Q4 2019 Earnings Call

We continue to execute on our divestiture program in January. We close the sale of our South Africa block to total for net proceeds of approximately ninety million dollars.

Thank you, Jeff and good morning, everyone the integration of our business into one cohesive oxy is progressing extremely. Well, we are ahead of schedule to fully capture value from our $2,000 Synergy program. We have repaid approximately a third of our debt related to the acquisition and we have the best people in place to leverage our Superior assets to deliver outstanding operation results as many of you may know twenty twenty marks Oxys 100 year anniversary success over Oxys first century was driven by technical expertise the ability to adapt quickly and our ceaseless Drive delete our industry forward through Innovative problem-solving these same attributes combined with our unique and defining approach to sustainability and a low-carbon Thursday will be integral to ensuring our leadership and success over the next one hundred years.

This follows the clothes of an aggregate of one and half billion dollars and divestitures in the fourth quarter. We applied the proceeds from these assets cells and five hundred million dollars of free cash flow to repay a billion dollars of debt and we recently announced our hundred eighty second consecutive quarterly dividend an outstanding record that few other companies can claim returning cash to shareholders through leading dividend is an integral part of our philosophy and the fourth quarter. We returned approximately $710 of cash and the amount we fully expect to continue to grow.

Moving now to slide six we continue to perform outperformed expectations and capturing value through synergies since closing the acquisition and on a run-rate basis. We have completed 60% of our two billion dollar Synergy Target since closing the acquisition including $799 of overhead synergies $83 of operating synergies and 323 million of capital synergies. We expect that our success and lowering costs will enable us to fully achieve our nine hundred million dollar overhead Synergy Target and twenty twenty-five a year earlier than originally promised.

before I touch you

The fourth quarter and value capture progress. I'd like to thank our remarkable employees who continue to work hard and responsibility to deliver excellent results whether their focus is on drilling the best Wells with a street leading Capital intensity operating our chemical plants efficiently maximizing product margins or delivering on our value capture and deleveraging targets our teams continue to life with passion to drive positive results every day. Our people demonstrate that they are exceptional at what they do while achieving the best safety performance in our history.

dead dead

We also have an ounce divestitures totaling 10.2 billion dollars net of taxes since closing the acquisition demonstrating significant progress towards achieving our Target of $15 month. We repaid 32% of the debt raised for the Anadarko acquisition with proceeds from the divestitures close to date along with the five hundred million dollars in free cash flow that I referenced earlier. Our total balance sheet debt has decreased by approximately 30% since the clothes. We repaid seven billion dollars of debt in the second half of 2019 and have a clear pact and closing the remaining transactions necessary to meet our divestiture Target operationally, our achievements are as significant as our cost reductions with a potential to accomplish much more money.

Moving to slide three as an Innovative and sustainable energy leader. We intend to be at the Forefront of our industry the opportunity the opportunity before us is immense faith in our teams are energized and ready for the challenge our technical expertise particularly in subsurface characterization is a competitive advantage that allows us to maximize the value of our assets off. All of our core assets are free cash flow positive and maintain dominant positions in the prolific basins or markets in which we operate our Focus portfolio includes includes multiple Decades of high birth short-to-medium cycle development opportunities with primary secondary and tertiary recovery options.

moving

How to slide seven is an example. Let's look at what we have accomplished on the Legacy Anadarko, Texas Delaware acreage. We are recovering more barrels per section with fewer Wells that are lowering costs by Upon Our unique subsurface capability and development approach similar to the advancements. We made on Legacy oxy Delaware acreage.

Already, we have drilled a record. Well in the Silver Tip area showcasing our ability as a premier operator in the Permian Basin. We are enhancing our best-in-class Permian Capital intensity by continuously improving time-to-market. We drilled our first five ten thousand foot wheels and Silver Tip 18% faster than those drilled prior to closing the deal and this is just a just the start we have many more improved implement.

We are already saving 1.9 million dollars per well completion by utilizing Oxys Advanced Atlas casing design. We're able to pump Frac stages particularly at the toe of the well, a much higher rates would lower treating pressures are completion design produces improved stimulation faster pump times and uses significantly less water put simply when in fact the optimize well account. We're spending 26% less than total Capital to recover 7% more oil.

Oxy's asset operability is unmatched and has greatly improved across the acquired assets by applying our base management expertise and best practices are Relentless drive for efficiency has reduced price down time by 22% on the acquired Delaware Basin acreage. We're also seeing downtime improvements across many of the other acquired assets, which is further improving cash flow and value. Additionally. We were working diligently with our partners and leaseholders to significantly reduce obligation Wells and short laterals allowing us to maximize value by focusing near-term activity on long-term divorce in our core areas.

As we had committed to do slide eight shows the measures will update each quarter to track the success of our progress. We have created a company with ample opportunities to efficiently allocate capital from a position of strength across a portfolio was sector leading returns. We have made significant progress in device divesting assets reducing debt and capturing synergies.

It's part of our

Commitment creating long-term value for our shareholders. We will continue to reduce that strengthen our balance sheet and enhance our ability to return even more cash to shareholders. I'll now hand the call over to said we'll walk you through our financial results and guidance.

Thank you Vicki. I'm also very pleased with how well our integration is proceeding completing. Our value capture program ahead of schedule is well within hand and is Vicky mentioned our teams are delivering out strong operational results as our integration progresses. We remain steadfast in our commitment to Capital this discipline and returning Capital to shareholders. We demonstrated our ability to excel operationally in 2019 while spending $400 less than our combined capital budget of eight point, six billion and lowered our operating costs on a daily basis or Capital intensity and value capture advancements have enabled us to lower our 2020 capital budget by $100 to five point two to five point four billion dollars for the year since closing the same position. We have strengthened our balance sheet by repaying 32% of the new debt raised and we will continue to leveraging as additional divestiture transactions are closed.

We have already achieved.

60% of annual run rates energies and I am confident that our 2020 financials will illustrate the progress. We are making in 2020. We expect to fully capture $900 of overhead savings meeting our Target a year earlier than originally stated.

Furthermore we expect to capture more than 75% of our operating and capital synergies this year.

In twenty-twenty we remain focused on maintaining our dividend by optimizing free cash flow and operating in a capital efficient manner. We have implemented a significant oil hedging program for twenty twenty and compass in a hundred and fifty thousand barrels per day which represents over 45% of our oil production. This will enhance cash flow in a low oil price environment.

As we have previously mentioned it will be a transition period before our financial results fully reflect rapidly improving operational performance and Synergy realizations June the fourth quarter. We announced an adjusted loss of $0.30 per diluted share and reported a loss of a dollar fifty per diluted share. The difference between adjusted and reported results is mainly due to a 1 billion dollar loss for reflecting Occidental Equity investment in West at fair value on December Thirty One as well as $656 of costs related to the acquisition.

Link to our business segments oil and gas adjusted fourth-quarter income of $630 represented an increase compared to the prior quarter primarily due to a full quarter of production from the Legacy assets and partially offset by lower International crude oil volumes as our contracts in Qatar terminated in early, October.

Oxychem surpassed Guidance with fourth-quarter income of $119 despite scheduled plant outages and softer overall demand which lowered production and sales volumes across many wage declines.

Marketing and midstream's adjusted fourth-quarter income of $200 which includes Wes decrease compared to the third quarter due to non-cash mark-to-market losses off the tightening of the Midland to em, eh differential and lower Equity investment income due to the sale of our planes units in the third quarter.

For the fourth quarter of 2019. We reported a balance sheet with without consolidating Wes starting in the first quarter of 2020. We will present our full financial statements without consolidating wage.

The first quarter and full-year 2020. We have provided guidance, which includes annual production growth of 2% first-quarter production guidance reflects planned downturn plan turnarounds dolphin and Al hosn as well as the timing effects of several large pad developments in the Permian resources as we continue to reduce debt in 2020 by applying asset divestiture the proceeds and free-cash-flow. We will update the debt reduction tracker in our earnings presentations. So investors can see our progress towards our divestiture Target of $15 plus taxes and in deleveraging. I look forward to providing future updates on our progress. I'll now turn the call back over to Vicky.

As Cedric said we will provide updates over the next few quarters as our continuing improvements and enhancements become increasingly evident.

For decades oxy has proven its ability to Innovative Lee recover more hydrocarbons from reservoirs. We have the technical expertise to operate and develop our unique portfolio of high-quality short-term cycle assets that are perfectly positioned to ensure. We will maintain our leadership as a low-cost operator this strengthens our ability to continue our long and steady track record of returning Xbox cash to shareholders. This combined with our differentiated low-carbon strategy will ensure our success and sustainability into the future will now open the call for your questions. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys off to withdraw your question, please press * then two, please limit your questions to one primary question and one follow-up if you have further questions, you may re-enter the question queue.

At this time, we will pause momentarily.

To assemble the roster.

The first question today comes from Douglas of Bank of America, please. Go ahead.

Thank you and good morning. Everybody morning Vicky. Good morning. I've got two two questions. If I made it. The first one is on disposal progress. Obviously Thursday is the Fairly significant micro change underway right now. I'm just wondering you November 14th, press release suggested line of sight to the upper end of your fifteen billion dollar Target by the Middle School this year. I'm just wondering if you can give us any color or confidence that to reiterate at that time line in that Target any color on the associated assets and specifically birth date on Algeria and Ghana where there seems to be some mixed news on whether the buyer is still has the appetite for those assets.

Okay Doug. I'll let Oscar actually give a full update on our divestitures. Great. Thanks Vicki. Hi Doug. So regarding we'll start with Africa regarding Africa. Of course, we continue to work with hotel and the governments of gone in Algeria towards the positive resolution of the divestitures. There's an increased risk as you point out associated with the timing and closing certain team that's become clearer. We'll report more when we have something more substantial to talk about and just to be clear. It's hard to comment Beyond what's public already in Africa is again, we would remain Bound by a definitive agreement with total around these assets but we're also cognizant that you know, these assets to these countries are very important to them and you know their interest in retaining an investment, you know is very sensitive and so all their constituents so we want to be careful with that but a couple of things I think I can say is as you probably know the assets and you know gone in Algeria dead.

Are very high quality produce significant cash flow, and we've used that to pay down debt as well.

Case of Algeria the I guess the one thing I can observe which is obvious is that since our the announcement of our deal with total algeria's voted in a new president has brought in a new Administration took that situation in particular is is pretty fluid. So as we look at all that we continue to run, you know, numerous sales processes as our commitment hit the $15 of assets sales hasn't changed and that is something will hit with or without the remaining Africa divestitures. So a great example that's come up again. We we really like to keep these processes a private we found that the best way to protect value but in other asset sales an example to address your broader question that is in the Press is the land grant. So that asset is primarily in Wyoming. There's been some juice press on that. It has over a million surface acres and over four million mineral acres and includes revenues from producing royalties primarily from Toronto.

But also from oil and gas coal other hard minerals and surface views such as wind farms and grazing and so forth. So while the state is, you know, clearly, you know communicated a lot of interest in this asset. It is a competitive process and there's a large number of qualified participants in that and the winner of that asset. It will be one of the largest land and mineral owners in the United States. So that's an example game want to list off, you know, a whole lot of other ideas and other things that were actually pursuing but we do think you know, we do, you know, we're going to get to our 15 billion and everything we do it's really important to as it relates to timing and we're focused on value and we understand in this market environment our timeline may maybe need to be a little flexible to protect that value but we still stick by our original announcement original schedule. We committed go back at the announcement Anadarko deal, you know twelve to twenty-four months, you know to get these transactions done from closing. We're about eight months in since birth.

Position and I remain confident we'll get to the 15 billion within the original timeframe. So again, we're focused on value.

Focused on certainty of closing in terms of dealing with counterparts and all of our divestitures, you know, we're still confident because look we've got as we mentioned over a hundred billion dollars of Assets in our portfolio took a good team and a good track record of success. So hopefully that that helps give a little color.

Thanks, Oscar. Vicky is really just on the standard your number. And first of all pretty rapid progress on getting the operational synergies done. I know it's only you know, I guess also you said eight months in but I can't help but ask well, you're you're obviously done it quicker. I'm wondering if you've seen other things. Is there a potential to reset that Synergy Target at some point and what time right now we can thank you. I think certainly we can reset the Synergy Target at some point, but now we're focused on making sure that we capture the synergies that we thought of that we've outlined as a goal and and I can tell you that progress has been actually amazing and I want to emphasize that part of the reason for that progress is Thursday. We got the the structure done and completed pretty quickly. We as you know, we've been working on our own company our own organization in our own approach to business and to share

And all the other things that we do we've worked on.

And optimize those over the past few years. So we had a business model that we felt was working well for us so we brought the Anadarko assets into our structure and have now started working with their business units. We rolled the Gulf of Mexico up under Kendall and who's manages our International operations and major projects He has the most offshore experience of any of our leadership team. So he's managing those brought in some good oxy people. But but most importantly we retained a an incredibly good Gulf of Mexico team from Anadarko and then the the Rockies business unit. We we created a business unit there and just brought it under our domestic operations under Robert Palmer's leadership. And and so the bringing the organization in was one thing that we did right off the bat, but the second thing that we were able to do very quickly was to start to work the culture and fortunately we found that ma'am.

the Anadarko employee

That that we brought with us and and kept were had the same or similar culture to what we have and you know credit Jim Hackett for that. It's just been a really good to bring those those guys in and and part of the thing that that has driven the Synergy capture so quickly for us to is not just the amazing and outstanding performance of Permian resources, and they're certainly ahead of schedule there. Thanks to Justin and his leadership. But but it's making sure that this was a process that we owned some companies will bring in consultants and use them throughout the process. We have an internal team working this in full and then composed of ambassadors that are working throughout the organization them and they're the ones that go out and help to ensure that our business units and teams know where we are know what the goals are no know the specific numbers. We're tracking them weekly our board is yep.

Engaged to this too. We actually have a board that's has a integration.

In committee led by dick palladian and dick has done a great job to drive dive into the information and be a part of that team driving progress very very quickly. So culturally organizationally were there the synergies are coming sooner, but but other things are happening in our other business units, the may we may not call it a part of the synergies, but but there's things happening elsewhere. We're we're continuing to advance our technical capability some of that in our own operations and some of that in the Anadarko assets that we picked up. So I like to just kind of turn it to Kendall and for him to cover some of those I think you'll find this is these are some of the things that will quantify over time and share with you but these are the kinds of things that we're working off.

Thanks Vicki. If we talk a little bit about Gulf of Mexico synergies with renegotiating contracts today. We potentially see between an eight and fifteen percent reduction this year in the cost of the capital program. We started to roll oxide drilling Dynamics, and we're already making savings on the first Wells with Optimum sequencing. We expect a reduction in shutdown generations of two thousand percent this year. The oxy maintenance programs will lead to further 20% Improvement next year in up time. And recently we were delighted that members of the oxy board of directors wage did the Deepwater Horn Mountain Spar to emphasize commitment to HSE / staff and our contractors offshore and this follows their visit to South Palm Desert. You know my last year

moving to

And we saw records this year in Block 62 of 29000 c u e per day and we've developed new tools in the house for something. We call logs ejecting. It's a new complexion technique which we piloted and 15 Wells so far. We've seen improvements of between two hundred and three hundred percent and IPS of new wells for an increase of 5% and the DNC costs. It's not tracking and I'm looking forward to being able to talk more about it and future calls.

We previously talked about the oxy field Optimizer and mkhize not sore high-speed Reservoir models and I running in the cloud and the system is making actual recommendations for Thursday. My location at McKay is not to the engineers in the pilot area, which covered 3% of the field. We saw increases oil production of that the 1% with a decrease in Steam of 15% Let me continue to increase the the pilot area.

Colombo

Yeah, we increase the production by 17% year and year. We kicked off the tech a continuous stream pod project so far, we build 16 Wells and we're optimizing the development one's life partner. I could Patrol in Exploration. Our teams delivered fifty two million barrels of resources that are finding cost of $3 a barrel and 2019. So if you look over the last five years, they've added two hundred million barrels resources to our portfolio Abu Dhabi we saw a record production of 86.6 mb per day is part of our winter rape trials and on schedule. We awarded the feed this quarter to a Mac in the UK's. We're on track for increasing capacity to 1.45.

So overall a good year we've performance be production and continue to innovate and break records.

And just one last thing on the divestitures. Remember we're repaying 3% debt with proceeds and have no 20/20 debt maturities. So while we share certainly are investors sense of urgency around lowering the debt, we do have flexibility as it pertains to retaining cash flow. For example, the Africa assets are generating right now around seven hundred million dollars of annual cash flow at 60,000 rent. So so we do have some flexibility with that.

Thank you. The next question comes from Paul Sankey of Missoula, please go ahead. Good morning. Everyone Vicky the investment case for oil is really very much about the wage. And and no less a Doxie. Can you reassure us that it really is your highest priority to keep paying the dividend that the environment being as difficult as it is and would you actually be want to cut capex in order to keep paying it? Thank you. Thanks Paul. Yes, our policy is is what it's been for the last probably twenty years are and and we we approach it based on our cash flow priorities which is first to maintain our our operations found after maintaining our operations. Certainly, it's the dividend and capital share repurchases. Those things come after that. So we yep.

have the flexibility to to do

Other impacts our cost structure to to continue to pay our dividend our intent is to balance our our cash flows. But we again with the flexibility of this enormous portfolio that came out today with the things that our teams are doing to drive efficiencies and improvements and cost reductions. We're actually in a good scenario. I think we because we don't expect this situation, but we can last through the situation understood and and just to be clear. Could you talk a bit more about your flexibility to cut? I mean at the moment you're growing obviously you could conceivably go grown flat too gross negative. And and if you could just talk about some of your flexibility because it is important for people secondly and finally, could you just reiterate on the divestment program? Because I think that's the other that's very important thing to people obviously you've gone through it line by line. But to be clear your reiterating that by mid-year you'll have done the 15 billion. Is that what I've read or already served story and and then seen re report wage.

I'll look online. Thanks.

So how long the this coronavirus impact will will last so what we've done is we've actually initiated our business continuity plans and we started look at various scenarios and what we would do and a situation where this looks to be lower for longer. So we we have the flexibility to First lower our growth to know something beyond that we have the flexibility to to go even lower than that and still maintain our production. So and and beyond that we I think we've said in the past that because of the high growth assets that we have we could actually allow our production to decline a little bit if we're in a scenario where we're the lower prices are being driven by an event and this is this is that case because remember now, you know prices were 55 or above before the coronavirus hit so we believe that that this is not a scenario that's going to last month.

For for so long that it would it would put us.

I'll address the the dividend first and you're right. We we have built a scenario around certainly the the environment we're in we don't.

A scenario that we can't deal with it with the situation that we have. So we've got those scenarios built-in and we've got timelines and when we would make decisions and pull triggers, so we're well prepared to address this month and with respect to the divestitures. We're we're very confident that we will achieve the 15 billion but you know given the scenario we're in today. I think every company that now looking at what their plans are and trying to decide you know, what do you what do you do in the scenario? And what are the things that that will that you should start to to adjust? We believe that we will achieve the synergies, but I'm going to pass it to Oscar. But I believe that some of the situations that were in right now our timeline could be impacted but just the fact that some of the interested parties can't travel they can't leave their countries. And so there are some travel impacts that could that could have could delay some of what time

our interaction with counterparties

Oscar do you have more than that? I think that's that's totally fair baking is something about summed it up pretty well. So, you know, we've got where it says we've got line of sight to mid year and and the processes we have going but we've got to be cognizant of this investment for those travel the volatility of the commodity, you know, all that. I think again, we're focused on value. So the timing needs to slip a little bit to protect that, you know, I think it's understandable if we look for that wage flexibility. I think you'd agree.

But I would say that if we believe that we still will still work the process with Algerian Ghana, but we do have a plan B's as I alluded to we we can we can go to plan B's and replace the proceeds. We would have gotten from Algeria with other assets else that essentially have about the same cash flow impact.

The next question comes from David McDermott of Morgan Stanley, please go ahead good morning. So I wanted to build on some of the the questions that were already wage around Synergy specifically and I was hoping you could comment on given the the reduction in capital spending you've already made here for 20 20 verse the original plan and the fact that you're on track to achieve your synergies ahead of the original schedule how that impacts the going to capital budget ranges for for twenty Twenty-One. I understand. It's far out to give preliminary guidance there but you previously talked about six point six billion of spend four five digit growth and then also talked about a maintenance capex scenario there how of those those ranges are how is that range change based on what you you've been able to achieve so far in terms of synergy realization took the the 6.6 that we set with a 5% growth was based on the synergies that we expected to capture capturing that time line and as as you just said the timeline has been accelerated. So we yep.

Have not laid out.

What the scenario would look like yet? And we're we're working that but we were certain that obviously that we get the 5% at 6.6 but we do believe that there's the opportunity wage that we could get the 5% with a certainly with the lower Capital. We just haven't calculated that number Well, we'd like to see is is how some of these other ideas and opportunities play out. So we're just say that it now I'm pretty excited about twenty Twenty-One and about and about what we can do based on what we're seeing today.

Got it. Great that that makes sense. And I wanted to ask is my second question a bit of a a longer-term one and it relates to some of what you're doing on the low-carbon ventures front and I think oxy is in a somewhat unique position given the large CO2 enhanced recovery business you have and I like the proactive approach with with the low-carbon ventures and and work to use anthropogenic CO2 in that business. But as long as you could specifically to the opportunity set that you see their kind of the return profile of some of those Investments, um, and how you're thinking about that fitting into the business and more meaningful way longer term wage longer-term. We actually think that that's going to be a a business that will generate significant cash flow and earnings for us over time with what our team is seeing today. There's a lot of interest in life Partnerships with companies that don't have the capability to otherwise lower their carbon footprint. So there are a lot of situations out there where that that exists off.

For competitive reasons. I can't talk specifics here, but I will say that.

That there's now so much interest in by all types of companies that this is going to be a scenario where we have partners that come in and invest and or we can sell ultimately CO2 offsets and we can we can generate our own electricity cheaper to to also provide CO2 for our operations or we can provide electricity to others through the technology that we've invested in today. So with the combination of anthropogenic from a tree where the nut power generating lower-cost electricity for our CO2 operations while also providing the CO2 for our operations, and then the the director of capture which is a process that we're we're doing a feed study on now and will ultimately start construction. We believe in late 2021 or 2022 with all of those plus. Yep.

Tristan and others to come in and invest and or buy offsets, it's there's lots of opportunity for us to to start making that a a business line and off at this point. I really can't say more than that, but we will as we can we will share much more information and I think by the end of the year, we'll have a lot of exciting things to tell

The next question comes from Ryan Todd of Simmons energy, please. Go ahead.

Great. Thanks. Maybe a couple a couple of follow-ups here. I mean you you've you've talked a lot about the best ship program in in about I guess maintaining dividend there in this time. I mean, what do you see is the the trade-offs of the downsides of just I was just targeting maintenance capex and tell debt is reduced to a certain level on a multi-year basis. You know, how do you view the trade-offs between modest growth you you're targeting over the medium-term versus the potential to pull forward debt reduction and maybe the the trade up to the benefits of of targeting a larger the larger investor program to get the debt down faster and be in a position to talk about distribution growth.

Well, I think Oscar could say a little bit more about.

Going beyond the 15 here in a minute, but but to start with I would say that are we do want to get our debt down. We want to get our debt down to at a $60 off WTI to be about 1 and 1/2 hour ratio. But but in doing that remember now our investment and organic growth is delivers an incredibly good returns. So we're what we're trying to balance is delivering returns to our shareholders while repairing the balance sheet. We think we can do both and so we're working to do both over time and the name of yours are really what we are are targeting to help the lower that debt a lot faster. And with what we have in the portfolio. We believe we can do that Oscar if you want to leave a comment or two. Yeah, I guess just, you know simple math. So we said clearly we've got processes ongoing or prepared to launch, you know, well in excess of fifteen billion weather Thursday,

We close on Africa. So to be clear.

Now we do have we've we've kind of done what you're suggesting right? We've got a lot more in the market than we need under really any scenario just for you know this purpose to be competitive across a supposed to be able to pull, you know deals that we don't like to sell things. We do like the land grants and interesting one where you know, it's you know, it's relatively immune from volatility and the oil and gas prices values else wage. And so these are kind of things will try to accelerate so clearly where we can protect value and move them forward. We're moving them forward and we're you know this volatility if it slows down a couple of them it slows down a few of them. So, it's a portfolio approach and it's it's a big it's a big effort.

Okay. Thanks. And maybe one you have a slide in the presentation where you run through the kind of the multi-year timing outlook on a number of your conventional assets around the around the world. What a what sort of timing requirements do you have on the various conventional assets globally on the time. Is there a limit to how far you can defer activity in places like Abu Dhabi in Columbia?

We are currently meeting all of our commitments on all of our International conventional assets. So I think we're doing a very good job of that. We we we work very closely with the government's in our partner companies in those areas to make sure that we're delivering what we said we would do we optimize where we can and some of the activity that can talked about in Oman in particular is delivering better results with less Capital than we had originally anticipated. So I think that we're we're doing well with all of our convention commitments

Yeah, it's Kenya. I think I talked to quite a few of the ones on the on the sheet out earlier. I think we're on track for 2019-2020. Twenty Twenty-One and we studied the way things are going. Well, they're shy expansion or our host and expansion is going well white energy project is moving ahead Target forty million gallons per dates and design with the phone company. We like working with we'd be plenty of places to put the CO2 which takes you through the 20 20 20 21 time frame, you know mines seismics gone. Well, we're in a building the the 3D seismic we captured last year on the on the main blocks.

Exploration Wells, you know, we've got a sudden 85%

Technical success rate there just under 50% commercial success rate and are finding cost or by $3 barrels that's going well overall. I think you know for all of the items listed, you know, Columbia would kicked off tech for 16 Wells drilling caused coming down facilities. Well known not moving ahead and see completions were working jointly with Echo Patrol and then we're getting ready for the tech of ramp up. So I would I would say generally meeting everything on that slide Twenty One in terms of dates, which is the on-time on-budget is is one of our mantras.

The next question today comes from Paul Chang of Scotiabank, please go ahead. Hey guys. Good morning, Ricky. Just curious that black ones that you get your debt under control. Is there a Park agrees of how much is the cash flow you want to reinvest and how much is going to return to the shareholder? I'm not talking about the next month or two year. Obviously that we payment is going to be the priority that may change it but in the longer-term, how should we look at the business model how you're going to use on the cash flow? Is there a reason that you are targeting? Well under the scenario that we're working today. You can model it that we we're assuming that a 5% off is the cap of where we really feel like we need to be over time. So the no matter what the oil price is whether it's seventy or eighty dollars. We don't think that we need to to home.

More than the 5% growth. So the Xs.

Cash beyond what what we need to invest organically to deliver that growth would go to generally to share repurchases or or other Investments like them. But but from a capital standpoint growth standpoint, we think 5% is is sufficient. So I don't know what that ratio. It'll it'll change over time actually. Okay, and does it suck on the sake on your $55 brand price that what what will be the target group rate for you guys then fifty-five to sixty dollars is still the 5% off.

We're not going to we're not going to adjust and and run our Capital organic capital investment up. As oil prices go up. We're really going to manage the business at an Optimum investment rate off and that investment rate generally will deliver that 5% growth. And so we don't want to get get ahead of ourselves with respect to maximizing net present value of our developments.

The next question comes from Pavel molchanov of Raymond James, please. Go ahead. Thanks for taking the question. When you set a few months ago that you will reduce your stake in Western Midstream to to less than 50% the yield on Western Midstream units was, you know, maybe 10% or so long to dates almost twenty given how distressed those units are trading. Does it make sense to divest any of them under current conditions?

I'll I'll take that one know generally know but there's a short answer but clearly we've got a commitment in terms of what we've done. I'm standing with Wes up and independently and indy consolidation and all of that where we do need to get below 50% but we do have timing flexibility on that as well. It's not something that necessarily needs to be done right away. But we agree. We're the largest shareholder. We hate the price as much as anybody more so probably so some patients around that is clearly something that would make sense.

Okay.

One more on the decarbonization aspect of the story most other companies that have put out a net zero Target have given a timetable, you know twenty fifty or something else realistically. When do you anticipate being ready to give a timetable for Thursday or NetZero status?

Our teams have already worked out a a fairly detailed strategy around getting there. In fact, this strategy that they worked is not an aspirational goal. It's a the outcome of a of a defined program where we actually have on a timeline milestones for the development of direct are captured and it's a CO2 and the installation of net power over time. So the last I saw that and we're not saying this is a target. But the last I saw of what that would deliver it looks like in the 2014 to 2045 timeframe. We would be carbon-neutral.

The next question today comes from Bryan Singer of Goldman Sachs, please. Go ahead. Thank you. Good morning. Wanted to start with a couple of follow-ups on questions from early June 1st with regards to a lower commodity environment given the low cost of debt from your financing round last summer. How would you weigh going to New Jersey going to decline versus taking on additional debt to keep the dividend sustained and then separately since you brought up the land grant, can you characterize where you see free cash flow coming from there right now?

I would say that we will will not take on debt. We don't feel the need to do that. We think that with the flexibility that we have then almost any scenario, especially given the fact that we've hedged 350,000 barrels a day pass that along with the fact that you know, $40 oil is just not sustainable for our industry over time. So we have the time to work through this and and we would we would actually along production to decline a little bit because now with the Permian resources business with with a DJ Basin and even ultimately the power Powder River those are very fast production package slow recovery engines and so we would have the bill the ability to recover from allowing our production to decline remember now back when we just had conventional assets that were found that had a much lower growth profile over time. That would not have been possible. But today we have that flexibility so we would not take on debt to pay the dividend.

We we we would what we do.

Is allow our Capital Investments organic Capital Investments decline real quick. It's Oscar on the on the land grant. We haven't disclosed with the cash flows Associated but with it, but we're think about it is like this off the value inherent in the asset. So again a lot of surface and a lot of minerals and minerals of all kinds hard and and liquid and so forth that a lot at least as much value is in the office in the future development of that surface and the minerals and the just the value of it there as to the value of the the current cash flows today. So we do like the potential value this a Thursday terms while it will have some impact on cash flow cuz it has cash flow. We expect the multiple of the asset value to be higher than you'd expect with more traditional asset sales.

Great. Thanks. And then my follow-up is with regards to two plays with an EMP portfolio the Permian and the Powder River Basin on the Permian on Slide. Twenty-eight the Highlight the significant increase each year in well performance a wondering what your outlook is for 2020 and the extent to which longer laterals will drive well performance versus other measures and then just any Milestones that you expect in the page over Basin this year and how you see that play developing within the portfolio.

I'd say on the premium resources business. I was I was

Please surprise I had forecasted the the 2019 from 2018 Improvement to be in the 5 to 10% range and you can see that clearly beat that with some of the things that our system is talking about today differences in the way. We we do not just our our where we where we put our laterals but the but the wages are are Frank jobs going back to the the improvements. They've made previously I believe there's still room to further stimulate the near wellbore along the full lateral and to recover more near Well Bar reserves, and I think that they can work on some things to do that over time. So I I I think that I I'd hate to give a number, but I do expect us to improve. I don't think will Plateau from from 2019 to 2020. I think we'll see Improvement this year and Improvement going into next year as well with respect to the Powder River. That's a nickname.

An area we've done some.

Appraisal work the team and and that's working powder Rivers all Legacy on a dark. Oh, they're incredibly good. They've looked at the offset operators looked at what they're doing there. Now, they've shared information with our internal people on the Permian resources were learning things both ways that teams going to that that team will make some significant noise in the Powder River. I believe they get started. We won't be very aggressive there. This year will pick up activity probably the toward the middle of the latter part part of next year.

The next question today comes from Janine way of Barclays, please. Go ahead. Good morning. This is Janine. My first question is on Permian maintenance capex. We've had a lot of money on that place so far. Can you discuss or maybe quantify how permeate maintenance capex Trends over the next couple of years? So I mean, we're thinking depending on the growth rate the decline rates page and potentially facilities related spending could also Decline and both of those would be telling so why we look at that really is from a capital in intelligence standpoint and we see that our Capital intensity right now is down in the low twenties. And so we believe that with the efforts that we can make around optimizing our box production and designing our fracks so that they are recovering more ultimate reserves from essentially the the same

Sort of designs. I think that I think that

The maintenance Capital shouldn't significantly increase over time. Do you have any numbers around that? Yeah, I mean what what Vicki said in? Jenin I think is what you're getting at is, you know, the maintenance Capital obviously is your Base Kitsap bigger that drives maintenance higher but what's going on is with the lower growth rate you get a lower Decline. And then with what Vicki said with the capital intensity continuing to improve we wouldn't expect maintenance Capital wage Permian resources to to go up significantly even on a much larger base, which normally you would expect that to happen. We shouldn't see that because of the improvements in performance package Decline. And as you mentioned we will get lower facility costs with time because you're not opening up new areas or newfronts you're able to leverage the facilities are already in place. So that business will continue to get better on that front.

Okay, great. That's that's really interesting. My second question is just on activity and Vicki following up on your prior comments about willingness to respond to a potentially lower for longer scenario, You said that you could go X growth or maybe even decline a little bit depending on the environment. Does that imply that there really isn't any non-catholics that could be pushed off in that reducing box for the year would just all the activities so we noticed that in the oil and gas cap ex budget facilities and exploration in between the two of those. It's about 24% So, you know, maybe there's potential scenario that you could push some of that off and and still kind of keep the machine going.

Yes.

That would be the first to go we've teared our Capital so that as we go through this and we start to have the having the lower Capital the less productive Capital goes first now wage that would mean that there could be a point in the future where our facilities capex could be a higher percentage but given where we are and optimizing our developments in this kind of scenario that that's exactly what we would do.

The final question will come from Rodger Reed of Wells Fargo, please go ahead.

Yeah, thanks. Good morning. I guess one thing I'd like to touch on if possible on the Gulf of Mexico on the chart car slide 21, you mention the Eastern Gulf of Mexico exploration Discovery and then obviously targeting additional exploration in the out years as we think about the sensitivity of capex wage and you know call it lower for longer. Here with oil prices. Where does the exploration need in the Gulf fit in with the general idea that you were going to keep production relatively stable there in the Gulf sort of that question has been asked about the Permian and maybe overall and the company. You know, how do you manage constraints on one end with goals on the other and keeping that business on a sound footing?

Hi, it's Ken.

Essentially, it's not only keeping production flat. It's you know, the Gulf of Mexico generates a large amount of net free cash flow. So our goal is really to have like ten year plan which focuses on keeping the net free cash flow relatively constant over that time frame as I mentioned in a previous go wheel of birth and it was one of our assets originally continues to look better and better Central gum looks really interesting also, so we see really good opportunities for near-field tie-backs am participating in ongoing activities where we can consolidate around those areas. So that's the goal is

Yeah, maintain long-term steady net free cash flow from from articles which are really really high margin battles. They can compete with you know, everything in the palm and we have great teams long history going all the way back to the Ambassador. Usually go

Okay, great. Thanks and then follow-up question you mentioned obviously the the change in the board structure that's gone on some of the other things in terms of uh, you know accessibility for shareholder initiatives and all that since the next time you have an earnings call will probably be deep into the proxy season. I was just curious wage has there been any change on on that front? She'd want to comment on sure recently, you know, we announced that Andrew would join our board that's going to be effective March 1st, and we think that adding Andrew complements the addition to Bob sharer to the board in July of last year Andrews Andrews Decades of operational and financial execution leadership in the industry will further strengthen our board of directors. So those two ads were were part of a process that we feel like we're really excited about

That's brought some.

And different experience to our board and also as a part of the independent chair succession plan the board approved last year. Gene batchelder will step down as chair after this year's meeting and he'll be succeeded by Jack Moore who is our vice chair this year accordingly. Gene has indicated that he will not seek re-election to the board. But I do appreciate jeannette's check if they as they've gone through this process. This is probably been the first formal succession to the chair roll that talks he's ever had so that process has worked. Well this year additionally Spencer Abraham has served us for for a while now has indicated to the board that he has decided not to stand for re-election. So we're grateful for both young children Mister Abraham for their contributions and their service to the board. And then the other thing I wanted to highlight is I'd already mentioned that the two new committees this year. I mentioned that dick played in was leaking.

The integration committee. He's also our audit chair. So he's been a big part of the help.

Thing is structure of the metrics and follow the integration and make that as accessible as it's in but also I want to highlight that Peggy foran has been appointed chair of the sustainability and shareholder engagement committee Peggy's proactive shareholder Outreach and thought leadership on key governance issues has earned her really the global recognition as a leader in corporate governance, and we appreciate the leadership and expertise that she brings to this committee into our board that committee. We want that committee to help us be much more engaged and and further proactive around shareholder concerns and engagement.

So with that what I'd like to do is win last information is to again reiterate that that I'm very very pleased with the acceleration of our our synergies and those that acceleration of synergies was only made possible by the fact that we Excel accelerated the integration of or businesses, and I wanted to pass it to to Cedric to talk a little bit about the one-time charges that that have occurred and what you can expect in the first quarter, um, both fourth quarter that you just saw him first quarter coming up.

Yeah, great. So there's been a number of questions logically so around the timing and magnitude of the one-time costs and also some confusion. We're going to suck up here with respect to when the costs are expensed and when they actually are paid out in cash because the timing will be different so through the first fourth-quarter, we encourage approximately 1.6 billion integrated related costs. And that is an expense item and this year we expect to incur an additional four hundred to five hundred million in integration costs money through the fourth quarter $868 million was paid out in cash in the remainder of that total balance will be paid out expected to be paid out this year in 2028. So as we look at it the paybacks are phenomenally good with these moves. They're very good paybacks. And so incurring these costs earlier in the process will enable the benefits to flow to our birth.

Online sooner than it works.

My expected so as Vicky mentioned we are significantly ahead of plan and schedule very excited about that. And we think that the financials are going to reflect that beginning, you know this year.

Okay, I'll close with another thanks to our employees and to all of the all of you who participated in our call today. Thanks again, and have a good day.

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