Q4 2020 Peyto Exploration & Development Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the two exploration year end 2020 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program.
Maybe you've recorded and now I'd like to introduce your host for today's program, Darren Gee, President and Chief Executive Officer. Please go ahead Sir.
Okay, well, thanks, Jonathan and good morning, ladies and gentlemen, thanks to everyone for tuning into the pillows fourth quarter and year end 2020 conference call today.
Before I get started with the remarks about the quarter I would like to remind everybody that all statements made by the company. During this call are subject to the forward looking disclaimer and advisory set forth from the company's news release issued yesterday.
In the room with me today is most of the Peyto management team, we've got J P. Vishal, sorry V P engineering, and Chief operating Officer, Kathy Turgeon on our CFO, Dave Thomas is our VP exploration he's here.
Todd Burdick, our VP of production and Lee Curran, our VP drilling and completions are also here.
And our newest member Derrick Zimmer RVP of land is here today.
The only one missing is Scott Robinson, our VP business development, but he'll be back in the office tomorrow.
Of course, we're all physically distanced in the boardroom and taking all the safety precautions with respect to COVID-19, but I can't say, we're also extremely relieved to see a significant improvement in Alberta is case count in hospitalizations.
As well as out of a lot of countries around the world. So hopefully this means that.
COVID-19 pandemic is coming to an end.
Before I get started talking about the quarter too much I do want to recognize the efforts of both our office and field personnel. This past quarter on for all of 2020 for that matter.
They continued to conduct operations with safety foremost in mind.
Particularly with Covid and all the other operational risks that exist on an ongoing basis out in the field.
We had a relatively busy year and as usual executed it in the safest possible manner.
Obviously without many wells drilled that many wells completed tied in and all of the wells that were operating every day, there's an enormous number of man hours logged in miles driven and so on.
I'm happy to report that our safety records in 2020 was as good as it's ever been.
And so a big thank you them too to all our people both here in Calgary and out in the field for continuing to keep the gas flowing so albertsons can keep the lights on and especially the heat on during this cold winter that we've had so far.
Okay fourth quarter results are operationally, we continue to drill some of our very best wells in Q4, and we grew our production throughout the quarter from around 81000 started the quarter to 87000 by the end.
That's just under half of Bcf of gas in close to 12000 view barrels per.
<unk> Ngls.
So production is coming up nicely and I have to say we had success in several areas across our D space on lands from Downing Brasow, all the way up to the northern edge of Sundance and from our West Wild Hey to the eastern part of agile.
And in many different zones from Blue Sky to oil rich not a queuing in cardiac.
So again.
We enjoyed both geographic and geologic diversity in our program.
Which I think reduces the risk and the dependency from well to well so that we're always making the very best investment decision. We've got lots of time to make that decision with the most information about the previous drilling results, so that affords us an opportunity to reduce risk.
And quite frankly, those results were very good the cardium wells, we drilled are producing more condensate natural gas liquids and the average peyto cardium, well, so thats holding our liquids yields up and.
The gas productivity that we saw from some of our non accruals in the quarter.
Just phenomenal so some incredible well results.
And I suppose the best part is that those great well results keep getting cheaper and cheaper.
Especially relative to how much reservoir, we're opening up and how fast we're drilling.
I think that was very evident in our PDP.
F&D costs this year dropping over 30%.
And you know really I suppose our timing could not have been any better with the rally in both gas and oil prices that we saw in Q4.
They weren't prices.
Back to what we had in Q4 2019, but there were a lot better than what we saw in the summertime.
Nymex was up 25% from Q3 and April was up 18% from Q3 and those continue to get better even into Q1. So I think our production growth was really well timed.
Growth in production and price drove cash flow up 55% from Q3, 2000, Twenty's 49 million Bucks to.
Over $76 million in Q4, and we were finally back in the black with respect to earnings.
Both the before the effect really about impairment reversal, we had earnings in the fourth quarter of around three.
$3 million so.
That's good to see.
Sadly, though that's still meant we recorded a loss for the year, which really is the only blemish on our 22 year track record.
So that's one we'll endeavor to not repeat going forward.
So.
2020, I think it was a good year. It was a good year from an ESG perspective, we reduced our emissions even more on a per Boe basis by capturing more vintage and flow methane.
Also did some R&D and test it out a new zero emissions control or that we're going to put to work in the field in 2021 on some new well site installations.
So that that emissions reductions trend I think will hopefully continue through 2021 and beyond we are constant.
Constantly working on that Todd can give us some more details later on that.
We also formed on the ESG Committee.
Is working on a more fulsome ESG report that'll be out later this year, John Russell of our board as chair of that Committee.
So we're continuing obviously to take our ESG responsibilities as seriously as we always have.
What else Oh, the acquisitions, we mentioned in our reserves release, we negotiated two tuck in acquisitions in the quarter that closed early in 2021. They are effective January one 2021.
It's.
It's a very synergistic bit of land and infrastructure that I think plugs nicely onto the north side of Sundance.
Just under 3000 barrels a day of her Boe's a day of production all from sort of 10 year old vertical wells that are extremely stable production less than a 5% annual decline so.
Quite a bit different than the new production that we're building.
All of that for around $35 million, it's mostly gas around 95% gas, but it also comes with.
A 30 million a day gas plant that has a about 50 million a day of room. So that's good and a bunch of gathering lines that are.
We can interconnect day crossover or Sundance.
Gathering system, and so that interconnects that whole system into our old man plans to the south.
Plus of course, we see some exciting on develop opportunity on the lands that we purchased that we can develop with our latest design of horizontal wells.
So I'm sure it won't be long before that plant is full and we will be filling up even some of the excess room at old man in north.
With locations on these lands.
I also assume everybody has read our reserves release of a couple of weeks ago, if not I highly encourage it.
Very thorough.
Analysis rips apart our reserves eight ways from Sunday.
In far greater detail than anyone else in the industry.
I think the biggest takeaway was that our F&D costs for P. P reserves developed in the year was the lowest in the last 18 years at close to a $1 an mcf.
That was our target going into the year and we just about got there so.
Good job by everyone.
We also continued our practice of converting reserves that had been previously booked as undeveloped from.
Even less than we had forecast while getting greater volume. So that's important when it comes to looking at all future locations that we have on our books.
And I think the one like nature of our reserves continue to shine through particularly when you look at the difference between on discounted value from discounted values. There is an incredible free option there for shareholders on those long dated reserves.
Wanted to take a look at those numbers.
So that was pretty much it for the fourth quarter in 2020, mostly are pretty steady year of drilling operations except for.
Those are a couple of tuck in acquisitions at the end of the year and.
And the volumes that came with those.
As for 'twenty one.
This year has already been even better than we expected with continued great well results are obviously, some some pretty exciting commodity prices in the month of February and and even new opportunities coming our way so.
The prices, we got particularly adventurer over the February long weekend was quite a nice bonus for the year.
And if we can put I think COVID-19 in the rearview mirror.
This might actually be.
A fine year ahead of us.
I think we're.
We're well protected when it comes to the upcoming summer with our hedge book and.
Particularly with respect to the ACO market and I think we're looking forward to next winter and the potential lift that.
We're expecting to see on the backend of the natural gas price curve.
Which we're pretty confident it's going to happen. So that obviously has a significant value on all the rest of our reserves that were about to development.
Anyway, that's probably it for the year it enough for the quarter. So Jonathan why don't we take this opportunity throw it open to questions from the listeners.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.
Our first question comes from the line of Joe O'dea from sure. He's a shareholder your question. Please.
Yes, Darren congratulations to you on a very good conclusion to a difficult year and a great start to the new year on my question relates to <unk>.
Your ongoing hedging program and.
I think it was last quarterly report you mentioned how much the.
Old had just had cost versus.
Our ongoing pricing and.
That was extremely helpful. Because it gives an idea of the future economics, because the picture as we roll forward improves not just because of the current pricing, but also because of the rolling over of the hedges that were made during.
More difficult periods. So as we look forward I had noticed that you had put.
Put on some basis hedges for next.
Our Q1 of 'twenty two that were a very small hedge went on 5000 at 63 versus your existing.
One is on Henry hub on the basis trades that were at $8 41, then that's extremely favorable if you could just comment on.
The forward hedging and the maturation of the older crop that were more difficult I would appreciate that.
Yeah, you bet Jerry.
Cute observation of how the market has definitely changed over the last few years.
The high cost basis deals that we had put in place.
<unk> put in place mostly in 2018.
At that time, obviously, the eco market was extremely disconnected from the rest of North America.
Lack of access to storage.
<unk>, some incredibly weak summer prices and so we were looking at a forward curve there of about a buck 50 acre well Nymex was at about $3.
So.
We didn't have a lot of confidence that the ACO market was ever going to get fixed and so we started to diversify away from it.
<unk> deals in place to get us down to the U S markets.
Many of the different hubs.
Mostly nymex because that was obviously the most liquid one.
And those were pretty high cost like you say, we had some $1 35 basis for the winter some dollars 40 basis prices for the summer.
And.
Then in the sort of.
Later in the fall of 19, I guess it was.
We saw the temporary service protocol approved by the CER and eco market quickly reconnected with the rest of North America and so for most of 2020, obviously, we saw a basis that was more typical.
It's slowly tightened up and and.
And we saw prices anywhere from sort of.
I would say 75 to $1 per basis in there, which was quite a bit better.
And of course, so we're we're having to live with the basis, we put in place that were higher cost on that and so the market diversification cost as we illustrate is pretty high.
What about a buck in Mcf.
But as those roll off as you noted our realized pricing is going to increase quite a bit we're continuing to diversify at what the current cost is which is as you point out a lot more attractive you know something in the 65 cent range from 75% range.
<unk> been less than the cost of pipe or pipe contracts. So that's that's attractive to us and gives us the diversification away from the ACO market that is still I think subject potentially to some volatility here.
As we move forward. So so we like that particularly just in the next few years until I think we start to see LNG, Canada project come on in a little more attention in the in the Western Canadian.
Market from a from a demand perspective, we've got obviously pull to eastern Canada and pull down into the states per exports, but to have pull on the west coast as well would be really nice I think that would tighten up that equal market quite a bit.
So the short term basis deals to us look attractive. So we will continue to layer them in as we always do we try to be sort of mechanical with not only the diversification.
Pieces that we're putting in place, but also with the hedges that we then layer on top of that so we put the basis deals in place that gives us the synthetic transport to those markets and then we can hedge those markets and fix those prices, which we've also been doing.
Obviously, the spot price is pretty much right across North America are at.
Price is today that are acceptable to us they work well with our economics and so we're taking them off the table and we're building back the hedge book that we did we used to enjoy prior to 2018.
We had a very strong hedge book than it was a very mechanical hedging strategy that that built out a profile of hedges into the future and we'd like to get back on that train and continue that practice I think that served our shareholders very well and it was very helpful for us to plan appropriate capital programs and appropriate dividends and in bad.
Sheet management so.
We are eager to get back there I think we're close to there the target levels that we're looking for in the next few seasons, but little further out we.
We need to we need to add some hedges and were optimistic that the back end of that curve is going to come up.
We're going to be able to take those prices off the table as well.
Looks like attractive.
Attractive gas prices for us.
Hopefully that answers your question.
Yes. Thank you.
Thank you. Our next question comes from the line of Terry Cavanaugh from Oakmont capital. Your question. Please.
Hi, good morning.
Yes.
Also echo the comments about you know.
Congratulations for doing a great job last year I wouldn't mind, if you could spend a little more time.
It's really a follow on to the first question.
With respect to these market diversification costs.
Really with respect to the timing of the roll off of them.
I know.
In the third quarter.
I think you guys said they'd be significantly reduced overtime I think on the Congress on the call with respect to the third quarter I think you referred to the coming two quarters, if I'm not mistaken.
And the outlook today it describes.
On the diminishing gas market cost with respect to the 'twenty one outlook.
But in the paragraph under marketing it talks about these things.
<unk>.
Decreasing over the next two years I'm really more interested in when we will get back to some kind of normalcy.
On the timing of it is it two quarters is it two years is it.
Are we going to see most of it this year.
A little more color on maybe even what they.
On just how we'll get back to normal.
If that makes any sense. Thank you.
No.
Totally does Teri and I appreciate it's obviously much more difficult for <unk>.
So look through now because we've got so much.
Diversity in our marketing.
We've had to obviously put that in place.
We're not just as simple as selling gas at eco anymore.
But youre right.
No.
It's a bit tricky to try and predict because of course, the eco prices trade somewhat independently of Nymex and that's that basis differential between those two markets.
That sort of floats around and so at any point in time, when we talk about what's going to be the market diversification cost for that next quarter. It's based on the future strip for both of those commodities as we're looking forward.
And so it moves around a little bit but.
I think.
We're obviously seeing some very strong pricing in Q1.
And I think our market diversification cost in Q1 won't be as high as they've historically been they.
They will look pretty good and then as we enter into summer.
There is some softer prices in both.
IMAX and a co.
And we will see the market diversification costs go up a little bit as we see some softening in the summer Nymex price unless of course.
We see strength in the Nymex relative to weaker equal prices, which we could possibly see because.
The TSP was not extended into the summer 'twenty one for the Alberta market. So we could see some weakness and volatility there and storage numbers in the U S look like Theyre headed pretty low and so if the refill isn't as aggressive as you.
You might predict then we could see some strength in the Nymex in which case, our diversification costs will fall for the for the next summer a couple of quarters right now we're forecasting them to be.
To be the higher parts of the year, and then really with Q4 of 'twenty. One that's why on everything starts to fall away. These oil basis deals more and more of them start to fall away.
We get a much tighter price and then entering into 2022.
Our prediction for the year at 22 is that we would get very close to the.
Current eco realized price or the current.
Delta really between Nymex and eco so effectively market diversification costs in 'twenty two we're forecasting right now it would be very little.
If anything at all and then actually into 2023, we would actually start to benefit from a lot of the diversification and getting actual prices realized that are superior to that of what the go forward strip shows so.
It's all of this sort of layering in smoothing approach, obviously to the diversification and then hedging on top of that.
But.
Realized prices look like they will be getting back to normal as you say by sort of the fourth quarter of 'twenty, one and into all of 'twenty. Two and then we look to do a better job than just the local legal market.
Beyond 'twenty two into 'twenty, three and after that.
So hopefully that helps a little bit it's hard to pin it down of course, because it's moving every day with the <unk>.
Curves.
Great. Thank you.
Thank you. Our next question comes from the line of Aaron <unk> from TD Securities. Your question. Please.
Hey, good morning Darren.
Good morning, Eric.
So we're coming up here on Ngls re contracting season, how should we think about NGL differentials realization in 2021 versus last year.
Yeah from what we're seeing in the market.
You know there is still strong storage of.
Propane and butane, particularly.
Across North America high levels of storage relative to the five year average as you've probably seen as well, they're coming down of course, I mean, the cold winter helped pull those down a bit.
And we'll see what other demands there are particularly export opportunities propane was being exported aggressively here through Q1, obviously the cold weather.
Europe and other places.
Big demand on any hydrocarbons really that could be moved to those cold.
Winter weather events that were happening.
So we've seen.
Particularly strong propane prices on the spot in the short term.
Weaken as we obviously get into the summer months.
Still look not too bad so propane prices actually have reversed quite a bit they were they weren't all that great in 2020.
And we've definitely seen them strength in a lot lately.
Butane prices on the other hand, obviously butane is used principally.
In Edmonton.
Our feedstock for the refineries to make gasoline.
Obviously gasoline demands are not great because COVID-19 a lot of driving a lot of flying so butane stocks remain relatively high diff.
Differentials butane is typically traded on a differential to WT ire or light oil price for instance, and I would say under normal situations. It should trade pretty close to 50% of light oil.
Right now I think indications for the re contracting year, our butane somewhere around that sort of high <unk> to 40% maybe.
Last year, our average term.
Deals are somewhere in the.
46% range, so we might be slightly under that as renewables for this year.
But.
Those two are changing quite dramatically the storage levels.
Butane or coming down really fast as well.
So.
If I had to guess I would say that.
Blend of propane and butane pricing realizations might be similar to 2020.
What we see in 2021, maybe a little bit weaker butane and a little bit stronger propane.
So all in all maybe we see something similar to slightly better.
But not not a ton better even though we've seen oil prices, obviously recover a lot.
Those two those two products are still sort of we're still working through a bit of a storage glut on there.
As well so.
Maybe throughout the year, we'll see spot prices improve and then by 2022, we might actually see some really really.
Really exciting looking.
Differentials in prices for those products.
Perfect. Thanks, Darren I appreciate the color.
Yes, you bet.
Thank you and as a reminder, ladies and gentlemen, if you have a question at this time. Please press Star and then one our next question comes from the line of Sean Macpherson from Industrial Alliance. Your question. Please.
Oh, Yes, Hi, I was hoping you could tell us roughly what.
What percentage of your production is exposed to some sales.
<unk>.
Our percentage of production I'm going to have to take a guess.
Sean.
We've got that one slide on our website.
In the presentation, we updated all the time of course it does.
<unk> is really on the season that we're looking at.
<unk>.
The eco exposure is probably.
Somewhere around maybe.
A little under a third.
And then the other two thirds is really distributed across mostly Nymex influenced prices.
We've got a fair chunk.
Henry hub.
And then we've got.
Probably about again another two thirds at the Henry hub and then we've got the remaining third I think equally split amongst smaller hubs like mill in Ventura Emerson.
Until we get into sort of the fall of 'twenty, one and then.
It Redistributes a little bit we've got far less really exposed to both.
Both <unk> and Nymex and a lot more becoming exposed to sort of the dawn area. We've got a lot of Emerson service that kicks in in November of 'twenty one.
Good one year renewable lower price service that.
It gives us a superior price.
Emerson is not really a hub that you can treat a lot of gas out, but it does get us halfway down the mainline.
Towards Dawn and then it branches from Emerson goes down the Great Lakes system, we get more into the Chicago market with that way or we can go over the top of the great lakes and into dawn.
Eastern Canadian market and beyond that into the northeastern U S market. So.
We think that's going to be a strong market going forward.
<unk>.
So, it's really changing and evolving.
I mean, those percentages will.
It will be similar for I guess really through the summer of 'twenty, one, but then as of the fall of 'twenty, One day start too.
They start to change a little bit and we get a little more exposure to sort of eastern Canada, and northeastern U S and little less exposure to to Nymex, but.
We were cautious about the ACO market I know its strong right now but.
We are still.
Careful in terms of our exposure there.
On overly confident that.
The storage.
System is working effectively on the NGL.
Sort of the western Canadian.
Gathering system doesn't seem to have full access to storage yet.
That makes us really comfortable with it so we're cautious with respect to that going forward for the next little while anyway.
Perfect. Thank you.
Thank you for your question. Our next question comes from the line of Nathan Schwartz private Investor Your question. Please.
Yes, first let me thank you and your team for everything you do for the shareholders I feel fortunate to have you guys managing some of my money.
My two questions are related first is the bank.
Bank borrowing in the penalty interest rate when do you anticipate that falling away and then related question is how are you thinking about dividends and when might you anticipate an increase in the dividends.
Sure good questions Nathan maybe actually I'll, just pass over to Kathy Turgeon, our CFO to talk a little bit about the banking situation.
Okay.
Thanks for the question.
You could see an RMT three Q4 are interest rates are significantly higher than historically they have been.
That is EUR.
Uh huh.
Staffing <unk> costs, so as we see those coming down obviously, we are going to normalize back.
And we're seeing net in Q1.
Definitely by Q2 of 2021, we'll be back well below four times, which will bring us down in the actual cost on our interest expense.
Little lumps natural flow true on the way Stephanie.
But by the end of 'twenty 'twenty, one we should see a more normalized interest cost that would be on a per mcf per day basis more in the mid <unk>.
As opposed to 38.
And from an interest rate point of view, we should be fine.
150 Bips.
We also have our bank deal.
Coming up for renewal.
<unk> date is October 2022, so we'll be looking to renew that Jeff farmer.
Obviously.
Yes.
And then Nathan your second question with respect to dividends.
Obviously, we're looking closely at our cash uses cash inflows cash outflows wanting to ensure our balance sheet stays.
Front of mind as well.
We're looking at right now, we're forecasting quite a bit of free cash flow over and above our capital requirements to get us.
Really back up to that 100000, a day level, we think we can exit the year somewhere between 95 to 100000 barrels a day close to the 100000 level, if we get the efficiencies we're looking for.
That's about.
About $350 million or a little less of total capital for the year.
Like I say is far less than the.
Cash flow, we're forecasting with commodity prices, we're looking at today, so that gives us a bunch of free cash flow to consider what are we going to do with that I think obviously initially we just put that on the bank line.
But also looking at how the earnings are evolving and earnings are strengthening our forecast of earnings for the year is coming up nicely, we're getting back to the type of profit margins that we used to enjoy which.
We want to feel confident about.
And so I think as we get into the back half of this year. Obviously the board will start to think about dividends again more seriously and.
And weigh that against.
The cost of capital for the company and what the 2022 year starts to look like.
I think it will really be.
Sort of fourth quarter 'twenty, one 2022 decision.
And.
There's still a lot of backwardation in the commodity tape right now both oil and gas prices fall away pretty hard as we look out into 'twenty, two and 'twenty three and so we expect that to change.
Do you expect the back end of that curve to come up and I think as it does obviously will gain a lot more confidence in the.
Total amount of free cash flow that we're going to be throwing off in 'twenty, two and 'twenty three.
I think we want to.
Probably.
Have a have both combined use of that free cash flow both in terms of balance sheet strengthening reducing our debt as well as dividend rewards to shareholders. So.
Like I say I think it's really a sort of.
The back half of 'twenty, one into 'twenty two.
Type of discussion.
A discussion at the board level.
And we'll see what the future looks like when we get to that point I think we want to see really the solidification of the commodity price strip.
The 22% and 23 years right now it's like Idiots.
A bit odd to us to see such severe backwardation in the forward curve.
And so.
We'd want to see some of that coming out of there. So we can lock that away and secure the the pricing that we need to generate a lot of that free cash flow.
Great. Thank you for the clarification I appreciate it.
No problem. Thank you once again, if you have a question at this time. Please press Star then one.
This does conclude the question and answer session of today's program I'd like to hand, the program back to Darren Gee, President and Chief Executive Officer for any further remarks.
Okay, well that was that.
That was good lots of good inbound questions.
I think.
We obviously have some big plans for 2021, it's going to be a busy year.
We did have some inbounds emailed in over the.
Over the last week or so questions about it.
This new acquisition that we recently picked up and so maybe if I can take a moment and just.
I wanted to ask Todd Burdick, our VP production, a little bit about the integration of those assets. Obviously, we pick those up just after the new year here close those deals.
We are still integrating a lot of those.
Sometimes acquisition integration is a difficult process. If the acquisitions are large but I don't think this one was.
<unk> is expected to be overly difficult Todd maybe if you could elaborate a little bit on how that's going and maybe some of the upside that we're seeing in that asset.
Yes sure.
So things have gone really smoothly so far.
We kind of took over operator ship the beginning of February.
Excuse me.
Again kudos to Scott and his team are sort of facilitating.
On transition and along with the previous operators, while they've made it a lot easier for us and so that we can make the transition really quickly.
But last week, we finished the integration.
The <unk> system for both plant and wells into Peyto system. So now we have real time visibility on all of the wells and all of the plants, which is nice to see so they can start working on optimization. So.
We've been looking at well optimization opportunities.
<unk> been evaluated and this week, we've been busy in the field.
Implementing changes that should result in seeing more gas in the plant.
We're excited about that.
We'll also be re activating and redirecting some wells that had flow to third parties.
But were shut in due to low gas prices and high fees.
So that redirection, which is really going to be done at very little cost will bring those wells into this facility on gathering system as well, we're just waiting on the license transfer piece with Edr before we can do some of that work.
As far as pipeline infrastructure, we've evaluated any constraints.
And.
We're making changes to operating strategies.
Those will be implemented where applicable.
Essentially without going into too much detail. The result will be more consistent flow in the gas gathering system on the less liquid holdup.
On the wells will.
We produce and perform better.
That was one of the things we spent a lot of time on looking at.
We've already had $1 six inch connection to the oil.
<unk> NAND system in place for years with the original operator and developer of the assets.
The.
A portion of that pipe had been deep.
The commission so we're going to re commission that line again, what's the license transfer happens we will be able to do that so then we will have a connection with part of the sealy infrastructure into the oil men will med north.
Infrastructure, and then as well we've been looking at little sort of short tie end opportunities.
It would cost much capital, but will give us some flexibility to even get gas tied in into the wild here yet so.
We'll move on those sort of add to the development dictates I think.
Multipart, but.
We've identified a lot of a lot of opportunities.
And that will give us obviously flexibility to swing gas around multiple plants like we have elsewhere in the greater Sundance area and then finally I think we've been.
We're going to leverage our relationships with <unk>.
Some of our key vendors out there. So we will get those those vendors working in the <unk> area.
With the long standing relationships.
Pricing that we see with them will not.
Not only get.
Reliable service, but will also see.
On the impact on an operating cost production base.
A lot of work has been happening and we're excited to keep pushing things forward that sounds really good I think as Todd Dave.
No you were eager to get your hands on these lands there were some interesting opportunities there.
Without.
Telling our competitors too much did you want to elaborate on some of the things we're excited about there.
Sure Darren maybe just a bit.
The opportunities were most excited about are in the spirit River and the dawn vegan.
We've got <unk> seismic over pretty much all of the new new lands end.
We have eight out of Q1 and two will reach locations teed up to drill later this year.
We are especially keen on the non QM, because they've been a pretty big part of this year's success and we see them.
Helping us continue that momentum into 2021 and 2022.
2023, and will follow that those those wells up with more not a Q1s plus some flares and we're keen to target <unk>.
On Vega, which is present over the northern part of the land.
There is also a good amount of cardiome opportunity, which we're very familiar familiar with.
But ultimately we see the potential for over 100 locations on the 54 sections.
And.
Just.
To complement the beat BD team they worked very hard to make this happen and we're really keen to start drilling.
So it was really exciting.
Scott's not hear J P. I don't know if you want to stand in true him but.
Obviously the industry is talking a lot these days about.
M&A.
We haven't typically been a company that does a lot of M&A, we tend to.
Do a lot of organic development on our own but we've had a few little complementary deals that we've tucked in here, there and maybe smaller stuff.
What's the strategy going forward is it.
Next up for small stuff what are you thinking.
I think like you said, we've always had great success with.
The sort of.
Bread and butter kind of tuck in acquisitions around our assets.
We do that via farm ins or poolings or swaps or whatever the case may be our land department and the BD group of both busy doing that so.
It's tough for us.
We add production at 9000 of flowing Boe.
Hard for us to sort of look at major acquisitions in some sense because of the value expectation on the other side is usually quite high as well on its for us to get that we want to make a profit here. So I mean, there's going to be these opportunities like we just discovered and especially when they come with infrastructure will continue to look at these there are other operators out there on the other lands out there.
Similar to this that we will continue to pursue that strategy.
I think with our cost structure.
Acumen in that regard, we will certainly have more of these opportunities available to us and thats really the strategy to continue.
Sure.
Okay great.
I think thats.
For the quarter and for the year for us.
We're obviously excited about 'twenty, one and are already.
Already we've seen.
Some interesting development with commodity prices.
Obviously, we're continuing to perform here.
Got it.
Active year plant, a bigger capital program quite a bit bigger than 2020, so we're going to be busy but.
That's not all that we can do obviously, we're looking to do even more than that so.
You're going to keep working on some of those future opportunities.
And we will report back to you guys on how that's coming but obviously it was.
Strategy at Peyto has never changed we're all about generating the maximum return we can on every dollar that we can put to work for shareholders. So.
We're going to continue that vein and keep pushing to lower costs and improve profitability as we go.
And so we'll be back to you are reporting on the first quarter how that went in.
Our headed into break up here.
On.
Maybe I guess.
So thanks for listening in and we'll talk to you then.
Thank you, ladies and gentlemen for your participation on today's conference. This does conclude the program you may now disconnect good day.
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