Q3 2022 CNX Resources Corp Earnings Call
Yeah.
Good morning, and welcome to the C and that's resources third quarter 2022 earnings Conference call. All participants will be in listen only mode could you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note this event is being recorded.
I'd now like to turn the conference over to Tyler Lewis Vice President of Investor Relations. Please go ahead.
Thank you and good morning to everybody.
Welcome to <unk> third quarter conference call, we have in the room today, Nick <unk>, our president and CEO , Alan Shepard, Our Chief Financial Officer, and Chad Griffith, Our Chief operating officer.
Today, we will be discussing our third quarter results.
This morning, we posted an updated slide presentation to our website.
Also detailed third quarter earnings release data, such as quarterly E&P data financial statements and non-GAAP reconciliations are posted to our website and a document titled three Q2022 earnings results and supplemental information of C. N X resources.
As a reminder, any forward looking statements, we make or comments about future expectations are subject to business risks, which we have laid out for you today in our press release as well as in our previous security and Exchange Commission filings.
We will begin our call today with prepared remarks by Nick followed by Alan and then we will open the call up for Q&A, where Chad will participate as well.
With that let me turn the call over to Unix.
Yeah, Thanks, Tyler and good morning, everybody. Thanks for joining us before we kick things over to Alan Who's going to discuss the third quarter financial results in detail I want to provide a couple of thoughts.
Talking about the macro backdrop, and how <unk> is continuing to position itself uniquely not just among energy companies, but I think also.
When you look across the broader equity markets. So if you go back 90 days or so ago. During the second quarter call. We talked in depth about the world's growing demand for responsible energy development and how natural gas is sourced from Appalachia, it's in a central catalyst fuel and delivering that future and we laid out our vision.
With Appalachia being the heart of a sustainable energy Revolution, and we talk about the numerous opportunities that CNS is developing to leverage our existing asset base and core competencies and create significant free cash flow opportunities for our ownership beyond what you'll see with the free cash flow from our core gas development activities.
However, I want to pivot back to sort of the foundation of our investment thesis and the actions that we're taking to position <unk> for long term per share value creation in the face of what we see as increasing uncertainty on three big fronts I'm going to talk about those three fronts of uncertainty. So the first one during the third quarter.
The macro economic backdrop in the United States. It has continued to become more uncertain.
Inflation and continues to erode purchasing power right you've got interest rates did have risen sharply of course, we see equity valuations all over the board in many instances are declining and despite this challenging backdrop and all this chaos, we were able to execute on attractive long term debt refinancing at further extended our maturity profile and.
Thereby that will unlock additional degrees of freedom is.
And as we call it with respect to our capital market activities, that's very important and very powerful our combination of consistent quarterly free cash flow generation, and then that extensive available liquidity and our long term debt maturity runway those things position us not just strongly but uniquely to take further advantage of any deepening values.
Asian, disconnects that might occur in either the equity or the debt markets frankly, so don't make any mistake about it when it comes to CNS, we are well positioned to continue to play offense in this type of chaotic environment now that second area of uncertainty that played really prominently during the third quarter is the continued inability.
Of our elected representatives to achieve consensus on Interstate pipeline permitting reform hard to believe.
But without a meaningful knowledge meant of energy realities from D. C. The natural gas industry is going to continue to be unable to unlock the full potential of U S shale to serve the obvious energy demand centers here in the United States. So despite Washington, continuing to ignore rational energy policy for the time being CNS.
As one of one when it comes to companies that have positioned themselves to work in this potentially capacity constrained world. So appalachia waste future pipelines to be built CNS.
C N X continues to focus on executing our maintenance of production plan to generate that annuity like stream of significant free cash flow, regardless of where we are in the commodity cycle. So in addition to our organic base development plan, we're going to leverage our extensive legged legacy asset base.
To create new free cash flow growth opportunities through our new technologies efforts and the continued deep dry Utica development, well clinically allocate this incremental free cash flow to create long term per share value growth like we always do.
Third and the last area of uncertainty I want to talk about this morning, it's the pricing volatility in the natural gas markets and what we experienced during the third quarter. It is a reminder of just how volatile the commodity markets are as well as how difficult. They are to predict however, C. N X we're positioned to respond to this.
How through our consistent programmatic hedging strategy and our basin, leading cost structure derived from our midstream ownership of these two strategic differentiators a significantly lower risk.
They provide long term free cash flow visibility throughout all phases of the commodity cycle, whether we're in an up part of the phase or a down part of the phase <unk>.
And this derisked approach it creates opportunity for significant long term per share free cash flow growth, even even if lower natural gas price scenarios were to materialize or when they materialize. So the CNI story, it's simple, but it's also a special it's a story about executing our sustainable business model plan over in <unk>.
And the time period to generate sustainable per share value most companies in our space will do well when gas prices are high what makes us unique is our ability to still drive when prices are low and when things might get tougher chaotic our sustainable business model doesn't rely on gas prices, staying high or being able to accurately predict the future which.
We all know is impossible, but instead our model is based on building a business that works in whatever the future holds so we're over what two and a half years now.
Into executing this plan across many different macro backdrops, we have seen a lot of these are different twists and turns over the past two and a half years third quarter I think adds another successful quarter to our track record and that's good to see so I'm going to conclude my commentary I will just a couple of thoughts on our social impact side of things and as.
We've discussed before our sustainable business model is not only focused on creating value for our owners, but also at the same time, creating tangible and impactful value in the local communities that we basically lived and operated within for the past 150, plus years and I want to take the opportunity to highlight the kickoff of the second class of young men and women who are entered.
D C N X foundations Mentorship Academy. This fall just a reminder, this initiative is focused on exposing students in our underserved urban and rural communities to a whole host of career opportunities that exist not just within the energy industry and energy is clearly a part of it but also throughout the region. These young adults.
Basically the foundation of Tomorrow's economy, and we're excited to build upon the success from last year's class. The first inaugural class and continue to provide a unique engagement I think and a unique model for others basically in the region to follow so just to reiterate we said this before we built this to either be copied or to be joined its open source and we're happy if other.
There's a want to join us or if they just want to plagiarize that welcome to do so this fits right into CNS. His vision for the region as we wait for the pipes to get built that we talked about out of the basin. There is no reason to wait to bring demand and manufacturing into our regions, which will help lift communities out of poverty.
By creating a long term manufacturing jobs, all while lowering global carbon emissions and improving the economy now.
Additionally, another effort we've engaged in on this front is the HQ at C. N X. That's what we're calling it the HQ was created to provide office space in our headquarters building for nonprofits for charities for underserved underrepresented organizations to basically help them elevate and thrive their businesses.
All enabling collaboration with effectively a group of like minded business or non-profit individuals and we view it as sort of the living embodiment of the CNS Foundation again looking for finding that diamond in the rough that might not receive the attention. It deserves an establishment, but it is doing the important hard work on the ground for <unk>.
Our communities that's what we're after investments we can make the produce returns not only for again the owners in the company, but also for the wider region. If you think about it you.
For generations. This region is fed the company with unmatched talent and the company and turn is fed the region with jobs investments in the communities and the quality of life. This drive from the product we bring to market. That's a pretty virtuous circle at least from my perspective and that is part of the fabric of the legacy that lives on today through initiatives like the <unk>.
Next foundation, and the Mentorship Academy and the HQ. Its <unk> concept, so that HQ initiative, it's well underway and we've got about a half dozen or so tenants are co nabors with us in the building so to speak and they range from a local nonprofit career development Association to a couple of female owned enterprises for profit entered.
Prizes, a social media marketing company also of Delhi, a regional nonprofit mentorship organizations joined US recently as well as a local university with their business program, we're really excited and fired up for the opportunities ahead for the HQ would see an extra help reinforce our overall tangible impactful and local value add philosophy.
So again, thanks for for allowing me the time this morning, I'm going to turn things over now to Alan and Alan's going to walk us through some of the financial details when it comes to the third quarter of 2022.
Thanks, Nick and good morning to everyone. This quarter represents the 11th consecutive quarter of significant free cash flow generation through the execution of our sustainable business model that is grounded and consistent operational execution and clinical capital allocation to optimize free cash flow per share growth in the third quarter, we generated 135 million of free cash flow, including the.
Working capital changes.
Slide four in our presentation highlights the strength of our balance sheet during the quarter, we issued 500 million of senior unsecured notes due in 'twenty 31. These proceeds were used to refinance $350 million of our 2027 notes.
Pay down 134 million are bursty and extra Barbara this opportunistic transaction removed future interest rate risk and resulted in a stronger balance sheet with our weighted average debt maturity now extending to 6.8 years.
Following the transaction, we now have approximately 500 million of pre payable debt that the company can opportunistically pay down over the next several years.
As Nick mentioned, a moment ago as a result of this transaction. We are now even more uniquely positioned to take advantage of any deepening valuation disconnect that might occur in either the equity or debt markets.
On the capital allocation side as highlighted on slide five we continue to take advantage of current equity market conditions by repurchasing $8 4 million shares in the quarter.
$3 2 million shares after the close of the quarter through October 21st said differently, we bought back in about 4% of our total shares outstanding and over the last eight quarters, we have repurchased approximately 20% of the outstanding shares of the company.
We continue to see this is a remarkable low risk capital allocation opportunity moving forward and although we have not given an explicit capital allocation framework. If you extrapolate these levels of buybacks moving forward you can see that we will continue to dramatically reduce our denominator and thereby meaningfully grow our free cash flow per share.
On the operation side as expected production was modestly up in the quarter compared to the second quarter based on the midpoint of the updated guidance range on slide six this implies fourth quarter production volumes that are roughly flat when compared to the third quarter.
Also in the quarter, we had two one time charges related to operations, but I want to touch on.
The first charge was for cleanup and repair expenses related to the historic flooding in Virginia, and Virginia. This summer.
Destroyed an estimated 100 to 150 homes unless thousands about power, we're incredibly proud of our Virginia team and how hard they work during this challenging time to restore normal operations and most importantly to assist their community of knee.
The second charge during the period is related to a CPA Utica wellbore that we chose to plug and abandon issues experienced during drilling operations resulted in the termination that the best course of action from both an operational and economic perspective was to plug and abandon the wellbore. This decision prevented delaying other wells on the schedule and reflects our commitment to long term focused decision making.
This well was originally part of a 2023 development plan and were scheduled to turn in line in 'twenty to 'twenty four instead, we will now access those reserves a few years out.
Let's now shift to our updated 2020 to outlook on slide six.
We have narrowed our 2022 production guidance range from 580 to 590 Bcf.
We're a five Bcf a decrease based on the midpoint of the new guidance range when compared to the previous guidance of 575 to 605 Bcf.
The driver of this change is due to the expected timing of a few wells being turned in line a bit later in the year.
Previously highlighted due to the magnitude of production from our new well pads modest changes in the timing of online within a quarter or a year will result in shifts unexpected production levels between periods.
Correspondingly, we're also narrowing our expected EBITDA range for the year to 1.325 to 1.375 billion compared to the previous guidance range of 1.3 to 1.45 billion. This slight decline in midpoint is due in part to the modest expected production change we just noted.
With respect to capital guidance for the remainder of the year, we are narrowing the 2022 capital range to $560 to $580 million, which keeps the midpoint of $570 million unchanged from our previous guidance range.
One final note on 2022 guidance, the improved pricing environment and positive working capital changes are largely offsetting the reduction to production volumes and EBITDA and as such we are leaving our free cash flow guidance for 2022 at approximately 700 million. Additionally, given our lower share count approximately $700 million of free cash flow is expected to result in a free cash flow per share.
$3.88 again that is a number that's not at the end of the year share count projection, but rather it is based on our current share count.
Before we move on to slide seven we wanted to provide some visibility on what to expect from the company in 2023, given the elevated uncertainty in the world that Nick discussed.
From an operational perspective, we expect to continue our maintenance of production program and utilize roughly one of the half rigs and one frac crew to maintain flat production levels plus or minus.
Extrapolating a full year of the elevated input cost that have been experienced during 2022 and considering the potential for additional inflationary pressures in 2023, we are expecting the 'twenty 'twenty three capital to range between 575 and $675 million.
This wide range reflects the significant uncertainty that exists with respect to inflation and supply chain risk prevalent in the world today.
In other words, if high inflation persist into 2023 and supply chain, starting further capital will trend towards the higher end of the range. Conversely capital will trend towards the low end of the range of inflation flattens and supply chain east consistent.
Consistent with 2022 or 2023 capital focus will remain on operationally derisking, our long term free cash flow annuity by investing and retaining the best crews securing critical materials and prioritizing investments that lower overall execution risks.
Despite these inflation challenges in the other macro uncertainties see an extra sustainable business model uniquely positions the company to generate significant free cash flow year after year in any commodity environment. For example, even if nymex prices were to return to below $3 per <unk> than in basin differentials were to widen after this winter the company would still generate an average of <unk>.
500 million of annual free cash flow and obviously, there would be significantly higher average long term free cash flow at the current strip.
Most importantly, however, we will continue to focus on clinically allocating that free cash flow to grow our long term per share value.
Slide seven is a slide we showed last quarter, but it's important to show again. This slide illustrates a core tenet of the CNS investment thesis and incredible and unique opportunity for rapid low risk free cash flow per share growth that results from our sustainable business model. This graph includes what we've already achieved and what we expect to achieve moving forward looking back we are already more than doubled our free cash flow per share since two.
<unk> 'twenty, assuming that cost of enterprise value and that 80% of the future free cash flow to allocate to share repurchases and the remaining 20% of balance sheet management total shares outstanding would reduce by an additional 54% while still achieving significant deleveraging in other words free cash flow per share doubled by 2026 over $8 per share or a leverage ratio of <unk>.
Lyons to roughly one times and implied share price again, assuming a constant enterprise value would appreciate to almost $45 per share due to this rapid share count reduction.
This potential share count reduction only accelerates the stock price depreciation does not keep pace with the decline in outstanding shares.
When you compare this projections of the 2020 free cash flow per share you can see 2026 free cash flow per share is over five times higher.
Slide eight is another illustration highlighting our capital allocation strategy in action, but for this slide we compare ourselves to companies outside of our industry, who have run successful capital allocation strategies for an extended period of time.
These four companies include some of the most consistent share repurchases within the S&P 500 over a 20 year period. All four of these companies are repurchased a significant amount of shares outstanding and meaningfully grew their free cash flow per share.
This resulted in a tremendous share price appreciation and the outperformance in their respective industries and across the broader equity markets.
Graph on the slide highlights the first six years over their respective share repurchase journeys, even though all four companies bought back a significant amount of shares outstanding if you compare our results what they achieved over the first six years you can see that <unk> is trending significantly above their levels of share repurchases. If the company keeps trading well below intrinsic value, we will continue to prioritize share repurchase.
And like we've already discussed this will result in significant free cash flow per share growth into the future.
To conclude the company is an exciting position moving forward, we have built a uniquely sustainable business model that generates a significant amount of free cash flow in any commodity environment and our focus will remain on steady execution and taking advantage of our future market disconnects to grow our free cash flow per share in other words, we will continue to operate with an owner mindset.
With that I'll turn it back over to Tyler for Q&A.
Thanks, Alan Operator, if you can please open the lineup for questions at this time please.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speaker phone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Zach <unk> with Jpmorgan. Please go ahead.
Hey, guys. Thanks for taking my question I guess first in the prepared remarks, you talked about flat production in 2023.
That compares to some prior commentary, where you talked about low single digit growth over the longer term just trying to reconcile those two like how should we be thinking about 2023 is that does that truly flat there should there be a little little growth.
Yeah, I think with the commentary we added the plus or minus as we talked about in the commentary it's difficult given the magnitude of the wells when they come online.
To give you exactly what that number is because plus or minus about a week or two here or there on anyone who's well pad, that's going to move that plus or minus 1% next year. So the way we think about it internally is it's generally flat.
Got it okay. Thanks for that color and then I guess, just one follow up on the central PA Utica.
Can you talk a little bit about the decision to plug and abandon that well does that change your view of the future development of the Utica in that area.
Yeah. So this is a this is Chad I'll take a shot at that.
I think with a two part answer on the first first wanted to talk a little bit about the timing.
And there's a there's a couple of factors there that are important to understand on timing now these rigs are not contracted and source to sell in a single well you know there are that we sourced them to drill a series of wells as part of a drilling program. So any delays associated with a single well can delay all those lost behind it and that's got to be considered when deciding how long to work through any unusual.
Downhole condition.
Secondly, we already had a handful of Marcellus wells on this pad.
And we plan to get those wells online early next year. So we'll let we'll let those Marcellus wells produce for a few years before we come back to this pad to access those same Utica reserves at that point in time.
Going a little deeper into two specifically what happened here and while we were drilling the vertical section of this Utica well, we had a formation above the Utica.
And to break apart on us and start to become unstable, it's something that does happen from time to time while drilling.
And it can often be solved through various mitigation strategies.
And many of which we are we attempted here. Unfortunately in this case it continued to cause delays.
Until we made the decision to P&A, the well and continue on with the drilling program elsewhere, we didn't lose these reserves.
And what will access those we plan to access those are an extra back to this pad and based on the root cause analysis here, we have an engineering solution, which we will incorporate into our future Utica wells and prevent this moving forward and so I like to think of US as you know this actually de risks our Utica program going forward, we still believe very strongly in the reservoir.
War.
In each of these sort of incremental steps just makes it.
That much easier to drill the next well.
Got it thanks for that color. Thank you, yes sure.
The next question comes from Leo Mariano with M. K M. Please go ahead.
Hey, guys wanted to follow up a little bit on the production here I guess can you just kind of looking at.
Some of the well trends it seems like you guys had 16 wells in southwest, Pennsylvania on in the second quarter. It looks like you bought five on in the third quarter I guess I would've thought that maybe would have led to a little bit more production. In <unk> was just curious if you guys are seeing anything like midstream downtime or any kind of production interruptions I know a number of the other gas companies kind of talk.
That.
Third quarter earnings.
Yeah. So yeah like we talked about the character of it it's all related to the timing of the wells coming online you know we don't struggled was kind of the midstream issues. Given we are the midstream operators. So that's certainly not the issue. It's just these pads come on at a couple of hundred thousand a day. So if you are behind by a week you could be plus or minus would be off your initial projections. So it's nothing more than that.
Okay.
Okay.
And then just wanted to say.
Jump a little bit more into kind of the comments around 2023.
I did say a fairly wide range of capital out there.
Paul correctly I think on the last call you guys did kind of say there were some uncertainty around equipment access and you'd kind of decided to maybe pull a couple of wells into 'twenty two from 'twenty. Three so just curious in terms of what you guys have done to kind of procure.
Services and equipment for 2023 do you feel like you've got.
The equipment kind of lock in maybe it's just variability on price next year or there are some services that you're still trying to contract for next year.
Yeah. So look we talked about in Q2.
The focus of the capital increase this year western sulfur exactly what you're talking about.
We do have our rigs under contract for next year and we started those earlier in the back half of this year to make sure that we have plenty of lead time between our drilling and our completions.
But we're talking about with the wider capital range is kind of.
If there continues to be pressure on the <unk> market, we see steel products still at elevated levels in the just general economic inflation.
It doesn't take more than another five or 10% to kind of see the types of movements that we wind up that range. So we'll have more color on that in January we released the full guidance, but just wanted to give folks an indication there.
Sure was headed.
Okay. Now that's helpful. And then just on the stock buyback here.
It's basically saying look we're still gonna have a lot of free cash flow of gas is you under three bucks and dips widen.
And I guess I'm just curious.
Do you see a scenario for Gaston.
In 2023, we're obviously you know sometimes that some of the cost structure is fixed where cash flows get crimped, a little bit and in 'twenty three and maybe you don't have quite as much free cash flow I know that certainly over the cycle.
500 million average young and he feels pretty good but is there a scenario where that could be a little bit lower in 'twenty three.
Yeah.
Yeah, I mean, ultimately it's going to depend on pricing on the open volumes and you know we will provide color on that in 'twenty. Three I think we think about 500 is kind of a floor just given where our hedge book sits in our ability to try to manage our costs and what we already have locked in.
It should be able Leo to get a rough and decent estimate of that with just some basic modeling based on our hedge book.
By difference with production given you the open volumes and what the sensitivity for us would be.
When you look at different gas price decks and of course, it's going to be much muted compared to your typical E&P just because of the programmatic hedging we've employed.
Okay. Thanks.
The next question comes from Neal Dingmann with Truest. Please go ahead.
Hi, guys. Just two quick ones could you maybe just walk through the hedging strategy, obviously, given the much better balance sheet and the backwardation strip and then secondly, maybe just talk about where that one rig how do you think with the one rig client can you continue to get the efficiencies you'd like thank you.
Yeah.
Yes, so maybe I'll go first on the hedging side. So the way we want to think about hedging is kind of twofold. One from a prices we're seeing out there on the strip now we're very comfortable continuing to take those hedges in the outer years that would imply.
Incredible IRR is at the well level.
So were happy to lock those in and continue with our with our program from an overall balance sheet strategy. We I think we've talked about before one of the things that hedge book does allow us to do is to invest significant amounts of free cash flow back into shareholder returns and currently that's taken the form of share buybacks.
So we're 20% so far and you know that hedge book is a big reason why we're able to do that while we were able to be the first ones in the basin to start doing that.
I think on your question about one rig in rather you can run that efficiently I think I think they definitely for sure because you know.
Like we've talked about several times in the past, having the one rig one frac crew consistent program. It allows us to secure the right partners. The right service partners on long term basis and develop very healthy relationships. They know will be there through through all parts of the cycle, both up and down and so they are willing to.
Work with us and really commit to us on a long term basis. So we get the right service partners put it put in place and then our employee base knows that they can count on a consistent.
Level of activity that we have a consistent activity set. So we can we can attract very well qualified and highly talented individuals to fill that that employee base.
And so now we've got the right service providers in place and the right employees. In place then you give those guys. The right target the right metrics to slide four on a long term basis and they can plan ahead, they figure out where the.
Past any constraints may be where the risks may be they solve them well in advance they put mitigation in place. It's just like a lot like we've talked about on multiple calls in the past Derisking. The plan looking forward, having a plan and then just going and executing our plans. So I think having this very consistent one rig one frac crew.
<unk> makes us operate at a very high level of efficiency.
Okay was there a follow up.
Okay. The next question comes from.
Yeah.
Go ahead I'm sorry.
Our next question.
I'm sorry, just one moment please.
The next question comes from will be just to verify here just one moment.
Noel parks.
Just one moment.
Mr Park. Please go ahead with your question.
Hi, good morning.
Good morning.
You're just talking a bit about.
Your service providers and it sounds like.
Things are good on the labor availability side could you just talk a little bit about your thoughts of your assumptions heading into next year as far as labor inflation, both on the on the contract side and also your own internally.
Yeah, I think on the labor inflation side, that's subject to kind of more of the macro environment. I mean, you could potentially paint a scenario, where if the company slip the country's slips into recession some of those pressures ease and Conversely, if we avoid that.
Continue to see pressure on those fronts.
So again this just goes back to kind of the wider guidance. We provided on this call and then we'll have some more color as we move forward I think we'll know a lot more a quarter from now about where things are headed and then on the employee side or the internal company employee side, we feel very good about that we've already been not just industry, leading but regionally leading on sort of all in <unk>.
Compensation average per per employee when you look at things on a on a median basis.
We're very proud of that I think we're in great shape, and I think things like attrition rates and sort of recruiting success rates sort of back that up in big ways. So we stay very close to that I think that's in a great spot. The biggest concern. We've got is not so much labor inflation or service inflation outside the company as much as it is.
Chad touched on earlier, which is the quality of the available labor set or the quality of the available service skill set and that's where we spent most of most of our time. So it's not just as easy a question of will be the individuals and the service provider be available. It's more question is can we get the best of the individuals and the best of the surface pro.
Riders available and again that lends itself to one of the advantages of the activity set that we've situated ourselves with.
Great. Thanks, I just wanted to.
Turning to financial.
Consideration.
As you as you model out the next few years and 10 years.
The economics, the drillbit side and the production side piece.
Can you just talk a little bit about what you're using as far as cost of capital assumptions going forward interest.
Interest rate environment, we've been higher than of course, we've seen in a long time.
Yeah. So certainly your you know your observation on the interest rate one is right.
Drove our views as well and some of the balance sheet stuff you saw us do during the quarter from a cost of capital perspective, you know when you model. This out we're very consistent with the peers I think are in somewhere in the mid teens mid low teens, so call. It 13, 14, and 15% somewhere around there on the on the equity side.
From our perspective, you know we tend to look at our stock in terms of an intrinsic value analysis, when we're determining share repurchases.
Or just kind of as various discount rates.
And when we do sort of the math of when our equity is worth when it comes to capital allocation last thing we want to do is issue additional shares at this valuation in the first thing we want to do is reduce our share count at basically bargain basement prices. So there's the weighted average cost of capital assessment for just coming up with the overall.
And at the company or the risk adjusted return.
Screenings, but then there's also the view of a.
From the equity perspective, like what do we want to do with capital allocation and clearly the last two and a half years of sort of reflected that in a big way.
Great. Thanks, a lot.
This concludes our question and answer session I would like to turn the conference back over to Tyler Lewis for any closing remarks.
Great. Thank you and thank you to everybody for joining us. This morning, please feel free to reach out if you might have any additional questions. Otherwise we will look forward to speaking with you again next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Uh huh.
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Yeah.
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