Q3 2020 Southwestern Energy Co Earnings Call
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Good morning, ladies and gentlemen, and thank you for standing by.
Welcome to the southwestern Energys third quarter 2020 earnings call.
Management will open up the call for a question and answer session following prepared remarks.
The interest of time, please limit yourself to two questions and then re queue for additional questions. This call is being recorded.
I will now turn the call over to Britney Raiford southwestern Energys director of Investor Relations you may begin.
Thank you Gary Good morning, and welcome to southwestern Energys third quarter 2020 earnings call. Joining me today are Bill way, President and Chief Executive Officer, Clay Carroll, Chief Operating Officer, Julian Bott, Chief Financial Officer, and Jason Clark head of marketing and transportation.
I'm with yesterday's earnings release, we also filed our 10-Q, which is available on the Investor Relations section of our website at Www Dot <unk> Dot com.
Before we get started I'd like to point out that many of the comments we make during this call are forward looking statements that involve risks and uncertainties affecting outcomes.
Many of these are beyond our control and are discussed in more detail in the risk factors and the forward looking statement sections of our annual report and quarterly filings with the Securities and Exchange Commission.
Although we believe the expectations expressed are based on reasonable assumptions. They are not guarantees of future performance and actual results may.
May differ materially and we are under no obligation to update them.
We may also refer to some non-GAAP financial measures, which helped facilitate comparisons across periods and with peers.
Any non-GAAP measures, we use a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release available on our website I.
I will now turn the call over to Bill way.
Thank you Britney and good morning, everyone.
We appreciate that you've joined our call today, and I hope that all of your safe and well, especially in this pandemic.
The third quarter was incredibly eventful for our team and we very effectively managed the many challenges present from this pandemic limited impact to our company for our people.
While announcing an acquisition and completing two capital market transactions.
Surrounded by volatility in the energy space as usual our teams steadfastly the labored above target results meeting or exceeding all consensus metrics.
I want to turn for a moment to all of our employees across the country are listening to this call.
Okay. Thank you.
Are your incredible dedication and commitment to our mission I truly appreciate all that you do and I'm very proud of you.
Over the past few years, we've executed a deliberate repositioning of our company reducing debt by nearly $2 billion decreasing our expense cost structure by over $200 million.
Reducing well cost by 40%.
Strategically mitigating risks through hedging.
And investing in our high quality Appalachian acreage.
Return the company to generating meaningful free cash flow.
We now expect to generate $300 million and free cash flow in 2021 at current strip prices.
Once again, we have delivered.
In the third quarter, we announced the acquisition of Monotype resources further solidifying our position as a top Appalachian producer increasing scale enhancing returns and positioning for greater free cash flow.
We have been consistent in our message that the industry needs to consolidate to benefit shareholders.
And we are pleased to have played an early role in this necessary trend.
We approach this transaction with the same discipline that we exercise in all of our investment decision and.
And that market transaction with tangible synergies, which will be delivered in closing, while maintaining our balance sheet strength.
Adding scale to the existing assets enables us to leverage operational expertise.
Optimize commercial contracts broaden and deepen our inventory base and enhance margins and returns and free cash flow all in a rising gas market.
The integration process is on track and advancing as planned in anticipation of closing following the montage resources shareholder vote scheduled for November 12.
Having successfully repositioned the company, our two stated goals or free cash flow generation and a sustainable two times leverage ratio are expected to be delivered in 2021.
We expect to release formal 2021 guidance early next year and based on current strip prices I've said before our free cash flow estimate is approximately $300 million.
We have no plans to invest about maintenance capital next year holding production levels flat exit to exit from Q4 20 to Q4 21.
We expect to use free cash flow for debt reduction.
And to be clear should seasonal prices improve further we will not increase our activity level above maintenance level.
The third quarter included more examples of above target results as we once again delivered ahead of plan.
Playing Julian will detail that in just a few minutes.
We further progressed, our leading operational execution and efficiencies setting numerous operational records, we fortified the balance sheet and maintained our maturity runway by accessing the capital markets.
We delivered on further cost reductions, we announced in the second quarter.
Let me speak briefly about a core part of our strategy to continue our SG leadership accountability and transparency.
During the third quarter, we released our seventh annual corporate responsibility report, which highlights the results of our dedication to achieving sustainable returns for our shareholders and responsible energy development through a relentless focus on health and safety practicing good environmental stewardship and being a good neighbor and.
Active member of the communities, where we work and live.
It's not just something that we say we're talking about it's something we believe in and practice every day.
So let me provide a few proof points supporting these beliefs and practices.
When is a recognized leader in environmental stewardship, including a focus on reducing greenhouse gas emissions swin and our Appalachian gas peers are playing a vital role in providing clean burning low carbon natural gas to our country and the world.
Which is helping to drive reduced greenhouse gas emissions wouldn't.
When was one of the first companies in our industry to commit to a science based methane leak loss rate target and we have consistently outperformed got aggressive goal.
In 2019, we reported the lowest greenhouse gas intensity among eggs PC peers in the annual DHS survey and our methane intensity is 85% lower than the target rate for one future.
Another environmental and social focus is water, which is an important resource in our drilling and completion operations and for the public.
Through a comprehensive approach to water usage optimization water recycling and water conservation projects, we're delivering tangible benefits to the environment and the communities, where we work and live.
For the past four years, we have returned as much or more fresh water than we have consumed back to the watersheds in the communities where we operate.
Another important pillar in our DSD strategy is to nurture and support our culture, we're fully engaged and committed people can thrive and.
And you can see from our results quarter after quarter after quarter, they're driving.
This is foundational and everything we do.
Developing our human capital in growing and maintaining an inclusive in diverse workforce is vital to our success.
Before I turn it over to clay I want to share our optimism about the future of the natural gas industry and Swin as a leader in that space we.
We believe that natural gas is foundational to a low carbon future.
The benefits of natural gas and improving global emissions performance. The in Greece increased global reach a clean burning natural gas through LNG and the strengthening supply and demand balance all provides support support.
Supportive outlook for natural gas fundamentals.
During these fundamentals with our culture of innovation at southwestern energy, we are poised to deliver a differentiated and sustainable shareholder value.
I'd like to turn the call over to clay now for some operating highlights.
Thanks Bill.
Once again this quarter, our operational teams achieve high end performance.
Breaking company records, driving additional value and increasing capital efficiency.
Our asset and operating teams continue to work safely and stay focused on the delivery of our operating and financial objectives.
I'll start with a few highlights from the quarter.
Total production was 221 bcf be above the midpoint of guidance and up 9% from both third quarter of 2019, and the second quarter of this year.
As production was 173 Bcf, representing 78% of total production.
Oil and NGL production was approximately 14000 barrels per day, and 73000 barrels per day, respectively.
During the quarter, we averaged three rigs and three frac crews with capital investment totaling $223 million.
Our full year capital investment will not exceed the top end of our capital guidance range of $915 million.
Including capital requirements related to a montage following the close of the transaction.
This quarter, we drilled 16 wells completed 25 wells and brought 30 wells to sales.
With 18 in northeast Appalachia, and 12 in southwest Appalachia.
In southwest Appalachian other wells were split evenly between the high rate high volume rich gas area and the Super Rich condensate area.
Well performance and 30 day rates for both areas are consistent with expectations and we continue to deliver well cost reductions through operational efficiencies extended laterals and optimized completion designs.
In the third quarter, we averaged $664 per lateral foot for all wells to sales.
This included a new company single well record of $491 per lateral foot.
On a 13000 foot lateral in Pennsylvania.
We expect to beat our target of $650 per lateral foot for the second half of the year.
Innovation and technology are core to continuing improvements in our operational performance.
Our swine rigs and Frac fleet remain a differentiator as we continue to leverage and expand our operational and technical expertise.
On a seven well pad in southwest up Malaysia.
Our swim Frac crew tested an ultra efficient fracture stimulation approach that simultaneously execute two independent zipper fracs on the same pad with one crew.
Utilizing this approach we set company records completing 22 stages on a single day.
And averaging 15 stages per day for the full pad.
Resulting in greater than 400000 dollar per well savings.
Another example of our innovation is in northeast Appalachia, where we have been able to extract incremental value from our long life high quality asset.
By drilling dual target wells that include a lateral that starts in the upper Marcellus interval before dipping down into the lower Marcellus.
This process, which requires precise drilling techniques subsurface control strategic we've seen in land efforts has allowed us to improve while recoveries by capturing additional tier one resource in a single well through multiple intervals.
We continue to drive innovation, which is core to our high performance culture to challenge, the operational and technical norms and maximize the value of our assets.
We look forward to finishing the year strong while carrying our operational momentum into 2021.
We're also excited to close the montage transaction and get our swim rig and crew up and running on the new assets.
I'll now turn it over to Julian for the financial results.
Thank you clay and good morning, everyone.
In the third quarter, we reported adjusted net income of $47 million EBITDAR of $154 million, a net cash flow of $135 million when excluding onetime noncash charges.
The quarter was in line with the updated guidance, reflecting a change in production mix due to our shift to high rate high volume natural gas wells back in April.
At the same time, we captured the savings across all expense categories that we announced last quarter as a result of our ongoing concerted cost management efforts.
We continue to benefit from our disciplined hedging strategy with $97 million in cash settlements in the quarter, bringing our total for the year to $310 million.
We're taking advantage of the strong run up in gas prices for Twentytwenty, one and have been layering in substantial protection.
We now have over 75% of our expected Twentytwenty, one gas production hedged with call as being the prominent instrument.
$20 million of hedging gains this quarter were related to our basis hedges that largely offset the weaker differentials witnessed in the region during the third quarter due to high storage levels, lower seasonal demand and maintenance outages.
Through our transportation portfolio contracting strategy and basis hedges, we were opened 90% hedged on basis in the third quarter.
Forecasting fourth quarter realizations in the 80 cents to 90 cents range per Mcf discount to Nymex. This.
This will be partially mitigated by our expected 15 to 20 cents gain from financial basis hedges.
As usual, we expect basis should improve later in the fourth quarter and throughout quarter one.
Twentytwenty one.
NGL prices this quarter improved 62% compared to the second quarter of this year.
We expect continued strengthening of NGL prices as we move through the rest of figure with fourth quarter expected realizations in the 28% to 34% WCS.
Consistent with assumptions in our full year guidance.
A highlight of the quarter was the announced at market acquisition of montage and we were pleased with the execution of the associated capital markets transactions.
While we are excited about the deal synergies and efficiency opportunities driving our increased free cash flow estimates. It was equally important for us to maintain our balance sheet strength and leading maturity runway.
Although the capital markets have been challenged in volatile CMP companies. This year, we successfully accessed both the equity and debt markets with approximately $500 million in total net proceeds.
Which will be utilized to refinance the montage 2020 three notes upon closing of the acquisition keeping our favorable maturity runway intact.
Until closing the proceeds have been used to pay down our revolver and we ended the quarter with no borrowings a cash balance of $95 million and total debt outstanding of $2.5 billion.
Subsequent to the quarter, we announced that our borrowing base has been reaffirmed at 1.8 billion.
With bank commitments to increased to $2 billion at the closing of the montage transaction.
With current bank price decks, our reserves off a strong coverage well above the elected commitment level.
We appreciate your continuing bank relationships and that demonstrated confidence in and support all the deliberate path we're on.
Our quarter end leverage ratio was 3.2 times.
And as we have previously discussed we expect debt to EBITDA to decrease throughout Twentytwenty one.
With the accretive acquisition cost reductions operational efficiencies and improved commodity prices, we expect to achieve our goal of two times by the end of next year based on current strip prices.
As Bill mentioned earlier, we have successfully delivered on several key initiatives and we look forward to meaningful free cash flow generation and further debt reduction.
With the actions we have taken and the progress we have made we are well positioned for the future.
That concludes our prepared remarks, so Gary could you. Please open the line for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
In the interest of time, please limit yourself to two questions and then re queue for additional questions. At this time, we will pause momentarily to assemble our roster.
Our first question comes from Charles Meade with Johnson Rice. Please go ahead.
Good morning, Bill to you and your whole team there good morning Charles.
Bill I appreciate you guys do.
Directly both in the press release and in your earlier comments.
Given the allied that that you guys are going to hold the line on 2021 spending and I think that's a I think that that will be welcome in the market, but I'm just curious.
If there are other aspects of flexibility you guys have and your plans for 21 2021.
That you might be able to.
To exercise if you if we do we'll see.
More strength in the curve you guys is it.
The compression.
Is it.
Are there are there different transportation expense or are there any other things that you guys might be able to do in response to higher pricing.
Yes, thanks for the question I think.
It's a very interesting actually terrific that we're in a place where we're looking at higher pricing into next year.
And were very excited about that the duration of that higher pricing where that goes is a key a key factor in in thinking about whether you invest further or you continue to pay down debt and we're going to be responsible as we said to do exactly what we said.
We've got a lot of.
Examples throughout the business optimization, whether it's driving lower well cost you heard about that kind of incredible example, or two simultaneous zipper fracs at the same time on the same pad with one team.
Our lowering of well costs, our optimization of commercial agreements.
A number of those kind of aspect.
Aspects, all helping to drive our maintenance capital level that.
And and drive the efficiency of our capital continuing to rise. So we have a lot of levers at our disposal and the teams.
Most of them are listening on this call, but the teams are constantly finding ways to innovate past, what we thought was even possible to.
To excel so.
I would I would tell you that commercially operationally financially theres, a number of different opportunities even getting montage integrated.
And enabling ours ours, swin drilling and completions teams.
Access to to those and integrating the montage team that we've we've met and quite like into the company Theres Theres lots of those levers that will pull we've made changes and optimization around decline rates already that will continue.
Clay could talk for days about all the things that have been done in the drilling side completion side.
And then we've got quite a commercial and we've demonstrated this we've got quite a commercial.
Team working on optimizing agreements integrating.
Even though the montage production with our transportation that sort of thing so.
There is there is a lot of upside there I think the other thing that that is.
It is important as well is the.
Our work around hedging and assuring that we that we.
Remained disciplined and deliberate in our hedging program, which is a 36 month program and optimizing the use of swaps collars.
For the given market that we're in so while we are very well protected on the downside we have access to the upside and that gives us further flexibility, but let me be clear that that we don't we don't have any.
Intent to.
Invest.
Dollars that would take us beyond maintenance capital.
And any excess cash flow that comes from seasonal.
Price changes at least at this point I would go to pay down debt.
And that's the right thing to do and so that's what we would do.
Got it thank you for that Bill.
No actually I have a lot of questions around the the montage.
Sure integration, but I'm a leave those for someone else and just take a rifle shot at it.
I'll comment that clay made in the prepared comments can.
Can you go back over it give us a little more color on what's going on with those dual target wells between the upper and lower Marcellus northeast.
Bob I guess.
I have a little confusion right now about what that does for you, but I'm sure you could.
You could clear that up for me if you just.
Sure.
Thomas Yes, we included it as another example of the innovation and technology that our teams are using to just keep getting the most value we can.
Out of our assets and so it. It's an example of the capability of our rigs in our crews and our technical teams where there's areas.
In our fields in Bradford and Susquehanna County, where there's.
Non drained quality lower Marcellus.
Acreage that has not been accessed yet.
That we're able to access.
The and asked shape lateral where we start up start off in the upper Marcellus, where we are generating good economics.
15, and completing in that interval, but then dip and down into the lower Marcellus to go pick up that part of the acreage that has now.
Been drained and do it on a long lateral that benefits from all the efficiencies all the long laterals sold that are that our economics benefit from it.
And the team's done a great job of.
Acreage trades leasing that cetra to bring those opportunities to Hawaii, and they're just adding to the economic development of our fields got clay just a quick follow up so if I understand. This is this is a segment of the lower Marcellus that is maybe stranded in the sense that it will only support like a one or 2000 foot lateral but but you can tack.
It on to the to the end of a of an otherwise an upper Marcellus well and can then access is that is that the right understanding generally you've got it exactly right short laterals, turning the longer laterals by a combination of upper and lower and then you get the full economic benefit of that Gavin. Thank you said, yes.
The next question is from Arun Jayaram with Jpmorgan. Please go ahead.
Yes, good morning, Karen.
Good morning Bill.
Bill My first question just kind of on the macro picture I know you've been clear that.
You're going to be investing.
Sustaining.
Capex had a mode and 2021.
In a post the merger I guess, a bigger picture question, we get from investors is what.
Gas price.
Would you know Appalachia operators need.
Order to incentivize some growth over the long term.
Yes, I think that largely and if you think about that.
Spikes in gas versus breadth of of a strip over multiple periods of time in our view.
Seasonal surge is.
Six months quarter, even a year.
It is a sort of a defined point in time and if the rest of the strip isn't isn't coming up with it.
It's all about economics of wells.
And best use of capital.
And or cash flow from from the company.
And so we've been pretty clear that.
Seasonal surge.
You don't invest in that because wells or three years four years economics.
And you and you want to have.
And we don't use hedges so when you look at it like that.
It doesn't make sense to go further if you if you step back from it and say, okay. What we do have a sustained period of higher pricing multiple years of higher pricing that probably means that theres been something in the supply demand mix that has caused that shift and that is and it's sustainable.
And then if you can hedge it and assure yourselves that those revenues and cash flows then you have to reevaluate that.
But that is a situation that isn't represented today and the curves and something scenarios that we that we analyze but right now with what we can see in front of us and and.
And where we sit today.
We free cash flow generation as important to us investing.
Maintenance capital is what makes sense to us so that we don't have declined in the company and.
Paying down debt in at least at this point paying down debt is the other.
Lever that we that we optimize around.
Great great.
Bill. It also seems one of the headlines in your update was the 300 million.
Of free cash flow, which you did raise I think from 100 million.
Pro forma for montage.
Can you give us maybe some of the key assumptions around that obviously.
We you know production will be on a sustaining capex mode. So we can we can get that but what are some of the assumptions are.
Capital.
Some of your differential assumptions to underpin that call it that $300 million number that you put in the press release.
Yes. This is Julian I actually the.
So the 300 is really consistent with the way we were looking at the business back.
When we announced the montage transaction and talked about that that $100 million. We've obviously seen the biggest back the improvement in prices.
So I think when we when we had done it.
And but the first announcement out it was in the 270 now it's obviously close to three so big run up in prices has certainly helped and we keep building our hedge position to get certainty around that.
As as well.
When we think about moving forward, we havent yet outline the activity levels, but we've obviously now said, what we expect to roughly to stand in the way of a maintenance capital number.
And we continue to to.
Jack or would the cost realizations that we have been able to already accomplished and that includes the $30 million of synergies that we saw in Amman, Pos transaction, which we are now very confident will be realized.
At closing essentially so.
Firming up of progression of costs, but not a large stretch in future cost savings just what we have already realized is giving us that confidence and is that capital Julian than the 850 to kind of $900 million range is that a good starting point.
Yes, I think thats, probably about right I mean 700 to 750 is the number on the DNC basis, and then you've got the CIA any.
Great. Thanks, a lot.
The next question is from Neal Dingmann with Truest Securities. Please go ahead.
Morning, guys. My first question just you mentioned on some of these well designs I guess my question is now is how do you all think about which you would term an optimal well design today, maybe size scale et cetera versus how you even thought about it a year or two ago.
Yes, my thought would be that it keeps evolving.
We came.
Putting completion and drilling designs.
Employees that are.
Building on the knowledge that we keep gain in every time, we're bringing wells on and we keep trying to optimize the overall economics of the well obviously our lateral lengths are increasing so we're going to average a little over 12000.
Laterals for the program in 2020 and that was 10000 foot laterals in 2019.
The the completion designs like I said.
We use data analytics, and we keep evolving what the right mix of stage.
Stage spacing cluster spacing proppant loading a fluid rates is in certain areas to optimize well performance.
So as we go forward, it's going to be two to methodically and smartly keep extending the lateral links on the wells as a result of the economic benefit that comes from that.
And then continuing to fine tune and optimize in the different areas of our development, where we can keep increasing.
Increasing the returns on the capital program. So it's a great tension between.
Manufacturing mindset drive every cost to drive every revenue and the appropriate attention and we're now going to be drilling in the Utica with the montage and an operating margin and lower and liquids rich and not liquids rich and dry gas and so.
The customization with the manufacturing mindset, we believe drives better economics, even going forward and you will see some improvements across the piece in well cost in well design.
Our next question comes from Holly Stewart with Scotia, Howard Weil. Please go ahead.
Good morning, gentlemen, Britney.
Holly.
On the first one for you Bill.
Just as you kind of move through the due diligence process with Woodmont.
With monetizing the assets have you learned anything that maybe you didnt realize sort of early in the process that would add additional value sort of post close.
Well I think.
I think we did the teams did a great job of.
Diligence along the way.
And of course the analysis.
I think the ability to get and deliver a no premium at market transaction and really fine tune that.
That.
Action with how we invest in everything that we do is certainly.
That was played out and all of that we've learned that have some terrific people.
That are going to come join us win and we're very excited about that I think we knew this but we also get a new learning lab to learn about Utica, because they've been drilling in Utica and so.
Our people have are very excited about bringing this together building on our culture and and continuous learning So we will.
It's a it's an ongoing learning process I think that we have some a lot of optimism around.
Additional covered commercial and marketing optimization or.
Drilling and completion option that optimization looking at their base production.
Their decline rates higher than ours. So how do we bring that how do we learn from one another and get that to get.
Does that down the increase with increased scale strategic sourcing and procurement opportunities there. So we're on it.
It will be an ongoing learning process. It's a great question rooted in in a a one team approach with our new colleagues and we're pretty excited about getting this thing closed.
Great. Thank you and then and then maybe just my follow up on on the cost reduction.
You've talked about mid stream cost in the past is something you would kind of continue to pursue to drive down costs.
Maybe how are those conversations going I think.
I Wonder if your partner DT, and they've announced plans to spin out their midstream I didn't know if there was anything to think through in terms of that.
Where we are in the middle of lot of these discussions on all respect the privacy of that so we get it done but if you think about it are you guys. As you look at all of our agreements.
The performance of our teams and the reservoirs and the amount of gas that we produce through time is then been very strong and.
Ahead of what we anticipated in a respect so.
Rather than being in a position of carrying a bunch of are paying out a bunch of nvcs, we've actually been building a lot of.
A credit and a lot of goodwill with our gathers and in particular.
Because weve overproduced versus.
Versus what they thought they were going to get so there is always opportunity. There there is additional dedications there's.
Just thinking about how the contracts are structured and making them, making adjustments necessary. So they work for both both companies. These are long term strategic relationships and and so building on those is critical we completed some of the negotiations and some of that's gotten to the bottom line.
And that will continue through the next several months and then of course again as we bring montage in applies its production to some of our.
Medium haul long haul commitments.
There's opportunities there we had the same thing going on on the liquid side.
As we take more and more control of our own liquids.
And and market them, and then look for commercial arrangements around some of the infrastructure, we have tied to that.
Yes, I appreciate the color.
Good talking to.
The next question is from Harry Halbach with Raymond James. Please go ahead.
Hi, Thanks for taking my question, you had mentioned that montage space declined a little bit higher than yours.
How how do you all are thinking about a consolidate basis kind upon closing how is that changing after a year in maintenance, though next year.
Yes, so so their base decline is in the 35% to 40% range coupled with our.
Low low to mid Twentys and so when you when you combine all that.
We think we're going to be mid to upper Twentys. Initially and then we're going to be focused on utilizing similar techniques that we have used on our assets to shallow that base decline. So our plans that we and our plans we announced.
We will have activity in our two divisional areas plus montage their wells compete in our capital allocation.
Plans that we have it's all about economics, and so we've already integrated from a planning perspective integrated what we know about that into our program. So our maintenance capital number and the maintenance capital.
Planning that's going on with that already includes what we believe to be.
From all of our due diligence.
All of those details so it won't from here is it shouldn't change unless it gets better because as we learn more and more about it.
We've taken the Companys decline.
Decline rate.
Significantly with field optimizations, and a number of things that we've done around productivity.
All of that learning just simply sweeps over too.
To the assets that were run together in witnessing closes and we expect to get some additional benefit out of that and we'll talk more about that when we do that.
Great. Thanks, and then.
You had mentioned that you expect to hit your two times leverage target next year and the strip and I guess I'm, just wondering what sort of leverage I guess looking at before potentially returning cash to shareholders. What is the best way Nols opinion do that whether it be repurchases or dividend.
Yes, I think we've been very focused on getting back to sustainable two times and we said that for several years now and we've accelerated getting that in.
In light of of.
The the announcements we've made regarding price improvement and then the cash flow improvement so.
Thank you we want to get there and we want to sustain it. So first of all to time sustainable and then when we do get there we will consider.
Return of capital to shareholders as much in the way that we've always have which is look at what makes the most sense for the.
For long term value creation for shareholders and and stock up the auctions and see which one is most favorable but I think.
As Bill said free cash flow and then the balance sheet two times leverage is a goal and.
We do think we can get that we're not there yet so we haven't had to tackle. The next question is what what do you do when you get that and if you think back to the to the sale of the say they'll this team has demonstrated disciplined to look at that objective league walk through that.
The various uses of.
Cash flow and as we did then distribute some to shareholders pay down debt and.
And.
Invest in the company to be sustainable and we'd arrived at that moment, now which is quite exciting.
All right appreciate the color. Thanks.
This concludes our question and answer session I would like to turn the conference back over to Bill way for any closing remarks.
Well, thanks again for all the questions and discussions and as I think you can tell we believe the company is well positioned as a leader in responsibly produce energy, namely natural gas and as we've discussed there is a lot to be excited about the future of southwestern energy. So thanks again for your time on the call and have a great weekend and we look forward to the next call take care.
This concludes the southwestern Energys third quarter 2020 earnings call you may now disconnect.
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