Q4 2021 Hess Corp Earnings Call
Good day, ladies and gentlemen, and welcome to the fourth quarter 2021, Hess Corporation Conference call. My name is Josh and I will be your operator for today at this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If at any time you require operator assistance. Please.
Press Star followed by zero, and we will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.
I'd now like to turn the conference over to Jay Wilson, Vice President of Investor Relations. Please proceed.
Thank you Josh good morning, everyone and thank you for participating in our fourth quarter earnings Conference call.
Our earnings release was issued this morning and appears on our website www Dot Hess Dot com.
Today's conference call contains projections and other forward looking statements within the meaning of the federal Securities laws.
These statements are subject to known risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements.
These risks include those set forth in the risk factor section I'll pass this annual and quarterly reports filed with the SEC.
Also on today's conference call, we may discuss certain non-GAAP financial measures a reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website.
On the call with me today are John Hess, Chief Executive Officer, Greg Hill, Chief Operating Officer, and John Reilly, Chief Financial Officer.
In case of any audio issues, we will be posting transcripts of each speaker's prepared remarks on www Dot has dot com following the presentation.
Now I'll turn the call over to John Hess.
Yeah.
Thank you Jay Good morning, welcome to our fourth quarter Conference call I Hope all of you and your families are well and staying healthy today I will review our continued progress in executing our strategy and provide a look at the year ahead, then Greg Hill will discuss our operations and John Riley.
I'll cover our financial results.
2022 marks an inflection point in the execution of our strategy as.
As we go from investment mode to return of capital mode, while still being able to invest to grow our business. Our strategy has been and continues to be to deliver a high return resource growth deliver a low cost to supply and deliver industry, leading cash flow growth while at the same time maintained our industry.
Leadership in environmental social and governance.
Disclosure.
In terms of resource growth, we have been disciplined in allocating capital to the best rocks for the best returns and have built a differentiated portfolio focused on the Bakken deepwater Gulf of Mexico, Southeast Asia, and Guyana with its multiple phases of low cost oil developments, we expect all four of these assets to be.
Free cash flow generative in 2022.
In terms of the low cost of supply because of the investments we are making our cash costs by 2026 are forecast to decline.
Approximately 25% to $9 per barrel of oil equivalent versus 2020 one.
And our portfolio breakeven is positioned to be one of the lowest in the industry 20, twenty-six decreasing to $45 per barrel Brent.
In terms of cash flow growth, we have an industry leading rate of change in durability story, we are positioned to grow our cash flow at a compound rate of 25% per year out to 2026 based upon a brent price of $65 per barrel and any business that can grow its cash flow at twice the rate.
Of its top line is a business you want to have in your investment portfolio.
Our company has been in the investment mode for the last several years building our portfolio to where it can deliver durable cash flow growth.
<unk> Phase II project, which is on track for first oil this quarter, well add $1 billion of net operating cash flow annually at $65 Brent.
Following project startup.
Planned to repay the remaining $500 million term loan.
And to increase our base dividend.
As our portfolio becomes increasingly free cash flow positive in the coming years, our top priority will be both to grow the base dividend and also accelerate our share repurchases.
Key to our strategy as Guyana, the industry's largest new oil province discovered in the last decade, which is positioned to be one of the highest margin lowest carbon intensity oil developments globally. According to a study by wood Mackenzie the.
The World will need these low cost high value resources to meet growing energy demands, particularly given the underinvestment by our industry in recent years.
The International Energy Agency's latest world energy outlook provides multiple scenarios for addressing the dual challenge.
Of growing global energy supply by about 20% over the next 20 years and reaching net zero emissions by 2050.
And all of the IEA scenarios oil and gas will be needed for decades to come and significantly more investment will be required much more than renewables and much more in the oil and gas a reasonable estimate for global oil and gas investment from these I E scenarios is approximately 450 billion.
Each year over the next 10 years.
In 2020 that number was $300 billion last.
Last year's investment was $340 billion, so while investors in oil and gas companies need to remain capital disciplined we also need to invest more in oil and gas and we are currently to ensure an affordable just and secure energy transition.
Turning to our plans for the year ahead, our 2022 capital and exploratory budget is $2.6 billion of which approximately 80% will be allocated to Guyana and the Bakken.
On the Stabroek block in Guyana, where Hess has a 30% interest and Exxonmobil is the operator, we continue to see the potential for at least six floating production storage and offloading vessels or F. P. S. O's and 2027 with a production capacity of more than 1 million gross barrels of oil per day and up to 10 F. P. S.
I used to develop the discovered resources on the block are three sanctioned oil developments on the block have a brent breakeven oil price of between 25 and $35 per barrel.
In terms of our Guyana oil developments production capacity at the Liza Phase one development is expected to increase to more than 140000 gross barrels of oil per day following production optimization work.
The Liza phase two development is on track for start up this quarter with a gross production capacity of approximately 220000 barrels of oil per day.
Our third development on the Stabroek block at the pie or a field is on track for production startup in 'twenty 'twenty. Four also with gross capacity of approximately 220000 barrels of oil per day.
The yellow tailed development has world class economics, and will be the largest to date on the stabroek block developing nearly 1 billion barrels of oil with a gross production capacity of approximately 250000 barrels of oil per day.
Yellow tail project continues to make progress has the full support of the government of Guyana, which is finalizing its third party review and remains on track for production start up in 2025.
We will continue to invest in an active exploration and appraisal program in Guyana in 2022 with approximately 12 wells planned for the Stabroek block.
Earlier this month, we announced two more significant discoveries on the block at the fine tooth and Lala wells with these discoveries the gross discovered recoverable resource estimate for the block is more than 10 billion barrels of oil equivalent and we continue to see multibillion barrels of future exploration potential remaining.
POS at Roosevelt said fine tooth, our first standalone deep exploration prospect confirm the deeper exploration potential of the block.
Both discoveries further underpin our Q, a future low cost oil development opportunities.
In the Bakken, we plan to operate a three rig program in 'twenty, 'twenty, two which will enable us to generate significant free cash flow lower our unit cash cost and further optimize our infrastructure.
Greg and our Bakken team to continue to do an outstanding job of applying lean manufacturing principles to keep driving down costs and building a culture of innovation and efficiency.
We will also continue to invest in our operated cash engines offshore in the Gulf of Mexico, We will drill the Huron number one exploration well and also a tie back well at the Llano field.
And in Southeast Asia, we will invest in drilling and facilities some of which was previously deferred due to COVID-19 and low commodity prices.
We are proud of our workforce for living <unk> values by working safely and delivering strong operating results, especially during the pandemic.
As we continue to execute our strategy our commitment to sustainability will remain a top priority our board and senior leadership have set aggressive five year targets for greenhouse gas emissions reduction for 2020 five most recently, we endorsed the world Bank's zero routine flaring by 2030 initiative and have.
Set a target to eliminate routine flaring from our operations by the end of 2025.
We are honored to have been recognized throughout 2021 as an industry leader in our environmental social and governance performance and disclosure.
In December we achieved leadership status in Cdp's annual global climate analysis for the 13th consecutive gear.
And in November earned a place on the Dow Jones sustainability Index for North America for the 12th consecutive year.
In summary, 2022 marks an inflection point in the execution of our strategy, we have built a differentiated portfolio offering a unique value proposition.
Delivering durable cash flow growth that'll enables us to continue to invest in some of the highest return projects in the industry and also to start growing our cash returns to our shareholders I will now turn the call over to Greg for an operational update.
Yeah.
Thanks, John too.
2021 was another year of strong operating performance and strategic execution for Hess.
Starting with reserves proved reserves at the end of 2021 .
Good at 1.3 billion barrels of oil equivalent.
Net proved reserve additions in 2021 totaled 348 million barrels of oil equivalent including positive net price revisions of 107 million barrels of oil equivalent resulting in an overall 2021 production replacement ratio of 295.
Per cent and a finding and development cost of approximately $5.25 per barrel of oil equivalent now turning to production.
In the fourth quarter and full year 2021.
Company wide net production averaged 295000 barrels of oil equivalent per day, excluding Libya in line with our guidance.
For the full year 2022 .
We forecast net production to increase by 12% to 15% and average between 330000 and 340000 barrels of oil equivalent per day, excluding Libya.
For the first quarter of 2022, we forecast net production to average between 275002 hundred 85000 barrels of oil equivalent per day, excluding Libya.
This forecast reflects the impact of severe weather in the Bakken remedial maintenance work at the bold patent Penn State field in the Gulf of Mexico, and planned downtime on the Liza Destiny <unk> P. S O for production optimization work.
Company wide net production is forecast to significantly increase over the course of the year driven both by Guyana, and the Bakken with the fourth quarter expected to average between 360000 and 370000 barrels of oil equivalent per day.
In the Bakken.
Both fourth quarter and full year 2021, net production were in line with our guidance, averaging 159000, and 156000 barrels of oil equivalent per day, respectively.
We have a robust inventory of approximately 2100 drilling locations in the Bakken.
It can generate attractive returns at $60 W. T I, representing approximately 70 rig years of activity in.
In 2022 .
We plan to operate three rigs and expect to drill approximately 90 gross operated wells and bring approximately 85, new wells online.
In the first quarter of 2022.
We plan to drill approximately 22 wells and bring 10, new wells online.
For the balance of the year, we expect to bring online an average of 25 wells per quarter.
In 2021, our drilling and completion costs per Bakken well averaged $5.8 million.
Which was $400000 or 6% lower in 2020.
In 2022 we expect to fully offset anticipated inflation through lean manufacturing and technology, driven efficiency gains and therefore D&C costs are expected to be flat with last year at approximately $5.8 million per well.
For the full year 2022.
We forecast Bakken net production to average between 165000 and 170000 barrels of oil equivalent per day, a 69% increase over 2021 .
First quarter net production is forecast to average between 155000 and 160000 barrels of oil equivalent per day.
Beginning in the second quarter, we expect to benefit from the addition of a third rig, which we added last September and improving weather conditions.
Net production net Bakken production is forecast to steadily ramp over the course of 2022 and to average between 175000 and 180000 barrels of oil equivalent per day in the fourth quarter.
Moving to the offshore.
In the deepwater Gulf of Mexico.
Net production averaged 39000 barrels of oil equivalent per day in the fourth quarter and 45000 barrels of oil equivalent per day for the full year 2021 in line with our guidance.
The deepwater Gulf of Mexico remains an important cash engine for the company as well as a platform for growth.
In 2022, we will resume drilling operations after a two year hiatus.
With one tie back well planned at the shell operated Llano field and one exploration well planned at the Hess operated Kiran prospect on Green Canyon Block 69.
Over the last five years, we have focused our efforts on getting best in class imaging across our acreage position in northern Green Canyon.
Where we believe there is high potential for multiple high return hub class Miocene opportunities here.
Iran is the first of these opportunities which attracted interest from multiple parties during the farm out process.
We expect to spud here on in the first quarter with <unk>, having a 40% working interest as operator and shell and Chevron at 30% each.
As part of our agreements with shell and Chevron. We've also accessed additional Miocene prospect prospects across Green Canyon and are excited about further potential in the play.
In February shell plans to spud, the Llanos six development, well in which Hess has a 50% working interest.
The well will be tied back to shell's auger platform with gross production from the well expected to build to a plateau rate of between 10015 thousand barrels of oil equivalent per day by the end of this year.
For the full year 2022, we forecast net production in the Gulf of Mexico to average approximately 35000 barrels of oil equivalent per day.
First quarter net production is forecast to average between 30030 5000 barrels of oil equivalent per day.
In Southeast Asia net.
Net production from the joint development area in North Malay Basin, where Hess has a 50% interest.
Average 66000 barrels of oil equivalent per day in the fourth quarter and 61000 barrels of oil equivalent per day for the full year 2021 in line with our guidance.
For the full year 2022, we forecast net production in southeast Asia to average approximately 65000 barrels of oil equivalent per day in the first quarter, we forecast net production to average between 60060 5000 barrels of oil equivalent per day.
Turning to Guyana.
Where hess has a 30% interest in this neighborhood Buck and Exxonmobil is the operator, we have continued or extraordinary run of exploration success and increased our estimate of gross discovered recoverable resources to more than 10 billion barrels of oil equivalent.
Net production from Guyana averaged 31000 barrels of oil per day in the fourth quarter of 'twenty one.
And 30000 barrels of oil per day for the full year 2021 in line with our guidance.
For the full year 2022, we forecast net production in Guyana to average between 65070 thousand barrels of oil per day.
In the first quarter, we forecast net production from our Guyana to average between 25030 thousand barrels of oil per day.
Reflecting planned downtime on the Liza Destiny for production optimization as previously mentioned.
And net production in the fourth quarter will increase to between 85090 thousand barrels of oil per day.
Earlier this month, we announced significant discoveries on the Stabroek block and thank tooth and Lal Lal.
Positive results had fangtooth, our first standalone deep exploration prospect help confirm the deeper exploration potential of the Stabroek block.
In the coming months, we will complete the analysis of the exploration well results appraisal activities will then be conducted to determine the optimum development approach and timing.
Low L. Further underpins our Q, a future low cost development opportunities in the southeastern portion of the Stabroek block.
This discovery will also require appraisal to determine the ultimate development approach and timing.
We continue to see multibillion barrels of exploration potential on the Stabroek block.
And in 2022 we plan to drill approximately 12 exploration and appraisal wells that will target a variety of prospects and play types.
These will include lower risk wells near existing discoveries.
Higher risk step outs, and several penetrations that will test deeper lower campaigning and St toning intervals.
Exploration wells planned for the first quarter of 2022 include Barreleye one.
Located approximately 20 miles south east of Liza.
The primary target is lower campaigning with shallower and deeper secondary targets the well spud on December 30th.
Tarpon, one which is located approximately 63 miles northwest of Liza will target lower campaigning plastics, let's say deeper Jurassic carbonate the well will spud following completion of Fangtooth operations.
Patois, one is nearer turbot area discoveries the wells approximately three miles northwest of the cat. It back one discovery with targets in upper Cretaceous clastic reservoirs.
This wells anticipated to spud in March.
<unk> one is in the southeastern part of the Staples block located approximately two miles west of Puma.
And as anticipated to spud in March.
The primary target is much stricter in age clastic reservoirs with secondary objectives in lower campaigning reservoirs.
The appraisal program in 2022 we'll be focused on delineating future developments.
First quarter appraisal activities will include the tilapia two appraisal well located.
Located approximately 24 miles southeast of Liza one.
The well will appraise the February 2019, tilapia, one discovery in the turbot area.
It is anticipated to spud in March. In addition, we plan to conduct drill stem tests at tilapia, one and pink tail one.
Turning now to our Guyana developments development activity. This year will include drilling for both the Liza Phase two Empire projects initial development drilling activities will also begin for the yellow till project following approval of the field development plan by the government.
A planned turnaround will be conducted in March on the Liza Destiny <unk> P. S O.
Work activities will include production optimization work designed to increase the vessels production capacity.
At Liza phase two the Liza Unity F. P. S. O vessel is undergoing final hookup and commissioning after arriving in Guyanese waters in October 2021 .
Unity is on track to start production in the first quarter of 2022 with a capacity of approximately 220000 gross barrels of oil per day.
With regard or a third development of pie are the overall project is 66% complete surf activities are progressing ahead of plan and we are preparing for a 2022 installation campaign.
The whole for the prosperity of P. S. O vessel is complete and top site construction activities are ongoing in Singapore for planned production startup in 2024.
The field development plan, an environmental impact assessment for the fourth potential project yellow tail had been submitted for government and regulatory review.
The government is supportive of the project and start up remains on track for 2025.
We look forward to continuing to work with the government of Guyana, and our partners to realize the extraordinary potential of this world class project.
Moving to Suriname.
Planning is underway for our second exploration well on block 42 at the Xander Ray one prospect targeting in the San Antonia and D play potential.
The operator shell has indicated they that they expect to drill the well around mid year.
We see the acreage as a potential play extension from the stable block with similar play types and trap styles.
Shell Chevron and has each have a one third working interest in block 42.
In closing our execution continues to be strong the startup of Liza phase two and steadily increasing production in the Bakken are expected to drive an approximate 30% increase in net production between the first quarter and fourth quarter of 2022, along with a significant increase.
And operating cash flow.
Which will underpin our commitment to increase cash returns to shareholders I will now turn the call over to John Reilly.
Thanks, Greg in my remarks today, I will compare results from the fourth quarter of 2021 to the third quarter of 2021 and provide guidance for 2022.
Turning to results, we had net income of $265 million in the fourth quarter of 2021, compared with $115 million in the third quarter of 2021.
On an adjusted basis third quarter net income was $86 million, which excludes an after tax gain of $29 million from the sale of our interest in Denmark.
Turning to E&P.
E&P had net income of $309 million in the fourth quarter of 2021, compared with adjusted net income of $149 million in the third quarter. The changes in the after tax components of adjusted E&P results between the fourth and third quarter, whereas follows.
Higher sales volumes increased earnings by $158 million higher realized selling prices increased earnings by $103 million higher DD&A expense decreased earnings by $44 million higher midstream tariff expense decreased earnings by $22 million higher cash.
<unk> cost decreased earnings by $21 million higher exploration expenses decreased earnings by $10 million. All other items decreased earnings by $4 million for an overall increase in fourth quarter earnings of $160 million.
For the fourth quarter, our E&P sales volumes were over lifted compared with production by approximately 690000 barrels which increased after tax income by approximately $17 million.
Turning to midstream.
The midstream segment had net income of $74 million in the fourth quarter of 2021, compared with $61 million in the prior quarter.
Midstream EBITDA before non controlling interests amounted to $246 million in the fourth quarter of 2021, compared with $203 million in the previous quarter.
Turning to our financial position at quarter end, excluding midstream cash and cash equivalents were $2.71 billion in total liquidity was $6 $3 billion, including available committed credit facilities, while debt and finance lease obligations totaled $6.1 billion.
In the fourth quarter net cash provided by operating activities before changes in working capital was $886 million compared with $631 million in the third quarter, primarily due to higher realized selling prices and sales volumes in.
In the fourth quarter net cash provided by operating activities. After changes in operating assets and liabilities was $899 million compared with $615 million in the third quarter.
In October we received net proceeds of $108 million from the public offering of 4.3 million Hess own class a shares of Hess midstream.
In January 2022, we paid a crude Libyan income taxes and royalties of approximately $470 million related to operations for the period December 2020 through November 2021.
Post the start up of the Liza phase two development, we intend to pay off the remaining $500 million on our term loan and increase our dividend.
With our strong cash and liquidity positions at our industry, leading cash flow growth, we are well positioned to significantly improve our credit metrics and increase cash returns to shareholders in the coming years, we remain committed to returning the majority of our increasing free cash flow to shareholders through further dividend increases and share repurchases.
Now turning to guidance first for E&P.
We project E&P cash costs, excluding Libya to be in the range of $13 50 to $14 per barrel of oil equivalent for the first quarter, reflecting the impact of lower companywide production and higher initial per unit costs for Liza phase two during its production ramp following first oil cash.
Cash costs, excluding Libya for the full year 2022 are expected to be in the range of $11 50 to $12 50 per barrel of oil equivalent as the low cost Guyana production reduces our unit cash costs in the second half of the year as Liza phase two reaches capacity.
<unk> expense, excluding Libya is forecast to be in the range of $11 50 to $12 per barrel of oil equivalent for the first quarter and $11 50 to $12 50 per barrel of oil equivalent for the full year.
This results in projected total E&P unit operating costs, excluding Libya to be in the range of 25 to $26 per barrel of oil equivalent for the first quarter and 23 to $25 per barrel of oil equivalent for the full year 2022.
Exploration expenses, excluding dry hole costs are expected to be in the range of $40 million to $45 million in the first quarter and $170 million to $180 million for the full year.
The midstream tariff is projected to be in the range of $285 million to $295 million for the first quarter and $1 billion $190 million to $1.215 billion for the full year 2022.
E&P income tax expense, excluding Libya is expected to be in the range of $40 million to $45 million for the first quarter and $300 million to $310 million for the full year 2022.
For calendar year 2022, we have purchased W. T. I callers for 90000 barrels of oil per day with an average monthly floor price of $60 per barrel and an average monthly ceiling price of $100 per barrel.
We also have entered into Brent collars for 60000 barrels of oil per day with an average monthly floor price of $65 per barrel and an average monthly ceiling price of $105 per barrel.
We expect non cash option premium amortization, which will be reflected in our realized selling prices to reduce our results by approximately $55 million per quarter or approximately $225 million for the full year 2022.
In the first quarter, we expect to have three lifting from Guyana with two lift coming from the Liza Destiny and our first lift from the Liza unity expect it to occur at the end of March in the second quarter, we expect a total of five lifting.
After the Liza unity reaches full production, which is currently projected for the third quarter of this year, we expect to have eight lifting per quarter in Guyana from these two F. P. S OS.
For the full year 2022, we expect 24 lifting in Guyana.
Our E&P capital and exploratory expenditures are expected to be approximately $650 million in the first quarter and approximately $2 $6 billion for the full year 2022.
For midstream, we anticipate net income attributable to Hess from the midstream segment to be in the range of 65 million to $70 million for the first quarter and $275 million to $285 million for the full year 2022.
For corporate corporate expenses are estimated to be in the range of $35 million to $40 million for the first quarter and $120 million to $130 million for the full year.
Interest expense is estimated to be in the range of $90 million to $95 million for the first quarter and $350 million to $360 million for the full year 2022.
This concludes my remarks, we'll be happy to answer any questions I will now turn the call over to the operator.
Thank you as a reminder, ladies and gentlemen, if you have a question. Please press star followed by one on your phone. If your question has been answered or you would like to withdraw your question Chris town.
Questions will be taken in the order received.
Please press star one to begin.
Your first question comes from the line of Jeanine Wai with Barclays.
Hi, good morning, everyone. Thanks for taking good morning.
Good morning, My first question is on cash return.
How are you thinking about the trajectory.
Dan.
In the past you've commented that the majority of our shareholders.
But I need to be higher than the us.
Any more color on what your target is on that.
For the buybacks you've been pretty clear that the base dividend is the first priority, but as the catalyst for more meaningful share repurchases is that really coming online in 'twenty.
But you can maybe initiate them.
Yeah.
This level and then accelerate them.
Janine Thank you.
In terms of a return of capital framework, you know once a liza phase two is up and producing oil we will pay off the $500 million remaining on our term loan and will start to increase our base dividend.
At that time, we'll also communicate our return of capital framework.
Not just where we want to take the dividend, but also how we plan on returning our free cash flow as a reminder, as you said earlier, we've been consistent in saying that our cash flow compounding.
As it does we intend to return the majority of our free cash flow to our shareholders by further increasing our dividend and also accelerating share repurchases and in terms of the dividend itself. The base dividend as our cash flow grows we plan to have a dividend that will have a meaningful premium to the S.
And P 500 dividend yield.
Okay, great. Thank you for that color second question, maybe for John Reilly, It's on Libya, and just maybe a housekeeping clarification thing.
<unk> indicated that in January .
Okay.
Royalties.
Million.
And that was related to operations from last year can you just provide a little bit of color on this.
If anything more or we can expect for the rest of it.
Sure Janine basically you know, we had tax and royalties related to our production on the wahoo concessions and these taxes and royalties were held by Hess and our other Wahaha partners after receiving instructions from the living authorities to withhold payment.
Then just recently the authorities instructed us to make those payments. So we did release it has at our partners released those taxes and royalties and paid during January as it was mentioned in the release and I mentioned earlier.
Discussion going forward. This is just normal taxes and royalties related to our production. It's typically paid monthly we expect it to be paid monthly here in 2022. So that's what I would I would say the go forward is and just you know I mean, all of those things are just normal taxes and royalties. They were all accrued all in earnings all in cash.
Hello from operations during during 2021 and as a reminder, jeanine.
You know our total our recently announced the sale of our interests.
In Libya to boats hotel and Conoco Phillips and we are still awaiting final approval from the government on that sale.
Great. Thank you.
Thank you.
Thank you. Your next question comes from Arun Jairam with JP Morgan.
Yeah. Good morning, John for you as you you talked about adopting a formal.
Capital allocation returns framework kind of near term and I was wondering if you could give us maybe some insights on how youre thinking about this.
Some of your E&P peers have a very formulaic approach.
To this well some of your major peers are a little bit more flexible. So I was wondering if you could maybe give us a little bit of thoughts on how are you involved in the board are thinking about that.
Yeah, no. It's a great question, Yeah, we will be coming out with a framework that will be pretty clear.
How we allocate capital, but also how we intend and how much we intend of our free cash flow to return it will have some flexibility in it but it will be very clear of our commitment to return the majority of our free cash flow to our shareholders by further increasing the dividend and you all will have our first.
The dividend once Liza phase two is up and running and producing oil, but then we will intend as our cash flow compounds are the majority of that free cash flow will go back to our shareholders by further increasing the dividend and also accelerating the share repurchases I think the return of capital framework when we announce it.
We will be clear and help provide clarity to the question Youre asking.
Great and just my follow up is on Guyana.
Greg you mentioned.
That are.
The yellow tail a project could.
Could include resources of 1 billion barrels I was wondering if you could kind of compare how this development looks like relative to <unk> I think the subsea kit a bit more.
Bigger of an F. P. S. So so maybe gives us some thoughts on how this could look like and then as well as maybe provide some insights on the objectives of the 2022.
Exploration program and gain it looks like you are maybe targeting some more elephants.
But I wanted to get some thoughts on those two questions.
Sure. So let me let me take your second question first to ruin so as I mentioned in my opening opening remarks, the objectives of the of the program. This year are two fold like they always have been the first one being to explore for new opportunities. So that includes.
Things in the upper campaigning, but also more penetrations in the in the deeper zones section that we saw as staying tooth right.
And so if you look at the 12 wells that we're going to do this year about two thirds of those wells or exploration wells and about one third is appraisal wells so pretty active this year on the on the exploration side and again, we're going to be testing deeper zones and also shallower zones.
With that exploration program and I kind of lined out that the first quarter in my opening remarks as to where we're where we're headed with that.
And then appraisal of courses is about appraising.
The existing discoveries so that we can figure out what that development queue is.
You know for the play out of the vessels you know the up to 10 F. P. S owes that we've talked about.
Now if I get back to your question on yellow tail. So first of all you know the yellow tailed developments world class economics will be the largest.
Date on the Stabroek block, it's as you mentioned, it's going to develop nearly 1 billion barrels of oil have a gross.
Capacity of 250000 barrels a day, so it's got a little bit bigger top sides.
And it's also got more wells, So Pi Ara has 41 wells, whereas yellow tail will have 51 wells.
So it's just a bigger project very large areal extent very fantastic reservoir. So it's going to be it's going to be one of the again the world class economics.
Yeah. Some of the highest returns are in the oil industry and comparing it to shale are comparing it to offshore developments and just gonna have a breakeven cost that will be lower than <unk>.
Great. Thanks, a lot gents.
Thank you. Your next question comes from Doug Leggate with Bank of America.
Thanks, Good morning, everybody I don't know if its too happy new year happy new year everybody.
The new year as well.
So John or Greg I'm, not sure who wants to take this but I want to ask a portfolio question given touched on the Libya news earlier.
You have a very very large footprint in the Gulf of Mexico, obviously, you've taken advantage of lease runs when no one else cared and so on.
When I look at play Ara yellow too.
Adding.
Essentially five times the current production in the Gulf of Mexico, I got to ask if.
The Gulf of Mexico is a keeper longer term for the portfolio given the effort.
Has to be put into maintaining that production and so on so.
Long term thoughts on whether the golf stays in the portfolio.
Yeah, Greg.
Yeah, sorry, It took me a second to get off on mute so Doug.
As we talked before you know the Gulf of Mexico remains an important cash engine and platform for growth for house, we have top quartile capability in both deepwater drilling and project delivery in the Gulf.
And so our objective is maintain that cash hub sustained production and cash flow generation through both tie backs and also selectively pursuing these high return hub glass exploration opportunities hopefully here on would be the first cab off the rank there.
And as you as you said, we've been selected you believe rebuilding our Gulf of Mexico portfolio.
Acquired more than 60 lease blocks it at really low prices.
And that's again that balance of high return tie back opportunities in a glass prospects. It remains a very important.
Province for has good returns in the Gulf of Mexico, and as I mentioned, we do have the capability to execute well there. So it's it's a core hold for us.
Okay, that's very clear I appreciate the answer.
Follow up is actually a balance sheet question. So its probably John Reilly question.
John I'm, just curious when you think about the scale of the free cash flow that you're going to be able to generate you still carry in absolute terms, a sizable amount of debt what do you see as the right level of debt where does the priority sits in the cash return framework to actually bring that debt down to let's say.
<unk> sector, leading levels like some of your peers, they're talking about zero net debt for example.
Sure Doug.
And as you know right once we start up Liza phase two we are going to pay off the remaining $500 million of that term loan then our next maturity because we've got a nice liquidity position isn't until 'twenty 'twenty four and it's $300 million. We do intend as you said with our rising free cash flow to pay off that maturity in 2020.
Four and then we don't have a really another debt maturity until 2027. So we're we're happy when we pay off that 2024 about what the absolute level of debt that we have and if we let me just say it like $65 Brent.
We run this out we bring pie are on and obviously other F. P. S. O's, we're going to drive our leverage down to under one times debt to EBITDAX. That's gross debt to EBITDAX. So we're going to have really a strong low leverage position improving credit metrics as I mentioned earlier, so where we are happy with.
That you know that level that absolute debt level as our EBIT tax grows from there.
And so there's no real benefit we've run N P vs on doing some things with the.
Either just doing.
Paying off the debt at this point, but right now with our low leverage we are very comfortable with leaving the debt levels, where they're at and then like we said with that balance sheet. So strong at that point and the rising free cash flow from pi or from yellow tail from the fifth development. We will then increase returns to shareholders obviously.
The rising free cash more of that free cash flow return versus will be share repurchases, but we'll also be growing our dividend over the time too as well. So I think we're in a really good position for this with Guyana coming on in these low cost development strong balance sheet and in an increasing return of capital to shareholders.
Great I appreciate the answer again.
Thank you. Your next question comes from Neil Mehta with Goldman Sachs.
Good morning team.
Couple of questions morning, Neil Good morning, John .
First one is around Liza two.
We're weeks away here from start up how do you think about any gating issues around the startup and just can you give a sense from an operational standpoint, how is it going around construction.
At <unk> as well.
So just any thoughts around the logistics.
These assets turned on.
Yeah, Greg please.
Yeah sure. So let me just talk about the phase III first so you know we will have 19 wells available at startup those are all ready to go.
All the risers had been recovered.
So they're they're hooked up into their porches now we've got a few left to commission. So we've got still got some commissioning of those razors. The F. P. S. O top site readiness is nearly complete so.
Neal what that means is we are on track for that that first quarter.
Startup is as we said in our opening remarks.
If you look at Pi aura.
Again, it's still relatively early in the project, but right now we're running slightly ahead of schedule in Pi R. S. So I would say we're firmly on track for that 2024 startup. So the project is about 66% complete.
We sit here today. So we're in we're in good shape, but again, it's early days Empire. So I think the operator, having some contingency in there is wise at this point, but on track for 2024 startup.
Thanks, Greg and then the follow up here is for John and John on that on the hedging strategy. Here. So you did provide an update around around the collars and and increase the ceiling price. There just talk about how you think about the optimal way to protecting is and John If you. If you don't mind tying that into your own view of the oil.
Macro is you've been constructive here, we're nearing 90, Brent is anything changing for the better for worse relative to what you've talked about over the last couple of months.
Sure Neal I'll start and then hand, it over to John Hess, but our hedging strategy. It really is consistent what we're doing with our past strategy. So as we continue to invest in our world class opportunity in Guyana, we wanted to ensure that we have significant price protection, which we did in 2022, so just to reiterate.
We have 90000 barrels of oil per day with W. T. I puts at a floor of $60 and then we have 60000 barrels a day of Brent puts at a floor of $65. Now this year, we didn't use high ceiling calls. So we have a call. It 100 for the W. T I and 105 per for Brent to reduce the cost of the program.
While retaining exposure basically to greater than $2 billion in additional cash flow in the case of higher oil prices above the hedged floor. So in addition to having hedged all of our oil production and obviously, we have unhedged NGL and gas production as well that will benefit from higher prices. So when I say this is consistent with our strategy we provide.
Significant downside protection, while also given the majority of upside to our shareholders as we continue to invest the opportunity in Guyana, Yes, Neil and obviously it does reflect a constructive view on the market and very consistent with our approach of protecting the downside and giving the majority of the upside to our shareholders on the Max.
Crow oil outlook on.
On the demand side V shaped recovery, a temporary setback of about a million barrels a day globally because of all micron and starting to see cases going down. Thank God. We think we'll be back at pre Covid, a global demand levels of 100 million barrels a day.
In the next month or so and as the year unfolds are we see a jet demand increasing as international travel increases and probably see a number of about 102 million barrels a day.
By the end of 2022, a supply shock side different it's a U shape recovery more sticky.
Shale is growing but at a more tempered pace function of the rig count of about 604 U S rigs operating we think that adds about 750000 barrels a day over the year of increased oil production I remember U S. A production.
Probably end up at the end of the year about a 12.2 million barrels a day, that's still short of the 13 million barrels a day, we had pre COVID-19 . So shelves on the recovery, but not a pre COVID-19 levels in terms of absolute U S oil production OPEC.
It sounds like they're going to stick to their 400000 barrels a day increases each month.
As has been written by a number of commentators a couple of countries are not meeting their quotas. There. So again I'd say disciplined tempered recovery on OPEC plus disciplined tempered recovery in shale all of which adds up to global oil inventories which had been.
A year and a half ago April 1.200 billion excess inventories globally, that's all been eaten up.
And now we see global oil inventories about 200 million barrels less than pre COVID-19 levels. So as you go through this year with demand increasing our inventories.
Inventories tight not much spare capacity in OPEC, plus we're pretty constructive on the oil market and really the oil prices, giving a signal of that investment has to increase which is why I referred to the world energy outlook earlier.
Depending upon what scenario you pick any credible scenario from the international Energy agency more investment is going to be needed to grow oil and gas supply to meet global oil and gas demand and currently we're not investing enough as an industry to do that.
So we're gonna have to have the right balance of being capital discipline, and returning capital to shareholders, but at the same time.
So the resource and grow the production capacity of the world. So that's the challenge that we have ahead and I think that also really presents a constructive oil market as the year unfolds. Thanks.
Thanks, Ken.
Thank you.
Thank you. Your next question comes from Paul Cheng with Scotiabank. You May proceed with your question.
Hey, guys good morning.
I guess two questions.
Yes.
One for Greg and the other one useful John and Bonnie.
Great.
When youre looking at the Frac, two and theater.
That you also have penetrated the difference.
If I may.
Is there anything you can tell us that.
In terms of the oil and gas ratio.
As of September 30 oil quality comparing to the more shallow formation is is there any significant differences that we see or any kind of conclusion that you can say.
Yes.
So so Paul.
I guess the first thing I'd say is you know the positive result of think tooth, which you know.
Was there first standalone deep exploration prospect and remember its up towards Lisa So it's kind of in that country. So very good oil quality and it confirms the deeper exploration potential of the stabroek block. So in the coming months, we're going to complete the analysis of that well, but think tooth well and then plan appraisal.
Activities, you know to really determine the best development approach. So generally we see these deeper zones is being developed through a combination of standalone developments and tie backs potentially two existing at P. S. O. So very encouraged very pleased by the results.
We saw at Fang tooth also remember we had other penetrations prior to thing teeth into those deeper zones that confirmed the same thing good reservoir quality and good.
Good fluid properties. So very excited that's why we're going to drill a lot more wells in kind of the deeper.
Prospectively this year than in years past and so well watch this space, but we're encouraged by the outcome in particular the thing too.
Well, we understand that yes, good but is there any.
Contrast, all comparison you can pull why are you in terms of the gas oil ratio.
The degree of the oil and September 30th Yetnikoff data that you can say.
No not at this point because again, we need to do some more analysis of the wells induce more appraisal.
Particularly in the thank yous area Yep.
Yes.
Second question is for Joe anybody that.
By the fourth quarter as you indicate that your unit costs going to come down a lot because gyn, though.
These are two years went to their full capacity handle that so what's the pulse had unit cost that you have by the fourth quarter.
And also that.
So that have you looked at I know you guys talking about next year that you may start the buyback, but have you bits that between the variable dividend and the buyback and that.
The pluses and minuses that and that's happening and that's why you decided that oh dividend, it's not a bet the tube and then.
Slide back just a y to for the company.
Not saying that.
You should keep up with it but I'm just curious to how you intend to debate that that has been the case.
Sure. So let me, let me start with with cash costs. So.
Through the year.
As I said and you mentioned, yeah, our unit costs will be dropping basically as Guyana phase two comes online and it's lower cost. Let me just remind you where the costs are for Guyana on phase one obviously, it's a smaller boat and what we've been saying is that the cash cost per barrel. There were $12. However, you did hear us.
Mentioned that we're doing the production optimization work so that one 'twenty gross capacity is going up so the cash cost per barrel for phase one will be decreasing as as that production optimization is completed on phase two the cash cost per barrel or $10 per barrel for phase two when it is fully up and <unk>.
I also should mention that both of these as when we're leasing the F. P. S. O. So phase II will actually dropped down to seven to $8 post purchase of the S. P. S L. But for this year around 10. So you have cash costs for phase two at 10, and you've got a phase one under $12 and what it does along with increasing pro.
Duction in the Bakken is by the fourth quarter, our cash cost will drop to around $11 per barrel for the company in the fourth quarter.
And then I'll pass it over to John Yeah, Paul.
Is some excellent.
Oh is that you Paul.
Yes, yes.
Okay, Yeah, no we were getting some feedback.
In terms of the dividend you.
You know we've done studies, we don't think are the variable dividend.
The creation of long term value, we believe strengthening the base dividend in a consistent share repurchases are a better way to go.
And in terms of the timing on that as I said.
Once Liza phase two is up and producing a we'd pay the $500 million of our remaining Ah that off from our term loan a we will increase our base dividend. We will start the process of that increase and then as you look forward in time.
Further dividend increases and accelerating share repurchases will be a function of market conditions and the growth in our cash flow. So are the framework for that are will be very clear.
And I think something that will be very competitive.
Okay.
Thank you John I don't know they can I go back into your.
When you're talking about the time the unit cost.
I'm wondering what is the timeline in terms of when you consider them, we decided to buy back the P S O or that.
I mean, Paul both NESA. One then he said too and secondly that when you're talking about those number 12 thrown up a phase one.
$10 for phase two.
Are those that the.
What is the denominator on that that base on.
<unk> phase two 220000 barrel per day, but your actual reported in your peninsula segment would be different what that this is what you expect to report.
Financial statement.
Okay. So answering your last question first yes, that's what will be reported in our financial statements. So that's our if you want to call it or our net cash costs on our entitlement production in Guyana, So that those are those numbers.
And as far as the F. P. S O purchases. The operator Exxonmobil is still in discussions with SPN on the actual date of the purchases of the F. P. S O.
And we will give you the specific timing of that when that is set but having said that.
As you noted we're not 2022 Capex released we don't expect any purchases in 2022 or in 2023.
Thank you.
Youre welcome.
Thank you. Your next question comes from David <unk> with Cowen.
Yeah.
Thanks, John and thank you guys for squeezing me in here I'll try to make it quick.
I had one question just on the reserve report.
Like your net additions organically at the drill bit like $241 million.
You noted in the press release were primarily from the Bakken.
Is that just reflective reflecting increased gas capture or have there been some performance revisions there as well.
Johnno there had been.
Go ahead go ahead, Greg you go you go first yeah. So look it there there were both performance additions in the Bakken plus you know we brought in additional wells into our five year plan.
Due to price increase which was 107, but then the other wells, bringing in so if you look at the Bakken.
We had adds of about $209 million and then the price of about 119 million specifically to the Bakken right. So both performance ads and also bring in additional wells into the five year plan.
Great. Thanks, Craig.
The color on that Gregg and then maybe for John just my last question just around.
You've laid out the timeline for paying down the $500 million term loan noted. The fact that you don't really have that many maturities.
Beyond as I guess, the free cash profile ramps here you talked about getting sub one times leverage we have on their number is that a run rate.
Sort of in that <unk> timeframe.
Should we be thinking about investment grade sort of coinciding sort of with mid year and how do you think about the tangible benefits from that outside of the obvious of refinancing some of that higher cost debt stack.
So again with our growing free cash flow and obviously, our growing cash flow and our growing free cash flow our debt metrics are going to significantly improve as and basically it is each F. PSL comes on and like I said, we are targeting to be on a gross debt to EBITDAX under one and we will achieve.
That as that as the cash flow growth now I can't specifically say you know what the rating agencies on timing. Obviously, we are investment grade with two of them and we're below on one but have a positive outlook with the one so I do expect as our cash flow improves that will become investment grade and actually will improve from where we are.
Our today as our cash flow grows so what we tried to do from our own strategy standpoint is we want to have a strong balance sheet, obviously to fund the growing resource base that we have and also for further return to shareholders. So from our standpoint that will be the outcome of our strategy of having a low leverage.
<unk> liquidity position, which you mentioned as well.
And then as each F. P. S. O comes on it will just continue to improve and improve our credit metrics as well as still providing increasing cash returns to shareholders. So the portfolio is set to be in a nice spot as John has mentioned earlier, there's kind of the inflection year and we will expect to grow on it from here.
I appreciate the answers guys.
Thank you.
Thank you. Our next question comes from Ryan Todd with Piper Sandler.
Great. Thanks, maybe just a couple of quick ones.
No.
Do you think about the medium term outlook on the Bakken I know you've talked about eventually wanting to get back to a four rig program.
And a production plateau of closer to 200000 barrels a day.
How much impact is.
Price of oil have on the timing of adding a fourth rig is that something that would be possible by the end of this year if prices stay high or is that further down the line.
Go ahead Greg.
Yeah again, you know.
Ryan I think as we've talked before you know the role of the Bakken and the portfolio is to be a cash engine. So.
Any decisions on pace or timing.
As a fourth rig is going to depend upon corporate cash flow needs and also returns.
Now having said that.
Assuming prices hold at this.
Relatively high level.
We would look to add that fourth rig next year and by doing so we could then take the Bakken to 200000 barrels a day.
And with the inventory we have at four rigs, we could hold that flat.
It broadly that 200000 barrels a day for almost a decade I'm with that fourth rig now add 200000 barrels a day, we really maximize the utilization of the infrastructure.
So that would be another objective did fill that infrastructure up and of course, you know gosh with these prices as you know the Bakken becomes you know there's massive cash generator and at that 200000 barrels a day, even at $60 to $65. It generates about $1 billion re cash flow. So you can see the real cash.
Firepower of the Bakken.
Yeah.
Thanks, Greg and then maybe I.
The comments on in constant place in an in well costs in the Bakken earlier.
As you think about the rest of the portfolio any comments on what Youre seeing in terms of service through material contemplation in an offshore environment, particularly as we think about upcoming potential.
Potential project sanctions.
Greg Please.
Yeah sure. So you know like the onshore we're also seeing some inflation in the offshore.
However, recall the majority of our offshore portfolio right now is driven by Guyana and.
And of course the projects currently in development are covered by EPC contracts that were largely insulated.
From cost increases in the in the offshore where current cost increases in the offshore plus you know exxonmobil with this design one build many strategy is just doing an outstanding job.
Of delivering efficiencies across that portfolio down there.
Well, if you look at our or in the Gulf of Mexico.
The rig that's going to drill the heron well.
$255000 a day to day rates, so I think that still reflects.
The low cost on a relative basis of the offshore drilling.
Thanks for all the help.
Thank you. Your next question comes from Bob Brackett with Bernstein Research.
Good morning, all had a question around <unk> and I'm going to try to tie a date and a percent completion, so im not incorrect.
Pyro was sanctioned maybe five quarters ago first production is expected maybe eight plus quarters from now but at the same time, it's 66% complete so if those numbers are right can you talk about maybe the rate limiting steps for <unk> and maybe for future developments.
Morning, Bob Great question, Greg It's yours.
Sure Yeah, Bob So player I think you know whats different about Pi or is there are three offshore installation campaigns. So yes. The project is 66% complete but because there are three installation can't campaigns, you will build a little bit more contingency.
And of that project.
Because what well you don't have you know hurricane issues or anything down there you do have some current issues.
Offshore occurrence during the installation campaign. So that's why there's there's still contingency Empire, we agree with the operator that that's the appropriate thing to do you know at this stage of the project and so we are firmly on track for 2024 start up.
Little ahead, right now, but again, it's early days.
Is there a good rule of thumb for the number of development wells drill ship.
Guyana can do in a year.
You mean in terms of drilling.
No Bob it's really kind of bespoke them. Some of these horizontals are longer than other ones. For example in some of these development. So there's not a great rule of thumb that I would say because again each development is very bespoke on not only you know the length of the Horizontals, but also what what reservoirs there.
Into as well.
Okay Fair point, Thanks al.
Okay.
Thank you.
Your next question comes from Noel Parks with Tuohy Brothers.
Yeah.
Good morning.
Good morning.
I just.
Just had a general question about exploratory program this year.
I was wondering what's the next most informative data point you're looking for.
Out of the program.
Because of this quite some large step ups there. So this profitability for aerial expansion.
And then it also sounded like some of the particular formation youre going at R. R. I believe.
The first time, you're gonna be tapping them in Guyana, and so I'm.
I was wondering if any of these really opens up a lot of new doors, if it meets or or surprises you.
Your expectations.
Greg.
No I think again you know the objectives of this year's program is.
A to continue to do kind of the upper campaigning.
Exploration, but also most importantly is to get more penetrations.
In the deep so.
The deep penetrations that we're gonna be watching closely and these are wells that we're going to spud in the first quarter or a barrel I won.
It was a lowered campaign in a primary target, but it's also got some shallow where things as well.
And then tarpon, one which is another lower campaigning well plus a deeper Jurassic carbonate feature that we see.
And then kind of in the upper Campania in space.
Is Luca 981.
But it also has some objectives into lower campaigning reservoirs and then finally patois, one which has.
Got some targets in the upper Cretaceous reservoir. So you can see it's a mixture.
Play types, so I wouldn't want to call one out specifically and say Oh, that's the most significant they're all significant.
In this year's program, they're all very promising Oh wells on seismic.
And and so.
Or are most of those deeper targets then.
Things that you.
Identified largely through seismic or or are any of them.
Are your expectations in Florida or any of them by actual analogies.
Have her or have already seen.
No I think they're all they're all they all have seismic features right. So that the primary driver down here or is there a seismic signature now obviously as we've gotten more data in the deep we're getting better at teasing out what that seismic is going to show us in the additional data when we pick up from these deeper wells.
We will improve that even more you know kind of as we go forward.
Okay, great. Thanks, a lot.
Thank you. Our next question comes from David Hagan with Pickering energy.
Good morning, guys and really just making sure that I'm thinking about this correctly you all continue to be cash.
Cash taxpayers in the U S and Malaysia, and then continue to build a cost pool at a faster pace given your spending in the ring fencing in Guyana for the next couple of years, just thinking 80, plus dollar of oil 2022, and 2023 is you got this call. It the hug of higher oil prices put a pause.
A higher cash taxes, but you are already essentially a full payer.
It's the way we're thinking about it.
That's right David.
No. So for US we are not cash taxpayers in the U S. We have a net operating loss carryforward.
Kelly.
How long does that take.
Yeah, I don't see us paying cash taxes, even with these high prices, let's just say for five years and beyond.
So for that that's where we are in the U S. The only place that we really are paying cash taxes is in southeast Asia.
And that's it's a small amount in the portfolio.
So I think I said that opposite sorry, I've got a little COVID-19 brain fog.
No no. The only thing you would see us in our you know when you're looking at it because I always do at ex Libya, Libya, obviously has its a 93, 5% tax rate. So that's the one place.
You know that we are paying cash taxes, and then the Guyana taxes are actually within the P. S. C. So its in the economics and in our net entitlement. So we pay them there.
Yeah, Yeah, and you just keep building a cost pool for the next three years, even at these prices.
Correct.
Yeah.
Okay. Thanks, guys I think I said that opposite my apologies no.
No problem.
You answered my question. Thank you al.
Thank you. Your next question comes from Phillips Johnston with capital one.
Hey, guys. Thanks, just one question for Greg on the production outlook.
You guys have a large ramp throughout the year and I know you don't give specific guidance on oil production, but just wondering if you could help us with the oil mix in both the Bakken and the Gulf of Mexico, and how those numbers should trend throughout the year I realized the Bakken mix can.
Fluctuate depending on gas capture in the NGL prices, but just from a high level perspective should we stick with around 50% of the Bakken and around 65% or so for the.
Greg Gulf of Mexico for the rest of the year.
Yeah, So let's address the Bakken for so.
First of all that the the mix at the wellhead.
<unk> is constant at around 65% and will be for the next several years for us in the Bakken and that's because we still have a lot of undeveloped.
Well locations now you're right when you get to the corporate results. It goes to 50% and that's because of increased gas capture in our third party volumes in our pop contracts in Hawaii, That's how you get to the 50%.
So at a corporate level broadly you could assume that that's going to be the the same mix in your you're on target for the Gulf of Mexico kind of that 65% or so mix in the Gulf.
Okay perfect. Thanks, Craig.
Thank you.
Yeah.
Thank you very much. This concludes today's conference. Thank you for your participation you may now disconnect have a great day.
Okay.
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