Q1 2022 Conocophillips Earnings Call

May 5, 2022

[music].

Cash flow and updated guidance for the full year and second quarter during.

During the call we'll make forward looking statements based on current expectations of course actual results may differ due to the factors described in today's release and our periodic SEC filings.

And finally, we will also make reference to some non-GAAP financial measures today reconciliations to the nearest corresponding GAAP measure can be found in this mornings release and on our website with that let me turn the call over to Ryan. Thank you Mark before we get into the results for the quarter.

To touch on a couple of other items that are top of mind for us.

The first is the war in Ukraine.

The world already ravaged by the pandemic. This unprovoked invasion is having tragic consequences as we all see and heartbreaking detail in the news every day the.

The driver of the Ukrainian people is inspiring and we pray for a peaceful resolution at the earliest possible moment.

This is deeply troubling war is also disrupting supply chains at a time or recovering global economic growth and energy demand.

It is affecting every aspect of the global economy and impacting the energy security of our allies in Europe , and its driving significant volatility in commodity prices.

We are fortunate that the United States has abundant resources to ensure our own energy security. These resources also provide vital geopolitical benefits.

Secure U S energy exports serve as a market stabilizing factor, enabling our allies to better withstand energy blackmail by hospital and unreliable resource sources.

Like the rest of industry, we've quickly restored activity levels from the lows driven by the pandemic related energy price collapse, despite lingering service and supply chain shortages infrastructure permitting delays.

Lead time required for workforce and equipment redeployment.

As a result total U S oil and gas production is growing meaningfully despite these headwinds and.

And Conocophillips will continue to do our part as we fulfill our triple mandate of a reliably and responsibly meeting energy transition demand delivering competitive returns on and of capital and achieving our net zero ambition.

Now the other topic I'd like to touch on are the leadership changes, we announced a couple of days ago I suspect you all saw the release on Monday, but for those who might have missed it Tim will be transitioning from leading our lower 48 business, which he has done incredibly well since we combined company is a little over a year ago to serving in an advisory role.

Myself and the entire leadership team.

Tim has truly been an industry visionary founding concho, almost 20 years ago and growing it in July .

One of the Permian is largest and best run companies before joining conocophillips.

He has also been instrumental in driving value realization as we've integrated the assets into the company.

Im appreciative that we will continue to benefit from 10 significant experience and strategic relationships in this new capacity and of course as a member of our board.

I'm also very pleased to welcome Jack Harper, who most of you know to our leadership team as executive Vice President of our lower 48 business.

<unk> is an experienced proven leader, who will help ensure that our lower 48 business fulfills its key role in delivering on our triple mandate.

Reflecting now on the quarter. Once again, we've made significant progress working on all levers across the company, we efficiently and safely delivered our capital scope globally and successfully integrated the shell Permian assets.

We also took important steps to further strengthen our balance sheet and continued to upgrade our portfolio with the sale of our mature Indonesian business and the acquisition of an additional 10% stake in our long life high quality AP LNG business, we're running well in a very strong financial performance.

So building on two very successful Permian transactions, we have truly transform conocophillips, we're a premier E&P company with a large low cost to supply low age ghd intensity resource space returns focused strategy.

And the balance sheet strength to thrive through the price cycles over the evolving energy transition.

And underscoring this last point, we also recently published our plan for our net zero energy transition.

Is available on our website.

I'm going to let bill cover the first quarter results, but before turning the call over to them on the topic of returns I want to highlight the fact that for the second consecutive quarter. We have again increased our targeted 2022 shareholder distributions. This time with an incremental $2 billion or 25% increase to be distributed through the.

<unk> of share repurchases and additional variable cash return.

We continue to make significant strides in all elements of our triple mandate and as you know we have now a five plus year track record of returning well over 30% of our CFO to our shareholders.

The increased 10 billion target for 2022 further demonstrates our commitment to return significant value to investors through the price cycles.

So now let me turn the call over to Bill and he'll cover the results for the quarter, starting with our returns on capital.

Picking up where Brian left off we generated return on capital employed up 19% on a trailing 12 month basis.

That's 21% on a cash adjusted basis.

We understand and appreciate that returns on and of capital matter to our investors and we are fully focused on delivering to our shareholders.

In the first quarter of 2000, 2010, we generated $3 27 per share and adjusted earnings.

That's driven by strong realized prices and production of 1.747 million barrels of oil equivalent per day, a record level of production since we became an independent E&P 10 years ago.

And is bolstered by our two highly accretive Permian acquisitions over the past 18 months.

Lower 48 production averaged 967000 barrels of oil equivalent per day for the quarter, including 640000 from the Permian 208 from Eagle Ford and <unk> 97 from the Bakken.

Operations across the rest of our global portfolio also ran well, allowing us to generate $7 billion in cash from operations, excluding working capital in the quarter.

We also continue to enhance our low cost of supply low greenhouse gas intensity portfolio closing on both the sale of our Indonesian assets and the acquisition of an additional 10% of Apiology taken ownership there to 47, 5%.

Both of these transactions enhance our overall margins going forward.

Illustrating this point, we realized roughly $500 million in cash distributions from AP LNG in the first quarter.

And we've already received $400 million so far in the second quarter.

While the full year distributions will continue to depend on prices going forward. If you assumed Brent averages $100 per barrel for the year, we would expect roughly $2 3 billion of total distributions from AP LNG in 2022.

Turning back to focus on the first quarter. In addition to the $7 billion and CFO , we generated $1 4 billion in cash the sale of our remaining 93 million shares of synovus.

And this $1 4 billion fully funded the share repurchased here of our $2 3 billion total returns to shareholders in the quarter.

We also made significant strides toward our $5 billion debt reduction target executing a successful refinancing through which we reduced our total debt by $1 2 billion, we decreased our annual interest expense by about $100 million and.

Tended our overall debt maturity by three years.

Also in April we called our $1 3 billion note, which was due in 2026.

So we will have achieved approximately half of our $5 billion debt reduction target by the end of May.

And what the progress we've made in the first two quarters of this year and our remaining natural maturities will reduce our debt by $3 $3 billion. This year.

We are now positioned to meet our overall $5 billion reduction target in 2025, that's one year earlier than our prior projections.

As you will have noted we also invested roughly $1 8 billion back into the business in the first quarter of the year.

While this is ratable with a $7 2 billion full year capital estimate we provided last December we're increasing our guidance to seven 8 billion.

About half of the increase is due to additional low cost of supply drilling and completion activity in some of our partner operated areas in the lower 48.

And the rest is modestly higher inflation as we believe such ply chain constraints will be prolonged as a result of the ongoing conflict in the Ukraine.

From a production standpoint, we've adjusted our full year target from an approximate $1 8 million barrels of oil equivalent per day to roughly $1 76 million per day.

That's reflecting the net impact of closed A&D activity through this point in the year as well as some expected impacts from weather and well timing.

So we've had a strong quarter to open the year, we've returned $2 3 billion to our shareholders and ended the quarter with seven 5 billion of cash and short term investments.

We further enhanced our low cost of supply portfolio, and we strengthened our balance sheet.

And of course, our operations around the globe are well positioned to deliver on our commitments to the rest of this year and through the energy transition Thats ahead of us.

With that let's go to Q&A.

Thank you we will now begin the question and answer session.

I have a question. Please press <unk> one using your Touchtone phone.

If you wish to cancel your request please press zero to maybe.

If you are using a speakerphone you may need to pick up the handset first before pressing the numbers.

Once again, if you have a question. Please press zero one you've seen your touchtone phone.

And we have a question from Jeanine Wai from Barclays. Please go ahead.

Hi, Good morning, good afternoon, everyone. Thanks for taking our questions.

Good morning Jeanine.

Our first question maybe for you.

Committed to returning at least 30% of cash of cash flow every year year on year out.

Can you talk about how you decided on that $10 billion level for the total return this year.

Assuming strip pricing.

35% of our forecasted cash flow and that's below that level.

And it's below the five year average prior to that we know cash balances look very very strong and they are growing throughout the year.

That'll probably be supplemented by some divestiture proceeds as well.

Yeah. Thanks, Jamie No. We look at this quarterly review with our board quarterly we take an informed view of what we think the macro and the outlook for commodity prices is going to be for the rest of the year.

I'd say, where we moved to $10 billion, because we certainly felt like.

Commodity price outlook is going to be probably above $90, a barrel and depending on where things ended for the year and that supported going from $8 billion to $10 billion and again, that's anchored in our commitment to return at least 30% of our cash flow back to our shareholders and as you noted correctly over the last four.

Five years, we've delivered even more of that and prepared to do that should should the market support that as we go forward.

I can say as you can see that cash is rebuilding on the balance sheet, a little bit as a result of the <unk>.

The check we wrote at the end of the year, we have a desire to put some more cash on the balance sheet to do that so at the same time, we want to keep funding our stable capital programs. So as we looked at it we certainly thought we could afford.

Moving to $10 billion in and Thats supported by even if prices were to fall below 90 for whatever reason or if they continue to say strong investors should expect calculate our cash flow and you should expect to get a minimum of 30% of that back as we go through the year Thats been our commitment for many many years now and we're just.

Living up to that commitment via these strong prices, we see in the market.

Okay, great. Thank you for that color a follow up question.

Maybe moving to natural gas.

Youre in a unique position among your E&P peers in that you've got a lot of scale.

Also the location of your resource base, especially when you have in the Permian with your really strong marketing and takeaway position. There. So maybe can you discuss how your view of Conoco's role in both the U S.

Natural gas market and on a global scale, how that's really changed over the past six months or so and perhaps any color you might have on your opportunity set as it relates to that would be really interesting. Thank you.

Yes, Thanks, Shane I guess.

The long term you know today, we're about 30% of our portfolio's natural gas. If you look at our global position a lot of that here domestically in the U S. And then globally with our LNG exposure were pretty big fans of LNG, We think the Asian market and the European market. Obviously as a result of this invasion of Ukraine is both.

<unk> sort of the international gas side of it which is why you see us doing things like competing for another train in Qatar in and why we are where we preempted on our AP LNG interest in Australia. So we understand LNG and we'd like to get into that full value chain of that LNG here domestically in the U S. We have a.

Large gas position as well and the beauty of our cost of supply model is it's a bit indifferent to gas and oil, but we are asking ourselves is there been a disconnect.

On the gas side and.

And what do we what should we be interested in and certainly LNG from the U S to Europe or other places is something of interest as long as we can be in that full value chain, we're not necessarily interested in just being in the liquefaction tolling business, but if we get exposed to that full value chain, that's something that we.

We would be interested in looking at.

Given the nature of the gas business that's out there today.

Thank you. Our next question comes from Neil Mehta from Goldman Sachs. Please go ahead.

Good morning team.

The first question is around.

The capital guidance and moving from 17% to seven seven I think this was well telegraphed that certainly we're in a in an inflationary environment.

But would love your perspective on the components of some of those moving pieces and as we get an early thought into 2023 and normalized spending levels. How much of this does carry forward.

Yes, I think what bill and tried to describe in the in the call transcript a little bit.

We've upped our capital from seven two to $7 eight and roughly half of that is extra activity that's ongoing across our lower 48 by other operators and these are good opportunities that are low cost supply very competitive in the portfolio and we certainly don't want to be drilled out of any opportunities. So we are funding those kinds of opportunities.

As we go along the other half is inflationary driven.

I would take you back to we set our budget at the end of last year in December we talked about it in our fourth quarter call where.

Our view of the world at the time was coming out of the pandemic. We thought we were seeing some elevated.

Inflation rates, primarily in the Permian, but the rest of the portfolio, we didn't see as much impact. So we were thinking in the order of mid single digit kind of inflation rates across the whole global portfolio and clearly since the Ukrainian.

And we also thought at the time that that would abate itself in the last half of the year.

As supply chain has got re normalized coming out of the Covid pandemic and certainly after the Ukrainian invasion, we're seeing DAU inflationary forces across the entire global portfolio we have.

Certain hotspots clearly still in the in the Permian and on certain categories of spend like labor and rigs steel pipes chemicals, and then some of the key categories of spend that our industry.

Relies upon so.

And I guess, whether it mitigates as we go into 2023, it's really a question of when does this.

All this turmoil that's going on around the world start to re normalize and get back get back a little bit and at this 10 seconds is hard to say that thats kind of re normalize anytime soon so I think it's C here with us for a while I don't think it's transitory.

And we're going to have to deal with it. The last thing I would say is we could have chose to cut the scope. We could have cut our operated scope in order to try to manage to a number and given the current macro environment that didn't make sense to us. So that's why we have raised our capital guidance for the year to $7 8 billion.

It makes a lot of sense, Ryan and Thats the follow up its on Russia, and the Ukraine War.

How does this structurally change the way that you think about the company and the oil and gas industry and there are a couple of components to that question.

Does it make it more likely.

Is that the market is going to be more accepting of sanctioning of long lead time projects, whether in Alaska or elsewhere does this change.

Change.

Does it change where you ultimately need want to invest in them.

Can you talk real time about what youre seeing in terms of.

Russia volumes.

As you guys explore.

Follow the oil macro really closely.

And how you see that playing out in the back half of the year recognizing you don't have frontline operations by Q you follow the situation very closely.

Yes, I think we all are trying to figure it all out I think we've seen sort of an immediate a million barrels a day of Russian crude off the market our expectation at this at this at this juncture as we're expecting probably two to 3 million barrels a day of Russian crude with all the conversations going on in Europe , right now to stop both.

<unk> and.

Oil imports into Europe, we're expecting that two to 3 million barrels a day being taken off the market and that's that's going to be tough for the supply to ratchet up. So we think about that that's happening on the supply side, while on the demand side. There is a little bit of uncertainty with what's going on in China and another COVID-19.

View of the demand side is we'll probably average close to 100 million barrels a day this year, which is kind of that pre pandemic demand level, but we see growth in demand coming now that could be that could get slowed if another wave of.

Colby.

Impacts the whole world, we don't see that as part of our base case, So we see demand continuing to grow over the next couple of years.

And it'll be tough if we take two to 3 million barrels a day of additional Russian supply off the market it'll be tougher supply to keep up in the short and medium term. So it does have an impact as we think about the need for medium and longer cycle projects the need for a call on more U S growth, which I think is key.

Coming this year, we think probably a million barrels a day and something similar next year.

And I think it does kind of changed the view angle on medium and longer cycle projects long term because of the underinvestment in the industry with demand growth continuing and.

And supply being challenged to keep up with that and then what that means back for the company as you know we're spending a lot of time rethink.

<unk> no longer term or medium and longer term macro what the energy transition has in store and how quickly that might start to abate demand and I think the immediate manifestation is what is your view of mid cycle pricing over the short medium and longer term right now and while I don't think that impact.

Our capital allocation scheme in our cost of supply method.

Methodology in how we think about allocating capital it does maybe at the broader level. When you think about how much you have available for distributions and then what channels should you be distributing that capital to and we have a three tiered system as you are aware of our ordinary.

Like to Ratably buy shares through the cycles and then we introduced our third tier the cash return V rock to supplement that in these times when prices are well in excess of what we think a mid cycle might be.

Thank you. Our next question comes from Phil Gresh from Jpmorgan. Please go ahead.

Yes, Hi, My first question is just.

On the Permian.

In the first quarter.

The quarter over quarter increase in production.

Look to have been below the.

The amount of the acquired volumes from shell and I recognize.

Yes, there is quarter to quarter variability, but I was just wondering if you could talk about some of those moving pieces, but also more importantly, just how youre thinking about that cadence of activity for the rest of the year given what you were talking about round.

OBO activity and other factors.

Yes, Phil this is Tim I'll take that one.

We have.

We've been really pleased let me first say I'm really pleased with the way the team has integrated the shell assets into.

Our overall company and activity they've done a great job at spin.

<unk> combination and we have.

Just now begun bringing wells online with our.

Our <unk>.

Vendors and our style of completion and things like that so if you look at the pace of activity.

In the lower 48.

We were going to bring on 500 completed wells throughout the year I think we brought on 90 in the first quarter and so it's always been backend loaded and.

Building on our ramp of we closed the quarter with 22 drilling rigs in the lower 48, and eight frac spreads and we planned when we rolled out our 10 year.

Plan and guidance, we were going to build that.

Over the next 10 years, and we're still on track to deliver all that type of activity.

And so.

That's that's the plan we're on that's what Ryan described as is not cutting our capital back, but trying to run a steady ship and get the most efficiency out of it so.

If you look at.

The ramp in activity throughout the year.

That's true across our asset base, especially true in the Permian 500 completed wells brought on throughout the entire year, but 90 in the first quarter. So it is going to build and be backend loaded.

Okay, Great that's helpful.

Second question I think would be for bill.

Clearly significant reductions in net debt in the first quarter you talked about.

Paydown of the gross debt and the targets you have there I'm curious how you think about the right levels of net debt or cash that you're holding.

I think you also have about $2 billion to $3 billion of asset sales are still coming here. So it just seems like even with the 10 billion return of capital. There's a lot of cash building up so any additional color there.

Yes, sure. Phil you said I think that you can see it manifesting itself and the rebuild of our balance sheet with our cash growing to $7 5 billion I think we're pretty happy right now with our pace in terms of debt reduction and how the program set up we've got a glide path set up for the next five years. So I think you can look.

And just the natural maturities as we go through time.

And I think we've been pretty opportunistic in the market to set that up and are quite happy with where that's at.

Yeah.

But I think as you rightly noted that will be continuing to build up cash on the balance sheet. We are looking forward to some asset dispositions. Here later part of this year and that's going to be go into generating cash.

Thank you.

Our next question comes from Doug Leggate from Bank of America. Please go ahead.

Thanks, Good morning, everybody.

Matt first seats and it sounds like Youre going to hear a little last few in future. Whenever you do next I just wanted to see good luck has been that's been great.

Getting to know you over the last 10 years.

So I have two.

Two questions if I may.

My first one is probably for bill.

Wondering if you could give us an update with all the changes.

Given the shell acquisition, obviously country what is your.

Okay.

Tax position in the U S. When do you expect to see full cash taxes there.

And my second question, if I may is a big picture question for Ryan.

Brian there's been two things came out of the gas climate related recently won as the proposal from the SEC on climate disclosure on the second is the Apis suggestion of a carbon copy. So I'm just wondering if you could offer clinical was prospectively on those issues.

Okay.

Yeah.

Great I'll, let bill talk about the cash tax and then I can address that last part, but I would say Tim is not leaving US Doug we look forward to us.

Continued involvement in all the key decisions in the company, so, but let me turn it back to Bill for sure Doug assuming that current pricing continues.

Would expect to be moving into the U S tax paying position this year with payments.

<unk> quarterly starting this quarter in the second quarter.

The amounts and timing vary depending on pricing and other market conditions, but we do expect to return to a cash tax paying position this year and.

Starting to make estimated payments in this quarter.

And with respect to your last part Doug certainly.

All kind of reviewing quite a bit of detail what the current climate suggestions that they've come out of the SEC SEC rulemaking process will be commenting on that as part of part of industry.

As well there.

<unk> problematic I mean, we've said all along we're supportive of.

Everything a company can do on scope, one and scope two reductions as a company and we came out with our ambition to be a Paris aligned to net zero by 2050 with respect to the emissions that we produce as a company and all companies ought to have a Paris aligned climate risk strategy in order to address that to deal with the emissions they create I guess the.

The problematic piece was always spend the scope three because of the double counting because who's responsible for that and should you hold a company like Conoco Phillips responsible for a <unk>.

The consumer's decision to buy a pickup truck versus a Toyota prius.

Thank <unk>.

These are things in the scope three side of things that we think are problematic. If you report in may change their subject to double counting and they have a lot of problems associated with how you might actually report against those certainly in AR.

In an FCC sort of document that has to be included in your Qs or your case.

But we think quite quite problematic, which is why for quite a while as a company. We've been supportive of if you want to impact the demand side of the equation you need to do something like a carbon tax. So we've been a part of API and a part of that decision process within our industry Association to say you know that.

The best way to deal with this on the demand side is to have a heavy carbon tax.

Our founding member of the climate leadership Council with the.

The dividend back to the to offset the progressive nature of attacks, but so.

So consumers can make choices and decisions around the kinds of services and goods with a supply and understand what the carbon impact of that might be we understand that that's a political hill to climb and it's tough.

But it makes more sense to us than trying to regulate your way to a solution that lets let the markets work and price carbon into the market, which is why we've been supportive of that as a better way to deal with the energy transition.

You've been leaders on this topic and I appreciate the answers.

Thanks, Doug.

Thank you. The next question comes from Paul Cheng from Scotia, Howard Weil. Please go ahead.

Hey, guys good morning.

Good morning, Paul.

Two questions.

Yes, actually we had a shot.

First one I wanted to go back into the cash tax.

From the accounting standpoint.

Do you estimate the food.

Cash tax way and then apply.

Throughout the year each.

Each quarter.

The full year estimate has been changed or each quarter, that's being at somebody.

That's the first question.

The second question I think is what team.

Also real quick what is the first quarter of what that impact on your production by.

By region or by by that they can play and also with that the second quarter.

Again packaging market that we've seen so far thank you.

Yeah sure Paul So for U S cash tax paying position, we estimate are our annual taxes on a yearly basis and then we pay quarterly on estimated taxes and as I indicated we expect to start making those quarterly payments in the second quarter of this year.

Paul on the on the weather question, we had a weather impact in all our major basins in the first quarter.

It was.

I'm really proud of how the team responded to that we got things back on fairly quickly I would say the weather impact while it affected almost all of our production that was rather nominal and we were able to overcome that as.

As the second part of your question about up in the Bakken I think.

Everybody is aware of that.

The most severe winter in recorded history up in North Dakota, and we're still assessing.

The.

The amount of time, it's going to take to bring that back up to full production. So I think the.

The assessment is still going on there.

No Paul Nick Tilled as add on too.

What Tim was saying related to turnaround impacts for Q2 and Q3. So Q2, we've got a fairly large.

Turnaround activity, both in Norway, non operated and operated as well as Fairmont. So that will average about 35000 barrels a day for Q2 and then we have less activity in Q3, that's focused on Alaska train two AP LNG and then Montney in Canada and will be 15000 for Q3, So 35000 in Q2.

215000 for Q3.

That's great. Thank you.

Thank you. Our next question comes from John Freeman from Raymond James.

First question Ryan when you were talking about just given everything that's happened to be in the market. How do you have to constantly kind of be.

<unk>, just sort of a 10 year sort of macro and energy transition demand impact your view on mid cycle pricing and then one of the things that you mentioned and I was hoping you can maybe expand a little bit higher as you said maybe change possibly change the view of how you think about kind of short cycle versus long cycle production.

Yes, yes, John I'd, just trying to make the point.

<unk>.

The transition is not going to be a cliff transition, it's going to be a <unk>.

Ron out one and the pace of that the slope of that curve is pretty unknown. So the way you react to that is have the lowest cost of supply of barrels that chicken supply whatever that transition demand is going to look like and make sure that theyre, giving adequate and competitive return and I think we're well set up to go do that and.

The point I was making is that.

And then all of these scenarios, even some of the IEA scenarios that they look at and we monitor or four or five different scenarios internally to the company. Most of those suggest that there is going to be a need for oil and gas long past 2050, so, but we have to supply that sustainably.

To supply that with a low <unk> intensity going to going to net zero by 2050, but we also have to supply low cost barrels. So when you look at that it's going to be around a long time, so sure medium and longer cycle projects are going to be needed. In this industry. We just have to assure ourselves that there are competitive on a cost of supply basis.

And then they have a competitive GHT intensity as well and so projects like Willow in Alaska fit that mode. There, while under a $40 cost of supply they are less than $10, a kilogram per barrel. The cotwo intensity, so they fit well within what the world's going to need in order to us to ratably.

<unk> supply the energy to a growing world, where energy demand is going to be increasing over time, we have to figure out how to do that more sustainably.

Thanks for that and then my follow up question for Tim.

Tim and Jack.

On the shell assets.

You'll see that in the past that the biggest opportunity there is transitioning from the one mile to two mile laterals.

Accomplish that it can require coring up a lot of that acreage with some of the partners.

Just kind of an update sort of how that's progressing and then a follow up for any closing according to plan kind of what would be a reasonable.

Amount of that that acreage and can be downloaded two mile plus laterals.

Yes, Thank you John .

These trades and swaps are a core competency of the team. So we're continuing that there we've seen good opportunity there and it's starting to manifest itself in some longer lateral both on the operated and the non op on the shell assets and I expect that to continue.

Thank you. Our next question comes from Leo Mariani from Keybanc. Please go ahead.

Hey, guys wanted to follow up a little bit on some of your comments around LNG here.

Really what I'm just trying to get a sense of is do you all at conoco through your kind of extensive global marketing footprint.

Can the U S really do anything in the next couple of years say 'twenty, three and 'twenty four would add any incremental LNG export capacity at this point in time are those ads more kind of mid decade, and beyond just trying to get a sense of whether or not you can be more material connectivity between Europe , and Asia and the U S.

And the next few years.

Yes sure Leo this is bill.

I think that if you look at LNG export capacity today, it's running a little over 12 Bcf a day.

Yes.

Export terminals are running effectively at capacity or slightly above nameplate.

Think that you've got several folks who are out in the market who are looking at taking FID, but theres a practical reality that once you take several years to build these terminals. So I think if youre looking at <unk>.

The impact in terms of immediate term or mid decade, icf's closer towards mid decade before you start seeing these.

These new import are these new export facilities online.

Okay. That's helpful for sure.

Just wanted to ask a brief question on your Canadian production I guess, primarily in the Montney here.

Looking at your conventional non oil sands volumes, it looks like that kind of been dropping for the last four quarters based on the data you. All provide do you expect those volumes to start growing at some point maybe in the back half of the year or 23, what can you kind of tell us about the trajectory of the Montney there.

Yes, Leo this is Nick one of the factors that we have to look back and as we took a fairly large capital cause obviously in 2020 and they were in maintenance mode. In 2021, we didn't have any rigs or frac crews. So we've.

Restarted that program earlier this year, we started fracking the wells Thats pad four and then we're also drilling pad five and pads six so that drop that youre seeing over the last four quarters is really just a lack of work that were doing up in money. So we were started back drilling both.

Like I said, Pat <unk> six we'll see some of that production come on stream in Q3 and Q4 and then another thing that we're doing is we're working on our Cps II facility expansion, that's where we're adding both gas handling our condensate recovery and then water handling where about 30% complete on that and that's on schedule.

And then I will come on stream in 2023 as well the condensate recovery unit will allow us to really monetize on that county acreage that we picked up a few years ago.

Thank you we have reached the allotted time, we have for questions I will now like to turn the call back to Mr. Kainer for final remarks.

Thank you Hilda and thanks to all who took part in today's call and with that I'll wrap it up with you held it any closing comments. Thank you.

Thank you.

Ladies and gentlemen. This concludes today's conference. We thank you for participating you may now disconnect.

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Yeah.

No.

Okay.

Hum.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

[music].

Okay.

[music].

Okay.

Thanks.

Okay.

Yes.

Okay.

Sure.

Yes.

[music].

Okay.

[music].

Yes.

[music].

Okay.

[music].

Yes.

Okay.

Sure.

Okay.

[music].

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Okay.

[music].

Okay.

Yes.

[music].

Great.

Yeah.

Yes.

[music].

Yes.

[music].

Okay.

Yeah.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Okay.

[music].

Okay.

Thanks.

Great.

Okay.

[music].

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Sure.

Okay.

Yes.

Okay.

Thanks.

Yes.

Okay.

Yes.

Sure.

Okay.

Yes.

Okay.

<unk>.

Sure.

Okay.

Yes.

Okay.

Thanks.

Okay.

Yes.

Okay.

Yeah.

Okay.

Thanks.

Okay.

Sure.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

Yes.

Thanks.

Yes.

Got it.

Yes.

Thank you.

Yes.

Okay.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Thanks.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

[music], Inc.

Hum.

Okay.

Yes.

Okay.

Thanks.

Okay.

Yes.

Sure.

Okay.

Thanks.

Yes.

Okay.

Hum.

Okay.

Yes.

Okay.

Hi.

Yes.

Okay.

Right.

Yes.

Okay.

Yes.

But.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Okay.

Yes.

Okay.

<unk>.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Yes.

Okay.

Yes.

Okay.

Yeah.

Okay.

[music].

Okay.

Sure.

Uh huh.

Okay.

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