Q4 2020 CNX Resources Corp Earnings Call

Good morning, and welcome to the C and X resources fourth quarter 2020 earnings Conference call.

Participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero after.

After todays presentation, there will be an opportunity to ask questions.

Please note this event is being recorded.

I would now like to turn the conference over to Tyler Lewis Vice President of Investor Relations. Please go ahead.

Thank you and good morning to everybody.

Welcome to <unk> fourth quarter conference call, we have in the room today, Nick <unk>, our president and CEO, Don Rush, our Chief Financial Officer, Chad Griffith, Our Chief operating officer, and Yummy I can't Cube, our Chief Excellence Officer.

They we will be discussing our fourth quarter results. This morning, we posted an updated slide presentation to our website also detailed fourth quarter earnings release data such as quarterly E&P data financial statements and non-GAAP reconciliations are posted to our website and a document titled for Q 'twenty 'twenty earn.

<unk> results and supplemental information of C N X Corp.

As a reminder, any forward looking statements, we make or comments about future expectations are subject to business risks, which we have laid out for you in our press release today as well as in our previous Securities and Exchange Commission filings.

We will begin our call today with prepared remarks by Nick followed by Don and then we will open the call up for Q&A, where Chad and Yummy will participate as well with that let me turn the call over to you Nick.

Thanks, Tyler and good morning, everybody I want to emphasize four points in my brief remarks before I turn it over to our CFO Don Rush. All four of these are emphasized in the slide deck that we posted this morning. Our first the first one is 2020 marked the most successful year, we've seen as an E&P and frankly as a public company.

Going back to the late 19 nineties as measured by free cash flow.

Better yet this bar setting level of free cash flow and free cash flow per share it steadily and substantially grew as twenty-twenty unfolded. Our original guidance for 2020 free cash flow was around $135 million compared to over the $356 million or approximately $1 60 per share that we actually posted it's been an awesome.

And year on the simplest yet most crucial of metrics or debt and share count both declined in the quarter as we allocated that free cash flow to the great benefit of our owners and execution allowed us to strengthen our balance sheet and return capital to shareholders all of it in the middle of one of the most challenging of years and decades.

Second point I want to make a we expect 2021 to meet be materially better than 2020 as measured by free cash flow, we expect to deliver approximately 425 million of free cash flow in 2021, so that builds upon and then exceeds will be accomplished in a very successful 2020, and that's at the current strip pricing not consensus pricing.

Third point, we built a free cash flow generating machine and that should deliver on average $500 million of free cash flow per year between 2022, and 2026 of course, that's a market improvement from our 'twenty 'twenty one targets that I, just mentioned of $425 million and that creates a sequencing to position us for three P on free.

Cash flow level setting when you run through 2020, 'twenty 'twenty, one and 2022.

And again, that's also at the current strip not not consensus pricing and that assumes the incremental interest expense for our bond issuance that we did last year or seven year, three plus billion dollar free cash flow plan that we unveiled last April it remains in place and the first year is now successfully on the books for.

And then last one I want to make we expect the generation of $500 million per year of free cash flow to continue for many years beyond 2026, our basin, leading cash costs, which were just a penny over a buck all in for the fourth quarter. It remains a huge differentiator for the capital markets and I think theyre, just starting to wake up to that fact.

Extensive swathes of our acreage footprint and inventory they work quite well at the forward strip because of our cost structure at fires the engine for the free cash flow machine that creates in a new attack sizable free cash flow stream for years measured in decades.

It's no coincidence that all four of these points that I just highlighted they speak to the same metrics, our free cash flow and free cash flow per share free cash flow. It informs our execution focus our strategy our capital allocation incentive comp our investment thesis and our M&A screening process, we secure the drivers of it like low cost.

And midstream integration, we execute to generate it and then we astutely allocated by applying clinical math.

Simple yet very powerful concept.

Now before I turn things over to Don Rush, One final thought I just said our approach is simple and powerful but it's also different from the industry. The management team and board of C. N X. We didn't make our names originally in E&P and what we've accomplished to date sort of proves that how are we said we were different than a typical E&P.

From the get go and at the time there were a lot of industry experts that were skeptics that really didn't matter. We took 150 year old coal company at that time and through constant battling toiling and perseverance, we transformed it and really every imaginable way into the premier manufacturer of natural gas and free cash flow per share.

As well as the leader in tangible and impactful ESG performance in our space with Shandy conventional E&P wisdom, and we took a best in class approach to disciplined capital allocation there was injected by our board.

To create even more per share value.

She's all this during some of the most tumultuous times seen in generations of traditional E&P team or board, coupled with a standard asset base would have driven the company to a very different place we know it because we see it out there. Unfortunately, our differentiated approach set us up in a position of strength that we enjoy today and it positions us for even more great things on a per share basis.

Moving forward. This is the team investors and other stakeholders want as stewards of their capital with that I'm going to turn things over now to Don Rush our CFO.

Thanks, Nick and good morning, everyone I'm going to start on slide three which highlights some of the key metrics that differentiates the index.

As you can see in the top left chart <unk> has one of the largest net shell acreage positions in the basin. This acreage position is even more impressive when looked at on a relative standpoint.

Since our production is less than our peers and our base PDP decline is so shallow we need to consume less of our current acreage each year to maintain the production profile we have today.

So if you look at the next 10 to 20 years, we will only need to develop a fraction of our acreage. If we continue to stay in a maintenance of production plant.

A key fact overlooked by many of the bigger you are the more acres you must consume each and every year to maintain your business model.

Our lean and highly profitable approach allows for a much longer runway and a less risky next few decades relative to our bigger peers, which need to consume two to three times that amount of acres, we do each year in order for them to maintain their production.

This is a big difference, especially when you consider that our plan not only consume fewer acres, but also generates approximately $500 million per year of free cash flow on average this outsized profitability unless production is due to our superior margins driven by our best in class cost structure that you can see on the top right.

This cost advantage allows us to generate significant free cash flow and based on where we are currently trading creates in very attractive free cash flow yield on our equity and we remain on track to continue to strengthen our balance sheet over the next several years as you can see in the bottom right.

When you view all of these metrics together it is clear we have positioned the company to grow intrinsic value per share going forward.

Slide four digs deeper into the cost structure.

As you can see our Q4 costs came in around $1, <unk>, which was slightly under the $1.04, we guided to on our Q3 call.

All in our fully burdened cash cost finished at $1 17 per Mcf fee for the full year 2020, we expect 2021 cost to be more in line with our Q4 numbers and to average approximately $1 five per M. Cfe.

Year over year equates to a 10% expected cost reduction.

Assuming the future free cash flow is allocated towards debt repayments, we would expect fully burden cost have decreased even further to around 90 cents per M cfe and lower and the years beyond.

When you combine our low cost position along with our steady execution. We have seen throughout 2020. The result is four quarters of consistent free cash flow generation, which you can see on slide five.

Q4, we produced approximately $85 million of free cash flow and $356 million for full year, 2020, which was modestly above our previous guidance.

Last quarter, we discussed that if Phoenix shares continue to try it continued to trade at a high free cash flow yield we would have the wherewithal to repurchase shares in conjunction with paying down debt that is exactly what we did and in the quarter. We bought back $43 million worth of shares at an average price of $10 43 per share was six.

That cash settling in the first few days of January 2021.

Slide six illustrates the point that our best in class cost structure, not only drives our annual free cash flow generation under the current strip. It also allows us to develop wells more economically than our peers.

As you can see on the slide out of the key variables and well walk economics, excluding price Opex has the largest overall impact on the economics of a new well.

To quickly explain the slide we use the hypothetical southwest P. A dry well with a two six Bcf a day per thousand foot type curve and the other assumptions footnoted below.

We then looked at how changing the four main variables affect the internal rate of return for that well for clarity. The delta shown on this slide are not percent improvements, but nominal rate of return enhancements for that well.

So for example, if the base well had a 30% IRR and you lowered the opex of that well by 50 cents.

The well would improve to a 68 per cent IRR.

As you can see operating expense has by far the largest impact on the profitability of a well much greater than even a sizable 0.5 bcf per thousand foot type curve difference.

Also as you can see on the slide the Capex, our D&C per foot per well has a much smaller impact to the walls profitability compared to Opex and this relationship holds true if you want to look at NPV as instead of iron ores as well.

This is not to say that yours and D&C costs are not important to us we continue to focus on driving down capital costs, and improving capital efficiency and well performance and look forward to that trend continuing as we become more and more efficient.

However, we recognize a few things about capital D&C cost and that's competitive impact one we acknowledged at all of our peers are good operators to we all use the same vendor base in the basin, so cost and technology advantages don't last long and ultimately D&C cost converge over time within the peer group one.

Example of this is the ongoing adoption of electric Frac fleets by our competitors a technology that <unk> adopted early on.

Three lower D&C cost across the industry over the past decade has led to continued drilling at lower and lower gas prices ultimately just bringing down the gas price.

Four at the end of the day Opex is the most material driver of well economics, as we said before and five our Opex advantage is sticky and will remain in place for a long time.

These comment these concepts seem like they're common sense, we find that most in the ecosystem often overlook it and instead focus to intently on whether capital costs are $730 per foot or $680 per foot. When the reality is that capex per foot is far less impactful to the profitability of oil and operating costs.

The bottom line is that <unk> has a structural cost advantage on the biggest driver of well profitability due to the fact that we own and control our midstream and water infrastructure.

And that we have avoided significant out of the money firm transportation agreements the burden others.

These were strategic decisions and cannot be replicated by others quickly or cheaply and it allows our best areas to be more profitable than our peers in similar areas and it allows for a large swath of acreage to be economical for C. N X at the current strip, whereas they might not be for our peers with higher cost structures and higher operating.

<unk> costs.

Slide seven is an update from last quarter. Since then we have closed on a $500 million senior notes offering which created additional financial flexibility over the next several years, we have worked hard to get the balance sheet to where it is today and as you can see we have not only pay down a significant amount of debt in 2020.

<unk> also increased our maturity runway significantly with their closest bond maturity now five years away in 2026.

Slide eight provides an updated look for 'twenty 'twenty one guidance as we typically do for current year guidance, we incorporated some modest ranges with this updated disclosure.

The summary is that based on the midpoint of the 'twenty 'twenty one guidance ranges production and EBITDA are up slightly from our previous guidance and Capex is up slightly due to timing and it's $18 million Capex beat last quarter based on the midpoint of 2020 guidance.

Most importantly, we are reaffirming our 2021 free cash flow and approximately $425 million or free cash flow per share guidance is increasing due to our share buybacks in Q4 on the pricing front. Our guidance is based on the forward strip as of January seven 2021 for natural gas prices and we have used a conservative four.

Cash for our NGL realized price per barrel of $15.

Q1, NGL prices are currently running higher than that and we will continue to monitor this as the year unfolds.

And last as we have said in the past quarterly guidance is difficult to be accurate on since a few weeks one way or the other on a new pad make a big difference for the quarter, but not for the overall pad economics. However for some color we expect quarterly production volumes to be relatively consistent throughout 2021 and as of now capital is projected to be modest.

Heavier in the first half of the year versus the second half of the year.

Slide nine is just a reminder, that's C. N X continues to screen very well compared to not only our E&P peers, but against the market indices highlighted on this slide.

And as such we feel that we are a great investment opportunity. Our focus remains on executing what has become a simple story about generating a significant amount of free cash flow each year and allocating that free cash flow to create substantial value for our shareholders.

We believe that this will drive the intrinsic value per share the company higher overtime and continue to provide meaningful opportunities to reward our shareholders with that I'll turn it back over to Tyler for Q&A great.

Great. Thanks, operator, if you can open the lineup for Q&A at this time. Please certainly we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Okay.

And the first question will come from Zach Quorum.

Please go ahead.

Hey, guys. Thanks for taking my question just.

I just wanted to ask on thoughts on the buyback going forward you utilize roughly half of the <unk> free cash flow to buy back shares is that a preview of what we should expect in 'twenty, one and I guess just more generally your thoughts on buying back shares versus reducing debt with the free cash flow you generate.

Yeah, No yeah, no. Thank you for that and you know I'll I'll I'll start and index can add in anything I Miss here. So I think if you rewind time back to our Q3 call we were pretty consistent in the conviction of the free cash flow plan not only to close out 2020, but what we're projecting for 'twenty, one and call it the $500 million on average.

22 to 26 and now we made it fairly clear that hey, the balance sheet was in a good shape or our cash flow generation relative to our debt and our maturities.

Was it was a very stable manageable scenario situation and our leverage ratio targets that we're trying to get to like a one five times leverage roughly with a $1 billion EBITDA runway is as you're in that zone, you would need to have a one $5 billion of debt to kind of get to that one and a half leverage position.

And we have the wherewithal and again going back to the Q3 call. We coded quoted a billion and half dollars between now and the end of 'twenty. Three Q4 was the first first chunk of that billion $5 that we were projected to make and we said we have the wherewithal to spend $1 billion to pay down debt and have plenty of capacity of that extra $500 million to utilize for other thing.

Along the way and if the free cash flow yield at the equity and if you need if you look at the call it close to roughly $2 per share free cash flow debt that we're projecting for 2021 stayed around you know close to a 20 per cent of free cash flow yield we would be thoughtful and opportunistic as we move through the year.

So I think as you look forward the clean answers are we can follow the math, we use we use the variables we choose.

Change decision, making based on how the variables move around us and we have the wherewithal to to do things Opportunistically what share count is the next several years unfold and it'll be a part of the balance between the debt the debt paydowns and potential returning capital to shareholders and the good news for <unk> in Phoenix.

And shareholders are we have the confidence and the wherewithal to do both.

Yes, exactly I would just add that to.

To me the most important thing here is that we've got a conviction that our cost structure the integration of our water midstream upstream.

And our inventory is going to be a substantial engine for generating free cash flow. So I look at 2020 in total Q4 for 2020, our guidance is for 'twenty, one and one year in the books across that seven year plan that we unveiled last year as long as we continue to execute we are going to a generate.

Our substantial free cash flow I think the scoreboard to date has shown and we're doing that.

B, we then want to allocate that free cash flow in the right places and at the right times and the two biggest most attractive opportunities. We see right now are a reducing debt and be opportunistically retiring shares at those free cash flow yields that Don had mentioned so.

That continues to be the two areas of focus for us on on free cash flow allocation.

The share count reduction will be opportunistic and I wouldn't read into a quarter or a year and Pat I would instead look towards the metrics that matter to us when we're doing our rate of return math Andrew.

I would expect to in 'twenty, one we continue to execute we hit our guidance on free cash flow youre going to see significantly lower debt at end of year and youre going to see a lower share count if the free cash flow yield stays where it has been hovering at a recent last.

Last quick comment since I forgot to mention our hedge book really helps on just the comfort and confidence in what these cash flows look like for <unk> for the next several years with her approximately 90 per cent in 'twenty. One we already have a material position in in 'twenty. Two and then if you look out in 'twenty three 'twenty four it's getting close to almost being half 50% hedged out in that area. If you assume.

Flat production. So there's just structural advantages we have as a business coupled with the clarity and cash flow generation via the hedge book allows the wherewithal to be thoughtful on this as these next quarters and years unfold.

Thanks, guys, just one follow up a weekly basis widen out a bit yellow, mostly had some basis in 'twenty, one but less so in the out years can you talk about what you can do to mitigate widening basis and just your general thoughts on what happens with basis over the next few years in Appalachia, given some concerns about new pipe.

<unk> potentially being delayed.

Yes. This is Chuck Griffith I'll take that.

I'm glad you asked because I was appointed I was hoping to be able to make today.

We've actually gotten out ahead on the hedging risk and we were actually over 99 over 90% hedged on in basin exposure 21 through 24 inclusive.

So.

That's really isolates us protects us from some of the invasive volatility that I think you're pointing to and certainly what you're seeing and some other risk with some of these pipeline projects and potentially what might come down the road on these pipeline projects. So that was Oh, we've gotten out ahead of it we've we've isolated the extra net risk and we've been able to get those hedges put in place at a what we think.

Sure.

Trackless levels a lot of those details are available in the supplemental materials that we've put out we have not traditionally talked about exactly what markets have been included but I was.

I'm glad you asked because we were able to sort of other additional color that a lot of that four basis has actually been focusing.

Moving that in basin pricing exposure and just sort of add on top of that debt to chad's point. There's the there's the basis side. Then there is the indexed in basin price. So those two things kind of can be confusing I think between the two the basic number sometimes it's just the difference between what Henry hub is and what the in basin local marginal dispatch caused cost.

As the economically kind of hedge out in the future for it to produce oil or an in basin. So we monitor this stuff very carefully one thing the entire industry has gotten very good at is is producing gas. So I think when you look at any of the supply demand fundamentals, whether it's in basin or any other basin markets.

Out there it's going to be tight these things are going to be volatile, while we make decisions off the forward strip. That's why we take opportunities to sort of derisk. The forward plan and ensure that we have the clarity and line of sight on the investments that we're making on the on the drill bit are protected.

From fluctuations that may or may not occur all one thing we've all I think all learned is in the world. It's very unpredictable, there's major drivers and variables of gas prices that are out of anybody's control for the next months, let alone years. So we use the strip to make decisions. We go ahead and lock in some of the economics of the wells prior.

Spending the capital gas prices go up.

We have a good wherewithal to be able to take advantage of that if it's structural and it's a long term forward strip thing that we can do.

We've shown the wherewithal to manage our production profile to take advantage of of seasonality or differences in spikes or downdrafts in the call. It hand to hand combat gas pricing environment, and we feel good about the business model. We've built works really well if gas prices stay where they're at and basically stays where it where it's at for the next decade or.

If it does step changes up by 50 cents, that's just even even a better company for saying that but we work well either way.

Thanks, guys. That's all for me I appreciate the color.

And the next question will come from Neal Dingmann with Suntrust. Please go ahead.

Morning, All my first question Nicky is for you or Don really.

Given you're now stellar free cash flow could you discuss a bit your thought process around free cash flow allocation, you mentioned a bit about all debt the debt repayment equity repurchase, but I'm wondering you know when it comes to these two plus a bit of growth and then probably even in the future potential dividends I'm. Just wondering how you sort of think about all of these.

Sure Neal I'll take a start at this.

Just generally thoughts macro thoughts that sort of play into this allocation opportunity set.

One lower debt typically in our industry with its volatility coupled with the opportunities that present themselves when things get volatile is always a good thing.

Sometimes that is difficult to quantify but we know it's tangible we know it's real so I think the leverage ratio metric absolute debt level metric.

<unk> to allocate a portion of the free cash flow to debt reduction is always going to be front and center with us through through the <unk>.

And the next calendar year, if not the next two right.

When you get into issues with respect to capital itself I think the industry is going to be facing more challenging times frankly, whether it's because of forward strip pricing or just the overall.

Sort of approach of how our industry is viewed by the capital markets, it's going to get Stingier in terms of being able to make your case to secure capital and those that can be free cash flow generators, and self fund and take advantage of the Stingier capital environment are going to be the ones that not just navigate through but thrive in it and that's certainly us so.

The ability to post free cash flow is more crucial than it's ever been especially on a consistent basis and then the third thing goes back to our prior comments on the first question, which is on the share count reduction front. It is part and parcel and integral to our philosophy. It was really started by our board a number of years ago and if you look at our seven year plan with one in our books.

And you look at what the prognosis as per our business when it comes to free cash flow generation. After that six year period left on the seven years, there's a compelling case, if the free cash flow yields were trading at to reduce share count and create substantial owner value on a per share basis, when that changes because of the math right because of the fact and circumstances when we start to trade in line with what you would expect.

Neil and other avenues for shareholder return like dividends I think come to the floor to be considered but right now for the foreseeable future debt reduction share count reduction Opportunistically I think those are the two primary paths for free cash flow allocation.

No. It makes sense and then really make my follow up for you Chad just going sort of more on cadence timing and focus.

Those earlier slides just show the depth of your inventory. So I'm just wondering specifically given that GAAP and you know a moderate plan. How do you think about this year, maybe talk about targeting the Marcellus and Utica dry gas plans around plans around that.

Yeah, I think there's a little bit more what wet gas and the mixes rolling through from 'twenty into 'twenty. One you can kind of see it flowing through a little bit other production cash costs that you're seeing in 'twenty, one versus 'twenty 'twenty.

I think when you look at the call what we're gonna do in 'twenty, one we've kind of.

I'll go back to the Q3 call said that if there is this the price spiked it may or may not happen sort of later in the area. We've got the wherewithal to kind of hold some of the 2022 deals up a little bit or like we've done before if there's a disconnect in shoulder seasons or something like that we can kind of delay some things and pushing back. The later periods, but the net net we feel good about the next couple.

For years, we have clean line of sight on being able to execute it very very efficiently. We gotta operating team. That's the best in the business to get this done in a very efficient manner.

Manner. So we're set and how we want to think through that as we said before the bulk of the six year program on gas. It was seven six year program is is based off of our Marcellus activity with other whistle a little bit of southwest PA Utica to just blend down some other damp Marcellus gas oil.

Chad can talk a little bit after I finished about how that damp Marcellus gas and what we blend versus what we process now that that changes as NGL prices change and then I know.

A little bit of activity in the CPA Utica, but yeah cadence wise, it's it's fairly similar fairly consistent although you know again these things get lumpy quarter on quarter, but Chad you want to talk a little bit about the the blending and what we are doing yes. Thanks, Todd So one of the additional benefits of owning a midstream system beyond the cost benefit is that it provides.

We have a tremendous amount of additional flexibility to go to move gas around to optimize or maximize the value of those molecules and certainly with NGL prices rallied, particularly propane we've been able to already move some of our dam production back towards processing to take advantage of that positive frac spread.

We're continuing to assess.

A number of additional wells that are sort of right on the right on the border between better to say the dry versus wet we're monitoring those really on a daily basis.

Close close communication with our with our with our processing partners to determine like when is it actually like economically best to send those molecules to processing.

Ownership of that midstream system provides us that flexibility.

Really we have you know our asset base has a mix of really drive dry Marcellus versus some wet.

Opportunities down the Shirley Penns Brookfield.

Were looking at was the exact way to optimize the timing of the Fracs until some natural defense biofuel to take advantage of some other near term strength in NGL pricing.

If I can just sneak one in on chat chat anytime it I guess for you done would you all consider monetizing. It is midstream is just it sounds like it just remains to important currently.

I mean, we've I mean, I guess, if you look at the last several years, we've got a pretty thorough track record of just making it economical decisions on left rights on do you keep a business DSL business, we've sold more more things both undeveloped acres in producing acres in different business units and I think anyone else over the last several years. So we follow the math, we assess any of them.

Decisions do we think that.

It's a big part of what drives the future economics of the company, Yes, do we think it's a big piece of why our cash flows are so much lower risk than the peers, absolutely I mean, ive tried to explain it call it upside down.

What the peers would look like at a 50 cent higher gas price, we look like that like the you know so that just gives us.

A layer of reliable free cash flow that gives us optionality to do interesting things over above and beyond that it unlocks a lot of a lot of additional values for foreseeing that so you know we evaluate everything one whenever we go to making decisions to do things on a risk adjusted cash flow base.

And we'll continue to do so but we are we like the position we're in and part of the reason we like the position we're in because we're the only one that has it.

If everybody had the midstream the gas price would probably just be 50 cents lower so I mean, it's it's it's unique for us because we're the only ones that have this type of a situation.

Great Great details in there.

Minutes of free cash flow guidance.

Okay.

Thank you and the next question will be from Holly Stewart with Scotia, Howard Weil. Please go ahead.

Good morning, gentlemen, maybe I'll just start off with a couple of questions on the production numbers could you provide the overall shut ins in 'twenty and 'twenty and then let us know or give us some color on if there's anything in the 'twenty One guide in terms of shut ins.

So as far as what the total quantity of Bcf shut in during 2020, I mean, I think we can follow up with you on that Hollywood.

You know I sort of looked at it on a per day number in sourcing watchtower fluctuate over time and make sure we're optimizing the value of that but.

But I don't have the total quantity sort of available in my back pocket right now as far as like twice a day one guidance. We're not currently planning on having any shut ins in any of that guidance.

It is obviously something we'll continue to monitor.

If the opportunity presents itself to better maximize the value of our assets or our production stream by by timing production differently. Then we will definitely jump on that just like weighted last year.

And so just like we did last year, but if we can make that call again, we would we would lock in the arbitrage or hedges against US, we would modify and sculpt our hedge book appropriately if if that opportunity presents itself and like I said, that's just a lot a lot of the flexibility that we have you know I'd say, it's hard to mathematically show the value until you do these things as they unfold and.

And to predict when they happen is impossible. So we don't try we just keep our eyes open for oil and then we move quick when they when they show up.

Great It well it maybe Chad just to follow up to that can you provide the the exit rate for the year for 2020.

Yeah.

We will look at.

<unk>.

One seven.

Yeah about 1.70 about 1.7 other day holidays, our exit rate.

Perfect.

And then Donald saw the slide on just the total cash cost guidance for for 'twenty or 'twenty one.

It may be getting just a little bit more granular for you. The midstream costs were a lot lower than expectation is that a good level kind of to think about as we're moving through through 'twenty 'twenty one.

Yeah.

Where it gets us into some of the mix as you roll into 'twenty, one we've kind of given what the costs look like in 'twenty, one and clearly some of the optimization Chad talks about moving some things around if you know if you have some processing you end up with some higher realizations of the cost looks a little bit higher but ultimately your margin stay in your cash flow.

So youre looking for 'twenty, one stay the same so youre going to see call. It fluctuations based on a little bit more drive versus a little bit more.

More wet and you look at some of the kind of the FTE moving around on to unused to use and stuff like that and it just really kind of day to day hand to hand combat.

As we're seeing what the what the Delta is between the Q3 to Q4, and then into 'twenty and 'twenty. One so we will continue to.

Use.

Call It Gopro goalpost guidance to give somewhat clarity, but it's going to fluctuate on a quarter to quarter. As we make these are you know week to week decisions.

Okay, Okay, and then one more.

For me if I could how are you thinking about that C. N axiom credit facility does that stay in place.

Yes, so right now when our debt.

That transaction was structured in fluctuated they did that.

Instruments remained outstanding so we still do do financials and post them to the other holders down in that standpoint, and what we do or don't do call. It over the long term I guess to be determined I think what it allows us some flexibility and I'd call it safety and capital structure management.

Obviously, the simple thing would be that hey that one capital capital consolidated structure.

And low debt for the enterprise and if that makes sense over the next several years and we can migrate towards that.

If for whatever reason says Nick's earlier comment if some of the E&P specific kind of debt markets are more difficult due to whatever reason and rationale that that might be you know, even though our balance sheet and everything looks good individually you can take part in like just the industry wide like noise, we have like the midstream.

<unk> side, which is just a pretty amazing efficient way to raise capital with the kind of security and collateral you can provide in that.

Talked about the safety and the cash flows that are there.

Available to that kind of piece of it and you saw this.

I guess right in the middle of the Covid situation loss when it started last February and March when we did our CSD project financing I mean, our our upstream bonds were trading difficult along with the rest of the peers groups entre and difficult, but we but we raised $150 million or so dollars. It.

Call it a blend at almost 6% interest rate whenever whenever upstream bonds, where we're very very very challenged so long term, we will see a near term like most cost effective thing to do is just kind of leave them as they are and we'll make those decisions and we got time clearly with when the bonds down there expire and obviously the credit facility down there.

It's a good runway on it to Holly this is Nick.

General thought on that I think it's an important point because whether we keep two separate facilities or whether we combine them into one moving forward I think it does show that our cost of capital should be more efficient because of the asset or rate that we've got other than your typical upstream Appalachian peer in other words that weather.

It's one single facility moving forward or two separates the weighted average or blended cost of that is going to be better and cheaper than what you would typically see for an upstream early and that makes sense to us that's part of the it's like another confirmation of it driving things like cost excuse me free cash flow.

Yeah, and you probably saw that in the way that your bonds price.

Back in November.

Okay I appreciate all the color. Thank you.

The next question will be from Michael <unk> with Stifel. Please go ahead.

Yeah. Thanks, Good morning goes.

It looks like Youre going to be able to pay off all your debt and your revolver pretty quickly with free cash flow.

Just wanted to see how and when Youre planning to retire your fixed debt and your seven year plan.

Do you build up a pile of cash until the fixed debt becomes due or can you call any of the fixed debt early Oh, where you are planning on handling the new seven year Glenn.

Yeah, no it's a it's a.

Yeah.

I guess flexibility as you heard we've been using often but being able to pick and choose along the way is just something that we find to be to be helpful and thoughtful to be able to do this.

Have a nice structure I think with with what we have it.

The <unk> like you mentioned, we do have some of the C. C. S. G bonds out there too that are pretty one not pretty they're very efficient they basically will be callable at par.

We also have the cost structure starting to kick in really here in a couple of months for for our first unsecured bond and clearly there's open market trading too. So if you look through 'twenty, one easy math isn't just like you said I mean, there's enough the base oil will take care of the <unk> and you know that puts you in a place to.

Alleghany capital.

Very thoughtfully not only across the different pieces of the of the debt structure, but you know the wherewithal to do things on on.

The share repurchase side as well so.

Simple math and you know what.

We've kind of lay out in the 'twenty one guidance is it just going to go into the RV al for the simple math on the guidance, but when you look at the Optionality you have to pick and choose these capital stacks. That's a that's a nice nice piece to have.

Okay. Good so it sounds like no no need to park cash on the balance sheet for any extended period of time.

I wanted to ask on slide six.

Great Slide show your cost structure advantage on operating cost relative to your competitors as it relates to our two well economics. If you looked at that same chart not relative to your competitors, but just relative to yourself today versus where you think you'll be 12 to 18 months from now can you say what you.

The biggest controllable driver under that scenario would be on your returns.

Yeah, No I think you know us.

We've laid out in prior calls we've you know a forward looking assumptions are fairly conservative so that the cost components that we have kind of coming down where we're basically contractual in nature I mean, if it's needed.

Commitments that we have just rolling off as they expired contracts expire you know clearly Chad and team is obsessed on on the D&C front and they're doing a lot of great things to push the envelope there and we're trying to obviously push the envelope on the on the Opex cost side.

As well, but Chad I don't know if you want to talk about any of the initiatives. We've got on sort of the opex and the D&C that to try to call. It continue to beat what it is we're doing today yeah. Thanks, Scott So certainly on the Opex side as we've we've talked.

Many times about the big a big chunk of the Opex stack is contractual or and or corporate structure based means that the ownership of our midstream the that the firm transportation commitments. We've made these are these are long term sticky cost advantages that it would take our peers a long time or.

A lot of money to sort of narrow the gap on some other stuff that's a little bit more directly controllable that we are paying you know laser focus too.

Is your Opex piece, which is a small smaller part of the overall operating cost, but certainly opex.

It contributes to that it's about 10% of that stack and we're always looking at ways of <unk>.

Maintaining by opt.

Optimizing how much maintenance, we're doing optimizing how much expense where or how much money. We're spending what we're doing with cruise how we deploy our workforce trying to squeeze every bit of optimization that we can out of the out of maintaining our asset base. So really on the on the D&C side look one of the you know you'll not only does our sort of maintenance of production of the seven year plan that we've put out there.

You got a lot of guidance so a lot of long term view.

It also provides our operating teams a long term view and that allows them to plan ahead negotiate with smart contracts smart logistics make sure that that.

That supplies will be in place service providers know what's coming.

We see what challenges are coming down the road, whether it's longer laterals or different you know different drilling locations like making they see that coming down the road, they know where they're going they know what to expect and they can plan. Accordingly that has allowed us to execute at an extremely high level and continue to improve the leading edge cutting edge of D&C efficiency.

Look we've got a team downstairs incredibly intelligent people incredibly type of Cooperators.

Giving them that long line of sight on what to expect giving them clear goalposts of what we're solving for free cash flow per share has allowed them to just focus on executing and getting the job done.

Yeah.

Great. Thank you for the detail.

Yes.

The next question will be from Nitzan Kumar with Wells Fargo. Please go ahead.

Good morning, gentlemen, and thank you for taking my questions.

Maybe change tack, a little bit and talk a little bit about what is your macro view on gas right now.

Our own plan calls for very steady production you you were talking earlier about hedges.

But I'm just kind of curious what do you see out there from your peers and so I'm just wondering.

Gas perspective.

Yeah. So we've been we've been cautious about the 'twenty one strip for some time now I think we've consistently messaged that we're very you know keeping a very close eye on of weather, particularly this winter weather and I think.

We're all keenly aware that the winter has been a little bit disappointing, so far and I think the strips traded office as a as a result.

Since our last call Cal 'twenty, one full calendar years off maybe.

Call It 28, or so and I think Cal 'twenty twos, maybe off a dime.

So you've seen the markets respond to the weaker winter and I think that's what we're all sort of worried about nevertheless, I think there is some structural under supply going on it looks like you have.

With production production is off you know one or two bcf per day compared to last year, if demand and exports are up so it does look like we're maybe structurally under supplied.

So everyone's shifting there both thesis to next winter I sort of make sense to us I think but at the same time, you've got you know you've got brake counts ticking up ever so slightly you've got.

There continues to play a big role.

I think I think the point is the markets are going to continue to fluctuate wildly as a function of weather producer behavior.

Policy like Theres going to be a lot of volatility in gas prices. We will continue to hedge. We continue ahead. We're very we're very heavily hedged well out into the future years, we'll continue to hedge will continue to include basis as part of our hedge just to just to minimize the amount of debt fluctuation effect on our share.

Just to minimize the amount of those fluctuations affect on our free cash flow plan.

The other than just sort of add on top of that I mean, we do have a lot of internal views and analysis on these we just recognize that.

Perfect Crystal ball doesn't exist a couple of variables.

All movements on a couple of variables outside of anybody's control can take can take a very accurate model and make it look silly within the matter of months.

And when you look statistically I mean, the end up you know before hedging typically ends up better than non hedging not just you know statistics and you know, we recognize that fact and or eyes open.

There could be a structural change and obviously, we'd be we'd be happy to see that I think you're hearing a lot of the right things from from different folks.

<unk> trying to stay disciplined and focus more on free cash flow a maintenance of production, but I think the ecosystem has a long way to go to to solidify that they're actually going to do that and part of the ecosystem is I mean, if you just look at.

The research community and others, I mean, they're still valuing companies, often EBITDA multiples and you know that the free cash flow talk I think it's starting to come but I think the more demanded in the more free cash flow is the main driver and how people are viewed and valued there's always going to be risk because it's pretty easy to grow EBITDA as E&P company I mean these wells.

And our ability to deploy capital and grow EBITDA is real we've seen it but it hasn't actually showed up in <unk> and shareholder value. So I think this.

You all could help the ecosystem and everybody I think we'd be better off if so good focus on free cash flow was the main driver on high oil companies are viewed and EBITDA multiples remain the you know the soup of the day it's risky.

As enticing I guess to to go ahead and grow that EBITDA to get a favorable kind of treatment in your valuation mechanics versus may be the right decision was just a focus on free cash flow, but it hasn't quite flowed through how people view companies yet.

I certainly appreciate your focus on free cash flow. So I appreciate that part of your answer as well.

I guess are you also kind of been passing mentioned how difficult. It is for the industry. These days in terms of investor sentiment.

She concerns.

You were one of the first to adopt a E fracs in the basin, but I'm just kind of curious.

Other strategic opportunities that you see them for to participate in any kind of green revenue streams and things like that I Wonder if computers was talking about partnering with a.

Accompanying on monitoring some of their wells I'm just curious if you know.

Beyond just reducing your own emissions and using E fracs anything youre seeing that might be interesting.

Yeah, No I think you know this is something.

Other conversations I've had in and then other Nic has had as well so I'll talk a bit and then the Ami can talk and if Nick wants to chime in too, but I think a lot of the things we've been doing have been very call. It ESG focused and friendly if you look back to the creation of <unk> and ex gas and capturing you know call. It coalbed methane that would've escaped to the atmosphere.

And today, it's called Big flaring and different things like that in the oil and gas flow, but we've been focused on trying to be thoughtful for a long time now I. Just don't think we've talked in ways and languages that people are used to sort of seeing that so I mean, the evolution Frac fleets. One example, I mean, we're very focused on on sort of local and sustainable and trying to be thoughtful and on numerous fronts here.

So I think you know what.

Our track record shows we've leaned into a lot of these sorts of things I mean, we have.

Our partnership with.

A bigger plant that does kind of like.

Coalbed methane generation and we've generated carbon carbon credits, we've had for last few years and different different vehicles. So.

Focus is there I think communication Kid can be improved and I think the track record of things. We've done I think gives you a little taste of things we can do going forward. So yeah. We're we're very interested in not only you know doing doing doing right by generating thoughtful law profitability through this through this in the comp.

<unk> set up and has a lot of ingredients to to be very very successful with that.

It becomes more and more important to the world, but I'll go ahead and I'll, let les.

I mean chime in as well thanks, Don I think the ESG.

The new focus on ESG is appropriate even in the environment.

We're in right now Don was talking about.

<unk> purpose and our whole view of it as being an IBM right from the outside the way. The company was created was if you look at it as more.

In light of ESG and one other things.

From us, but we really appreciate with a new.

Our focus on it we are local.

We work local we would live local.

Employees are local so the new focus on ESG, especially to make sure that the companies are responsible.

Good day.

A very good thing for our workers is a very good thing for our company and in addition to that provides new opportunities for us and for all the companies out there as it relates to debt I mean, we've started looking at ways to do use to use more of our product.

And we've seen that one when we deployed all electric Frac fleet, we saw the efficiency and Thats why when you started seeing some of our other competitors adopt that as well as income.

To you to talk and evaluate we've seen more more and more opportunity with our legacy asset to actually take advantage of the new focus on opportunities in ESG and then finally, the only thing I'll add.

From a big picture perspective, if you look at sustainability and ESG right, two buzzwords or terms that are being bantered about everywhere you look these days.

We translate what that means into really three crucial legs. One you got to be transparent. So when I think of sustainability and our local commitments that <unk>, just talked about or our free cash flow generation, we need to put out to the world right. There is a responsibility to transparently.

State and very clear metrics that are measurable what youre going to do versus just hollow words or promises are happy talk I think you see too much happy talk when it comes to sustainability and ESG, let's be transparent, let's lay our cards on the table and show the capital markets and wider stakeholder group, what we're gonna do too.

Tangible okay.

Things these targets these metrics need to be measured and they need to be tangible like what did we actually deliver on.

You can measure whether its financial sustainability or ESG as it relates to wider stakeholder groups.

Tangible measurable accomplishments not.

PR feel good type things and then the third piece of this is actions right. So if youre laying out the transparent view on what Youre going to do and then you're doing that intangible metrics. All your actions are going to be consistent with all the stuff. You. Just said so I think it's pretty simple across those three.

But despite all the talk and in the volume of stuff, that's being bantered about a process metrics I think those three things are lagging quite a bit we don't want to be in that but we definitely want to be in the camp of hey, Here's what we're gonna do transparently, here's what we're going to measure an accomplished tangibly and then here's what our actions were that were consistent with those two things.

Well, Nick I considerably and you'll be touched a 43 million that you're returning cash to shareholders. This quarter. So that's that's great. If I if I can just sneak one last day like I wouldn't been E&P analysts if I didn't ask about capital efficiency.

You head into 'twenty 'twenty, one what is your base decline compared to 20, you know as you headed into 2020.

And how do you see that tracking as you know.

Slow down your activity levels.

So let.

We certainly expect base decline to continue to decline over over the seven now six year plan.

What was the.

The idea there is as your production stays flat or flattish that youre replacement each year with new wells goes down because we got more of a bigger bigger portion of your production basis sort of older wells and as those wells.

Average age of your wells get older than that.

Client curve flattens out so you get your replacement rate goes down over time and your average decline rate goes down over time.

This year, where we expect sort of looking at 2020 exit rate and sort of what the decline is off of our PDP at the end of 2020, where I think we're somewhere in the crowd mid to low 30% sort of client curve.

Decline rate and year over year. So that's sort of what we're targeting right now is needing to replace in 2021 day in and as you can move forward through <unk> through 'twenty, two and beyond this 26 planet oil kind of trend down to around that 20% sort of timeframe and I think when you. When you look at call. It 2021, it's a little bit noisy just because.

We shut in a lot of things in 2020, so it turned a bunch of things back on right around kind of November and December at the end of 2020, so again it.

The decline rate between 'twenty versus <unk> 19 in 'twenty versus 'twenty, one just look strange because of all the different shut in things that we did but like I said, assuming sort of no shut ins in similar cadence, you'll you'll see it move from that position.

Position in in the low thirties down into the mid Twenty's been down into around 20 per center. So when you get to the midway point over over a six year plan, yes, that's a good point.

You all recall we.

Held back a lot of production of our new wells and brought them online with winter. So you basically had a handful of brand new pads till November December time period, and so they were at their peak production and then as we roll off into the balance of 'twenty, one youll see those pads.

Come off.

They are typical early times for net client and that was.

I'm going off memory goes from March to November so.

Is the bulk of our pads that we and again economically fantastic.

Our cash flow is tremendously helped the rate of return of those pads tremendously, but clearly it gets moving around a little bit on these base declines whenever you're doing things like that.

Appreciate the answers gentlemen, thank you so much.

The next question will be from Leo Mariani with Keybanc. Please go ahead.

Hey, guys I was hoping to get a little bit more.

Clarity on the production here, obviously, a very strong fourth quarter, you guys talked about a one seven Bcf a day.

Exit rate here and I think if I heard you right. It sounds like you had a lot of wells that came on kind of later in the quarter.

At peak rates, which kind of helped you guys achieve that but as I look into 'twenty one.

<unk> is kind of just over one and a half a bcf a day on production was down quite a bit from that $1 seven exit.

Exit rate can you just kind of help me with the math there or is there just a really big drop in the first quarter, maybe because not no wells are coming on because I think you guys had said that the quarters individually in 'twenty, one and they're all pretty similar on production. So can you kind of help me bridge the gap between the $1 seven and kind of just over one five in the guidance here.

Well, maybe I'll start and let Don maybe wrap up with anything I, Miss but certainly I think what youre seeing with that extra rate has an impact of the shut ins that we had during 2020 right. So so we held back.

A number of our brand new pads brought them online at the end of May end of it.

Early November in the November and so Youre seeing basically the December 31st number that is very very strong.

And that results in a surge of production synced up with November December basically Adobe March right November the winter months, the strong price that we saw in the incremental hedging that we layered on to capture the strong winter pricing.

Was by design that was my plan that was the whole point of sort of shutting in summertime 'twenty 'twenty production was to get this surge of production during winter 2021.

But obviously as you roll into sort of normal course steady pace development that sort of normalizes over the course of the year.

And I think ultimately average without so basically what you're looking at that over the course of the year wound up averaging out.

The numbers Youre.

Youre alluding to there yeah, and I think as you roll into again, all we had.

By design, we wanted to get as much production as we can and how we optimize the flow of those wells to get to get when the price back in again, we got to the hedge book So.

Even though the kind of the cash prices didn't hold in there as much as you'd hoped in December and in January we got it because we have risk off with the hedge book and recapture gross margins, even though that it didn't kind of show up and as you look into I call. It I'd say, our cadence on Q1, Q2, Q3 and Q4.

Yeah, I mean, Q2 is probably going to be the lightest quarter I mean, it typically is for us and but it's not like a dramatically different. So yeah. We'll run on that sort of average will be Q1 will be a little bit above Q2 be a little bit.

Around it or so below three and four will be kind.

Kind of similar in that in that front, but like I said this could change pretty quickly if oil.

The gas prices spike in the summer drop into summer spike in the shoulder dropping the shoulder Spike next winter don't Spike next Wednesday, we will shift around our our production management.

Squeeze out extra into the millions of dollars and for us that's.

All free money. If you can just shape your production profile different and increase share returns I mean why wouldn't you.

Right, So I think.

These exit to exit quarter in years are going to just look weird for us because we're we're always going to be moving things around to try to grab that extra million dollars here or there.

Alright, so just to make sure I sort of understand I mean, again, I guess that the 107 exit to the one five does seem like a fairly healthy change are you guys sort of saying that there is a big component of like choke management and just production management also just driving the shape of the volumes, where you guys were just trying to kind of produce.

All out into the winter and now you can kind of catch up back the wells would be a little bit more steady in 'twenty, one am I understanding that right and obviously I know that as prices change during the year, you'll you'll modify that approach, but just want to make sure I get that at a high level and not if.

If prices are good and you try to grab as much production per day is again if prices arent that good he tried to save a little bit for later, if the later prices share something about it but I think again.

It's going to be on a quarter to quarter week to week thing, it's going to be like hard to tick and tie I think but if you look step back like 2020, our production power was a 500.

Yes.

That's 21 will look quite good morning private loans.

511, so that's why it's funny, we were at 511 for the year 2021, we're forecasting 585. So just because we were like a 107 in December and we're Gonna average I got one five or something all across the year like we've we've increased our production by 10% on volume versus <unk>.

<unk> 21 for the capital program that we have out there that still generates a four.

<unk> hundred $25 million in free cash flow. So that's just like pick and tie in just like a 175 and like our 'twenty. One production is coming down like our 'twenty 'twenty. One production grew by 10% and you're going to have some things and like I said I'm glad that we had a long ones have been in the and the good month pricing and right now, it's a little bit shape could be down so I'd say debt bunch of stuff.

It's choke management or optimization on that coupled with the fact like like we said earlier, we saved all of our deals that we're going to be coming online in the summer and fall last year and turn them online in the winter. So that's going to create a little bit of a not smooth production profile.

To sort of maybe wrap it up on this issue I think what you've seen is what happens.

The difference between managing an E&P business for production and production growth and production cadence versus managing a cash flow generation plan to create per share value. We look at what's going on month by month or week by week quarter by quarter in the context of free cash flow and free cash flow per share and the way I look at the progression is.

2020 was a very successful free cash flow year, $3 56, and 2021 is going to be even more successful we hit our guidance right or when we hit our guidance of $4 25 and to me. That's that's what we're solving for now.

Production cadence plays out in that.

Nothing more than a variable in November to be managed versus the other way around.

Okay. That's good color and I guess just last one here from me could you give us the.

Number of wells that you plan to drill and complete our turn in line. How do you want to look at it in 'twenty, one like how many Marcellus wells should we expect to come online in 'twenty, one versus how many Utica wells in the plan this year.

Yes.

Sorry.

Sheet of paper.

So all Covid is Marcellus.

There's two Utica wells in 'twenty one.

Okay. So what's the total number of wells.

So we haven't we haven't said explicitly.

So I think in 2020, we were at 46 or 47 sales I believe off the top of my head 45.

And then we said we're going to transition obviously to the maintenance plan, which average is 25 wells a year from 'twenty to 'twenty six 'twenty or 'twenty, one is going to be probably somewhere in between but maybe a little bit a little bit higher.

Okay. So between 25 to 45.

Yes, yes, yes, I mean, we're I think right now we're around 37.

Like I said, we can get something posted out there for clarity, where we'll do it as the quarters unfold in our supplemental tables, but yeah right now 21, its around 37 in two of those.

Okay. Thanks, guys.

Okay.

The next question will be from Noel Parks with Tuohy Brothers. Please go ahead.

Good morning.

Okay.

Oh yeah.

One question I had I was thinking about your share buyback plan and you already have a good healthy allocation already approved and.

Just looking at the stock and the chart and thinking.

Thinking about what your appetite was for taking the risk of continuing to buy.

If the if the shares and maybe gas prices keep.

Trending up and if you have a sense of maybe an upper limit or how far how far up in price you might consider buying and.

I think why I ask this is it.

On a 52 week basis, the stock has kind of near the top of that range. If you back up a.

A couple of years, it's kind of like right smack in the middle of where it's traded the last few years. So I guess my thought is do you consider where it is now just way undervalued on the free cash flow basis as you've mentioned.

And we're continuing to buy back would be attractive or or do you think theres a chance that.

It's going to run too far beyond where you'd really want to put capital there.

Yeah, I mean, I think you.

I'll start with saying predicting what.

What the stock price is going to do it or not there is [laughter].

Impossible thing like that.

One time I never thought we'd be at five or $6 a share for the time that we were there for them for sure with debt.

Trying to predict this stuff perfectly it's similar to the gas prices and its like a hole there and like it.

It's hard to do I think whenever you dumb it down to its basic principles of like how how do you feel about the free cash flow per share the company, what's that translate into free cash flow yield how do you think about pace and process and timing as Nick said. This is something we talk about and think through with the board. All the time clearly we have the wherewithal to be thoughtful on this.

Ooh, we'll try our best to judge things as best as we can over the next several quarters and years, because you're right. I mean, there's there's different catalysts that could have different effects and well continue to to call make the right calls at the right time to the best of our ability or over the next several years or the good thing is that.

There's a lot of cash flow comment relative to the debt relative to the market cap of the company relative to getting to the balance sheet to which would be you know.

Completely completely ironclad once were at that level. So the optionality is there and we spend a lot of time trying to be thoughtful around these decisions as weeks and days and months and quarters and years unfold and then the only thing I'll add in all of it.

To me its much you're right about obviously, the one year and the prior multiyear.

Averages versus stock price, but for us the decision, making on allocation of our free cash flow and particularly in the area of share count reduction exclusively comes down to what we think our future performance is going to be what the risk is assigned to it net that metric right to define that as free cash flow and free cash flow per share the free cash flow yield and then seeing it.

Is there.

Per share value creation opportunity with respect to share count reduction and with the yields that we've experienced right looking at based on what that is 2020, 'twenty 'twenty, one and forward on free cash flow.

There was a good opportunity there and we took advantage of in Q4, we've got the flexibility as Don said to keep doing that through 'twenty, one and beyond but.

But at the same time debt reduction remains front and center with regard to our focus.

Great. Thanks, a lot and my my other question and again. This is asking you to talk about or think about totally external factors, but I have to admit I am a little surprised that crude is stabilized.

Yes.

Handily as it has right in the.

Sort of low fifties for the last I guess for going on three weeks or so.

And of course, a lot could happen geopolitically, OPEC COVID-19 and so forth.

But do you have any sense.

Or hedging with your hedging it doesn't affect you directly that we might be seeing in associated gas story.

Maybe start to interfere in the gas market.

<unk>.

More as a <unk>.

Say second half 'twenty, one event I was not really thinking that was going to be likely for at least another year plus.

I mean, I guess, if you can predict how Saudi Arabia, and Russia, we will cooperate or the coming 12 months I mean, that's a better crystal ball than I have I think that's why we definitely focus on hedging because some of this stuff is just beyond our ability to predict.

I I am I am.

I'm encouraged by seeing crude sort of stabilize around that $50 per barrel mark it seems to keep.

People from getting too heavy back into the <unk>.

The associated gas place.

Although I am hearing from bank start talking about seven handles on the on the oil price you start getting up to those price levels, they're talking like year to down the road.

If those levels, you'll probably start seeing some folks coming back into the associated gas play.

I'm just not sure whether whether are you know the OPEC plus is that interest of that allowing American Permian producers.

<unk>.

Achieve another foothold I got to think that they are incentives to try to keep price down to a level, where the Permian does just doesn't keep it doesn't get going again.

Which should help keep associated gas out of the market, but man future oil future hotel.

And that's why we keep we keep we just stay steady and consistent on hedging and taken all that volatility risk out of our free cash flow plan.

Great. Thanks, a lot.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Great. Thank you Chad and thank you everyone for joining us if you have any additional questions. Please feel free to reach out to the company, but thank you for joining.

And thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

Yeah.

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