Q1 2021 Cabot Oil & Gas Corp Earnings Call
It was associated with our recent early retirement program, our balance sheet remains as strong as ever been with less than $900 million of net debt as of quarter and resulting in a net leverage ratio of approximately one times trailing 12 months EBITDA.
This leverage ratio is expected to further improve throughout the year due to and increasing cash flow profile, resulting from a higher natural gas price environment. This year compared to the 25 year Nymex flow, we experienced in 2020, our fortress balance sheet provides significant financial flexibility.
Disability and will allow us to continue to return a significant amount of our free cash flow to shareholders. This year and for years to come this uniquely differentiates us from so many and or industry today, who are approaching the inflection.
Positive free cash flow generation, but we will be forced to utilize that free cash flow for significant balance sheet repair and medium term as opposed to capital returned to shareholders on the topic of capital returns yesterday, we announced a 10% increase and our quarterly base dividend to <unk> 11 per share.
Which on an annualized basis represents a base dividend yield of two 6% as we highlighted on our year end call. We are fully committed to a base plus supplemental dividend strategy, which incorporates a growing base dividend and an annual supplemental dividend to arrive at a minimum.
On capital return target of at least 50% of our annual free cash flow based on the current natural gas price outlook for this year, we expect to generate excessive.
Free cash flow above our minimum capital return target and our debt repayment.
Excess free cash flow is anticipated to be earmarked for additional capital returns, including opportunistic share repurchases, especially given the recent equity underperformance and or incremental supplemental dividends as we have provided in the last few years on.
On the operations front Cabot has implemented a focused stage by stage completion design, along each newly drilled well bore to maximize production and minimize potential impacts to adjacent and parent wells based on an in depth engineering and geologic analysis of each offer.
And that well obtain developed a customized segmented completion design for each new well lateral design and variables include the volume.
Fluid pump profit concentration and cluster spacing and the trading rate for each section along the Wellbore. This concept was utilized on each of the four pads and 21 wells that were placed on production and the first quarter with two to four different completion design.
And utilized and various sections of each lateral additional safeguards were also employed to protect the 33 per wells, which partially or fully offset the 21, new wells safeguards included and the use of deep set and Retrievable bridge plug and <unk>.
Relation of tubing and capillary strength and pair.
<unk> wells, when bringing them back online a customized completion design in conjunction with offset mitigation measures to protect parent wells yielded very positive results collectively our new wells on these four pads are meeting pre drill expectations, while the offset group.
The parent wells are producing above pre drill test rates, we have seen very little impact to the parent wells with only three of the 33.
Parent wells, having a combined impact of only 2 million cubic foot per day, we are very pleased with these results.
To remain on operations Cabot had been implemented another program enhancement operation cash.
Recently initiated a well pad compression program, which incorporates claimed burn emission control systems to date, we have installed compression on six of our pads the pad compression compressors are.
Uh huh.
To achieve a 10%, 15% pressure reduction and each of our installations, resulting and increased production rates and and EUR uplift.
Five to 15 Bcf per pad, all while delivering triple digit rates of return and and average finding cost below 20 per.
And for Mcf for the incremental reserves. We currently have plans for five additional <unk>.
Pad compression installations this year on the pricing front, we remain confident and our constructive outlook on natural gas pricing and both the short and midterm and while.
While we anticipate some near term pressure on local basis differentials during shoulder months and as pipeline and maintenance programs kick in and we expect to experience a much more bullish and are some.
<unk> 2021, and winter of 2021 'twenty two.
And then our outlook at this time last year to begin the global and the LNG supply and demand outlook. This year is far more robust.
And then what we experienced during the summer of 2020 U S. LNG exports are currently averaging over 11 Bcf per day and increase of three Bcf per day relative to the same.
Period last year. Additionally, exports to Mexico continue to improve and recently set a record of over seven Bcf per day and increase of approximately two bcf per day year over year, resulting in strong tailwind for natural gas demand as we move into the second half of the year on supply.
We continue to see capital discipline throughout most basins, including Appalachia, where production volume to roughly half roughly flat year over year and about two five bcf per day lower than the peak levels from fall 2020, despite higher natural gas prices.
The rig count and Appalachia is down slightly relative to the same period last year, highlighting our belief that capital discipline across the base and remains intact more broadly dry gas production across the lower 48 remains about one five bcf per day below levels from the same period and <unk>.
And in 'twenty and approximate five Bcf.
Per day below pre pandemic levels from late 2019 currently lower 48 natural gas storage levels are 302 Bcf.
Less than last year, and 40 Bcf below the five year average more importantly, the northeast and Midwest two regions at materially affect northeast pricing and summer demand are collectively a 162 Bcf below last year and that deficit is expected to widen over the next couple.
Of weeks as we look towards the end of <unk>.
Season, and October storage levels are forecast to be around three five tcf or approximately 400 Bcf below October 2020 levels setting up a much stronger scenario for the winter of 2021, and 2022 to 2021 Nymex futures currently sits around <unk>.
<unk> higher and the 2020 level the only a portion of the Cabot gas is affected a widening basis in the northeast has created some near term headwinds.
The low local prices have or we are still expecting a material increase and our realized price year over year. This will resolve and a significant expansion of free cash flow and.
And returns on and of.
Capital the recent widening and was primarily due to a major pipeline replacement replacement projects scheduled from May on behalf of and Leidy South expansion project. However, we are optimistic.
Summer demand for LNG and storage will negate this project weakness and basis. Moreover, with the completion of the Leidy South expansion project, which includes 580 million cubic foot per day of new takeaway out of the basin.
And this is scheduled for December one and service our expectation is northeast differentiate differentials should return to a more moderate level and yesterday's release, we affirmed our full year 2021 planned to deliver and average net production rate of two three bcf.
Net per day from a capital program of $530 to $540 million. We also provided a second quarter 2021 production guidance range of 2.2.
Two five to $2 227 Bcf per day second quarter production guidance implies a slight sequential.
Sequential decline relative to the first quarter, which is a result of lower activity levels and capital spending during the winter season activity levels are expected to increase and the second and third quarter, resulting in sequential growth during the second half of the year, primarily during the fourth quarter and anticipation of higher natural gas.
Prices and the winter and and service.
South expansion project, while we all share the frustration regarding cabot's recent underperformance and I firmly believe our expectation for outsized capital returns this year, which is underpinned by our disciplined capital program, resulting in significant free cash flow expansion.
We'll become more appreciated with time.
And continued execution. However, we remain fully committed to continuing our evaluation of all opportunities to further enhance shareholder value over time and with that Angie I'll be more than happy to open the floor up for questions.
Certainly at this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad.
Pause for just a moment to capacity.
The capacity the Q&A roster.
Your first question comes from the line of Josh Silverstein with Wolfe Research. Your line is open.
Great. Thanks, Good morning, guys.
You guys, probably know where I'm going on with this but then it goes back to your to your last comment there.
The stock has significantly underperformed peers and perform.
On the commodity price.
And I get more aggressive now and look at doing some aggressive buyback now or return on capital profile. Now ahead of what you just outlined and the bullish backdrop for natural gas prices.
And it seems like the stock really starts to get it going outside and gas prices going higher. So just wanted to get some thoughts there and what we've won recently for you guys.
Yes, we don't disagree with Josh the underperformance is is a standout and.
We are disappointed.
With those results.
To your point.
We are looking at.
What I discussed we're looking at the buyback platform.
We're also and.
And our.
And certainly our most recent board meeting we had this week.
We've increased the.
And the dividend.
And.
It's obvious our balance sheet is and is in great shape. So.
Along the lines that you are discussing we are focusing on it and we appreciate your comments and and agree with your comment.
Would you guys be able to.
Are you willing to take on some leverage to go in and do that now knowing that you can hedge out the curve a bit and rebuild the cash flow back up.
Yes.
We've always been stewards of the balance sheet and and.
And with as low as our our leverage is today.
We have we have ample capacity to do.
A number of things that that would be I think constructive.
Got it.
The.
Idea that we laid out was potentially using cabot's premium multiple versus peers to go on making acquisitions and so you guys can.
Probably by assets and.
And the gas markets. These days for three to four <unk> EBITDA that are currently producing free cash flow.
What would be your thoughts around that or whether you might want to and whether you would look outside of the basin to go and do that.
Yes.
And when you look at the M&A space and its and its been Ben.
Had been active of course pandemic put a lull on some of that.
From the standpoint.
How trades might be able to make up.
And with the <unk>.
Difficult volatility and and.
And commodity price along with share prices.
Every company has its own opinion about how they ought to trade and where the entre. So when you talk about the M&A space and and you look at how you put together.
Transaction that can be a win win transaction, it's not easy to find that point and time to be able to to.
And to make it work.
I can assure you that.
Cabot has not.
Done anything in our and our.
We've traded sideways, while there has been significant volatility and our in our.
And our peers stock.
From a way below us to exceeding us and the.
And the say the last six months and it's been a star contrast.
And once you had you had support and the commodity price you got out of the window of concern about overleverage cafes.
And their outcome and their attention to their balance sheet.
The basic plays and the torque and that.
Investment by by investors has.
Carried the day and it's been significant cash.
Cabot with a clean balance sheet and free cash flow for 17 out of 20.
Quarters was that was yesterday and.
And.
And we recognize that.
There is opportunity out there on the market.
We are conscious of it we evaluate it.
We are not sitting on our laurels.
We have discussion and our and our board rain we.
We had.
Discussions and our boardroom this week about this topic in fact, it was the majority of the conversation.
And so.
Sure.
Fully aware.
Kind of where we sit we know the.
The disappointment.
And cabbage.
<unk> share value performance.
It happened to be a large shareholder also.
Hacked off about it.
And I'm not going to set out on my laurels and the team's not and we plan on.
<unk>.
Looking for that best Avenue to enhance shareholder value.
Great. Thanks, Dan and I appreciate the comments there.
You bet.
Your next question comes from the line of Leo Mariani with Keybanc.
Your line is now open.
Thank you.
I was hoping that you could.
Touch a little bit more on <unk>.
Some of the issues with gas basis and Appalachia.
And we sounded from your prepared comments you were spec and you see some improvement as we get into the summer, but you also hinted that there could be a much larger improvement as we approach the leidy south expansion startup.
On December here, because really think that leidy, south can be kind of a game changer and set up for <unk>.
It's much better local pricing and December and into 2022, you, obviously talked a lot about stock performance and it seems as though maybe some of the basis issues here and kind of and what's caused some of the poorest stock price performance.
Yes Leo.
And I agree with your sentiment on on that and I'll turn this over to Jeff and in one second but we.
<unk>.
And.
Excited about new takeaway capacity.
Time and you have.
Greater than a half a bcf a day that's going to.
And now be.
A new debt structure to exit volumes.
Directly out of the basin.
We sell a portion of our gas into.
We think it is going to be constructive on debt.
<unk>, we're very much looking forward.
Two.
Two.
Positive effects and I will turn it over to Jeff of the comments also.
Great Good morning Leo.
Yes, and why do yourself.
A major project.
And we're excited to get it and program for us.
Incremental 250000 per day.
But youre going to have a 30000, a day and some fees from the web.
Over and the more of a cheap and.
Seneca area.
But the basis differential for <unk>.
And a little bit because of the construction process is required to build out that project.
And just a fixed model replacement pipe.
Thanks, Brent to install and this month kind of a one shot and then.
Peter.
Before.
But overall, you've got to keep them on through the Cabot has exposure to local basis, that's rolling on and it's great.
A lot of people.
Believe.
And our Investor day.
It looks like we'll see.
The price for our early flow payable and kind of highlight.
Distribution for our products.
And if you look closely at that our volume.
And if there is over 50% of those volumes with the non net.
From fixed price and then we have about 10% of private power.
And it's roughly 70% and.
We have about 15% or so of our gas volumes.
On the east coast and getting price off of different based on location.
Knock on basin locations and kind of like that.
And then we add our cash piece, which is.
And the difference and local bases for first month sales of roughly 10%.
Really whittle down our basis exposure and local places exposure to roughly 15% and there maybe 18% depending on the.
On a year.
We are disappointed about the money.
The parental blowout and if you will due to a.
Pipeline project and everyone.
Take place, but then again that project offering prohibit and gas one and through the life storage fields from month to month.
And we're going to have a pick up on gas sales per storage and June and the rest of the summer up there and.
Yeah.
And those supplying crude food.
No.
On the other factors that we mentioned our expectations are a strong summer and a strong winter.
Price.
Okay. That's very good color for sure why don't you just move over to returns on capital.
From a second here, obviously, it was really nice to see the bump and the base dividend here. Obviously I think you have a plan to pay off another $100 million on the bond side come September and just wanted to kind of see like and as you guys think about these returns to shareholders and.
Do you want to be and in a position, where we're a little bit closer to having.
And everything ready to pay off these $100 million and bonds before you start to get a little bit more aggressive on some of these other return strategy such as a larger supplemental dividend ordered and maybe kind of start the buyback program.
And then just and.
Additionally, can you just maybe remind us kind of if there is a.
Specific formula in terms of how youre going to pay the supplemental dividend by the end of the year here.
Yes.
Good questions and and.
From our perspective and looking at what we have out in front of us and really.
And just what Jeff was talking about it's paid out very well for us.
And moving moving forward into the rest of the year and into 2022.
And when you look at the expectations on free cash flow generation for.
And for Cabot, and it's going to be.
Fairly robust.
A number and you can look at our history and.
And we have been and.
The last few years fairly generous on.
On and rightfully so.
Jim.
Interest on returning a.
Large portion and much greater than 50% of our free cash flow back to shareholders.
We have and then I'll, let Scott talk about our program.
And and the variable piece on supplemental and.
Right.
The horizon and the.
Picture we're painting.
From.
And demand.
Okay.
The rationalization.
Capital allocated and.
And the basin.
Going to.
We expect.
Favorable pricing so.
And looking at.
And how we would manage the available cash.
Okay.
We're already talking about it and.
Sure.
Shareholders should look forward to what will have out in front of us.
Net.
Scott and I could comment on <unk>, we do think it's teed up very positively.
And as Dan alluded to we have out and generous outsized what that is dividend plan as from a formulaic perspective, as you lay out or commented on.
And recall and we get it.
To the fourth quarter midway through the fourth quarter and identify what that pricing is.
It was going to be below our pricing and early December so we'll have a pretty good idea on a revenue stream for the full year.
And we're not that complicated so we will be able to.
And that's why we targeted and telegraph that December will be the time of the supplemental dividend payment.
And we'll have most of our ducks in a row, obviously December wont be close but 11 of the 12 months will be closed and we will have pricing for the 12 months. So.
That's kind of on.
And and picking up on Josh. This question also again, we will be opportunistic as well.
Sure before I think one thing is we've got the strongest balance if the market were to move against us.
Catastrophic for us.
We're able to.
Weather any storm that can be thrown at us at the same time.
Well and I'll make sure I would I would kind of lead.
And towards the fact that you ship.
Probably expect something in excess of 50% to 50%.
And when you look back at the history as Dan alluded to we far exceeded.
Okay and that's that's helpful color for sure guidance I guess.
And I was trying to get at is just.
Above that 50%, obviously you have the fixed dividend.
Are already in place here. So you guys want to do on the buyback versus just variable dividend. So, let's just make up some numbers if you had.
And $500 million on free cash.
So this year and call it a 170 <unk>.
And the dividend and I guess I believe.
He says buyback as the year progresses as Dan.
Yes.
And so.
Sorry on the free cash flow was $500 million.
And on random and 500 million.
And again, our commitment is $2 50, and then above the $2 50 is.
Yeah.
188 of GAAP, leaving a wedge of about $100 million and depending on market conditions will dictate.
And once we get.
Debt to the $2 50 already delivered and we will look at do we want to deliver more or have we already volume shares earlier in the year, taking debt with the wedge above the $2 50.
$12, we would lean more heavily.
$20 per.
<unk>.
Buy anything back and it would all be delivered and the supplemental cash dividend bucket.
Okay, that's great color. Thanks.
Thank you.
Thanks, Dan.
Your next question comes from the line of Charles Meade with Johnson Rice. Your line is now open.
Good morning, Dan to you and everyone else there and.
Charles.
I really I really appreciated all the comments you made in your prepared remark on the success you had in and mitigating those.
Alright, well effects.
Like you you would succeed.
Initially or from <unk>.
And there may be completely solve that debt issue and then.
And and then the second part of it is.
There was one part that may be missing. So you have just the debt.
And that $2 million.
Just on the 2 million cubic feet a day, but.
Did it cost you those 21 wells.
The change in completion design.
Yes.
Good question, Charles and what we've seen so far no it hasnt.
On cost us anything on our recipe on completion and we.
We have.
And the early results on <unk>.
New wells the early reserves.
<unk> has certainly met our expectation on what we would have anticipated saying and.
And on the.
Basically at now.
No.
Okay.
And.
Anticipate possible just that day.
And and not be.
They are rounding error.
As we move forward so.
Again, yes, we are excited and pleased.
And of our some of the revisions that we had to look at this last year or were resolved.
Of this phenomenon and fair.
Burnt child every every company and industry is dealing with this.
And four wells before pads and 21 wells 33 offsets.
We're getting a database now with the <unk>.
Surgical completion, we have that.
We think we are.
Having a recipe that not only mitigate offset but it also.
Effective completions and.
And the child well also we don't think we are compromising our completion standard.
Got it.
That's helpful detail, Dan and then and then.
The question just to see if I could.
Maybe look ahead a bit.
2022 and the.
And the effects of the cadence from 'twenty one.
It looks like your 'twenty and capital spending plan is it's not going to be exactly say, but it looks similar to your plan and 'twenty and that the peak of spending is it comes in Q2 and there is a low for the year.
Q4, and if you.
You look at the effect of <unk>.
Peer to have on 'twenty one.
Declined sequentially and <unk> and <unk> based on that 20 pattern. So is it fair and for instance, that's what we're going to be looking at in 'twenty two based on the 'twenty, one spending patterns or is that too simplistic.
Well.
And one of things that.
You need debt takeaway Charles and I know you know this you followed Cabot for a long time, but I think it's worth repeating cash.
<unk> is the lowest capital intensity company at their two rigs we have three retro running right now, but we're going to delay one of those rigs and as we've already message and will be between one five and two frac crews so anytime.
We are.
Out there and and it takes so Q.
Wells and pads to be able to maintain our forecast levels of production.
If you, if we drill and eight well pad and and debt pad.
And whether it's for weather or for whatever reasons, if it's delayed.
200 million a day is delayed for a week or 200 million a day delay for a week and say that occurred at the very end of the quarter. We report when we bring those wells on at the end of the quarter as new wells brought on kind of like we did this quarter, bringing on 21 wells, but if that eight well pad comes on in the last week.
The quarter.
It's reflected as a quarter completion, but eight wells coming on at the end of the quarter had and essence very little impact on production and that quarter.
And so youre looking at a week delay is.
And a 200 million.
And a day.
And the pad is one four bcf.
So that is how.
To fine tune and like that it's not always easy.
<unk> for us to cover our cadence are to smooth out our cadence.
And because we don't have 10 rigs running we don't have.
Five or six Frac crews, we don't have that mix of pads, where you can balance out a new pad coming on at various different times were more lumpy just by the nature of being a very.
Low capital intensity company and it's a good news, but when we report and we get granular on the cadence.
Yes.
Yeah, it's kind of hard to.
To use that metric.
With Cabot just simply because.
Just like we're going to see this year and.
<unk>.
And second quarter third quarter, we're going to start bringing on a lot more stages and we have through the.
<unk> first quarter, and we're going to start ramping up so.
And that's.
And I understand where youre going with and I would love to be able to to smooth it out Charles but that's some of what I deal with.
And the frustration I have on <unk>.
And to report on a quarterly basis, and when I read the tie between the number of wells brought on and how inefficient or the lack of production tied to the number of wells brought on I'll look up and say well, maybe we need to put in there exactly when those wells came on and the month to be able to have a better time.
And.
Right.
It's hard to know how much information is too much but I. Appreciate I appreciate your point's well taken and thank you Dan.
Thanks Charles.
Your next question comes from the line of Iran, shower and Ram with Jpmorgan Chase.
Your line is open.
Good morning, Dan.
Quick question.
And the updated messaging does include <unk>.
Sequential production growth and the back half of the year.
Specifically and the fourth quarter as the Leidy South enter service.
I know, it's early but I'm, just wondering about the potential production trajectory and 'twenty two and.
And any thoughts on holding that cost at higher <unk>.
Exit rate flat and thoughts on what kind of capex would that require to keep.
And <unk> flat.
Yes.
You are right. It is a little bit early far disclosing 2022, we are working on 2022 program. We've taken consideration just like we do on our our capital our free cash flow management, how we're going to allocate and what we're going to do.
With that the same holds true with our capital program.
Our 2022, and we're evaluating exactly how hot out of the box, we might want to come and our design of our program, which would which would really answer that question, but it is early in the season.
To lay that out but I appreciate the question.
Okay, and just maybe a follow up to Charles's question I know you addressed this but one of the questions that came in and Dan 80 wells for this year.
21, and so just one other question.
Production and.
<unk> was it going down sequentially.
Maybe that timing.
And the answer that you just gave but maybe a little bit more meat behind the boat Americas.
And maybe it'll be a little bit more.
Flatter and.
Terms of sequential just given the number of tight and lines and <unk>.
Yes.
And again.
The other other element debt that needs to be.
Bob.
Focused on would be.
Not only the timing the number.
But also keep in mind that debt hour.
We're not in a geographically in a perfect squares.
Sectional drilling.
Our units set up to up there are various configurations by nature.
Pennsylvania.
And our lateral lengths number of stages.
And you're tired of well count is not as systematic as it would be if you had.
And what I hope to be able to do and the upper Marcellus.
Which I think is going to be more systematic and the drilling that we now have and the lower Marcellus, where we drill 10000 foot laterals and we will have consistent number of stages and and our clean map and the upper Marcellus, which will gain efficiencies.
That.
For that project in the.
And the unit configurations, and what we drilled and the lower right now as we come back through the field to to fill and the number of frac stages in each well is going to be.
More variable with with our program right now until we get into the upper that effect.
Exactly the cadence and.
And and the type of pads that we bring on.
Along with.
The timing of those pads so.
And I'm trying to I'm trying to answer the question on expectation and some of the variables that go into.
And that expectations.
Sum it up and a different way, we're not concerned about what we're seeing on results of our wells and factual.
And we're more pleased with what we're seeing now on the offset impacts.
That had affected what we had seen in the rearview mirror, a little bit and 2020 latter part of 19 and 2020, when we had more of an and.
And in fact on the parent wells and being able to unload those parent wells and some of the impacts we had with Frac hits on those parent wells and the latter part of 19 and latter part of 'twenty that did affect our forecasting and how we would look at.
The measurement.
The results and and a tieback to the number of wells. We brought on moving forward assuming are resolved stay consistent as we have with our surgical completions. We don't expect now to have that that impact as we bring on completions from from the child well.
<unk>.
We do expect now to get a more immediate impact and uplift and and similar.
Production return.
And to the parent wells after our completion of the child. So we are hoping that we are mitigating.
And that that concern.
Great. Thanks, a lot Dan.
Thank you.
Your next question comes from the line of Omar Challengery.
With Goldman Sachs. Your line is open.
Hi, good morning, and thank you for taking my questions.
Good morning.
I appreciate the comments around differentials improving with the startup of <unk> data and video.
Wanted to calculate as Todd said on local demand and takeaway medium to long term and.
And any projects, which you are working on right now.
Emulate that capture the demand for Cabot.
Yes.
Thank Jeff is the perfect one to answer the question.
Yes, good morning.
And the lifestyle project.
<unk>.
We'll take our production down from northeast VA and through the.
The Washington, DC area now through location called River Road.
Important debt.
And that's a central location volume, both north and south depending on on the season for oil and gas demand and so enhancing our takeaway from from.
Susquehanna County to that area.
Magnitude and 250000 per day.
And a great project for us.
Awesome.
And your thermal project and the work on a year from.
And the recent.
News on regarding and the.
Supreme Court case on and I'm, a domain and then I'm sure you're aware the Transco also now regional energy access, which is a close to a bcf.
They are pipeline and that basically and brownfield projects.
Right of ways.
And that project.
After enrolling and we connected the camera supply.
Area.
And certainly from a spot so we're excited for that project.
And on Oxford pennies.
And as well too on the coming for over the next couple of years.
Great. Thank you so much.
Thank you.
Our final question comes from the line of David <unk> with Cowen Your line is open.
I'm wondering Dan Scott.
Thanks for squeezing me and this morning, yes.
Dan you gave some really good income.
And the surgical completions.
And <unk>.
And you talked about.
If you can replicate those results moving forward.
It mitigates a lot of the concerns that you would have had at least the current channel.
And there's no incremental cost.
I have two questions one.
Could be.
Is there and incremental cost that's just being offset by.
The location and we're replacing these wells and sort of the amortization of previous costs on existing pad.
And then two as.
As you go forward.
You are able to replicate these results does it change how you think about your maintenance program going forward.
Yes.
And would be something where we would see improvements and your capital efficiency metrics.
Well, there's a couple of things and I'll answer the second question.
And on a more heavy repeat the first question. David you were breaking up on me a little bit but.
And we feel good about what we've seen and and our expectation about replication.
The four pads 21 wells.
Again, when we steer our wells on the.
Child drilling.
We know exactly what our landing points are and we're trying to mitigate the impacts also with picking our landing zones on on the parent wells.
And as I've already indicated the variables we are using on the completion. So we do anticipate.
Positive results, we think that is going to.
Certainly.
A metric that will.
Enhance.
Our our program simply by now.
Not having the impact that we saw and latter part of 19 and and some of our wells on 'twenty.
Not only was it difficult to bring some of those wells back on.
And we took.
And revisions on some of those wells and keep in mind some of those wells that we took provisions on.
We think certainly have the ability to come back on it just when we see it we.
We reported as it and see it.
What we do and.
And enhancing some of the wells continue to improve.
Back from.
The Frac impact that we received so we're optimistic going forward, we do think that.
<unk>.
If we look back and look at that as a negative surprise and in 2020, we hope we've mitigated that and 22.
'twenty, one reporting results and David I'm going to have to ask for the repeating the first question.
Thanks, Dan and happy to I'm, sorry for the.
But.
The first question was just you talked earlier that the surgical completions Dan.
And the incremental cost, but I guess in isolation and are they adding cost that's just being offset by savings on existing pads or existing infrastructure that's in place.
Sure.
And let me make sure I understand the question from.
One day.
And the completion design.
It's not adding any incremental cost too.
And what we would have done if we would have completed the last entire lateral in a similar fashion.
Net effective way answers it.
Yeah, and in fact, I would have to I'd have to get filled.
<unk>.
And <unk> kind of to answer the question more directly but.
Might have incremental savings if you would if you had maybe less fluid or less proppant.
And in a particular frac, but I don't think it would be consequential and F on the savings side too.
And to try to dissect it.
And I appreciate it thanks Dan.
Bob and one quickly the Scott.
And maybe it's not quick.
But.
You mentioned you mentioned earlier.
The span of buybacks.
And I know that it was more explicit as it relates to the incremental 50% of excess free cash of buying back more shares and waiting and that more heavily at 15 versus distributing more cash at 20.
And one I just wanted to understand as you think about that that's really a 2021 reality with the free cash debt that's coming forward and.
And then along along those lines.
And you guys are approaching zero net debt.
And the bullet payments that come on this year.
The revolver is pretty clean here and Theres a lot of capacity there so.
Do you think debt do you have a goal of being at zero times.
Or.
Might you lean on that and capacity a bit more.
<unk> shares.
Yes, I'll make a quick comment and turn it to Scott.
<unk>.
And what you're talking about David.
<unk>.
And what a clean balance sheet does for us It gives us all the optionality that you have just defined that we do have flexibility.
I can assure you and this environment that we're not going to zero.
Net debt position.
We have flexibility I know Scott talks.
And that it's Scott, Matt visit about kind of what capacity, we have how we might utilize that to enhance shareholder value and we're going to continue to do that and and.
And we're not we're not so conservative I am not so conservative to where we're going to try to get to net debt and not.
And not utilize the opportunity with this.
Available cash too.
Enhance shareholder value and I'll turn that Scott there is nothing to add.
There's really not I mean at the end of the day, David again, there is no intent to be zero debt.
Even net debt. The plan we have we have nothing maturing next year, we have a $62 million tranche in 2023, and you probably at 6% money you probably pay that off and again, if the cash flow profile space.
But for the remaining $800 million, we'll look to refinance those biggest tranches in 2024 and then there are some other tranche in 2026, so those would there would be.
Hundreds of $1 billion and kind of permanent financing.
In a status quo case in the balance sheet.
But as Dan said, we have lots of flexibility and.
Again, you know we're also more.
And.
We're very judicious with shareholder money, we'd like to tell you. After the fact after we've done it we don't like to get over our skis and make promises that if conditions change.
And it doesn't make sense that we're putting in a defensive posture. So.
And I don't mean to say trust us, but I think we have a good track record of returning and being very disciplined.
But quite honestly I'll be.
And the buyback program of old I could thank Matt and I had this debate I think every share I buy are instructed him to buyback and has been bought at a higher price and we've recently been at so that kind of hits the little bit of a pause button going okay, where does this settle and app because we are and a different dynamic in terms of your initial question.
We had shareholders a year ago again in the thick of COVID-19 and saying, we want all E&P companies to be zero debt, that's not our debt not our path and I think the market is quickly reverted.
As people were able to extend out our maturities and repay debt as Dan said in his script and.
We're on different footing as an industry.
Even with the ESG focused and we were and have been in a very long period of time with discipline and everybody's focused on being judicious and their capital programs, just makes for a better industry and better companies across the board and not just cabinets.
Looking forward on the C&I allows you guys got thank you.
Sure.
Thank you David.
This concludes our question and answer session I would now like to turn the conference back over to Dan Dinges.
Closing remark.
Thank you Angie and great.
Great questions I appreciate.
Investors.
Patients.
And again I mentioned on.
On a shareholder.
My frustration is equally as high as is.
Maybe some years and I can assure you that debt.
And my optimism going into the season.
We're going into and the setup that we have out in front of us.
Significantly better than it has has been and and.
And I'm optimistic that we're going to be able to start enhancing.
And enhancing shareholder value. So thanks again and thank you for the questions look forward to the next visit.
This concludes today's conference call you may now disconnect.