Q1 2022 Antero Resources Corp Earnings Call
Ladies and gentlemen, thank you for your participation and please remain on the line to Antero Resources' conference, we'll be starting momentarily once again that is.
Please remain on the line the Antero Resources' conference, we'll be starting momentarily.
[music].
Greetings and welcome to the Antero resources first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation, if you'd like to ask a question. Please press star one on your telephone keypad, if anyone should require operator assistance during the conference. Please press <unk>.
Zero on your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Brendon Cougar C. F. O is midstream and Vice President Finance Treasurer. Thank you. Please go ahead.
Thank you for joining us for Antero <unk> first quarter 2022, Investor Conference call, we'll spend a few minutes going through the financial and operating 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, where 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 Paul Rady, Chairman, President and CEO , Michael Kennedy, CFO , and Justin Fowler Senior Vice President of gas marketing and transportation.
I will now turn the call over to Paul.
Thanks, Brendan good morning, everyone.
I'd like to begin by discussing the overall macro environment and the factors that led to the recent increase in commodity prices.
During the last year 2021 that is commodity prices, we're strengthening driven by a resurgence in demand as we came out of the pot.
The pandemic.
The supply side.
Shift towards maintenance capital plans and supply chain constraints led to moderated global supply growth.
And during the first quarter of 2022 as you all know this bullish fundamental backdrop was further strengthened by the geopolitical events in Europe .
Unlike prior commodity price spikes.
These events had a large impact on the futures curve, where we saw the natural gas strip move up 45% throughout the curve all the way to calendar year 2026.
As Europe looks to strengthen its energy security it is.
It has become clear that there will be a significant call on U S shale gas in the coming decades.
Importantly, with Antero is two three Bcf a day of firm transportation to the LNG fairways, we are uniquely positioned to supply the increase in international demand.
Today, we are already selling nearly one bcf a day of natural gas to LNG facilities on a mix of long term and short term contracts.
As additional LNG export capacity is built out we think our premium to Nymex will increase and will become more closely linked to international prices.
Let me just comment a little bit in terms of contracts.
And make an important point.
We're happy where we are right now on shorter term deals whether it's selling on the day or on the months.
We deliver to premium locations in the LNG fairways, such as Anr southeast head station, whereas many as three LNG liquefied or bidding for our gas.
But we're not interested in longer term supply deals unless we received significantly higher premiums there's too much optionality today to get locked in prematurely.
Since the last cycle the industry has shifted from one of outstand and growth to free cash flow.
Maintenance capital and return of capital to shareholders because of this shift along with other fundamentals that will touch on later that we remained constructive on commodity prices going forward.
Yeah.
Slide number three titled structurally higher prices ahead.
Compares historical.
Nymex natural gas spot prices versus the corresponding natural gas surplus or deficit. So they're running five year average.
The red circles highlight the historical natural gas price during periods when storage levels.
In line with the five year average.
During the shale growth era from 2015 to 2019 natural gas prices averaged $2.50 to $3 25.
<unk>, reflecting high storage levels.
The green circles out on the right represent natural gas prices when storage levels are low.
As we see during the maintenance ore from 2022 today.
During this period prices have averaged over $4 per F&B to you.
We believe that is structural.
A structural shift has occurred with respect to pricing versus storage levels.
Primary driver behind this shift as the supply side with limited access to capital.
<unk> infrastructure build out and also supply chain constraints that limited production growth.
Also supporting a higher price outlook is number one inventory inventory exhaustion.
Two continued LNG export growth and three low global storage levels.
We believe this bodes well for commodity pricing moving forward and Antero is best positioned to directly benefit from higher prices.
Now, let's shift focus to antero has significant exposure to rising commodity prices.
Slide number four titled leading commodity price exposure.
Yeah.
Depicts our 2022 and 2023 hedge portfolio relative to our peer group.
Notably we have not added any natural gas hedges since 2020, which will which once again is a testament to our natural gas and liquids commodity fundamentals teams that remain bullish on the outlook for both natural gas and Ngls.
Antero is less than 50% hedged on expected 2022 natural gas production and has no liquids hedges were virtually unhedged on all commodities in 2023, except for 16 Bcf or just 2% of our production in 2023 these hedge.
Were put on in 2020.
This remains a sharp contrast to our peers.
Who were on average 74% hedged on natural gas for the remainder of 'twenty two.
And 57% hedged on natural gas in 2023.
Okay.
As previously as previously mentioned, we continue to see favorable fundamentals for the commodities and are very comfortable with where we are today from a balance sheet diversified product and destination mix.
<unk> industry, leading firm transportation portfolio allows us to deliver the majority of our gas and liquids to premium markets.
This attribute is unique to antero and will allow us to capture the upside to growing LNG and LPG export demand.
With this in mind.
We have invited our senior vice president of gas marketing and transportation, Justin Fowler to be on the call today and.
I'll now turn it over to Justin and let him expand.
Yeah.
Thanks.
Over the last few months natural gas prices have reached their highest levels since 2009.
Monthly Nymex prices have touched 13 year highs supported by global supply concerns and geopolitical tensions across several key regions.
Yesterday, we saw the expiration for the may contract above $7 per <unk> for the first time since 2008.
Taking a closer look at storage levels and current supply expectations, let's turn to slide number five titled working gas in storage.
Through the first four months of 2022 U S. Natural gas supplies have averaged around 93, five bcf per day.
This resulted in a storage level of around 145 Tcf at the end of the withdrawal season.
Consensus estimates call for the end of injection storage of approximately three five tcf prior to the 2022 2023 winter heating season.
The chart on this slide depicts the supply required to hit that consensus target in November .
Assuming similar demand levels that we've seen over the last several years adjusted for the higher exports we have today.
<unk> would need to average over 97 Bcf every single day.
Beginning today through November .
This represents a nearly four bcf per day increase from current production levels.
If supply does not increase that level in the near term, we will likely need production in excess of 100 Bcf in the back half of 2022.
While we do expect to see supply increase in the coming months, we believe the eventual supply growth in 2022 pit underwhelmed.
Further we continue to see very strong power generation and industrial demand that is averaging 3% to 4% above these historical levels.
LNG exports are also only assumed at the year to date average of 13 Bcf per day.
Which is expected to increase as incremental capacity comes online this year.
This suggests even higher supply growth will be required to fill storage ahead of next winter.
Now turning to slide number six titled Interros peer leading exposure to LNG fairways.
This slide highlights what Paul touched on earlier with our two three Bcf a day of firm transportation to the U S Gulf Coast and to the mid Atlantic Cove point LNG terminal.
As shown in the Inset chart. This two three Bcf a day represents approximately 75% of Antero as total natural gas production.
As depicted this is significantly higher direct exposure to growing LNG demand than any of our peers.
We are currently selling nearly one bcf a day of natural gas directly to LNG facilities, which includes four of the seven facilities that are in service today.
This includes counterparties, such as scale of India at Cove point.
Chubu electric at Shreveport.
Cheniere energy as Sabine pass.
Venture Global Calcasieu pass phase one.
Specifically, we have one four bcf of firm transport along the Columbia Gulf.
Tennessee gas and Gulf Express pipelines.
These pipelines deliver our gas to the doorstep of many of the Newbuild LNG terminals that are already in service or being discussed today.
For context, when we began building our firm transportation portfolio to the LNG corridor in 2011.
There was careful consideration to the firm delivery points that were negotiated with the Interstate pipeline companies.
The Anr 600, Mcf per day capacity delivers the primary points that can supply cheniere Sabine pass and venture Global's Calcasieu pass phase, one and phase two terminals.
Additionally, the Antero 570 Mcf per day on Tennessee gas pipeline has the ability to feed the proposed venture Global's Plaquemines LNG terminal.
For the new fortress recently announced offshore liquefaction terminal.
Finally, the Columbia Gulf firm transport southbound is capable of supplying Sabine pass.
So Marion Driftwood Sempra.
Sempra Cameron and other various contemplated LNG project projects.
As additional trains and terminals are completed we expect the pricing hubs. These pipelines access we will see larger and larger basis premiums to Nymex.
With the expected increase in LNG exports, both on an absolute and relative percentage of overall U S supply.
We believe these premium hubs will see price increase more dramatically than Nymex as they linked directly to international prices.
This environment will provide further support to <unk> strategic position today accessing LNG markets.
This large firm transportation portfolio combined with a deep resource base that includes more than 20 years of drilling inventory makes antero a preferred partner for both LNG suppliers and international buyers.
We are excited about the opportunities to increase our margins in gas realizations as this market develops further in the months and years ahead.
With that I will turn it over to Mike.
Thanks, Justin.
I'd like to start on slide number seven titled 2014 versus now.
While this cycle is different for antero.
To expand on how antero has positioned itself to capitalize on rising commodity prices.
Before charts on this page comparing tariffs positioning in 2014 compared to today.
As you can see in the past seven years and Taro has grown production significantly and is now a top five natural gas and top two NGL producer in the U S.
During this time antero has dramatically reduced its absolute debt and leverage as a result of transitioning from an outspend to a consistent free cash flow generator.
Despite this transformation to a more sustainable business model and Taro is valuation remains well below what it was during the last cycle when e&ps were being rewarded isn't valued for growth.
As the industry continues its focus on maintenance capital development, we believe investors will favor e&ps like antero that have scale healthy balance sheets sustainable free cash flow generation and attractive return of capital strategies.
The next slide highlights the increase in our free cash flow targets with the increase in commodity prices and Taro is 2022 development plan is now expected to generate over $2 $5 billion of free cash flow.
We are also expecting a similar level of free cash flow in 2023, despite the backward dated strip prices as our hedges roll off.
This brings our current five year cumulative free cash flow target to approximately $10 billion, which is essentially in line with our current market cap.
Our substantial free cash flow will enable us to continue returning capital to our shareholders. While also continuing to pay down debt.
In February and Taro is board of directors authorized a share repurchase program for the company to repurchase up to $1 billion of outstanding common stock.
Despite commencing the share buyback program in late February Antero was able to repurchase approximately $100 million of stock at an average share price of $27 11 during the first quarter.
This amount approximated 25% of our initial free cash flow estimate for the quarter.
Based on current commodity prices and Taro is targeting in excess of 25% of free cash flow to be used.
For share repurchases in the second quarter.
Once the credit facility has been repaid.
We expect to occur later in the second quarter, we expect to increase the share repurchase program, the greater than 50% of free cash flow.
Now, let's turn to slide number nine titled.
Our lowest leverage highest return.
The benefit to our shareholders of having already significantly reduced our debt is that we can return more of our free cash flow to shareholders.
Scatter plot shown here highlights our leverage position and cash return relative to the Appalachian peer group.
As you can see has the lowest leverage which supports a 10% cash return the highest among our peers.
Another noteworthy item is this puts <unk> in a similar position as the majors and well ahead of the S&P 500.
As further debt reduction opportunities become limited later this year, we expect to maintain a very high cash return profile relative to other e&ps.
To summarize on slide number 10, titled Antero investment highlights.
Antero is well positioned to execute in shale three point O and capitalize on rising commodity prices.
Antero has the strongest balance sheet in Appalachia with sub $2 billion of debt and a one one times leverage ratio that is expected to go below a half.
A turn this year.
We have significant scale as the fifth largest natural gas producer and second largest NGL producer in the U S providing product diversity at attractive prices are limited hedge position and industry, leading firm transport portfolio provide direct exposure to rising natural gas and liquids prices driven by <unk>.
Rising global demand.
Lastly, if we assume today's strip prices, we are forecasting substantial free cash flow generation in excess of $10 billion through 2026, which is our current market cap.
With the lowest leverage and highest free cash flow yield of our peer group and a trading multiple of sub four times.
We believe antero is uniquely positioned to continue to deliver attractive multiple expansion and value to our shareholders.
With that I will now turn the call over to the operator for questions.
Ladies and gentlemen, the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys once.
Again that is star once you Register your questions at this time.
The first question today is coming from a route.
Of J P. Morgan Chase. Please go ahead.
Yeah, Good morning, Mike.
Mike maybe for you I wanted to.
To see if you can elaborate on potential cash returns to shareholders. This year you mentioned how.
Things could accelerate once you.
Paid off the revolver.
But your updated guidance for $2 5 billion or so in free cash flow.
You know how much debt can you assist or debt can you efficiently repay this year and what does that mean do you think in terms of buyback for the year. I mean do you think you can do the full billion dollar authorization. This year potentially even reloads just given the free cash flow numbers that you're talking about this morning, Yes, I mean thats what the commodity.
Prices would suggest would happen a room right now in the last call. We highlighted we have approximately about 800 and $900 million of debt paydown on an efficient basis.
We paid down $200 million of that in the first quarter, we still have an additional 385 on the credit facility, which we will pay down in this quarter. So thats 600, and we thought it could maybe get $2 million to $300 million and efficiently.
The remaining non callable bonds.
So thats the plan around the debt at these commodity prices hold and are supportive that would leave one 6 billion remaining with the majority of that being used for share repurchases. So that would suggest you would exhaust the $1 billion and have put in an additional program sometime later this year.
Great Thanks for that.
I had one maybe housekeeping question.
On both NGL and gas pricing.
The first one regarding.
C III plus pricing.
Realized price pre hedging was about 61 50.
And are you guys doing a nice job of giving us kind of what the core lead numbers would be.
You know whats your updates and I think the benchmark was close to the 64, so a little bit of a gap. There just wondering if there was something unusual in the quarter and would you expect those to trade at parity same thing on the gas side.
Free rent hedge pray.
Premium relative to Nymex about six and I think the guidance is 15% to 25, so just trying to understand what any implications from <unk> realizations for the rest of the year in your guidance.
Yes, Ryan Thanks for the the point out on our weekly we are doing a terrific job on a weekly basis of publishing what our NGL prices and we've done that for a couple of years now and it's always very close to actuals. This quarter. There was a one time adjustment.
To those prices as it related to the carrying value of our line fill and NGL inventory without this adjustment we would have approximated that weekly pricing around like you mentioned the $64 per barrel. So.
We continue to expect whatever we published on a weekly basis will be very close and this was just a one time item.
The gas another kind of one time item was really related we are a <unk> premium our guidance for the year was 15 to 25.
Premium.
This related to in February if everyone would recall there was I think it was around $1 50 increase on the last day of trading for the February monthly contract.
And that pushed that monthly contract up to $6 28 per Mcf and then the subsequent daily trading for that month fell all the way back down I think the $4 50. So what happened is that first of the month pricing was 628, the dailies averaged well below that as we have a portion thats sold on first of the month and a portion of that.
<unk> sold on dailies.
Got a much lower price in that month and that for some months.
Would have suggested so I was kind of a one time item, we don't see that happening going forward. So we kept that 15 to 25 premium guidance and we expect to obviously be higher than that in the second third and fourth quarters to average out for the year.
Great. Thanks, a lot Mike.
Thanks Arun.
Thank you. The next question is coming from Neal Dingmann of Truth Securities. Please go ahead.
Good morning, I'll call on you and Mike and the team did a great job, obviously with the lack of hedges I'm just wondering on a go forward and look at that slide four is there anything that would cause you to change that to you know I know look your finances are gonna be pristine, but is there anything that you know where prices might go or we've heard a number of anecdotes where.
Callers are pretty fantastic out there that would cause you to change your opinion that to put some hedges on.
Hi, Neil good question and but no.
We have not attempted to put any hedges on the other callers were pretty strong there for a while but.
Our Santa Rita product prices for both gas and Ngls is that it's it's a pretty bullish outlook that we have and so no planned new hedge any commodity for the foreseeable future.
Youre right, we have are headed towards a pristine balance sheet.
So that's a great position to be in and so.
Really our our strategy and philosophy is to remain on the front of the curve sell on the front of the curve and not hedge into a backward dated curve at all so no plans to hedge in the foreseeable future I know, we used to be the kings of hedging in a contango environment.
Now we're on the opposite add just.
<unk> the benefits of staying on the front and remaining unhedged and with that our de levering will.
Tara that much quicker.
Sort of a fantastic call and then just one follow up on <unk> you guys look to be very stable going forward with the three rigs over there.
Marcellus.
On that side too if you're able to bring on some incremental capacity or another LNG contract or something of the likes what would anything like that again, I mean again once again, having the financial flexibility to do so.
Anything on that front cause you to I don't know later this year early next year.
Add a rig or thinking about different in activity.
No nothing contemplated there.
We feel good about.
Where we are in terms of maintenance cap.
With our drilling partnership there might be a small increase in production production net but.
Not that much so nothing in the cards that would.
That would get us.
Turn it up in order to add another rig and start growing again feel pretty good with where we are now.
Fantastic Thanks, a lot.
Thanks Neil.
Thank you. The next question is coming from Sebastian genre of Benchmark Company. Please go ahead.
Yes.
Sure.
Hey, good morning, Michael.
So the question I guess is on the LNG premium.
Are there any specific hubs you know we should be watching or are there any specific hubs into developing that.
Did I guess in the world in the Permian World, but Magellan east and so on.
That would express that international premium to Nymex.
No.
Haven't seen that at all.
We mentioned our hubs and we're pleased with where we deliver to us Justin.
We negotiated that all and made the right calls on.
Where we deliver to.
Years ago, we were pitched.
Maybe through Cheniere, where there'd be a sharing mechanism.
He didn't bite on those but we kept track of those and certainly during the downturn those would have been deeply underwater. So glad we didn't even nimble.
But there is no particular hub I would say that if there were a.
That deal to emerge where you could somehow get into that are between J J M. Let's say our TTS versus.
Henry if you could capture some of that $10 plus premium while minimizing the risks that would be of interest that we were studying it but we haven't seen anything that.
As tempting, so, but I do think the premium hubs. We go to our are in very good stead for most of the players in the LNG fairway.
Got it.
On LPG, you know a lot of things happening right. We got we got the typical seasonal shoulder and we have lockdowns in war etcetera.
How do you sort of see the spring and summer even autumn play out.
No we're very bullish still on the LNG on the LPG prices, you're still at all you know very low inventory levels on propane.
Very low days of supply on propane see a lot of constraints around propane growth.
We have our own ownership in processing and fractionation and don't see any growth in Appalachia, yeah, Theres low growth out of some other basins, but nothing that would overwhelm the market and we still see very much a lot of demand coming from Asia. So the LPG story continues to be very bullish and we're unhedged.
We mentioned on in the second largest producers so feel very good about it.
Alright, Thanks, and just if I could ask a bit of a housekeeping question, but you know I guess this quarter I was expecting in terms of G. P. T cost probably be higher than it was it seems that.
Actually at least transportation costs went down quite a bit and helped blunt some of the processing increases.
You gave the guide for the year, but what sort of.
What kind of dynamic should we be looking for you know <unk> rest of the year.
Yeah, when I look at that I would I would include the marketing expense with the GP and T. Because what happens is you know.
<unk> like for the first quarter transport expenses better than expected as we used more local firm and so that has had less cost associated with it.
Firstly, the transport that was had a little bit of Unutilized and it was the longer haul.
So the Gulf transports, our marketing expense was a bit higher than our guidance. So in combination those two or so.
At the low end. So we've obviously built conservatism into our ranges. So that they were still good numbers, but in combination they werent quite as low as the transport expense would suggest so.
We can sir thank those who've kind of reverse in the summer months will start using our longer haul transport and with the local basis widening not use the local and so youll, probably see those flip transport expense a bit higher with marketing expense a bit lower so we left the guidance the same.
Okay makes sense. Thank you Yep mhm.
Thank you. The next question is coming from Omar Chowdhry of Goldman Sachs. Please go ahead.
Thank you and good morning, and thank you for taking my questions.
You have highlighted the positive view on gas and Ngls to market I was wondering if you can talk a little bit about risk and risk management here.
I'm trying to understand if you would look to deploy all of the free cash flow, which was your new this year towards the shred it but just broken out mode. What do you think about.
Building some cash on the balance sheet.
Now.
First call on that is for debt reduction.
Of course, but once that occurs we will have now.
Half a turn of leverage.
No callable debt nothing efficient way to get in.
You know it'll be in and around in the low $1 billion worth of debt for a company that on current commodity prices I think it's two two and a half a billion plus of free cash flow. So.
In really good shape, there so no reason to build any cash balances.
And then when you look where our stock trades at a 25% free cash flow yield sub four times and that actually continues into 'twenty three and beyond the market caps covered with the five year free cash flow right now.
That would suggest you should really be buying in the.
Shares.
As quickly as you could so once that that gets down on the credit facility will be deploying the majority of that cash to share buybacks.
Got it that's helpful. And then I just wanted to follow up on the question around the premium to Henry hub for the Bcf per day in which you wouldn't sell to LNG facility facilities on short term contracts can you help us with the framework as to how we should think about that premium.
In the near term how could how could that look like.
Okay.
Yes.
It's slower AD numbers, so it would be from Nymex flat to maybe Nymex plus 12 or 13.
That's probably the range right now as we get liquefied bidding for the quantities of gas.
But I think the key to that is that that's the current spot we see that the optionality around that as being substantial.
Substantial for Antero, because you just don't know.
Where that's going to go with the next wave of LNG being built and I was going to be a lot of competition for that gas.
What are the ones with the transport. So I think that's the whole point is that we retain that optionality. All of these volumes are on a spot basis and over the next couple of years, we're going to see where that goes because theyre going to have to compete to try to secure that supply and like I mentioned, there is a finite amount of transport down to the LNG corridor. So we're in really good.
<unk>.
That's helpful. Thank you.
Thank you. The next question is coming from David <unk> of Cowen. Please go ahead.
Good morning, everyone. Thanks for taking my questions.
Good morning.
Just a quick question first one just you guys pointed out the fact that you did not add any hedges in the quarter when the whole commodity complex move quite a bit higher.
Should we take that as an indication of your view on the market and your view forward on the strengths of commodities or just the evolution of risk management and considering the buyback the balance sheet in such great shape.
Well of course, it's both but I think.
More.
Primarily it's our bullish outlook on the commodity itself. We just we like everyone are watching.
Supply and demand and usage and the power stack and so on and we just.
Feel good about.
Higher prices ahead and didn't want to.
As I've said, a backward dated curve or even a flat curve that we just don't want to give up our optionality received writer brighter times Ed.
Even above where we are now.
Fair enough.
And then just.
A little bit of color just on the on the cadence of buybacks. I know you said that you would be triggered to using 50% of free cash once you've paid down the revolver. This quarter, which was used to redeem the notes and one Q I guess the the <unk>.
Timing I think you alluded to you you acquired shares so the 100 million or so in the first quarter in the last six weeks of the quarter.
Was that just a coincident with completing the redemption of the senior notes, whereas that that's sort of the window that you had to work with that time or Oh it was.
If you recall, David we didn't reach our under $2 billion target for debt until mid February which was consistent with our conference call. So we did not initiate a share buyback program pill.
Couple of days after that conference call, which left US six weeks in the first quarter.
We did as we looked at our free cash flow estimates at the time. It was a one five to $1 7 billion forecast on the commodity prices, but $400 million of that would occur in the first quarter. So we put in a <unk> one plan to buy back $100 million by March 31.
<unk> prices were higher we performed better than we thought.
So we ended up having free cash flow of 465, but couldn't change that can be five one plan because we were outside an open window.
But still you know, we're very confident in our ability to.
We hit that 400, so we put the $100 million then of course going forward now we look at the free cash flow estimates are well in excess of what we originally assumed.
We do have that $388 million of the credit facility that will be paid down during the quarter, but anything above that during the quarter for your free cash flow estimates as a pretty good assumption of whats going to be bought back during the quarter.
Absolutely and I guess, just along those same lines, how often are you communicating with the board around the authorizations.
It was one communication and when we get it authorized for the $1 billion, we report back to them on our progress against that number.
That's the communication.
Perfect. Thanks, Mike.
Thank you. The next question is coming from Tom Kumar of Wells Fargo. Please go ahead.
Hi, good morning, gentlemen, and thanks for taking my call.
My question.
To start with the buyback commentary always see.
Phenomenal place to be gained through the debt targets earlier in there as you indicated.
But any thoughts of doing.
<unk> stock is up almost 100% of this year.
I just want to understand the why.
You still focus on what are you looking at that makes you feel like your stock is still undervalued.
I think anything about the 25% free cash flow yield qualifies as being undervalued also sub four times EBITDA. If you look at on a PDP basis, it's like a PDP <unk> you put these type of commodity prices on there if anything close to that occurs we are substantially undervalued. So we should have.
I am back shares as quickly as we can.
And so that's how we're doing.
Once the $1 billion as Don No of course, we'll reassess and look at it in that timeframe. Once that is exhausted and see what further return of capital strategy, we have but we're firmly behind this first initial $1 billion share buyback program.
Program.
Alright.
Thank you that makes sense and I guess the other question is you mentioned the fluid transport.
And your position in supplying LNG gas.
Are you seeing any any movement on that.
They're saidi of potentially <unk> projects out there.
LNG, but in terms of incremental ability to get the gas to the Gulf coast.
Are you seeing any discussions or move them there.
No.
No.
Yes.
<unk>.
The difficult time right now to do pipeline expansions as you are aware, whether it's new builds or even installing compression on existing lines. So there is nothing material that.
Is happening to boost say.
Potential firm transportation from Appalachia, or even down my shirt.
The Chicago corridor lets say, there is nothing particularly happening thats going to.
Boost LNG into the fairway at least for them as far north as where we are I know there are number of ideas in the haynesville.
New newly arrived players in the Haynesville that are continuing to circle and try and figure out a way to get their gas to the Gulf economically so could be some are.
New builds or.
Enhancements coming out of Haynesville.
It's about all I can think of or northern Appalachia and don't see anything but that's why we continue to highlight our $2 30 Bcf of transport I mean, such a finite resource and we've captured such a significant portion of it. So we don't need really any further pipeline rebuilt to have our LNG exposure you know we're already at 75% of our gas.
We're in good position.
Okay. That's really helpful. Thank you gentlemen.
Thank you.
Thank you. The next question is coming from Holly Stewart of Scotia, Howard Weil. Please go ahead.
Good morning, gentlemen.
Two quick ones.
Two quick ones for me first I think Mike one of your your peers highlighted the impact.
Of cash taxes on their free cash flow portfolio over the next five years I'm, assuming you guys probably have that.
Your numbers here. Thank you.
David as well any any can you give us any inclination on kind of when that kicks in and the magnitude.
Yeah of course in our free cash flow free cash flow projections already include the projected cash taxes.
Just to remind everyone. We have $2 3 billion of Nols, the vast majority of which are 100%.
We also have over $800 million of capitalized IDC from prior periods that we did not need then, but we can use going forward and we have leases.
That are not in our 15 year plan that can be expense as well. So we have a lot of tax attributes. However.
Now when you have an excess of $2 5 billion of free cash flow this year and next year.
You know you chewed through those pretty quickly so not this year, but.
Right now if these commodity prices sometime in late 'twenty three is when we would become a cash taxpayer.
Okay. That's helpful and then maybe Paul just an update on.
Your ownership.
I mean, you've highlighted here this morning $10 billion of free cash flow over the next.
Five years can you just maybe give us some thoughts around that ownership.
Yeah, we own 139 million shares which is about 29%, it's a terrific asset.
The first mile of the LNG story here.
Huge inventory behind a lot of throughput so.
We want to own it and have no plans of divesting any.
Alright, Thank you guys.
Thanks, Alex Thanks Ali.
Thank you at this time I would like to turn the floor back over to Mr. Kroeker for closing comments.
Yes. Thank you for joining us on today's call. Please reach out to any further questions. Thank you.
Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect. Your lines at this time and enjoy the rest of your day.
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