Q2 2021 Ovintiv Inc Earnings Call
Good day, ladies and gentlemen, and thank you for standing by.
Welcome to you of vintage 2021 second quarter results conference call.
As a reminder, today's call is being recorded.
At this time all participants are in a listen only mode.
Following the presentation, we will conduct a question and answer session.
Members of the investment community will have the opportunity.
Attunity to ask questions and can join the queue at any time by pressing star 1.
For members of the media attending in a listen only mode. Today, you may quote statements made by any of the vintage of representatives.
However members of the media, who wish to quote others, who are speaking on today's call. We advise you.
GAAP those individuals directly to obtain their consent.
Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Aventis.
I'd now like to turn the conference call over to Jason Voorhees from Investor Relations. Please go ahead.
Mr of our haste.
Thank you operator, and welcome everyone to our second quarter 'twenty 1 conference call.
This call is being webcast and the slides are available on our website at <unk> Dot com.
Please take note of the advisory regarding forward looking statements at the end of our slides and in our disclosure documents filed on SEDAR and Edgar.
Following prepared remarks will be available to take your specific questions. Please limit your time to 1 question and 1 follow up just the.
Allows us to get to more of your questions today.
I'll now turn the call over to our CEO Doug Suttles.
Thanks, Jason and thanks, everyone for joining us today as you can see from our second quarter.
The results our business is performing very well simply put we are delivering on our promises.
Our very strong performance is clearly seen in our substantial and recurring free cash flow generation.
With almost $900 million of free cash flow through the first half of 2021, we have proven.
Our business is capable of generating quality returns and significant cash flow and free cash flow. This consistent strong performance allows us to directly increase cash returns to our shareholders, while continuing to reduce our debt. We are on track to deliver our $4.5 billion net debt target before year.
We're in a full year ahead of our original timeline.
The achievement of this milestone we will.
Mark almost $3 billion of net debt reduction since the second quarter of 2020 in.
In the same tone, we set of new debt target of $3 billion and increase shareholder returns by raising our dividend.
<unk> of 50%.
With that said none of these tremendous financial achievements would be possible without the operational excellence delivered borrowed by our teams a focus on operational efficiencies and industry, leading cost management is allowing us to more than offset economy wide inflation pressure.
<unk> and continue to deliver industry, leading capital efficiencies. This this is clearly demonstrated by our racing of full year production guidance with no change to our capital budget. Ultimately it is our culture of innovation that is providing a true competitive advantage and driving performance across the business the.
The ability to innovate in real time is unmatched.
We have been through a lot over the past few years and then an old vintage has persevered through at all from a global pandemic to negative oil prices and a freak winter storm. Our team is not only survive, but thrive in the face of adversity, a true Testament to the culture.
Culture, and the strength of what we have built.
Extending on our proven track record 2021 is expected to be our fourth consecutive year of free cash flow generation, we've generated almost $900 million of free cash flow year to date and expect to generate over $1.7 billion on.
The team year basis at current strip pricing.
This substantial free cash flow is driven by our operational performance and our high quality multi basin portfolio as Greg will highlight later our teams culture of innovation is continuing to achieve leading edge efficiencies, allowing us to reaffirm our 1.
On a fully 5 billion capital budget, despite inflationary headlines across the economy, while also raising production guidance.
With our reaffirm capital budget and over 3 point to estimated 2021 cash flow at strip prices, we are achieving of reinvestment ratio of less than 50.
50% substantially below our 75% of investment framework.
These outstanding results allow us to reinforce our commitment to shareholder returns as we return our efficiency gains.
To our investors.
Yesterday, we announced the number of new actions that reflect the sustainability of our business model.
And the tremendous performance of our organization.
First we are increasing our debase dividend by nearly 50%.
This substantial increase reflects the confidence we have in the growing cash flow capacity of our business.
As a reminder, not only did we leave our dividend untouched during the recent downturn.
But this raise marks the second increase since 2019.
We are delivering on our commitment to return cash to our shareholders and we are we see a growing base dividend is an important part of the value proposition for our owners.
Second we have a new set of we have set of new debt target of.
$3 billion to be achieved by year end 2023 over the last year, we've made tremendous progress deleveraging our balance sheet and we are rapidly approaching our $4.5 billion dollar target, which is I know noted earlier, we expect to achieve before year end, which is a full year ahead of our original plan.
We published our 2020 environmental performance and safety performance metrics on our website, marking our 17th consecutive year of sort of sustainability reporting.
We made significant improvements in our ability to measure and manage our ESG metrics and our strong year over year performance demonstrates.
Our focus on driving results across this evolving part of our business.
We are relentlessly focused on delivering consistency transparency and continuous improvement in our environmental and safety report performance and reporting finally, we increased full year crude and condensate.
Third production guidance to 190 to 195000 barrels per day.
This increase is entirely driven by asset outperformance and comes with no additional capital spending as I noted earlier, our capital budget remains unchanged at $1.5 billion as.
As I hand, the reins over to Brendan Mccracken.
So it cannot be more confident and Brendan our executive team the entire organization and the future of our business. It has been an honor and an incredible privilege to lead this great team with that I'll now turn the call over to our Chief Financial Officer, Corey code. Thanks, Doug Q2 as of yet another quarter of strong results.
We're firing on all cylinders and delivering on our promises to drive value creation during.
During the quarter, we reduced our net debt by $1.2 billion.
Resulting in the current net debt balance of $5.2 billion and bringing us within striking distance of our $4.5 billion of year end 2021 net debt target.
We generated substantial.
Stash of total cash flow of $733 million, which was ahead of consensus and as Doug noted, we have been generating significant free cash flow achieving $350 million in the second quarter and almost $900 million so far in 2021.
Our capital spend totaled $383 million in the quarter as.
As Greg will highlight.
Carl we have seen inflationary attention on certain items, but are more than offsetting these pressures with operational efficiencies, leaving our original full year capital guidance untouched.
Finally, I want to highlight our strong production performance during the quarter, we achieved 201000 barrels a day of crude and condensate despite closing on our Eagle Ford and do for any assets.
Later on those in the quarter. Additionally, I think it's worth highlighting our balanced commodity mix, we have substantial exposure to multiple revenue streams and we produced over 1.6 Bcf a day of natural gas and 86000 barrels a day of Ngls during the quarter, our multi basin and multi product production profile generates.
That's a flow from multiple sources and provides us with robust market optionality.
As evident by our new $3 billion net debt target.
Net reduction remains our top priority the combination of free cash flow and asset sale proceeds will see us drop our net debt by almost $3 billion from midyear.
Cash flow and a 22 year end 2021.
Not only does debt reduction drive costs out of the business. It also improves our resiliency during periods of market volatility.
In June we redeemed the $600 million of our 2022 senior notes and in July we provided notice to redeem $518 million of our.
<unk> 21 senior notes August 16th the redemptions represent over $1.1 billion of long term debt repayments and will generate more than $50 million of year of annualized interest expense savings.
Soon our next debt maturity will be July of 2024.
Our business is in a very strong position financially.
<unk> committed to preserving the strength, we have an attractive balance of free cash flow generation quality corporate returns on a track record of returning cash to shareholders. This model stands to be differentiated by the market on the road ahead I will now turn the call over to Greg Givens, Our Chief operating officer, who will discuss our operational results.
Thanks Corey.
The teams continue to deliver industry, leading well costs and strong operational performance across the board.
Wrapping up the first half of the year drilling and completion costs for the core assets remained below guidance reaffirming our confidence in hitting the $1.5 billion full year capital budget.
These costs were approximately <unk> 11.
11% lower than our 2020 program average.
We achieved these costs. Despite the continued increase in inflationary pressure during the quarter.
Driven by the global economic recovery and rising commodity prices, we're seeing an increase in demand for raw materials, leading the higher diesel and steel costs.
Also like most other industries, we're starting.
Some of the impact global inflation is having on the labor market.
That being said our teams are operating more efficiently than ever before our.
Our ability to continue setting the bar higher operationally is more than offsetting today's inflationary pressure.
In addition through strategic contract structuring local sourcing and improved logistics we have.
Starting to the cost of sand and water.
During the quarter, we achieved numerous new pacesetter performances, we drilled 6 of our fastest wells to date in the Montney and completed our entire stack program using simultaneous.
We are accomplishing new milestones across our portfolio and across all operational disciplines.
These pacesetter.
Of lowered her accomplished through our unique culture that fosters innovation and cross functional learning.
In fact, many of today's average cost drill times and completion efficiency metrics. We're pacesetter performance is less than a year ago.
Slide 8 is a great example of how this culture of innovation has transformed our Permian program.
Compared to just 2 years ago, we have made significant strides in every aspect of our operations.
Driven by Wellbore design optimization, new bottom hole Assembly technology, and a laser focus on flat or idle time reduction are second quarter rig released wells on the Permian averaged over 12000 feet of lateral length and nearly 2000 feet.
Of drilling per day, this is over 30% longer than 15% faster in 2019.
On the completions front in basin wet sand has provided a reliable source for <unk> operations and has driven down sand cost by 40%.
With faster well tie ins and resource will savings through equipment.
Redeployment or Permian facilities team has driven down cycle times and reduce facilities cost by $180000 per well since 2019.
This evolution has been powered by innovative thinking and collaboration and has a strong competitive advantage.
But we are never satisfied we're performing where performance currently stands.
And are constantly pushing the envelope to get faster more efficient and ultimately cheaper.
We also wanted to provide an update on the outstanding results from our Bakken program and the operational advancements we have made in the basin.
Not only of lower drilling and completion costs by 14% since 2019.
But we are now efficiently delivering a more reliable wellbore configuration capable of handling our unique high rate high intensity completion design the.
The 3 wells, we brought online in the second quarter have shown exceptionally strong early time performance, averaging 235 barrels of oil per day through the first 60 days of production. We're currently projecting.
Sales to pay out in less than 6 months.
When you combine our high quality acreage position the basins of oil leverage in today's pricing environment, we are delivering portfolio of leading returns on our Bakken program.
This asset will generate substantial free cash flow for us in 2021, and we plan on continuing to operate a rig in the basin.
For the remainder of the year.
Yeah.
As noted earlier, we are raising our 2021 production guidance for the same $1.5 billion capital budget.
Our team's relentless work to optimize our base production profile and unlock additional resource through a thoughtful development program have driven outstanding results.
These were only on a world class multi based on net asset portfolio is continuing to deliver advantaged operations was over 200000 barrels of crude and condensate ATC.
<unk> 86000 barrels per day of high value Ngls and over 1.6 bcf of gas per day during produced during the second quarter, we have exposure to multiple cash flow stream.
<unk> that enable us to maximize returns.
I would now like to turn the call over to Brendan Mccracken, our president and incoming CEO. Thanks, Greg we're focused on generating free cash flow of delivering quality returns were powered by our unique culture of innovation teamwork and discipline and we relentlessly innovate to.
Additionally, in every part of our business and today's results show, we have the key components to deliver differentiated returns to our shareholders.
We're committed to maintaining capital discipline and delivering significant free cash flow.
Our 2021 capital is unchanged and we are highly confident in our ability to more than offset.
Driving cost inflation for the rest of the year.
Our low level program is also highly repeatable as we look ahead to 2022.
We remain committed to returning cash to our shareholders. We see today's 50% dividend increase is an important step in delivering what we believe will be of regular sustaining.
Stably growing return of cash to our owners.
Our stakeholders expect continuous improvement on ESG and enhanced disclosure from our sector and our company and we are delivering on this challenge.
We look for efficiency in everything we do and our entire team is relentless bone innovating to make our business better.
This is of.
The key part of our culture and it is incredibly powerful because every person on our company plays a part.
We see this as a competitive advantage and it's a big part of the reason we are confident we can continue to deliver on our priorities.
Finally, we are of the size scale and portfolio necessary to succeed on the road ahead.
Our multi basin of Optionality commodity diversification and deep drilling inventory offer multiple pathways to deliver the best corporate outcomes and drive quality returns.
Before we move to the Q&A I'd like to take this opportunity to thank Doug for his tremendous leadership.
Leadership over the last 8 years.
His leadership will have the legacy impact on our company that will serve us well for many years to come I feel fortunate to have had 8 years working very closely with 1 of the great leaders of our industry.
And I wish him all of the best in his retirement.
This concludes our prepared remarks.
Operator, we're now prepared to take questions.
Ladies and gentlemen, as a reminder, you can join the queue to ask the question by pressing Star..1 we will now begin the question and answer session. Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.
Good morning, Doug Congratulations Brandon.
Congratulations to you as well if you take on this new role.
Thanks Neil.
So that's probably a good place to start Brendan as you have had some time here to think through strategic.
The strategic priorities as the new CEO of the business.
What do you see as the 2 or 3 most.
Can the focus areas for you should.
Should we view this as stay the course or are there areas of focus that that you think are needed as we enter at a different phase of the commodity cycle.
Yes, thanks Neil.
As you know I've been deeply involved in setting the <unk>.
Strategy and direction of the company for some time and so today our strategy and priorities are unchanged. We are laser focused on delivering free cash flow and quality returns.
You see that today in the of the new debt target and the increase of cash returns to our shareholders.
Also our business is performing very well and we've been accelerating on those targets and adding to them and so I feel quite confident in the direction that we're headed in and the ability for the company to perform.
Yes.
That's the follow up is how should we think about excess free cash flow of deployment beyond.
On the base dividend and the debt reduction specifically any thoughts around share repurchase.
Repurchases given that you guys are trading at 1 of the highest free cash flow yields in the industry right now.
Yes Neil.
Since last year, we've been laser focused on debt reduction and so you've seen us.
Perform there and accelerate the target forward and so today, what we've done is reset that debt target of 3 billion, but also introduce increased cash returns to our shareholders and so obviously as we accelerate towards that $3 billion target. We've got all of the options on the table on and will be considered.
He knows the as we go forward.
Your next question comes from Iran, J, Iran with J P. Morgan Chase. Please go ahead.
Good morning, Doug and Brendan.
I do have a follow up to that you guys have outlined.
$1.5 billion.
Consider net reduction from the end of the year 3 of the end of 'twenty 3 kind of using of $52.75 deck now if you assume strip Brendan.
Cumulative free cash flow.
In 'twenty, 2 and 'twenty 3 would be $3.7 billion.
Which would provide $2.2 billion.
Dollars of incremental free cash flow beyond that $1.5 billion deleveraging targets. So again I'd love to hear your thoughts on how youre thinking about cash return beyond the dividend cause certainly seems you can walk and chew gum hair width of <unk>.
20% type of free cash flow yield.
Yes.
Of new appreciate the confidence you're expressing there and you're quite right. We've given the new debt target out of $50 to 75 deck and clearly as as the business continues to drive efficiency.
And prices could be it could be higher through that period, we would accelerate that and that's fantastic that's of great outcome.
<unk> like I said the options on the table as we get there, but I think you should expect our discipline on capital to continue we've not changed our capital guidance for 2021.
And we don't see the macro conditions that would change that thinking in the world today, there's still a lot of excess global capacity.
Rune and of course, many parts of the world there are still deals.
<unk> with the pandemic.
We'll certainly be thinking about those options as we get closer to achieving that target.
Okay fair enough.
Brendan the recent theme in the industry has been kind of the continued transfer of assets from price.
The publics I wanted to get your thoughts on.
The company's A&D strategy, and how youre thinking about.
Your current.
Inventory depth, and just broadly about kind of industry consolidation.
Yeah, Ryan we've been very deliberate about creating the.
That's to folio of that we have today.
Many of the transactions that you reference.
Have been aimed at creating the advantages that we've already got in the company.
So really our emphasis today is on delivering on the priorities that we've laid out.
Generating free cash flow and delivering quality returns and you.
You can see that interactions today.
Your next question comes from Josh Josh Silverstein with Wolfe Research. Please go ahead.
Yeah. Thanks, Good morning, guys I was going to touch on the same thing.
And you can certainly look at additional return of capital, but the free cash flow profile.
Profile, but how would you think about the use of cash in terms of.
The acquisition purposes, just for bolt ons and whatnot next year.
Well I think Josh the the answer's the same as we as we get towards that we've got options on the table.
What we've laid out is the pathway.
<unk> achieved net debt target and increase our cash returns to shareholders.
I think as Greg outlined we've continued to be able to drive efficiency gains everywhere we operate.
Teams had great success in coring up our acreage through cashless swaps and trades and we really like that increases.
The returns were generating and adds premium inventory lets us drill longer laterals.
And so I expect we'd continue to look for ways to do that going forward.
Got it and then.
No mention of of volume growth and the forward outlook as well.
But I imagine that could also be of use of proceeds.
The weighted is from from free cash flow getting redeployed can you just talk about how you would think about volume growth and 65 environment relative to the the $50 of $2.75 environment that you've outlined here.
Yes, Josh I mean, certainly that's an option as well, but today, we don't see the macro conditions that we would.
So our thinking.
I said, there is still excess global capacity today, and many parts of the world still dealing with the pandemic. So these are these are things we're watching closely but you should expect us to continue to be very disciplined with capital going forward.
Your next question comes from Brian.
<unk> with Citigroup. Please go ahead.
Good morning, Thanks for taking my questions, maybe starting on the Capex front could you give us an update on the efficiency versus inflation you use that you had highlighted from last quarter I'm curious any second half puts and takes this year as it seems your well costs and pay set of results to date.
Down here pretty favorably with guidance, how thats shaping up versus any inflationary trends youre seeing to the rest of the year on whether we should still expect ratable spend for the remaining 2 quarters.
Yeah, Brian I mean.
Like you and the rest of US we see inflationary pressure on our everyday lives.
And it's showing up in a few spots on our business.
Moving to come to the highlighted really in places like the tangible goods in diesel.
Starting to be there and the labor piece as well, but really our focus for a long time has been on driving efficiencies.
To offset that inflation and you can see that on the results were more than offsetting the inflation we've seen.
And it's great and we're confident that we're going to continue to do that maybe I'll ask Greg to just talk on a couple of of the highlights of how the team is doing that.
Yeah. Thanks Brendan.
As we've said, we're seeing some inflation on the steel side, but our supply management team is very sophisticated and they're being proactive and getting out ahead.
Seen today the pipe ahead of our program, which is allowing us to lock in reasonable cost of 1 of the other ways. We're pushing back on that is as we highlighted not only in the Permian, but in other areas of the field steel is of major input component to our facilities.
So we're reusing a lot of our existing equipment tying.
And new wells to existing facilities that allows us to actually reduce our facilities costs and avoid some of that inflationary pressure.
We're also working really hard as we always have on reducing cycle times.
Days in this business or dollars and so the faster we can drill and complete our wells the fewer days, we have on location the less cost we.
And purchased from our vendors, but also on the Frac side simultaneously by completing the well in half of the days, you're using quite a bit less diesel and it allows you to to avoid some of the inflationary pressures. So while we're seeing the pressure we feel very confident that we will continue to be able to offset that and deliver on our targets from the second half of them.
Brian I'd just add that.
Greg highlighted the impacted Simon fracs been having on our business and how we're now.
In some places all of the program or <unk> 90 per cent of the program is using that technology for us, but I think what's important to know here is that it's not just implementing.
We incur some of Frac and stop there. The teams have continued to find ways to make Sima frac itself better and you can see we've put some incremental disclosure in our appendix deck, where you see things like in the Montney. We're now delivering pump times of 22 hours a day, just by making that some of Frac technology better as we go.
Great and then maybe just given the new debt target any any updated or different thoughts on how youre approaching hedging it looks like based on your your hedges in place for 2022, you're further along on the natural gas side than oil.
Any different thoughts there as you continue to delever the balance sheet.
Yeah, maybe.
Couple of things there, Brian So really is a refresh of the rationale for our hedging is to ensure we can deliver on our strategic priorities and manage balance sheet risk that's why we hedge.
And so what you can see as of characteristic in our 'twenty 2 book.
Is the focus on 3 way structures.
Just a couple of give us protection to manage those priorities and the rest of the balance sheet, but also exposure to the upside is as prices improve and maybe the last thing I'd say there is as we continue to reduce debt.
We will adjust the the amount of hedging we do in the last.
Is that couple of years, we've had really robust hedge books to ensure we could deliver on those strategic priorities and clearly as we do that we book to reduce the size of that hedge book going forward.
Your next question comes from Jeffrey Lambert Zone, with Tudor Pickering, Holt <unk> Company. Please go ahead.
Good morning, Thanks for taking my questions on my first 1 is just at the asset level for the Montney can you remind us what the landscape looks like there in terms of access to gas capacity over the next several years of just speak to the production profile and potential of that assets, specifically and then I've got a follow up on some of the discussion from earlier.
Yeah.
Jeff.
We're in great shape, there the infrastructure expansions that we undertook several years ago.
Set us well up in the play and so we've got full access to market with our production and you can see that in the performance.
Great and then from my follow up and sorry to tack on here.
But just wanted to make sure we're thinking about it appropriately as it relates to the 'twenty 2 just given the the increase in baseline capacity at OPEC and the uncertainty on the demand recovery just given things like the Delta variant plus of priorities. You've continued to highlight on debt reduction on return of cash to shareholders would maintenance production be a good placeholder for 2022 at this.
Point in time based on those conditions, you're seeing in that you've highlighted.
Well I think sitting here in July it's still a bit early to set expectations for the 2022 budget.
We will make sure we communicate that on as we go through the year, but.
Like I said book continue to emphasize capital discipline.
Here again, I'm very clear about what the strategic priorities that we have on.
Your next question comes from Greg Pardy with RBC capital markets. Please go ahead.
Thanks very much.
The good on the last name.
Sales of things so.
Yeah.
First off Doug gasoline.
The Butcher Greg.
Anyway, we'll just let that 1 go but wasn't Doug all the very best in your retirement I can't believe 8 years is gone by so fast and congrats again on Brendan.
Brendan on the on the new role.
Look a lot of great questions the only thing.
I'd kind of ask.
As you know you you've got the the big 3 and then you've got the circa 25000 BOE a day sitting out there with Bakken and some of the other noncore assets.
I mean today.
I'm, assuming that's really about harvesting free cash flow at the states do they eventually move out of the portfolio No rush happy to have.
And then there how should we sort of think about the minority in the portfolio.
Yes, Thanks, Greg.
Lee.
You said, we've been very deliberate about creating the portfolio that we have today the Bakken plays an important role there.
Free cash generating asset high margin oil rich and as Greg highlighted.
<unk> some of the same efficiency gains that we've been delivering elsewhere in the portfolio. We're now bringing to bear on the Bakken and seen great results. Both on the cost reduction side, but also on the well performance side, where we're seeing really strong well performance there and so.
Well its small its mighty and we like.
How it fits into our strategy.
<unk> going forward. So I think you should expect us.
To continue on with the portfolio we have today.
Okay terrific and then.
You've kind of answered it around.
Really driving towards sustaining capital so in the environment. We're in you are continuing to advance efficiency.
Strategy mentioning you're offsetting inflation. So is is kind of maintaining and sustaining at around 1 billion of half or so is that what the thinking is internally or do you think you can actually continue to take that sustaining capital number down.
Well I think Greg this is something that we work on all the time.
Gains in.
The approach that we're taking today is the efficiency gains are flowing to the investor and we like that model and that's how it will be continue to run the business going forward.
Your next question comes from Nitin Kumar with Wells Fargo. Please go ahead.
Hi.
Good morning, and first of all congrats Doug on the retirement and Brendan on the new role.
I Wonder if the dollar a shot at 2022 here.
The 1 thing I noticed is your.
And you mentioned that Youre tracking all of the below your planned D&C per foot numbers in the Anadarko and the Montney.
Alright.
Does that change the thinking on returns for 2022 on capital allocation between the Permian and other basins.
Yes, thanks, Nick.
I think really at this point the the point to put out there is we're really.
Pleased with how the business is performing and we just need to watch how the macro head of games.
Themed towards 2022.
And it's great to have options.
The.
Okay.
Then.
I noticed you've hedged quite of bit of fair gas, but youre just starting to work on the oil side.
Syed.
Some additions on as you mentioned on the callers.
Should we expect the company to hedge more.
In line with prior years on the oil side as well as the year progresses for 'twenty 'twenty 2.
We will evaluate that net and as we go I think my comments earlier around is the.
As the debt comes down our head need the hedge to deliver on those strategic priorities shifts. So I think look to us for further guidance on that as we go through the year.
Your next question comes from Neal Dingmann with tourists Securities. Please go ahead.
Manuel Congrats again.
The question is kind of interest I noticed the couldnt help but notice that now on the latest presentation of the Bakken.
You did of digging into that nobody is just behind the Permian on the latest slide deck, obviously, Greg also walk through just some of those key highlights the certainly are noticeable.
Versus I don't think it was highlighted at nearly.
As much on the the depth of about a year ago. So I'm just wondering the old now consider the second highest sort of priority in the portfolio and maybe a question for Gregg what he would consider sort of the most dramatic changes of that play in the last 12 months.
Yes, Neil I wouldn't read anything into the flight orders there, but the.
I think what Youre seeing is.
When we took the operational pause in 2020, we didn't have a lot of activity in the Bakken program and so coming into this year. We've now resumed activity in that play and just really pleased with the results that we're seeing in reporting out on that.
I don't know, Greg if you wanted to address.
The second year to date.
Yes, Neal I think the thing to keep in mind is we really like the returns from all of our assets we've been.
Most recent times focusing on the course reach but we've always liked the Bakken. We just took the pause as Brendan noted.
And really of now that we're getting back to it we're just catching.
<unk> up to where we've been on our other basins using some of the same technologies and what I think it really proves is that our operational philosophy works across multiple basins at not only the.
Transformed what we had in the Permian done great things in the Anadarko and I expect it to do good things in the Bakken as well so it just gives us confidence of our.
Philosophy, and how well the teams can perform when they're given the opportunity.
No. It makes total sense from total and then just 1 follow up I'm just wondering given.
Then kind of pulled out quite a bit today you guys. Even mentioned given to me what appears to be just the.
Really the certainty of your future free cash flow and a couple.
All of that with the low cost of your current debt I guess, the natural question why not pay out maybe more of shareholder return nearer term versus continuing to pay down that debt.
Yeah Neal this is.
Remember of long term piece of it we've been working on this is now the fourth consecutive year of.
Operating cash generation. So this is not new for us.
And like Doug highlighted in his comments the increase of the shareholder returns is not new for us either. So this is clearly something were going to look to do going forward.
Your next.
<unk> comes from Doug Leggate with Bank of America. Please.
Free.
Hey, good morning, everyone. Thanks for getting the on Doug we're passing the torch here as well so congratulations on the Brendan look forward to chatting with you again soon.
I guess I wanted to buy from 1 of the very most of questions on free cash flow yield than it was of jobs, obviously, the 1 of the.
Go ahead.
The sector it seems to us as a function of market per section of the portfolio of sustainability. So when you talk about the maintenance capital.
Follow on question is you have up for how long. So I'm just wondering if you could give us a quick refresh is still moving inventory that occur.
The.
All the assets, including the Bakken.
Okay.
Yeah, Doug this is something we spend a lot of time thinking about and and you know we've got great inventory depth across the portfolio, we have a decade of inventory across the core assets and so on.
Across the highlighted before of how the teams.
Continue to build on that through coring up our acreage in each of the basins we operate in.
So specific to the Bakken Brendan.
Oh, yeah in the Bakken really the Bakken and for US of course is the smaller asset scale relative to the core.
Core and it doesn't have as much inventory, but still has quite a number of years of go forward inventory.
At the levels, we're investing into it today.
Okay.
Follow up then is I guess is tenable.
<unk> for the debt paydown visibility of the free cash flow and so on.
And if you're in the kind of a maintenance more than the balance sheet has got pretty good trajectory.
And part of the toll on your philosophy on hedging.
If you're not protecting.
Capital programs, so to speak on the balance sheet in better shape, what is the thinking on how you navigate hedging from holding I'll leave it there. Thank you.
Yeah, Doug we're very clear the hedging program is to manage balance sheet risk and ensure we can deliver on our strategic priorities. So to your point directionally as the balance sheet improves.
The hedging program can be smaller.
Your next question comes from it.
Cool. Thank you with Santee research. Please go ahead.
Good morning, everybody on the Doug the older.
From the future of Brendan Thanks for taking the question can.
Can you outline the the investment case for events of here because.
I think 1 of my questions is how you think about the cost of debt.
And.
The cost of that relative to the cost of equity just insofar as.
Debt is so cheap now I was wondering why you're not pursuing a more aggressive cash Fritz on strategy given the amount of free cash flow.
You are generating and Brian could you roll that into.
Really what is it.
Sizing of that Vince if I'm trying to sell the company.
To 2 of new investing what is your competitive advantage, what's great about of Vince If I can go out there and so you've got to buy the stock.
Yeah. Thank you cool I mean, we've been really clear about this sort of strategy is to deliver significant free cash generation.
<unk> quality returns and.
We're backing that up with return of cash to shareholders highlighted by today of 50% increase to our dividend and so I think that's that's the answer to your question.
The the dividend is still very low right I mean, I caught the account to have people buy it with the whatever it is 2% yield is is it going to be the growth.
It's going to be the really exciting thing.
You know I think.
Really call the piece of the highlight on here is the the efficiency gains that we're delivering in the business are flowing through to our investors and so.
Today's dividend increases the step on increasing that cash returned to shareholders.
From the dividend and then could you just address the issue of the how you see the cost of the the cost of debt versus the price of the equity.
Is it is it really a great idea to be paying down debt because interest rates of just so low I figure that maybe you might be tempted to run with us at the higher debt level and the higher cash return.
You know of.
We've been.
Laser focused on this debt reduction piece for over a year now and it's had an incredible impact of our equity performance and we see that continuing to translate going forward.
Your next question comes from Noel Parks with Tuohy Brothers. Please go ahead.
Okay.
Okay.
I'm sorry on later.
Are you from.
Hi, good morning.
Good morning.
Wondering if you could talk a little of it about your thoughts on the NGL market share.
Just what year.
The sort of assuming the scenarios of hours, we as we head into the end of the year.
Well no I mean, we've seen a robust NGL market through the year here, we produce 80000 barrels a day of NGL sorts of significant part of our production mix and great to have that.
The exposure so it's it's definitely helping increase cash flow and part of the reason we're on track to deliver over $1.7 billion of free cash this year.
Great and Rick.
Regarding the the ESG disclosures that the that you've updated.
Curious about the the methane emissions intensity.
Significant year over year improvement, there and considering sort of of the different vintage of your various plays and basins. I was just curious do you have.
Of particular region. That's the that is more of a focus.
Because from improvement going forward or is the the way forward relatively similar across them.
It's happening across the portfolio we've seen.
Big gains as we've been enhancing our leak detection.
Reducing our flaring bent.
Volumes and so those are having a direct effect on our results and you see not in our 2020 performance and I would just tell you that's continued across the portfolio of this year.
At this time, we have completed the question answer session.
And well now turn the conference back over to Mr. Hayes.
Yes.
Thank you operator, and thank you everyone for joining us today and for your continued interest in our company Our conference call is now complete.
Okay.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a great.
The.