanding execution which sets the stage for 2020 decreasing capital and increase in cash flow and volume II the move to a lower annual corporate diffraction line rate and maintenance capital and third a global inventory that includes substantial low-cost discovered resources that can utilize existing infrastructure to generate compassion.
Our accomplishments in 2019 serve as evidence of our ability to provide differential performance for our investors. Thanks for your time this morning and I will now hand this over to print off text Dave. Good morning. Everyone 2019 was was truly a tremendous year for the company. We closed out the year with a strong fourth-quarter and with the extension list of accomplishments during the year as we move into twenty-twenty. We're building on our 2019 successes and is Dave discussed. We expect to increase cash flow and production and decrease Capital expenses. And yes on sure we achieve sustainable reductions in capital last year through several initiatives including faster drilling rates accelerated completion times Lower Court T's and well connects.
an expense
Optimize compression improved uptime and reduced work over frequency or examples of long-term changes in the efficiency of our base production operations.
Expect the 2019 capital and experience gained to continue into twenty-twenty and Beyond.
We also achieved those improvements in our execution and cost culture while while cost structure while maintaining a strong company-wide safety culture and 2019. We achieved a record-low total recordable incident rate for the US on Shore and we delivered the Leviathan platform in Israel. And the seeing six people in Africa without a recordable injury, each of these programs are well-executed less Capital than planned which strengthens our conviction that efficient operations are safe operations are 2019 execution success is also shaped our thinking about Capital allocation for 2020 as Dave mentioned. We set the total capital budget for the company at one point six to one point eight billion dollars which includes offshore major projects expiration capital and essential maintenance Capital level for the US on Shore do the govt improvements in capital efficiency. We're planning a similar number of activities in the DJ and the Delaware for the 2019 Juliet.
panes for aprox
Only $200 less capital.
The program is expected to generate DJ growth to offset Eagle for Decline and maintainer modestly grow Delaware production.
We think that the focus on DJ makes sense based on the scale and the remaining inventory in the DJ Basin our track record of successful execution and returns there and their birth to grow while generating significant cash flow.
We expect this Capital plan to deliver moderate onshore oil growth is production increases in the more oil assets and offsets decline in the ngos and natural gas in the eagle food off. All three stations are designed to generate free cash flow in 2020.
Jumping into some asset specifics in 2019 the DJ Basin delivered more than 20% growth over 2018 and during the year Mustang and wills Ranch both delivered quarterly record production off the strong performance in the Mustang Development Area resulted in positive Observer visions of almost twenty-seven million barrels equivalent for the year validating the quality of our acreage and the importance of off road development.
DJ
And costs were down more than 15% year-over-year with record lows in the fourth quarter furthermore the DJ DDJ rates improved by more than $3 a barrel for 2020 reflecting the Improvement in ER and cost per well.
Exceptional performance for the year as trending into twenty-twenty and we expect even more efficient development in Mustang. Our first deals for the year will will complete road to in Mustang on the Far Eastern part of the development and then we'll move to 3 which is which is immediately adjacent to road to and we plan to utilize the existing upstream and Midstream infrastructure. Therefore reducing the well costs and improving the efficiency the well connects and the first quarter we plan to run three Rigs and two for a cruise and they're targeting about 20 deals.
North Wales Ranch comprehensive drilling plan is progressing through the approval process and the CDP will add about 250 Long Live drilling permits to our existing permit inventory page and they'll give us Clarity to about two more years of drilling activity.
2019 the Delaware Basin delivered 25% growth over 2018 and during the year, we realize several important improvements in the asset row development is improved the consistency of our well results Drilling and completion efficiencies have helped reduce. Well costs by over 20% and Eloise has decreased by more than 30% on a per-unit basis in my life is rare to see such dramatic year-over-year improvements in an asset and it would be difficult for us to replicate the magnitude of the 29 improvements. However, we still expect to see cost structure and well performance gains and the Delaware again in 2020.
So for example in the fourth quarter 2019 we completed for Wells in the southern portion of our Delaware acreage and the 30-day IPS on those Wells averaged two hundred barrels of oil per thousand foot 860 barrels per foot on an equivalent basis those great results demonstrate how we can further improve well performance with optimized Landing zones and customized completion designs should apply those ideas and techniques across the acreage position. We expect to see improved well performance increase Capital efficiency and even better returns in 2020.
and the first
We'll have two Rigs and two fractures running in the Delaware and deliberate about 15 pills.
Eagle for that settle continue to be a considerable cash flow generator as we maintain focus on base production optimization in 2020.
Closing out the door. I want to highlight the strong underlying performance of noble Midstream the team at Noble ex has done a great job of building out the Gathering infrastructure to support a noble Energy's activity in the South Delaware, like noble noble Midstream is nearing the end of a heavy investment cycle and transitioning the longer term sustainable cash flow and the impact of long-haul pipes out of both bases along with significantly reduced organic Capital Outlook positions. Double Midstream very well for 2020 and Beyond.
Turning to the offshore. We delivered several strategic milestones in 2019 clearly punctuated by the start-up of Leviathan a year-end as we signal. We expect emailed in the bath be the growth engine for the company in 2020 since start up the fields been ramping up and on peak days. We've exceeded 1.8 BCF BCF per day from both tomorrow and Leviathan combined name is Dave mentioned. We also successfully opened up new markets in the region with exports flowing into both Jordan and Egypt.
as we ramped up
Have proven to be even more prolific than we anticipated with. Well deliverability succeeding four hundred million million cubic feet a day due to the very high rose water permeability thickness.
Our focus in 2020 is going to be the deliverer safe operations demonstrate Supply reliability and increased value through greater contracted sales. We have a combined 2.3 BCF of capacity and we're primarily focused on increasing the utilization of that capacity this year.
Allocation for 20 28 will be approximately $100 which includes the tomorrow Southwest pipeline project compression at Ashkelon on the EMG Pipeline and adding a project on the Israel ingl pipeline grid.
In addition to the value creation of the project and the regional economic benefits. Leviathan is a a very long-term source of clean reliable energy because of the use of more natural gas and Thursday for electrical generation will result in significant better air quality in the region in West Africa the seeing 60 well and the 11 sanction with the highlights for the year off the six P. Well this continued outperform expectations and will help reduce bass declines in 2020.
also for 2020 will allocate a
Tell me a hundred sixty-five million dollars to the oil and gas project facilitating an early twenty Twenty-One start out the project already had a positive impact on the 2019 results with 34,000 of Reserve additions from Lynn and eighteen million barrels of positive revisions from extending the economic life of the album field.
Bigger picture a longer-term capital planning also includes exploration as a means to adding future resources and maintaining longer-term portfolio value and twenty20. We allocate 65 million dollars to drill the Kumbia Prospect in Columbia, which is in the second half of the Year. This will test targets approaching a half a billion barrels of resource at the midpoint of estimates month and a successful. Well here we'll ask additional prospects in the basement.
So I'll wrap up this morning with guidance 1st for the full year during the year. We expect us onshore Capital spending to be about 60% waited to the first half of twenty-twenty similar to the Pro Bowl 2019. And we also expect the 2020 production profile to be similar to 2019 with second-half growth in the US on Shore driven by Peak second quarter till counts.
U.s. Oil production is expected to be up 3 to 5% year-over-year and 5 to 7 % for Q2 for Q.
In eastern mad weeks anticipate the second quarter to be the lowest sales for the year with a peek and the third quarter due to Growing contract quantities and and the second quarter lower seasonal demand wage based on the successful start-up of the field. We're maintaining our prior guidance of 1.4 to 1.6 BCF per day gross from our Israel fields in the first half and 1.8 to 2 BCF back in the second half of the year.
Do do shift in Africa due to Greater capital and maintenance activities this year than in 2019. We expect more quarterly variability in our sales expenses and cash wage. Does she want sales will be will benefit from additional lifting and then we also expect some fourth-quarter downtime as we prepare for the oil and gas project to come online and do the plan maintenance that they're saying and the album feels
Specifically in the first quarter, we expect q1 bottoms to be up meaningfully from the fourth quarter primarily due to our incremental Leviathan production and all three of us onshore business units should be down in Georgia because of low fourth quarter and first quarter activity levels and Israel, we expect 410 to 440 million cubic feet a day net from our tomorrow and Leviathan assets off in West Africa. All sales are anticipated to be higher than production with total equivalents down slightly quarter-over-quarter primarily due to Natural Gas declines in the album field.
Start a company sales for the first quarter anticipated to be $378 to $398,000 equivalent per day.
Not expect the second quarter to be relatively consistent with the total first quarter volumes before we see another substantial jump up in the third quarter.
For 2020 we remain committed to Capital discipline and Cheryl to return and we believe it's a it's prudent to prioritize total company free cash flow generation over us onshore production growth particularly when considering the total company you over your production in cash flow growth from the Eastern Med and the uncertain commodity price environment.
On twenty-twenty the combination of the depth and quality of our unconventional and conventional inventory our ability to execute on our plan as a and manage costs are low decline rate and capital discipline all enable us to deliver long-term sustainable growth and free cash flow.
This competes completes our prepared comments, and we'll now turn the call over to the operator for Q&A. Thank you. We will now begin the question-and-answer session to ask a question. You may press start off on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause moments Charlie to assemble our roster.
And the first question will come from Arun with JPMorgan, please go ahead. Yeah, good morning, Dave. You did reduce your permanent scat packs by two hundred million. I wanted to know how you'll deal with uncertainties in 2020 regarding the plan. You obviously have the coronavirus off the warm start to the winter weather season in the week gas prices in the US and in Europe, so so wondering how you would Flex twenty-twenty if prices are below the reference prices that you highlighted in in slight 25 appreciate it and I'll tell you what it's
it's great to be sitting here and
Despite all those other outside influences coming off the momentum that we created in 2019 and I and I think that'll go partly to answering your questions. I talked about it off cuz I I think to your point. We had a reference Tech out there. We were looking at when we budgeted but we've also obviously kept track of strip pricing and so forth and I'd say even in the strip case it's out there now that's been influenced by some of those things that you've talked about. We're still staying committed to that free cash flow generation, you know partly because of the hedges we have in place already and partly because of the fact that we're continuing to carry in on the capital efficiency improvements. So I think we're staying committed and focused on that and you know, we'll we'll play it out from there.
Yeah, fair enough. I had one question regarding twenty Twenty-One. I was wondering if you could help us think about the volume impact from the gas monetization project. Looks like it's going to be start up in early 2021 and and in your mind is the path to get to full volumes or Thursday at 11 in in in 2021 or 2022.
I think when you think about it, then you know, we should be able to and what Keith and his team is working on is getting that ready for early Twenty-One. I think a full year impact of that what it out in there was around $260 million a day gross. So somewhere in on an equivalent basis 15 to 20,000 barrels a day equivalent for us if I'm not mistaken. So that's that's a nice catalyst is you look into twenty one. And then the other piece that you referenced is and you look at the profile this year as the ramp up in the Eastern Med in the second half of the year and carry over into next year. So our focus in twenty one will be on carrying over that ramp up from the second half of this year and then seeing if we can supplement that by filling out some of that capacity that we still have available there. So I think you've got opportunity for both of those things to be very nice Catalyst as you go into 21.
Great. Thanks a lot. The next question comes from Bryan Singer with Goldman Sachs, please. Go ahead. Thank you. Good morning. First question is on Israel gas little of a slight follow up there. You talked about increasing utilization of Leviathan over the course of the year, and I wondered if you could just add even more color on some of the moving pieces production capacity versus seasonal demand vs. Maintenance or pipeline constraints versus Contracting as we go through the year and specifically what you see as the market for additional contracts and how that could impact your production and and pricing.
yeah, Brian, this is
We took all those things into consideration when we originally guided, you know, the third quarter last year on a third-quarter call last year for this year's full year. We still Thursday. We're going to see a step up in the first half to the second half all all factors considered but the the startup has gone very well. And as I mentioned in the public comments, we've been above 1.8 BCF a day on weekdays from the combined total of Tomorrow Leviathan on a gross basis. So I think I think other than some, you know seem to lower demand in the second quarter. You know, we we think we've got the the the profile profile model about right and then remember as we move into the second quarter the contracts and the exports wage each of Step Up. So we go to 450 million a day. So that's what's influencing our second perceptive second half year growth and it's what's already contracted.
My second questions on proved reserves. Can you speak to the drivers and the production mix in the US of the increase in PDP and then what drove the the downward revisions and how does Thursday the reserve report as well as the point that you made on expectations for well performance and cost in 2020 impact your interest in pursuing inorganic growth projects in the u.s. Going forward. But yeah, I I think just hit on the proved reserves the the biggest positive revisions and improvements on proved reserves in the US were in the DJ the downward revisions were more a reflection of changing activity timing and making sure that we're staying in that four to five year level on activity. And then also there was obviously some impact on price, you know, there was significant price changes from 18 to nineteen.
And then from an inorganic perspective when you take that and and how you see the the costs and expectations for performance in the US business. Does that make you more or less interested or uninterested in in pursuing inorganic growth types in the you know, we've said and we consistently said, we're not focusing on Acquisitions if that's what your question is, but we're focusing on continuing to get more and more mature and develop out the the large Global resource base that we have both an international. We have that significant benefit of a large Global discovered resource base.
Thank you.
And our next question will come from charlesmead with Johnson rice. Please go ahead and your old team there. I wanted to ask a question about the US on Shore in and if you guys could deliver or you know, offer free more details on on how you know, some of the drivers over over the back half of 19 in into 28. If you look at the you guys came in under capex under capex guidance and both three q and four q and I think part of that was the US on Shore and we look at your your one few guide off the u.s. Archery oil is going to decline by, you know, depending on where you're following your guidance, you know eight to ten thousand barrels a day, but you guys are putting the you guys are putting the pedal down. It seems on your spec in Wanaque. So can you talk about what those those drivers were and how much of that decline we're seeing one key was really a function of you guys coming in. Perhaps below what you're what you're spending what you thought you're spending was going to be in the back half of the year.
We so just to give you a little.
We got more activities done through the full year 2019 than we budgeted for Less Capital but it's timing related because we were accelerating off the completion pace and the drilling Pace. We pulled some of those third quarter completions in the second quarter and some of the fourth quarter into the third. So our fourth quarter last year and our first quarter this year with the new projects that turned into line were were lower than you know, we would have thought about it the beginning of last year. So that's what contributed to the production outperformance walk through the year. It also is also what's causing the shape of it as we go forth quarter the first quarter all that is was in line with our expectations with the exception maybe the outperformance that we saw in the DJ and so in that case we beat volumes in the DJ over what we would have guided in the fourth quarter and we grew more oil in the in the full year of birth.
Nineteen because of that outperformance. So the so far we're not seeing anything.
Negative and the way we were modeling well performance capital or Capital efficiency.
I'd say Charles just add to that and Brent highlighted in his prepared comments. You looked at that even fourth quarter to fourth quarter oil volume increase from 19 to 20 that's pretty significant for the onshore portion.
Got it that that some of the color I was hoping for and then I have a question on on kind of a refresh or an update on how you guys are thinking about your your your Target off or Target debt. You guys you're going to have some free cash flows here. You know that you guys mentioned the dividend is a priority, but can you can you tell us or you know, give us an updated on your thinking on on what message you guys use whether it's an absolute that level or whether it's a Consolidated leverage or or Upstream only leverage that you're that you're looking to get to? Yeah Charles. I think we've been fairly consistent with staying focused on talking about the net Upstream debt-to-ebitda Target of 1.5 or lower over the next few years. And that's the trajectory. We're going to connect you to watch and stay focused on so I'd say the priorities as you mentioned our our dividend and balance sheet trajectory.
Got it. Thank you.
Okay Charles.
The next question comes from Doug Leggett with Bank of America Merrill Lynch, please go ahead.
I think so. Good morning. Everybody. See if I I wonder if I could Israel. First of all, I mean, thanks first of all for the Cadence of the second half, but you can give us some ideas to know what your exit rate looks like in Israel what your expectations are and maybe in the answer. If you could address some of these headlines. I've been circulating around Jordan has it at least to the exports and I've got a phone number.
Yeah, we we've been very pleased with our exports and what we've been seeing out of both Jordan and Egypt and the support and cooperation in in both places. I think it's been remarkable. You know, when you look at our second half of the year, you know, what we've said that 1.8 to 2 BCF a day for the total Eastern Med volume, and and I think that's still a reasonable place to be thinking about I think when you when you look even beyond that and it was touched on earlier.
And it's a good.
Here to to dive into this I think but it's been absolutely remarkable. The impact that Leviathan has had on the region when you think about how it's brought together the country. I mean, obviously the cooperation between Israel Jordan and Egypt, but then you think about it on a on a bigger scale you now have an Eastern Med gas Forum that started up you've got home countries like Cyprus Israel Egypt Jordan Palestinian Authority that are all getting together to think about. How do you use this huge resource off in the area that's now on and I think partly from Leviathan getting a lot more International attention and then you've got other groups that are looking at things like how do we get gas to Europe? You know, you've got groups pulling together discussions on a pipeline to Europe. We're looking at flng as a competitive option. You've got the opportunity to yep.
the gas plants in
The LNG plants in Egypt, so you've got some very strong competing options and up very strong pool to get gas into Europe at some place and just expand off the whole Horizon of development and broader reach of this large resource and that's getting attention. It's getting attention from the countries themselves and it's getting attention from a lot of international players, but I've got to give Leviathan a lot of credit now for having now been online to just creating kind of a revitalization of that part of the world from an energy perspective.
I appreciate the length yesterday my follow-up. I'm not sure if you'll be able to offer any color here, but I'm looking at slight twenty in the and I think you know for at least for us on the sales side. That's a really helpful in terms of how the kid and civil and kicks in the for the production profile. My question is what can you tell is about your cash flow coming out of each month because obviously you're providing the resources, but there is nothing much disclosure around the terms obviously, so I'm just curious when we think about the contributions of volumes coming from your legacy asset often does your cash full trajectory, you know evolve as we look at our chart on page 20
Yeah.
If we we haven't guided yet, this is brand again. We haven't guided yet to that level. We stayed at the volume level but we remind everyone that this is a very low cost to liquefy a very low-cost project to operate because it's all existing infrastructure with the addition of a new pipeline to the LNG plant. And then the only other variable would be you know, Global gas prices that you can think about right now. They're softer than they've been in the past but long-term, you know, it'd be it'd be a global gas price because we're we own the equity gas and Mom.
All right, guys, I thought I'd give it a go, but appreciate the help and I appreciate the capital discipline. Thanks.
The next question is from Michael Hall with hiking in energy advisors, please go ahead.
Thanks. Good morning. Appreciate the time. I just I guess focus a little bit on the growth rate you provided for a oil change. It looks pretty good relative to where we were. I'm just curious. How are you thinking about the sustainability of that level and then how would you frame your inventory wage in the US are unsure? Let's say for 20 21 Beyond at this point. How are you thinking about that? Yeah Mike, this is Brian again. Yeah, I think the second question is, you know, we still feel like we've got a long Runway both in the DJ and the Delaware of you know, high-return high-quality inventory partly because of you know, the size and scale of the DJ position and then partly because of, you know at lower activity levels that effectively extends our inventory life and and and both places so wage.
We've got lots of sustainability in terms of depth and quality of inventory.
And Colorado specifically we've got a deep inventory of of approved drilling permits and we're working to extend those more with the with the new CD P. We're working on in terms of the oil part of it. You know, it's it's even though we're keeping the u s essentially flat year-over-year 2019 to 2020 with the current capital plan because we're focusing it in the back and the Delaware that our oil earlier than the eagleford by comparison, then that's why we're able to grow well and that Trend would continue going forward as long as we continue to focus capital in those two years.
Okay, that that last bit was hoping to hear that's helpful. And and I guess maybe if you could also translate to Total corporate oil. I mean, I know there's some some down time in fourth quarter in West Africa. Is that just a second gas volume should we actually think about fourth quarter exit to exit file photo corporate office is some oil condensate type of mix but, you know, then when you when you get into twenty one will have that behind us and then then we'll also have some some condensate that comes with that.
Okay, great. Well.
Appreciate it. Thanks.
The next question is from Scott Gruber with City, please go ahead. Yes. Good morning.
I just wanted to follow the last line of question really focusing on the DJ cuz that's what you're growing in twenty-twenty and you mentioned, you know, maintaining that momentum into twenty one of them to death. But just as you think about the asset long-term, is there a plan to shift the assets at the maintenance mode at some point and and if so when and off and just how how could you know International growth opportunities affect that timing?
Yeah, I don't I don't think this is I don't think we we think about it like shifted to maintenance mode or not. It's you know our Capital allocation, you know long-term is returns driven and the dead returns, you know stack up very well right now in the in the in the portfolio and so I think as long as it's in that position then then you know, it would continue to to Garner its funding and then they both would be an outcome not a not a goal. You know, remember that asset is already like all usss but even at the current capital and current growth rate DJ's free cash flow positive at the asset level and so we can continue to stay in this mode for you know long-term.
Got it and a follow-up on the season.
Audi in the u.s. Number from a cat vaccine production standpoint sounds like it's going to repeat again in 2020 in potentially, you know capex flexing down a bit more in the second half of commodity prices for a week. But in general are you comfortable with that seasonality on an ongoing basis? Would it be better to try to smooth out the capex over the course of the year? I guess the real question is do you feel like you're losing any efficiency in our operations with that seasonality? Yeah, that's it's it's it's always, you know always best case if you could be perfect level loaded in all aspects of the business, but if you look at the performance from 18 to nineteen and look at the improvements and cycle time reductions capital and capital efficiency. I'm unsure even though we were kind of 60% front half loaded and 40% back half loaded on Capitol. I think we found ways to manage those that that a little bit of unlevel nostalgia.
Not that much, but it's it's manageable.
And we're still able to hang on to the our Drive even significant improvements in the in the capital efficiency. It takes a lot of planning and scheduling but that's that's what we do.
Got it. Appreciate the color.
The next question is from David deckelbaum with Colin, please go ahead.
Morning, everyone. Thanks for taking my questions and thanks for the Outlook.
Curious as you guys look at Leviathan we've read reports that from some of your peers out there and some of your partners that there's decisions this year off expansion. I think they've talked about floating LNG as a viable option. Can you give us a timeline on when you expect to make those decisions around expansion pack, you know and giving some of the productivity where are you sort of see that that capacity tapping out for the field at this point.
Yeah, there's this is Brad.
Maybe I'll jump in and take that one the you know, we've said, you know pretty consistently for 2020. Our priority is you know, making sure we can demonstrate, you know, safe reliable Supply coming from the project and so far so good and that regard and then you know, utilizing the existing capacity. So in total, we now have 2.3 BCF a day in the Metro. So those are those are definitely going to be the our our primary focus for twenty twenty and even twenty Twenty-One when we roll into it, but because of the size and and quality purposes resource were I think we're a long term for long-term going to be talking about expansion possibilities. So the one that we've talked about publicly is that we've got an F floating LNG flng wage study underway Dave mentioned and that's that's that's a possibility for to expand to additional markets. The others would be in all three countries we could expand in Israel, Georgia.
and Egypt
And we can ultimately maybe get it exported out of Egypt through the LG facilities. So all of those are are all actively being worked and we're looking to be able to expand with you know with demand off.
Got it. I appreciate the color there recognizes. It's not a whole lot you can say there and just wanted to ask a question on you assure. You talked about the mix right now focus on a obviously in Delaware and that makes a 60-40 split is is pretty consistent, I guess with 2019. Is there a point in your long-term development profile where that that's switches off it does that happens Beyond, you know the proposed Wells Rams CDP, and I guess as a follow-on to that is, you know as we think about capital of those assets. I know it's it's returns base at this point, but given the corporate level focus on free cash generation, you know, if we're looking at strip now and and the low fifties is there a sub maintenance profile that makes more sense from a free cash generation perspective.
It feels like we've you know, we've gone a long way here from 18 to 19 to 20 in terms of driving down us on Shore Capital and driving off Capital efficiency, you know at the level that we're at now to the earlier question, you know, you know, we're we're pretty low in terms of activities Rigs and stem and we've got a matched up pretty well off in the pace of development. And so it feels like a a good level if prices go lower though, you know, we've been very very consistently, you know committed to to our phone no objectives. And so so we'd have to think about something in the back half of the year for an adjustment.
Thanks, Brian. Appreciate the color guys.
The next question will come from Scott handled with RBC Capital markets, please. Go ahead. Yeah, I think I'm just going to building on a a couple of the line of questions a little bit obviously in 2020. You got off the night grows growth and Leviathan and then e g and twenty Twenty-One as you look a little bit, you know bigger picture longer-dated. I mean do you feel I mean do you see the need to you know continues to ramp up the US on Shore a little bit more as you get into some of those out years to provide that 5 to 10% growth and maybe it's a part of that discussion when you think about things like flng wage long of a time frame do you really have their that is that you know, two years one year two or three years. Can you give me give us a sense of you know, how long that would take to come to fruition?
well
Let me start with the last question flng will be doing a hard look feed study this year. So by the end of this year will have a better perspective and I think to actually bring it about to a real life take say plus or minus three years. Let's call it something like that. I think on your other question, which goes to the longer-term outlook for the company. I think that's where our ability to have maintained. Our exploration capabilities also comes into play. I mean, hopefully not missed in the discussion was the fact we're back to drilling, you know, significant material exploration Prospect this year off short Columbia, and we consistently focused on three to five key material potential plays going forward to any of those could supplement or our Outlook is we go forward just as our our offshore developments so far, we're driven by exploration in the past and then in the onshore business, let's not forget the significance.
position we've built in particularly in Wyoming up there and
Tori and my expectation is over time over the next five years that will start to compete with DJ and in Delaware to give us another leg to build off. So I think the the beauty of Life portfolio of a diverse portfolio is the fact that we've maintained our onshore capabilities or offshore capabilities and our exploration major project execution that gives us a lot to look forward to going forward. That was a great color in into my follow-up is is on the eagleford obviously getting you know, really no Capital this year and and you know, not much last year, you know giving it's it's free cash flow, but it is a declining assets, you know, and then and just from a you know, a visual perspective it obviously ways on on that us, you know growth rates on especially on a be a we perspective. What is the big picture a long-term plan of the eagleford?
Yeah, it's it's got the some of the things we've talked about in the past. Is there still a lot of resource there that's in the
On the secondary upper parts of the eagleford and we tested last year pilot program to do some refracts to see what we could do with the older Wells and the older vintage completions off. So those that upside still exist and this is still potential that's out there. But right now the the the heads up drilling Capital doesn't compete with the Delaware and the DJ's Thursday and it's free cash flow generation posture. Would it be a monetization candidate?
Yeah, I mean we said we've said off and on that, you know, we're willing to think about the vesting non-core assets and we've done a fair amount of that over the last couple of years. So if you know somebody came in with a big enough check we think about it.
Appreciate it. Thanks.
Next question is from Paul Chang with Scotiabank, please go ahead good morning. Thank you guys do quick question one. Do you have an estimate? What's the name meaning postbag inventory a DJ and devil if we base on the $50 WTI and 250 Henry Hub on an audience including copy g n a note that to generate a 10% return but I don't have numbers right here in front of me. But what we've continued to say is activity levels. We've got ten years type inventory or Beyond dead on this stuff that fits are returned and write and print that when you guys say ten years what kind of return that you have a Nissan and then what did that that's including on the or the inclusive or on the field level? What's trying to understand? What's the pace now that we are using?
Yeah, so just a reminder, you know our our investment for the next well, she is our total rates of 30% hurdle rate. And that's what we would start on these long-term inventory wage of conversations. And then remember that we've been driving Capital efficiencies significantly. So when we take out a a couple of million dollars of well cost and or improve the productivity of the wells off been doing about DJ in Delaware, then that that only that increases the value of the of the of the inventory, so that's that's the way we think about it long term life. The second one that I think with is with that now your total capacity 2.3. I think you have to opportunity maybe up four hundred million cubic feet all day. You just fine. It's just curious. I mean, do you have a rough estimate? What is the cap ex requirement? If we do want to expand the next four hundred million cubic feet and then the next month?
yeah, I think the best way to
Think about it is to take you back to our long-term capital framework, you know, but we've laid out, you know total company, you know, 1.8 to 2 p c f a day over the next five years and that includes both exploration and major projects and those expansions you're talking about in Leviathan fit within that framework. So the major project Capital per year includes I thinking about how those how those expansions would come in overtime. So at least one of them is included in that say next five years.
Paul say that again. Please is it means that at least one four hundred million cubic feet per day expansion is included in the next five years God. Yes, you can assume that because remember the first expansion is really low cost. We're only talking about, you know, some some incremental, you know, Wells and and facility mods. So the first expansion is easily fits within our Capital framework.
Okay, very good. Thank you.
Question is from Leo Mariani with KeyBank, please go ahead.
Hey guys. Wanted to dig in a little bit more into the trajectory of the Permian production here in 2020. I think you guys were kind of talking flat year-over-year. You did have some pretty good wage growth in the second half of nineteen. So you're kind of get the flattish should be thinking that Permian is kind of down a little bit and the first half of 20 before tramping and the second half twenty. Just wanted to see if I'm reading that off. Yeah that that's right. And and before I expand on it remembered that it's flat ishan equivalents, it grows on an oil basis here over a year and then it should grow exit exit the fourth quarter to fourth quarter, which means then because of the completion activity in the fourth quarter lower completion activities in the fourth quarter and first quarter, then we're down a little bit and keep one that we go through the year.
So you've got it, right? All right. Now that's that's helpful for sure and your comment with the the oil growing and the equivalent sort of flattish is that just reflecting, you know where you may be shifting some activity in the Permian to some oil your areas and in twenty know it's that was really a mixed comments. That was a flattish on equivalent basis for the all of u s onshore month. So the Permian it'll grow oil and equivalents.
Got it. Okay, that's helpful. I guess just jumping back over to Israel. Obviously, you've got a significant ramp in production here in in 2020, you know, I just wanted to get a sense. I think that all of that ramp is is is volumes that are already under contract which would clearly benefit you guys into 2021 as well. Just wanted to get a sense. Now that log-ins online and wells look great. Are you starting to see accelerated discussions around new contracts there and you think there's a decent chance you guys might be able to get something in place here in in 20, and lastly with respect to Israel. Is there any possibility you could sell volumes above what's contracted in in 20 20 and 21 or do you sort of need kind of hard contracts month to get those new volumes going but I think your question Leo. We were starting to see accelerated interest before Leviathan even came on line from potential customers. So I think those discussions with them.
Can you kind of get back to that most?
Type of thing and and you're seeing that and you're seeing that interest over there. The other thing that keep an eye on is how quickly Israel starts to displace cold. You've always talked about that being about a six hundred million a day plus or minus type opportunity there and now with Leviathan on we'll see if they kind of accelerate some of that conversion off on that opportunity. So I think they've already talked about moving that up from late this decade to middle of this decade and now that leviathans on I think that's an opportunity so long. Yeah. We'll see, you know, we're we're obviously not limiting ourselves. We're not limited on capacity right now. We have some room to grow beyond what we've laid out this year and and we'll see how it progresses. We're we're just a month over a month into this and everything looks great so far, so it's a good start.
Okay. Thanks for the color.
The next question is from Irene with imperial capital, please go ahead. Yeah, very quickly to follow up on Friends comment earlier that Noble X right now is going you know past life Investments stage. So any plan for like debt reduction like the term long do Twenty-One twenty-two and also related to this your interest in no, no blacks Midstream. Are you okay with it? And you need to reduce ownership and D consolidate in the near-term. That's all I have financing capital structure question for a Nobel X. Yeah. Yeah. Yep. Uh-huh. Yeah. Yeah, so that will will that call a little later this morning too. But yeah, you would expect is that business grows over time? It would turn out some of its debt, you know, that makes sense, you know, but in terms of the ownership, you know after the simplification and drop, we now own 62% of the units and as you know, we consolidate that business accordingly and so birth
We're in we have a lock.
After the first six months through mid year this year, so nothing would happen in the first half and then longer-term we'd have to look at, you know, the merits of only sixty 2% of it. We don't we don't we don't have to own that much of it to be able to manage maintain the control of the pace of development to keep up with our with our DJ in our Delaware activity. So it's an option to think about great. Thank you.
The next question is from Gail Nicholson with Stevens. Good morning request on the Le side. There's a lot of moving pieces in 2020. But if we just specifically look at the Delaware a DJ, can you talk about Ellery trajectory in 2020? Is that should we think it's in line with four Q nineteen levels or should we think there's incremental improvements throughout the year? I think you think about it more in line with this is Brent. Think about it more in line with the second half of last year. The fourth quarter was an exceptional us on Shore l o e performance. It was our our lowest per barrel. Well unit costs that we've had in the US on Shore it was a combination of things we had, you know, really mild winter and not much to deal with there in the in the late part of the of the quarter. We had very low work over kind of Maintenance activities. We had really good run time and you know, Wells and Facilities. So we you know, we we managed, you know cost well and compression well and those kind of things some of those are wage.
Dianabol and no flow right in to this year
But we'll probably probably not be as low as fourth quarter, you know as we go through the full year and and we've got we've got it more like second half.
Great. Thank you. And then I just kind of wanted to tack on to Irene question regards to that the deceleration kind of this last year being that heavy and how do you guys think about the benefits of that ownership in regard to free cash flow generation really in 20 21 for it took the market doesn't fully give you guys credit for kind of that a new Deus like situation. I was just kind of curious on your thoughts of ownership benefit to the cash flow stream in 2018 for Gail on his on his comment that you know for entering its face like we've entered now with log in with the new pipes coming on and the big inflection infusion, I guess is a better word of cash flow little start to come in here this year and then it'll carry over on a full year basis next year. So that's you know, the big benefit that we see of that that it's you know, not that dissimilar to what we've seen from Noble is undergoing their big inflection in transition.
and so you
Beyond this year and you've got both companies now that are seeing the benefit of these past Investments that are generating a tremendous amount of cash flow going forward
and if I just had one thing I think I understand your question better the you know, the two big things that we saw last year. When at the when we announced the end of the Strategic review where the benefits of having the two business together because of the the collaboration and the synergies and we can you know, the real examples of lower objects and lower capex that's directly related to the synergies of having the business together and then the birth of the cash flows in the Midstream business, especially as it expands Downstream and to the oil pipes, you know, we like the quality of those cash flows and the ability to to Upstream some of that too Noble.
Great. Thank you. The next question is from nitin Kumar with Wells Fargo.
Good morning, gentlemen, and thank you for taking my question a quick question on slide 9 as you've brought down the cost in the US onshore business. What is the Breakeven price on a oil or something for that business today? Cuz it seems like you're during free cash flow out of the US aren't sure with the new plan. Is that fair?
So two questions in there, so the the the break evens the definitely come down and partly depends on how you define it. So so if you're talking about just break even at a cost of capital returns, it's got to be some fifty dollars, you know, we invested a higher threshold than that, but you know, we've driven it down some $50 for for, you know, straight cost of capital like returns off. The other part of the question is the is the US on Shore business stand alone today free cash flow neutral. Let's say at strip or $50 it is today your plans for the total of us on Shore and each asset area of each business unit. So DJ Delaware and and eagleford at this year's Capital plans are all free cash flow positive dead.
Great, the other question David you said in your prepared remarks, you know, obviously you're raised dividends about 9% last year in anticipation of the Leviathan cash flows as you think about 20 20 in decadence of your spending and production. Clearly. It's going to be a second half. Free cash flow profile, but you may think the board or the management team is looking for to wait till you have more line of sight on actual free cashflows before raising the dividend or you could do it in anticipation of the growth. Well, we look at that wage order. If you look back over the last two years, it wasn't just nineteen but eighteen also we we raised the dividend in April. So I imagine we'll take a another pretty hard. Look at that this coming April also and we'll see where we need to.
Great. Thanks.
You so much.
The next question comes from Jeffrey lamb Bouchon with Tudor Pickering and Holt please go ahead and thanks for taking my questions. My first was just a follow-up to one of the earlier responses regarding staying committed to the free cash flow generation. It sounds like the $500 Target is what will remain intact even if something closer to strip plays out. So if that's a fair interpretation just wanted to get more color on what the fox could be on the budgeting side of of that's in that scenario. Yeah. I like you're right from the standpoint. We're staying committed to that even at a strip price scenario, you know, the hedges help protect that we don't see that big of an impact when you move from the 55 to the strip because of that hedging that we have in place with the capital efficiencies that we've seen and we're continuing to stay focused on not just Capital but operating efficiencies. Also give us a lot of confidence in you know, if we're staying that kind of a ballpark we can log
Stay focused on delivering.
Target got in. My second was just a Nuance one on the the eagleford. Just wanted to see if you could give us a sense for what to expect there in terms of exit over exit production or or just how u c p p declines in general. Just thinking about the DJ and Adele receiving that the bulk of the the US on tour budget.
Yeah, I don't I don't have the eagleford decline right in front of us. But if if you look on page nine, we showed a typical legal for it declines and that Thirty to forty percent that's probably pretty similar to where we are off. Obviously as you get further away from making Investments to decline will level off a little more than that or slow down a little bit but as as we go into twenty-twenty, that's probably a reasonable range.
Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Brad Whitemarsh for any closing remarks. Sure. Thank you, Chad and thanks to all for joining us today. Kim and I are around for questions and answers all afternoon if you have anything and we look forward to talking with you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Thursday
Thursday Thursday