Q4 2021 Antero Resources Corp Earnings Call
Greetings and welcome to the Antero resources fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Brendon Cougar CFO of midstream Vice President of Finance and Treasurer. Please proceed.
Good morning, Thank you for joining us for Antero <unk> fourth quarter 2021, Investor Conference call I will spend a few minutes going through the financial and operational highlights and then we'll open it up for Q&A I would also like to direct you to the homepage of our website at Www Dot Antero resources Dot com.
We have provided a separate earnings call presentation that will be reviewed during today's call.
Before we start our comments I would like to first remind you that during this call Antero management will make forward looking statements such statements are based on our current judgments regarding factors that will impact the future performance of Antero and are subject to a number of risks and uncertainties many of which are beyond <unk> control.
Actual outcomes and results could materially differ from what is expressed implied or forecast in such statements. Today's call may also contain certain non-GAAP financial measures.
Please refer to our earnings press release for important disclosures regarding such measures.
Including reconciliations to the most comparable GAAP financial measures.
Joining me on the call today are already chairman President and CEO .
Michael Kennedy CFO .
Excuse me.
David <unk>, Vice President of liquids marketing and transportation I will now turn the call over to Paul.
Thank you Brandon.
Let's begin with slide number three titled.
2022 activity.
In 2022, we are targeting a maintenance capital plan with average volumes of three two to three three bcf equivalent per day.
We expect production to increase through the year as completion activity accelerates in the third and fourth quarters.
The chart on the top of the slide highlights that our completion schedule is weighted to the second half of the year, which will drive volume growth during that period and into 2023.
The chart on the bottom of this slide illustrates our production cadence.
We expect first half 2022 production to average three one to three two bcf equivalent per day in.
Increasing to three three to three four Bcf equivalent per day in the second half of the year.
This second half growth will result in 4% to 5% exit to exit growth in 2022 versus 2021.
Turning to slide number four.
Let's discuss our 2022 capital budget.
This slide depicts a waterfall chart bridging our 2021 capital program with our 2022 budget.
Our drilling and completion capital budget of $675 million to $700 million.
It reflects an impact of approximately 5% from service cost inflation.
This inflation includes the net benefit of expected <unk> savings from our regional sand mine.
Our sand mine is expected to reduce well costs by 400 to $500000 per well further improving the capital efficiencies of our operations.
Entering this year, we also elected to increase our working interest in our drilling partnership by 5% due to the strong commodity price backdrop.
This higher working interest results in $35 million to $40 million of incremental D&C investment during the year.
This additional investment is highly accretive to cash flow given the attractive rates of return that are liquids rich wells are generating today.
Further this higher working interest will drive low single digit production growth in 2023 as compared to second half 2022 volumes.
Now, let's turn to slide number five titled Pure leading premium core drilling inventory.
We have seen an increase in both public and private acquisitions over the last couple of years.
During this time, we've maintained our focus on our core acreage footprint.
As opposed to larger transactions that can dilute your equity result in a large overhang and lever your balance sheet, we have preferred preferred to pick up smaller more tailored acreage packages within our core liquids rich position in West Virginia.
As an example in the fourth quarter, we spent $30 million on land a portion of which was used to add 20 additional drilling locations at less than $1 million per location.
This approach is much more cost effective relative to many of the recent larger M&A transactions that averaged one and a half to $2 million per location.
Making this even more attractive these locations are in the core areas. We're focused on today, providing further liquids development runway and improving our overall operating efficiencies.
The map on this slide provides a summary of the core inventory remaining in the southwestern part of the Appalachian Basin as we see it.
We recently completed our annual technical review of peer acreage acreage positions on drilled acreage and location potential.
We also analyzed btu well performance and <unk> as you may recall, we provide an update on our views at the beginning of each year.
Based on these results, we bifurcated the core of the southwest Marcellus and Ohio, Ohio Utica into premium.
And tier two sub areas.
We've identified approximately 4700 premium undeveloped locations for the industry not just ourselves, but for the industry in the southwest Marcellus, which are located within the red outlined on the map.
Of that we estimate Antero holds 1500 50 of those premium locations or 33% of the total which includes more than 925 liquids rich locations.
The decrease in Antero is drilling locations relative to last year's analysis reflects an optimization of our development program that increases average lateral length by 1000 feet to over 13000 feet of lateral length per well.
In the Ohio, Utica, we estimate roughly 800 premium undeveloped locations for the industry of which Antero holds a 180 or 23% of the total.
Beyond that we estimate that there are 1600 tier two locations remaining which you can see are located within the blue lines.
You can see that much of the acreage in southwest Appalachia is covered up with existing Marcellus and Utica producing horizontal wells, which are the red lines on the map.
However, based on our maintenance level development plan, which assumes 60 to 65 net wells per year Antero has at least 15 years of premium liquids drilling locations remaining with many years of dry gas locations on top of that.
Ultimately, we believe inventory inventory fatigue, and the limited number of premium drilling locations will be a critical distinction between the haves and the have nots across Appalachian producers.
We also believe this will be a critical driver for commodity prices in the coming years as a shift to tier two acreage. We will continue to require higher commodity prices to incentivize the drilling required to hold supply levels flat.
Against this backdrop, we believe antero is uniquely positioned to prosper over both the short and long term time horizons, given our deep core inventory position.
With that I'll turn it over to our vice president of liquids marketing and transportation, Dave <unk> for his comments Dave.
Thanks, Paul.
My comments today will focus on our current view of the liquids markets more important than ever given we are fully unhedged on all oil and NGL production as of the start of 2022.
The past few months, we have seen crude prices, reaching their highest levels since 2014 with brenton WTO touching the seven year highs supported by global supply concerns and geopolitical tensions across several key regions.
At the same time demand has surprised to the upside and market demand forecasts have been revised upward primarily due to the more muted impact of omicron on global consumption compared to previous Covid variance.
NGL prices have also benefited in the current bullish price environment.
<unk>, we are currently buying for another quarterly see three plus price record in the first quarter of 2022 and at current strip pricing. We are on pace for our highest annual C three plus pricing.
Slide number six titled NGL price strength illustrates.
Illustrates our NGL prices relative to <unk> have tightened in recent years.
This is due to increased U S export capacity that has resulted in ngls pricing as global commodities as opposed to pricing being predicated on domestic drivers in prior years.
Also contributing to higher prices relative to WTS is continued global demand growth.
And relative limited supply growth due to the barriers to entry that exist in NGL production that starts with having access to high quality rich gas acreage priority processing and fractionation capacity and takeaway to markets where demand for those products is robust.
We believe that these factors have created a market shift for NGL prices that should remain over 60% of <unk> going forward.
As a reminder, antero has been fully unhedged on propane since October one of last year, and our remaining butane and pentane hedges expired at the end of 2021 meeting that Antero has been completely unhedged on all NGL and oil volumes since January one 2022. This positions they are with.
Tremendous exposure to NGL prices and free cash flow generation, given both the near and longer term fundamentals that we see for these markets.
Turning to slide number seven let's discuss the propane market in more detail, although propane prices have retreated from the levels seen early in the fourth quarter of 2021. They have remained at around 60% of <unk> since the beginning of 2022, even as crude prices have escalated.
Temperatures thus far this winter has been relatively mild in the U S and particularly in Asia, resulting in a more moderated withdrawal season.
Additionally, U S buyers have shown a willingness to bid up Mont belvieu pricing in order to keep barrels in the domestic market as needed resulting in several occasions. This season, where the arb is closed, causing lower export levels and sometimes incentivising midstream companies to buyback export cargoes, keeping the local market adequately.
Supplied.
These factors have prevented a propane price blowout. Despite continued tight fundamentals, even with the mild winter and lower exports U S. Propane inventories are still sitting 15% below last year's levels and days of supply is trending around 20% below the five year average for this point in the winter season.
As we look towards the coming quarters. It appears likely that we will see some degree of liquid supply growth as drillers take advantage of the high commodity price environment, particularly in the Permian basin. However outside of the U S. Geopolitical challenges across multiple regions are creating dynamic supply risks and have the potential to offset the <unk>.
Impact of growing U S supply.
On the demand side, we have recently seen several non traditional factors impacting demand in the far east, including power rationing emissions controls and zero tolerance Covid policies, which include Lockdowns in large cities and restrictions on the movement of citizens.
These factors have dampened Asian demand for liquids in recent months, but their impact is likely temporary in the near to medium term, we see general upside for global demand as Covid moves from pandemic to endemic and supply chain issues are gradually resolved.
As we have discussed previously we anticipate a nearly 550000 barrel per day increase in propane.
Related pet Chem demand in China from 2021 to 2023 at over 110000 barrels per day of European and North American PTH growth during that same period.
Finally, we would like to highlight that we anticipate 2022 will be transformative for the Marcellus ethane market with the new shell World scale steam Cracker in Pennsylvania, and other new demand projects coming online dramatically increasing regional feedstock demand.
Antero is an anchor supplier to the new shell cracker with 30000 barrels per day slated to feed the new facility.
Overall, we anticipate nearly doubling our recovered ethane volumes from current levels by this time next year. This increase in ethane recovery will immediately be economically accretive to antero and our ethane portfolio will increasingly shift towards gasoline pricing as we have mentioned in prior quarters with that I will turn it over to Mike.
Thanks, Dave.
I'd like to start on slide number eight highlighting interros financial strength.
During the fourth quarter, we generated $237 million of free cash flow, which we used to reduce our absolute debt.
Our total debt of $2 1 billion at the end of the year represents an $876 million decrease from year end 2020, and $1 6 billion dollar decrease over the past two years.
The top right quadrant of the slide illustrates the LTM EBITDAX improvement from just over $1 billion in 2020 to over one 6 billion for 2021.
Total debt reduction combined with an improvement in LTM EBITDAX decreased leverage to one three times at the end of the year down significantly from year end 2020, and at the lowest level for any natural gas Pierre.
Now, let's turn to slide number nine titled strong and sustainable balance sheet.
In January we called the remaining $585 million of 2025 senior notes.
Which will be funded through free cash flow by the second quarter of 2022.
This redemption will reduce our annual interest expense by $30 million or <unk> <unk> per Mcf.
Importantly, this balance sheet momentum has positioned us to begin returning capital to our shareholders.
As you can see on this slide the remaining maturities are not callable until 2024, which means once the balance of the 25 notes are paid off free cash flow will be increasingly directed towards capital returns.
Our 2022 development plan is expected to generate $1 five to $1 7 billion and free cash flow.
With a similar level projected in 2023 based on current commodity prices.
Stansell free cash flow enables us to begin returning capital to our shareholders. While also continuing to pay down debt.
We are currently the least hedged in our company history with approximately 50% of our expected natural gas production hedged in 'twenty, two and we have no liquids hedges in place.
We are also essentially unhedged in 2023 and beyond on all commodities.
Further our industry, leading firm transportation portfolio allows us to sell a 100% of our natural gas out of basin.
This generates best in class natural gas realizations and.
And provides confidence that we can deliver on our free cash flow and production guidance.
This is an area of our business. We believe will continue to prove valuable with the delay in MVP and likely limited infrastructure being built in Appalachia going forward.
Now, let's discuss in more detail the return of capital framework, We just announced.
Starting with slide number 10, titled strongest balance sheet in Appalachia supports shareholder returns.
During this first quarter of 'twenty, two we achieved our debt target of below $2 billion, which was the threshold, we set internally before initiating a shareholder return program.
Going forward, we intend to initially returned $25 to 50% of free cash flow to our shareholders.
This significant cash return is supported by our peer leading net debt level as shown in the chart at the top of the slide.
The chart on the bottom of this slide compares our leverage profile to our peer group as well as the S&P 500 average and is line with major integrated companies.
Slide number 11 highlights why share buybacks are the most attractive form of capital return for Antero today on.
On the left hand of the slide you can see we have the highest free cash flow yield whether you look at it relative to market cap or enterprise value.
We believe the more appropriate metric is your free cash flow to enterprise value as it reflects your debt levels and as more sustainable through commodity cycles.
On this basis, we lead our peer group in 2022 with a 16% yield.
The chart on the top right hand side of this slide highlights our discounted trading multiple based on consensus estimates our stock is valued at just three seven times enterprise value to EBITDAX.
<unk> below the peer average.
An important note. These estimates are based on consensus numbers, if we looked at the guidance provided today.
Trades at a 25% free cash flow yield on market cap and trades at approximately three five times enterprise value to EBITDAX.
And lastly, the chart on the bottom right hand side of the slot side of the slide illustrates that the capital return program that we announced today positions Antero as a leader in cash returns at 10% of our market cap, assuming the midpoint of our capital return program.
The combination of highest free cash flow yield and lowest trading multiple make share buybacks. The most accretive use of free cash flow at the onset of our capital return program.
We're also excited about our continued ESG progress as detailed on slide number 12.
Last quarter, we highlighted an important ratings upgraded MSCI in the publication of our annual ESG report.
We are excited announce that we've received responsibly source gas certification through a pilot with project Canary.
We view. This success is an important first step ahead of expanding the certification across our asset base.
In addition, driven by the success of our emissions reduction program to date, we have expanded our 2025 net zero target to include scope two emissions.
We're very proud of these recent accomplishments and believe that through our ambitious targets, we can positively impact.
Global energy poverty with a reliable affordable and responsibly produced natural gas and liquids.
While also reducing overall global emissions by replacing more carbon intensive fuels with clean U S natural gas.
Summarize them.
<unk> operating and financial momentum continued for Antero.
Slide number three titled key investment highlights summarizes a position of strength we are in today.
We have significant scale as the fifth largest natural gas producer and second largest NGL producer in the U S providing best in class exposure to relatively unhedged healthy commodity prices.
We have extensive core inventory with nearly 1000 premium liquids locations remaining.
Since the beginning of our deleveraging program, we've reduced debt by $1 6 billion in just two years and.
And we expect to further reduce the absolute debt in 2022 with leverage well below one times.
These strengths truly differentiate antero and we expect this to significantly benefit to shareholders moving forward.
Lastly, if we assume today's strip prices, which includes a backward dated NGL and natural gas strip, we're forecasting substantial free cash flow generation in excess of $6 billion through 2026.
Consider this free cash flow outlook against our enterprise value of $8 billion.
With the lowest leverage and highest free cash flow yield of our peer group and a trading multiple of approximately three five times.
We believe antero is uniquely positioned to deliver attractive multiple expansion and value to our shareholders.
With that I will now turn the call over to the operator for questions.
At this time, we'll be conducting a question and answer session I would like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate that your line. Your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
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One moment, please while we poll for questions.
Our first question is from Iran, Jr. AMA, Robyn with J P. Morgan. Please proceed with your question.
Yes, good morning.
Perhaps for Paul or Mike I wanted to ask.
Around.
The intentions around.
Cash return in 2022.
Kind of if the strip holds.
Mike on slide 11, Youre showing.
The midpoint of the 25% to 50% free cash flow range.
About 10% a return of cash yield so.
Question from the buy side. This morning is.
How should we think about.
What would drive you towards the low end of the 25% to 50 or the or.
The upper end of that with again very limited.
Debt reduction options outside of the 2020, fives, which you outlined.
Right. So the midpoint of our free cash flow guidance is $1 6 billion to.
So $600 million of that is to call. The 2025 notes.
So in addition to that we hope that we have the ability to repurchase on the open market or through some other efficient that transaction in a couple of hundred million plus of further debt reduction.
And so if you think about that.
Up to the $8 $900 billion level.
Above and beyond that will probably be focused on share buybacks. So if commodity prices do hold.
You'd be trend more towards the upper end of that range and so we just wanted to provide flexibility around that.
Great.
Just as my follow up.
You've outlined.
6 billion.
Plus in free cash flow from 2022% to 2026.
And I was wondering the 25% to 50% range, how do you see that evolving over time.
Yeah.
Maybe just give us a sense of that.
Return of capital could evolve over time as well as thoughts on.
Looking at a dividend.
For Antero in the future.
Yes, so over time, obviously, you would trend higher than the 25 to 50, because you run out of that to pay down.
<unk> 6 billion on a total $8 billion.
Have $2 billion of debt Starwood. So obviously that would suggest that a lot more going return of capital and paying down debt.
And I think a dividend would be something we would consider obviously to start. This program is focused on share buybacks, just because of the discount we trade at and those opportunities to capture 25% free cash flow yields and three five times debt to EBITDA type.
Sure.
Enterprise value of the data type metrics, so our focus on free cash flow there.
Share buybacks there, but then after that we will.
Reevaluate once this programs complete and certain could be a dividend at that time.
But that.
Definitely focused on share buybacks this year.
Alright, Thanks, a lot Mike.
Thanks Ryan.
Yeah.
Yes.
One moment, please while we're pulling for questions.
Our next question is from Gregg Brody with Bank of America. Please proceed with your question.
Hey, guys.
Thanks for the update.
Just to follow up on that you you you talked about reducing debt further or is there a debt level you're targeting after you get past this year.
Are you there once you.
Just be Opportunistically, Greg I mean, after this year I mean, you'd be down to $1 $31 2 billion of debt, which is basically half ton.
Half EBIT turn so.
I would just say if theres further opportunities.
We do have some.
That we'd like to pay off that our higher coupon like the 2000 2683 eights and then we've got seven and $5 eight to 29, so that's efficient to buy those type of.
Coupons and.
But no real target after that we've just hit our target of $2 billion and with the call. It 25 notes would be at one 5 billion. So.
Our target is well below what we thought possible at this time last year.
Yes, I'm not going to get creative.
Wanted to know the nuances.
Yes.
It was really fun.
Suddenly and opportunities can we efficiently get to that end.
And if we can efficiently get it and then we will.
Great job there.
You spent a lot of time talking about your inventory and how you how you how you've been focused on adding it.
Small bolt ons of acreage so I'm just going to ask this question thinking you may have answered this already but just to be clear.
Are you thinking about outside of the basin opportunities.
So that's something that would make sense to you or is it or just the core inventories.
Stay stay in your and your sandbox.
Hi, Greg It's Paul Yes, it's the latter that stay inside our sandbox, we just have such a wealth of.
Quality inventory, we monitor all basins, we understand Permian Haynesville Bakken you name it just because we.
We do such things to appraise, where the supply could come from in future years, but we are really focused on our corner of the world and there is no need to go elsewhere, if we really like our position both quality of the inventory.
Liquids rich nature of it the controlling of processing fractionation takeaway to premium markets. So like where we are and don't see ourselves, leaving the basin going outside of it.
And last one for you are you are you able to give some some framework for how to think about cash taxes going forward.
Yes.
And that 6 billion, that's net of cash taxes that we see in the five year period for the first three years.
Arent any Greg.
I will just remind you we have a $2 $3 billion approximate NOL position.
So that serves us well over the next three years, but in year four and five you do start having a little bit of cash taxes.
That's it for me guys and just kind of.
Congrats on the.
Tim I'll just touch on it's been very impressive.
Thanks, Alright, thanks, Greg.
Our next question is from Neal Dingmann with <unk> Securities. Please proceed with your question.
Good morning first question just on takeaway I'm just wondering.
You all anticipate additional export opportunities I'm, just wondering what maybe you see the best takeaway opportunities to receive stronger prices.
Well certainly there is.
More and more LNG in the Gulf that is coming online and so.
We already sell to Cheniere at Sabine.
<unk> at Freeport, we are now.
<unk> relationship and selling to venture global Calcasieu. So.
And.
We have two two Bcf a day of firm transport that goes to that LNG fairway. So.
More opportunities, we do see prices being bid up at places like Anr Southeast head station to be a premium to Henry hub. So we're delivering to the right places and <unk>.
Establishing relationships with a number of the <unk>.
<unk> facilities in liquid fires, so to see growth there and we will continue to.
To move move our gas to the most attractive buyers, but do see it growing I'm sure you're following it as well.
There is a lot of because of prices across the world. There is a lot of <unk>.
<unk> or more facilities going.
Yes, absolutely agree and then my second just on inflation I know your prepared remarks ill mentioned about Mike was talking about placements, partially offset by the.
San savings I'm, just wondering in your basin are you seeing kind of the cost inflation that the Permian and other areas or.
Maybe you could just talk about that.
Theres sort of contracts and things you're doing to help offset some of that.
Yes, definitely well of course, we shop around but we have some very reliable suppliers in drilling and completions. So there is definitely pressure both.
Drilling completions and then.
Steel as many people are are noting so.
Tubular is et cetera.
Going up but we lock them in as we can in advance to take advantage of any pricing discounts, which we've done so definitely pressure on the hard asset side on diesel and so on so we're pleased with our local sand mine and being able to offset some of those pressures.
Third by by moving it down a little bit, but I think we're seeing probably about what others are seeing although.
Think he can see more and more reports of sand shortages in other basins and prices have gone up quite a bit so that makes our local sand that much more valuable, but we are seeing pressures just like much of the industry.
Okay very good thanks, so much.
Thanks Neil.
Yeah.
Our next question is from Holly Stewart with Scotia, Howard Weil. Please proceed with your question.
Good morning, gentlemen.
Maybe Paul Paul I'll.
Quick one do you for.
On the on the hedging.
I know for a couple of quarters now you guys have certainly been been talking about your hedging philosophy.
And then I think you mentioned kind of 2023 being essentially unhedged on all commodities here now. So curious if you can kind of talk about bridging the gap you've put out there.
The guidance here of 25% to 50% of your free cash flow going to shareholders. How do you balance those two.
Those two concepts here going forward.
Yes.
<unk>.
Yes.
<unk>.
I think we've read the market right and we backed off on natural gas hedging. So we haven't put in natural gas hedges for I think 22 months something like that dating back to adjust as we're entering.
Oh this spring.
'twenty 'twenty.
So those were the last hedges we put in.
We said and this was the same as discussed on this call we're down to just our natural gas hedges for half of our production.
With no intention of.
Adding anymore.
And then completely unhedged as Dave can logos, just saying on the liquid side.
Sure.
We have the balance sheet now and.
A lot of opportunities to really pay down debt more quickly if were just willing to stay on the front of the curve, we don't want to hedge into a backward dated curve. So.
It's working out well no plan to hedge.
Live on the front and really don't step into.
Two backward dated curves as you know.
It's more moderate on the natural gas side, but pretty steep on the NGL side. So no need to do that with the dynamics that we've outlined here so no hedging in the foreseeable future.
That gives us.
A stronger and stronger balance sheet as we continue to be right by laying back on the front month.
So that's our plan.
Okay great.
And then maybe Mike one for you just on.
Just on the.
The expense guidance.
Can you maybe just help us understand some of the.
Components of the cash production expense I mean, if you.
I think if you look at it relative to the fourth quarter, it looks like things come down pretty nicely over the over the course of 2020, Jason just trying to.
And maybe even thinking about kind of total production expense just trying to think about some of those those components as it relates to the <unk> actuals versus the guy.
Yes, compared to the <unk> guide, it's really just the decrease in commodity prices. The average is for 'twenty two are well below what we realized in the fourth quarter. So it's just production and AD valorem AD valorem taxes.
That's really the only floating component and theres, a little bit of fuel as well and fuel comes off too.
Just because again its commodity base, but everything else is fixed hauling.
Okay. So anything.
I know you guys had some FTE that rolled off maybe this year and next year and marketing, yes that would be in the marketing expense and marketing expenses down year over year that we were just talking with the cash production expense there.
But we definitely have had that Rex roll off October one that's about $40 million a year or less.
Marketing expense, so we'll realize the full benefit of that in 'twenty two.
Okay. So as you think about that <unk> line.
The <unk> line does not have marketing expense in it the marketing expenses a different line item.
Sure I understand that.
About <unk>.
That component of the total.
Cash production expense guide.
It tends to last year.
Yes, it's relatively flat.
Okay. Okay.
Perfect. Thank you guys.
Thanks Holly.
Okay.
Our next question is from <unk> <unk> with Goldman Sachs. Please proceed with your question.
Hi, good morning, and thank you for taking my questions.
My first question was on share repurchase given you're planning to pay down $600 million in debt in March can you talk to the cadence of free cash flow allocation towards share repurchase over the course of 222, yes.
Yes, it will start to share repurchase this Monday, so we're starting.
As soon as we can.
We've reached that 2 billion target that we mentioned we are essentially added at the end of January .
So got there and so that's why we're initiating right now and those started in the first quarter.
We have the luxury of being able to buy back shares and pay down debt at the same time because of the cash flow generation is pretty explosive at these commodity prices. So.
And that's what we'll do if you think about the $1 6 billion and this divided by 12 months its about $130 million a month of free cash flow. So.
You didn't have anything drawn on credit facility at year end to $130 million a month I mean since these are all just round numbers, but.
That allows you to pay off that $600 million and a five month period and still have some share buybacks. So that's what we plan to do.
Got it Thats helpful.
And then turning to a long term question.
Great question.
Part of the increase spending in 2020, because electing to.
Big hiring looking interesting events.
How does that impact your Duane Duane.
23 production outlook spending outlook I was looking through your multi year guidance. It seems like production outlook is higher.
On average between 220 to 1026.
Yes, It does go up a little bit.
1%, 2% just that election of going from.
The drilling JV partner participating at a 12% to 15% it's really just 23.
Selling JV set up for when the wells are spud, so that only applies to the well spud.
In 2022, so there was about a nine month lag time between wells spud and first production, so really aren't going to see much of that in.
2022, but definitely we will have 1% to 2% growth because of it in 'twenty three.
Great. Thank you.
Mhm.
<unk>.
Our next question is from Sebastian Sciandra with benchmark. Please proceed with your question.
Alright. Thank you just a quick clarification.
Mike did you say the buyback program began on Monday or begins on Monday.
So again, we're in a blackout window. So you have to wait till 48 hours. After your earnings before you can start anything so thats why its Monday.
This coming this coming Monday, you can't enter buyback program three days before your earnings.
Yeah, well, that's what I was curious about is there like a Tuesday, president today's Monday or Tuesday.
It's too ambitious.
Okay, I'll make that judgment on my calendar.
Sure.
Is there can.
<unk> five is something that can get you through the blackout period.
Yes, before I mean, we are in a blackout period, when we achieve that $2 billion at the end of January . So there is nothing we can do there you had when you put it into a <unk>. One plan you have to be in an open window.
And so that's what we've done in past and probably our intention going forward as you put it in attendance five one plan. So I'll go through any blackout windows, and then opportunistically repurchase as well.
If you see opportunities.
Okay great.
The second question is so these lads lateral lengths are getting quite a bit longer 'twenty 'twenty to 'twenty one.
How do you think about EUR per foot.
Will you maintain them.
Proportionately or.
What do you see happening there.
Yes, that's a good question, but the answer is yes, we've not seen any tailing off in EUR per thousand feet of lateral as we go longer and longer.
I think our I know our longest lateral is two feet short of 20000 feet 19 998.
But we are looking at our.
Our profiles all the time and we don't see any diminishing of.
Production as you get out to the far end.
And we look at that all the time.
We're able to break down the tariffs at the toe of the lateral that.
As much as 20000 feet just need a little more pumping capacity on the surface, but haven't had a problem breaking it down and so.
We don't see a limit yet certainly 20000, plus as you know you.
You have to take that seriously but.
So we think we can reach at least that long and so we're getting longer all the time on the books, we've got quite a few 15% to 18000 footers that are coming up over the next couple of years.
Got it and then I think for Q, you had some Utica dry gas completions. Some of this could just be.
For catch up work or something.
Any change in sort of.
Ambitions, there economics anything like that to one to recommit.
To the basin.
No. We're good as we are we like the Utica, but Marcellus there's more operating efficiencies there.
We still have as you note the completions for later this year in the Utica.
We selected.
Particularly rich gas with with free liquids over in the Utica and so thats, what we will be bringing on later this year is being completed right now so pretty.
Pretty selective in what we do there is no big dry gas volumes over in the Utica as well, but our economics are just stronger over in the Marcellus, So thats, where virtually all of our budget. It will be going out. The next couple of years, Yeah, and when you look at <unk> over the next five years, it's generally.
Maybe a pad a year and thats just to keep the Rex FTE full 400 million a day full so.
We contemplate that when we make our investment decisions wanting to keep transportable.
Okay got it.
Great work guys. Thank you.
Thanks Sebastian.
Our next question is from <unk> Kumar with Wells Fargo. Please proceed with your question.
Hey, good morning, guys and thanks for taking my questions.
Ono historically.
I noticed a 10 to 15 cents premium.
To Henry hub that you guided for lets say 15 to 25 premium.
And I know that's related to your ft could you remind us I know you had some coming off this year, but what is the schedule.
Toward that ft that you have and what are your plans given.
Some of the.
Recent developments on MVP and other basin outflows.
Yes, Rex came off but what's coming off in the next couple of years and then it's just regional Theres no long haul.
So we still have.
I guess two thirds go into the Gulf, 20% go into the Midwest and then some going over to Cove point and Pico. So we still have the premium transport and getting our.
Our gas to the premium basin, so no change there.
Okay, Great and then I guess.
The other question is congrats on getting the project <unk> certification, but I'm curious.
Are you seeing a premium pricing some of your peers have talked about premium pricing for certified gas.
But im just wondering if you can give us some color on whether that's economic opportunity. In addition to being the license to operate.
No we don't view it as an economic opportunity we haven't seen anything we just think of it as a license to operate like you said just to have a sustainable business.
Something that's required so that is how we view it.
Great. Thanks, guys.
Thanks Sidney.
Yeah.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back over to Brendan Bell for closing remarks.
Yes. Thank you for joining us on today's call. Please follow up with any questions. We are available. Thank you.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.