Q1 2022 Centennial Resource Development Inc Earnings Call
Good morning, and walk into Centennial Resource development conference call to discuss its first quarter 2022 earnings today's call is being recorded a replay of the call will be accessible until May 12, 2022 by dialing 85585920.
Six and entering the conference I'd number three zero G. D. Five G are they visiting centennial's website at Www Dot C. D E V. I N C. Dot com at this time I will turn the call over to Heath Baby Center on your senior director of Investor Relations for some opening remarks. Please.
Great.
Thank you Rudy.
And thank you all for joining us on the company's first quarter earnings call.
Presenting on the call today are Sean Smith, our Chief Executive Officer.
George Glimpses, our Chief Financial Officer, and Matt Garrison, our Chief operating Officer, Yes.
Yesterday may 4th we filed a form 8-K with an earnings release reporting first quarter results as well as the operational results for the company. We also posted an earnings presentation to our website that we will reference during today's call.
You can find the presentation on our website homepage or under presentations at Www Dot Sidoti Inc. Dotcom.
I would like to note that many of the comments. During this earnings call are forward looking statements that involve risk and uncertainties that could.
Affect our actual results and plans.
Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward looking statements sections of our filings with the Securities and Exchange Commission.
Including our quarterly report on Form 10-Q for the quarter ended March 31st which.
Which will be filed with the SEC later this afternoon.
We believe the expectations expressed are based on reasonable assumptions. They are not guarantees of future performance and actual results or developments may differ materially.
We may also refer to non-GAAP financial measures that help facilitate comparisons across periods and with our peers.
For any non-GAAP measure we use a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release or presentation, which are both available on our website.
With that I will turn the call over to Sean Smith, our CEO .
Thank you is good.
Good morning, and welcome to Centennial's first quarter earnings call.
Overall Q1 was a strong quarter and we are very pleased to have started the year off with robust financial and operational execution.
From a financial perspective, we generated record free cash flow that allowed us to fully repay all borrowings under our credit facility and build a significant amount of cash.
This net debt reduction delivered leverage of one one times at the end of the quarter a level that is ahead of previous expectations.
Operationally, we continue to deliver from a technical perspective with strong well results from our northern and southern Delaware positions across a variety of zones.
Additionally, we were able to deliver capital expenditures in line with our expectations. Despite completing six more wells than originally anticipated.
This dynamic underscores our operation teams focus on continued drilling and completion efficiencies as well as continuing our quarterly success of drilling and completing wells ahead of schedule and under budget.
In my comments from the year end 2021 call, which is highlighted on slide five I laid out a differentiated 2022 game plan that was predicated on three core principles first delivering meaningful free cash flow generation and reducing leverage below one turn.
Second targeting top tier oil production growth of 10% to 15% and third announcing and executing on our two year $350 million share repurchase program. Once we have achieved our leverage target.
As I look back at our execution in the first quarter and look ahead to our expectations for the remainder of the year. We believe that these objectives are not only on track, but are ahead of schedule relative to our initial expectations from a growth perspective, we believe we are well positioned to deliver on our targets based.
Our strong well performance and continued operational efficiencies to date.
From a free cash flow and deleveraging perspective, we have made significant progress in Q1 and are raising our free cash flow target by $150 million from greater than $400 million to now greater than $550 million at today's strip.
Third with our revolver fully repaid meaningful free cash flow and the balance sheet and leverage nearing our target levels. We look forward to commencing our share repurchase program in the near term all in all Q1 was a very strong quarter and I'm excited for our continued financial and operational execution of our 2022 games.
Plan.
With that said I'll turn it over to George to review our financial results.
Thank you Sean.
Turning to our financial and operating results on slide 12 of the earnings presentation overall.
Overall Q1 results were in line with our expectations as.
As we had previewed during our Q for Q4 earnings call back in February Q1 production levels declined quarter over quarter due to the shift to larger development packages. In addition to the carryover of Ducks from Q4.
As a result net oil production for the first quarter was approximately 32750 barrels per day.
While average net equivalent production totaled approximately 61400 barrels per day.
Oil as a percentage of total production declined to 53% from 55% in Q4.
Due in part to the completion of six wells in the high <unk> area of our Reeves County acreage several of which were the highest rate of return wells in the quarter.
Despite lower production levels compared to Q4 total revenues increased by 10% quarter over quarter to almost $350 million as a result of higher oil and NGL prices.
Overall unit costs during Q1 came in within expected ranges relative to full year guidance.
Q1, LOE per barrel was slightly higher than Q4 due to elevated workover expense, but were still within our guidance range for the year.
G PMT was slightly above expectations, mainly because of higher than anticipated natural gas and NGL prices, which increased the expense associated with our percent of proceeds contracts.
As I mentioned on the last earnings call Q1 is expected to be our lowest production quarter. This year.
And we expect our overall unit cost to decline in subsequent quarters as our production base increases.
We generated approximately 89 million of free cash flow during the quarter and use that cash flow to fully repay borrowings under our revolving credit facility.
And to build cash on hand adjusted.
Adjusted EBITDAX totaled $217 million, which was up approximately 16% from Q4.
Lastly, net income for Q1 totaled approximately $616 million excuse me.
Turning to Capex during Q1 Centennial incurred approximately $115 million of total capital expenditures for the quarter, We spud 13 wells and completed 18 wells compared to 12 and nine respectively in the prior quarter.
While Matt will touch on this further it is important to note that as a result of efficiencies we completed six more wells during the quarter than anticipated, but still posted capex in line with our original expectations.
This acceleration of well completions into Q1, coupled with over half of our Q1 wells being brought online during the last months of the quarter.
Centennial up for significant significant quarter over quarter production growth and strong free cash flow in Q2.
On slide eight we summarize our capital structure leverage and liquidity.
Total net debt decreased by 8% from year end to approximately 765 million at March 31, and.
And net debt to LTM EBITDAX declined to one one times compared to one four times at year end.
The significant improvement in our balance sheet and strong outlook resulted in one notch upgrades from both Moody's and S&P.
At March 31st revolver borrowings were zero, providing us nearly full access to the $750 million of elected commitments under the credit facility.
Additionally, we had approximately $51 million of cash on hand, which we expect will build over time.
Finally, with our first note maturity scheduled for early 2026 Centennial has significant financial flexibility going forward.
Turning to our share repurchase I'd like to reiterate a few points we covered on the last earnings call.
First we have the free cash flow profile and balance sheet to return a significant amount of capital to our shareholders and.
In fact, our $350 million program represents approximately 15% of our market capitalization.
Second we expect the share repurchase program to be accretive to our long term shareholders as it delivers higher per share ownership of production and cash flow as the plan is executed over time.
With an already differentiated production growth profile share repurchases could enhance our already strong metrics on a per share basis.
In addition, the share repurchase provides flexibility to drive value over time.
Our strategy will allow for both regularly timed buybacks as well as opportunity opportunistic repurchases during periods of market dislocation.
As time progresses, and we built an execution track record, we are likely to revisit the size and duration of the current program. In addition to evaluating potential additional return of capital options.
With respect to execution, we have previously communicated our intent to begin repurchasing shares when leverage fell below one times.
With March 31st leverage at one one times and strong anticipated free cash flow in Q1.
We look forward to beginning to repurchase shares in the near term with that I'll turn the call over to Matt to review operations.
Thank you George Q1 was an outstanding quarter the operations group as.
As we continued to build upon the significant operational efficiencies gained last year with incremental improvements to completion cycle times.
We have also made the shift to larger packages at four to six well development projects.
To capture additional efficiencies via economies of scale.
We see the utilization of larger development units.
And the usage of shared facilities as key drivers of capital efficiency going forward.
Staying on this topic on slide six as.
As we first mentioned during our Q3 call last year, our operations team began testing a new completion design.
Which utilizes less fluid, resulting in shorten pump times and additional cost savings.
As you can see on the slide we've driven a step change in our completion cycle times, increasing both stages per day in lateral feet completed per day by 17% and 32%, respectively when compared to Q1 2021.
Most importantly.
Since we began pumping this new design late last year, we've seen strong initial production results as essentially every well utilizing this design has been at or above our original expectations.
As George alluded to these completions efficiencies were the primary driver of US completing six additional wells during the quarter and places centennial on a strong footing for the start of the year.
On the drilling front our team continues to carryover.
Efficiency gains from last year.
Which has been driven by larger pad developments and reduced mobilization times. Additionally, we recently drilled our longest lateral in company history. The Challenger AC 32, H, which reached total depth in just under 16 days for two and a half mile lateral or approximately 24000 feet.
Of total depth.
For reference our previous data point for two and a half mile lateral in Reeves County was the Doc Gardner, a U 23, H, which drilled to a total depth of approximately 23000 feet in 44 days back in 2018.
It's really puts into perspective in my opinion and demonstrates the material step change in performance from our drilling group.
It is important to note.
Our team has not stopped at the drilling and completions process to drive efficiencies into the program or cut costs.
Shifting to the bottom right hand side of slide six we began implementing centralized tank batteries and our development program. During 2018 and continue to increase the percentage of our development program utilizing this new facility design.
Once built these centralized tank batteries are easily expandable to accommodate additional nearby wells and can do so at significantly lower costs than newbuild facilities.
For 2022, we expect that roughly 60% of our new wells will flow into existing expandable facilities.
A significant uplift compared to previous years.
Finally, we will be evaluating the potential to retire some of our legacy facilities over time.
And flow those wells into nearby newer facilities with expandable capabilities.
This will have a positive impact on our LOE.
Overall, our operations Department is constantly innovating from a technology standpoint to drive further efficiencies.
<unk> continued focus on innovation and efficiency will be particularly critical as we look to help offset some of the inflationary pressures.
Continued to see in 2022.
Now turning to our recent well results on slide seven.
In Reeves County, Texas, the powdered donut wells came online in our Miramar block.
Which as many of you know is the higher G O our portion of our Texas asset.
This four well development consisted of laterals and the third bone spring sand.
The Wolfcamp, a and Wolfcamp C with average lateral lengths of almost 10000 feet.
<unk> delivered an average IP 30 of over 2400 Boe per day per well with a 42% oil cut.
Or approximately 1000 barrels of oil per day per well.
Notably the maximum IP 24 hour rate for the four well pad was over 41 million cubic feet of natural gas per day.
These wells represent our highest rate of return project for the quarter and we expect this development on average to pay out in roughly three months.
These are outstanding results from our team and a testament to their advanced planning and operational flexibility as we accelerated the development of this pad given the recent strength of natural gas prices.
Furthermore, the powdered donut wells represent another solid infill.
<unk> from the third bone spring and Wolfcamp C.
Further bolstering our confidence in our remaining inventory across the Texas acreage position.
In new Mexico, we completed two separate six well developments during the quarter, both targeting the second bone spring sand interval.
In the central portion of our Lea County position, the Chimichanga and Queso Blanco wells were drilled at a six well development with approximately 8400 foot average lateral lengths.
These wells generated robust results, averaging IP 30 of over 2100 Boe per day, or approximately 800 barrels a day of oil.
Further south in the new Mexico acreage position, the Pac man and Donkey Kong wells represent another six well development.
At this time utilizing a stack staggered pattern in the upper and lower portions of the second bone spring sand.
With approximately 8500 foot average lateral lengths.
Like the Chimichanga in the queso package production numbers were strong posting IP 30 numbers of approximately seven 750 Boe per day or over 1400 barrels a day of oil.
Overall, our team did a tremendous job during the first quarter and brought online some outstanding wells more specifically we.
We estimate that all our wells brought online during the quarter, we will achieve payout in approximately four months, assuming the current strip prices.
The well results this quarter continued to demonstrate the high quality of both of our assets.
Lastly, I'd like to finish up reviewing our outlook for natural gas takeaway and how centennial plans to navigate the potential headwinds.
Depending on future Permian production growth, we do believe that natural gas egress out of the basin could become tight in future periods until a new pipeline has built.
Such we have been evaluating and are close to executing multiple term sales contracts.
Which would provide transportation for essentially all our expected gross revenue residue gas.
In the near term out of the Permian Basin. During these expected periods of tightness.
Overall, our objectives are to maintain flow assurance for all product streams at a low transportation cost without entering into long term contracts.
Given where we are in these discussions we feel very good about our ability to execute on these agreements over the next few months and look forward to discussing in more detail on future calls.
As you can see our operations team is firing on all cylinders and doing an excellent job navigating the current oilfield service environment.
While we continue to focus on driving further efficiencies in an effort to partially offset inflation.
We're also very mindful to avoid any material delays or lost time to our operations.
In light of the current oilfield supply chain challenges our team has been very focused on sourcing the necessary equipment.
Well in advance of the anticipated schedule.
We also worked diligently to keep good lines of communication with our service providers.
So that centennial can continue to efficiently develop our acreage on time.
Year to date, we have not experienced delays or procurement issues, primarily due to our team's efforts on both the planning and execution fronts.
Overall this is a strong start to the year from our operations team and we look forward to building upon this performance going forward.
With that I'll hand, the call back to Sean.
Thanks, Matt.
In closing we are very pleased with our execution in the first quarter and excited about the go forward game plan for Centennial.
We have put the company in position to continue to generate significant and sustainable free cash flow with a balance sheet that is resilient to commodity price volatility and provides financial flexibility.
We continue to have a differentiated growth profile supported by our high quality assets and the Premier U S oil basin and operations team with a proven track record an inventory depth that will allow us to continue to execute our game plan.
These factors will allow centennial to embark on the next chapter of our company with a focus on shareholder returns, which we expect to commence in the near term and how they have us well positioned to succeed for the remainder of 2022 and beyond.
Thanks for listening and now we'll go to Q&A.
Thank you the question and answer session will be conducted electronically if you'd like to ask a question. Please do so by pressing star then the number one on your telephone keypad. If he would like to withdraw your question. Please press the pound key one moment. Please for our first question.
Your first question comes from the line of Neal Dingmann from curious Securities. Your line is open.
Good morning, all it's Jordan Levy on for Neil.
First just wanted to compare the two lead developments you brought on this quarter booking like really strong results. Both six well developments one kind of in that stack staggered pattern I'm curious, how you think about the comparative economics and performance versus your expectations in each of those developments given theyre kind of relatively the same.
ZIP code.
Sure I'll take that.
We've been very pleased the second bone spring sand and new Mexico has been kind of our bread and butter target for us for for a while and we have been very pleased with both the stack staggered programs that we've been working in the upper and lower second bone spring sand.
As well as some of the end zone.
It's at the lower second bone spring sand one of the things we've been very pleased with this year.
Virtue of the larger development units is the increase in percentage of parent wells relative to child wells as we move in and execute a offset wells and a larger package of wells at one time, you know in past years, where we were doing one or two wells or or maybe smaller groupings.
Percentage of our new wells brought online were subject to some of the depletion effects that we saw from from prior producers what we've seen in the shift so far is that the percentage of <unk>.
Child wells in any incremental development unit.
Drops significantly and we enjoy more parent like production from from the offset wells so relative to our internal expectations. These wells are performing kind of right on par with what we expected them to and the costs coming in kind of right, where we needed them to come in relative to these.
Expectations.
Thanks for that and then second I know you mentioned you had his experience you haven't experienced any delays or cost overruns, which is great to hear just wanted to get a sense of in the current service environment. What you are seeing whether internally or in talks with your neighbors, whether from a workforce perspective cost perspective.
Sure.
What we're seeing primarily.
You know the highest the highest ticket items on any given well really are related to steel pricing and fuel pricing.
And so so we see those those as kind of the dominant.
Drivers of of inflationary pressure, but what we do is we procure we order that steel we order the casing and the tubular as you know two quarters at a minimum in advance of the program.
And we really have been committed to our contractors as well as the rigs we have not had any material changes in terms of rig cadence or or number of rigs that we contracted at any given time. So we've been able to manage that schedule pretty far in advance and try to negotiate pricing and things like that.
What we have heard people waiting on.
A lot of times with sand delivery relative to completions.
And things like that but but with our with our vendors.
And our lead times that we that we put out there. We've just not been able to we have not had any of those kinds of delays relative to our operations and we've been very proud of that working relationship with our vendors and our folks in the field with the long term planning.
That's great to hear thanks, so much thanks.
Thanks Jordan.
The next question comes from the line of babies Petros from RBC capital markets. Your line is open.
Good morning, Thanks for taking my questions and I guess, firstly, just kind of piggybacking on that last point is there any updated thoughts on when you guys could maybe look to add a third rig or even if that's a consideration at this point just given the.
The long kind of procurement and lead time on securing those supplies.
Yes, I appreciate that question, David I'll take that one you know as we look at our program I will say that I think Matt described it very well, we haven't seen any delays or issues with procurement because of our advanced planning in our current two rig program does provide significant growth on a year over year basis differentiated from for most of.
Our peers I would say to the tune of 10% to 15% so as we think about.
Growing the business, we're going to do so within our own current operations and don't have a necessary and need to add a third rig to provide additional growth. So we're already doing that with our existing program should we want to add a third rig in the future because prices remained strong.
The road, we could make that decision I do think there is a fair amount of lead time that you would need to put in place, but again I'll reemphasize that our two rig program to date provides the growth that others may need to add a rig to accomplish so pleased with what we have in our plan going forward.
Got it that makes sense definitely a good program and I guess, maybe just.
Quick follow up on that and maybe getting a little nuanced as you'd think maybe early 2023 thoughts at this time as this third rig a consideration or is that kind of a to be determined at a later date.
I think that is a to be determined at a later date as denim. So as we think about commodity prices and the flexibility of what's going on relative to the macro situation out there, whether it's China or Russia, or OPEC Theres a lot of factors that come into play I am a believer and where commodity prices are today I think it is sustainable.
Our system around where we are right now that being said, we're not looking into 2023, yet to provide additional guidance. What we are going to focus on is growing our business. Our production as it stands right now at 10% to 15% year over year and so that's what we're focused on and that's we're going to execute and look.
Forward to giving you know.
Further 2023 guidance in coming quarters, if you will.
Got it alright, and just one one last question.
Is there any updated thoughts on how quick that buyback pace could be out of the gates. I think you should reach your leverage target. This quarter I'm, just wondering kind of given the free cash flow outlook that youll increase for this year I mean realistically could you exhaust that kind of a year end or early next year or kind of is there any more color on that you can provide at this time.
I think you know.
It's a good question, particularly as we look at our cash flow as you heard probably in my prepared remarks, we are increasing our free cash flow. This year up from an estimated $400 million to greater than $550 million. So.
Your point is valid as we think about that but I will say that we are we've yet to begin the execution of that share buyback program. So look forward to beginning that in the near term and executing against that and as we get towards the.
Point, where we are exhausting that share repurchase program I do think there is additional opportunity to be incremental to that down the road.
Got it thanks for taking the questions.
Thanks, David.
Thank you and once again, if you'd like to ask a question simply press Star then the number one on your telephone keypad.
The next question comes from the line of Zach Parham from Jpmorgan. Your line is open.
Hey, guys. Thanks for taking my question I guess first just an operational one you'll continue to drill and complete wells faster as we get into the back half of the year. If these efficiencies continue how do you think about the capital program would you consider raising the budget a little bit to potentially drive more turn in lines and maybe a bit more.
Both in 'twenty, three or would you take a frac holiday.
How are you thinking about managing that in the back half.
Yeah. Thanks, Zach I think that first of all it's a complement to our operations team that we have been ahead of schedule I would say significantly ahead of schedule, bringing on six more wells this quarter than originally anticipated and that's really.
On operational efficiency improvement and should that continue throughout the rest of the year I think it will be towards the high side of our estimated completed wells for the year, which then of course translate likely to a <unk>.
Towards the high end of our capital budget that being said at this point, we're not moving our R. R.
Our ranges our guidance for capital I do think that there's an opportunity there to have flexibility at the end of the year, whether that is pushing completions into next year. Some of that will depend on commodity prices right now I'm a fan of completing wells in these commodity prices and so not building a significant DUC inventory that being said.
There's a lot of things that can happen between now and the end of the year. So flexibility is key for us, but again with the efficiencies that we've driven out of the field.
We've got some real options down the road as to how many wells, we're going to complete but that gives you some thought process.
An indication of where we can go by the end of the year I Hope that's helpful.
Yes, that's great color certainly a good problem to have.
I guess, just one follow up on the buyback you've talked about getting started on that near term. So should we we expect that youll be repurchasing shares in two Q.
If so can you talk about.
Potentially how aggressive you would be or how much free cash flow you would dedicate to cash returns in the near term.
Yeah, we are.
We were very specific I guess in what we provided last quarter on leverage targets and whatnot before executing as you probably heard and saw from the release.
Our quarter ended at one one times and we had been very specific of reaching our leverage target of less than one times before initiating our share buyback program and that program is kind of two different ways of executing that regularly time buybacks as well as opportunistic repurchases. So we will be.
Executing that in the near term and we're in a position to do that but I can't be more specific as to when we will be in the market. It doesn't make sense for us to release that information at this point.
Alright, Thanks, guys I appreciate the color. Thanks.
<unk>.
Sure.
And the next question comes from the line of Jack <unk> from Stifel. Your line is open.
Good morning, all.
With the current commodity price environment, driving inflationary pressures for the entire industry I. Just first wanted to complement you on holding the line on Capex.
My first question just building off of the previous questions on inflation could you speak broadly to the percent of remaining 2022 spend where you have locked in pricing supply needed to execute your program.
Yeah, I can I can I can talk about that a little bit without revealing much in the way of.
The specifics around what we have or haven't locked in I would say generally what we've sought to try to try to do it.
Is lock in.
Portions of our sand in terms of fixed price costs. So we've we've been able to kind of work.
One deal currently we've got about 50% of our of our sand termed up.
And a comfortable contract that we feel is as competitive and below spot pricing.
The other thing we try to do as I said in an earlier Q&A question as we try to order our steel far enough in advance for tubular and things like that that we can.
Accommodate.
<unk>.
The delays in terms of the production timing for steel costs and the and when you do that there's there's portions of that that are that you can lock in in terms of cost as well and and at this time.
Based on what we can see we don't anticipate seeing.
Additional inflation relative to our steel pricing for the remainder of the year just by virtue of what we've kind of been able to work through so far.
And then lastly, you know the rigs are going to be termed up in there and they're finished them.
Through the through the rest of the year, we don't anticipate.
Incremental cause.
Contract fuel increases in rates, we've already been through that with these two rigs and we've had these these two rigs in our service now.
For almost two years and so you know.
We feel very good about where we are with those with those rigs and that vendor as well as like I said this the sand in the steel.
That's great I appreciate the color.
For my follow up with the understanding that you have 15 years of quality inventory that was highlighted by some strong wells. This quarter I wanted to ask how you see centennial playing a role in industry consolidation and your views on the A&D market today.
Yeah. We are we continue to look for opportunities I would say we have a very active deal team I doubt that there's been anything that's gone on the Delaware basin that we have and at least in part of it from a review point of view I would say that we have very high standards because of that 15 year inventory, we're not out to fill a void from them.
Inventory perspective, we are looking for opportunities that are accretive across a number of fronts has to be accretive financially, but also from an inventory perspective. They don't have to compete for capital in the near term and so as we look at those opportunities there.
To be very specific and what they would add to our company going forward I do remain focused on trying to grow the company both organically as well as inorganically, but we've got very specific needs our qual.
Qualifiers, if you will on on adding any other opportunities to our existing base, who I don't want to do is dilute the shareholders.
Relative to inventory quality and certainly not from a.
Cash flow per share basis, or anything like that so it's a very.
Specific set of needs that any assets <unk> companies would need to qualify for us to add it to our existing position.
That's great. Thanks for the time.
Thank you I appreciate it.
Do we have a follow up question from babies Petros from RBC capital markets. Your line is open.
I appreciate you hadn't been back into the queue. Just one last question, you'll started to bucket statutory GAAP tax rate this quarter.
It was around 30%.
Any more color on kind of how we should think about that going forward either for the rest of the year.
Into 'twenty, three and then as well as kind of an update on our cash tax horizon.
Sure Good morning, Davis, it's George.
I'd say with respect to the the rate you saw this quarter.
That was kind of a one time true up related to our state apportionment rate.
Which gets a little bit complicated I'll, just kind of leave it at that on why that 31% occurred.
<unk> to see that rate going forward.
It should be.
Much lower.
At least in Q2.
I think from a from a tax standpoint overall, the first thing I would say, it's fairly remarkable that were discussing cash taxes. So broadly within the industry. That's my first observation.
But with respect to <unk> specifically.
We're very fortunate to have a significant federal NOL position and if you dig through our 10-K, you'll note that it's.
Approximately 500 million at year end 2021, so we came into the year with a very meaningful tax shield.
As we look at the current business plan activity levels commodity environment.
Believe we're a couple of years away from fully utilizing those Nols and being a federal cash taxpayer.
So to summarize we're in a relatively relatively well positioned.
Not to have any material cash tax liabilities in the near term.
Got it so just just to clarify to make sure I'm thinking about it correctly kind of to Q onwards that book tax rate, probably going to be closer to peers around 20% to 25% something like that correct and then cash taxes still probably maybe 24 beyond that the right way to kind of summarize that.
I think that's directionally, okay, we are thinking.
Thinking about it I don't want to specify a success.
Civic percentage it will be below 31% on the book tax.
Got it appreciate the time.
Thank you and we have reached the end of our Q&A session I would now like to hand, the conference obituaries CEO , Mr. Sean Smith for any closing remarks.
Thank you Rudy.
All I can say is that I'm very pleased with how the company is positioned we have a bullet proof balance sheet meaningful production growth significant and sustainable free cash flow and a robust shareholder return program. That's been board approved I believe that all of these trades are going to drive substantial value for our shareholders and.
Look forward to the upcoming quarters. Thank you for listening today and with that we'll end the call.
Thank you and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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