Q3 2022 Denbury Inc Earnings Call

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2022 earnings call will begin shortly.

During the presentation you have the opportunity to ask a question by pressing star for about one one times will keep had thank.

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[music].

Okay.

Good day, ladies and gentlemen, and welcome to Berry's first quarter 2022 results Conference call. My name is Glenn and I'll be your moderator for today's call. At this time all participants are in listen only mode.

Later, we will conduct a question and answer sessions to ask a question at that time. Please press star one.

Now I'd like to turn the conference call over to your host for today's call, but with Marsh head of Investor Relations. Please proceed sir.

Good morning, everyone and thank you for joining us today.

Over the last week, we've issued three news releases to announcing significant CCA U S agreements and this morning, our Q3 earnings release I.

I hope you've had a chance to review them all and are supporting earnings materials that are available on our website at Danbury Dot com.

Results for the third quarter were very strong as we generated strong cash flow again above expectations.

I want to remind everyone that today's call will include forward looking statements that are based on our best and most reasonable information.

There are numerous factors that could cause actual results to differ materially from what is discussed on today's call.

You can read our full disclosures on forward looking statements and the risk factors associated with our business in the slides accompanying today's presentation.

Our most recent SEC filings and today's news release.

Also please note that during the course of today's call. We may reference certain non-GAAP measures reconciliation and disclosure relative to these measures is provided in today's earnings release as well. This morning, our prepared comments will come from Chris Kendall President and CEO .

Mark Allen CFO , David Shepherd C O O Nick would S V P of carbon solutions, and Matt Day hand, SVP of business development and technology are all here to participate in the Q&A.

With that I'll turn the call over to Chris.

Thanks, Brad and good morning.

It's hard to believe we are already in November and closing in on the end of 2022.

As we began the year I mentioned that I believe this would be a transformational year for Denburg and looking back now I may have underestimated just how impactful 2022 could be.

This morning, I'll begin with a brief overview of the quarter and our outlook for the remainder of the year, then I'll touch on some business highlights and will finish by opening the call for questions.

Starting with the quarter and our outlook first and foremost we've continued to keep our people safe. Our teams are doing a fantastic job of nurturing our great safety culture, and we are tracking very well with last year's record low safety metrics are testament to the sustained efforts of our team.

We delivered robust financial and operating results in the third quarter with 156 million in operating cash flow and slightly better than expected sales volumes in both the Gulf coast and Rocky Mountain regions.

Our development projects at So-so in Beaver Creek.

Along with growing EUR response at Grieve were key drivers of this outperformance.

Fourth quarter production should be somewhat higher than the third quarter, putting us close to the midpoint of our original full year guidance and we expect to enter 2023 with strong momentum.

Due to supply chain challenges some of our capital projects were pushed to the fourth quarter, but we still expect to be close to our full year capital guidance.

We currently have three drilling rigs and 36 workover rigs operating across the company.

The highest level of rig activity, we've had in many years.

Through the first nine months of this year, we've generated 153 million and free cash after development capital.

Consistent with what we've said before in addition to maintaining a top tier balance sheet. Our priorities on capital allocation are first to support our E O our operations and develop our significant AOR resource at CCA.

Second to fully fund the capital needs of the Cc U S business, which we expect to grow over the next several years as we build out C O two storage sites and expand our pipeline network.

And third a strong oil prices provide additional cash flow beyond our anticipated near term needs. We plan to return capital to our shareholders just as we've done this year.

About two thirds of the free cash we have generated this year has been allocated to our share repurchase program with the remaining third split evenly between debt reduction and abandonment activities in our more mature fields.

Our major EUR project at Cedar Creek Anticline continues to progress nicely.

And first oil from that project as expected in less than a year.

To handle that production installation of the first two C. O. Two recycle facilities is in progress and expected to be completed in the first half of 2023.

We've been focused on bringing <unk> to the incredible CCA resource for a long time now and it's very exciting to be so close to first oil there.

Denver is EUR business is fundamental to the execution of our CCA us vision, providing the financial technical and operational capacity for us to grow substantially and CCA U S.

Turning to our CCA U S activity, we've made tremendous progress on the commercialization of our Ccs business.

Earlier this week, we announced our participation with clean hydrogen works and the largest planned blue ammonia complex in the U S. The ascension clean energy or Ace project.

The Ace project is massive.

Rejected to ultimately produce over 7 million tons of blue ammonia annually.

It is expected to capture of 6 million tons of Cotwo annually by the end of 2027 with plans to expand to 12 million tons. Shortly thereafter, all of which will be transported and stored by Dan Berry.

The Ace facility location, along the Mississippi River is ideal for exporting ammonia and is less than two miles from our C. O two pipeline.

With the land secured an initial offtake agreements in place supporting 75% of the planned ammonia production, we feel very good about this project.

We're also excited to continue working with Lake Charles Methanol, whose innovative project is designed to capture a million tonnes of cotwo per year, beginning in 2027, while producing nearly 4 million tons per year of blue methanol.

In connection with this new agreement, we plan to extend our pipeline network into a heavy industrial area near Lake Charles with both a high concentration of existing C. O two emissions, which we estimate at over 20 million tons per year and strong potential for newbuild projects that would benefit from nearby C. O two infrastructure.

Our recent agreements highlight the incredible benefits of our Gulf Coast Network <unk>.

Beginning with the certainty of a 900 miles C. O two pipeline system that is in place and in service today, our customers are joining a unique expansive network with unmatched reliability and flexibility for transporting.

And storing that C O two.

The network effect.

Originating with the broad reach of our Gulf Coast pipeline system supplemented by more than a dozen <unk> injection locations and multiple strategically located sequestration locations allows us to amplify the capacity of this system far beyond the nameplate capacity.

As an example for the Ace project, we expect to have at least five auctions, including two nearby plans sequestration sites that are already secured for moving the 12 million tons of annually captured cotwo emissions from the plant.

Several of these options would use little if any capacity on the existing pipelines.

This network effect that generates massive scale, while providing our customers with unbeatable reliability.

Youll recall that for 2022, we set a target to execute C. O two offtake agreements totaling a cumulative 10 million metric tons per year, along with poor space agreements totaling accumulative of $1 2 billion metric tons.

With our recent announcements, we now have 20 million metric tons per year under various offtake agreements double our goal for the year and we've executed poorest based agreements for over $1 5 billion tonnes significantly above our annual goal.

And our build out of the Ccs business is just getting started.

By the end of this year, we expect to start drilling the first well and are stratigraphic test well program supporting our EPA classics permitting process and we have multiple additional offtake and force based agreements in detailed negotiations with new opportunities arising every week.

The recent increase in 45, Q CCA U S tax incentives opens up even more carbon capture opportunities in a number of industries that were not previously economic including cement steel certain power generation industrial heat and others.

And with those new capture opportunities, we see a significant expansion of the potential market a market that was already very exciting even before the 45 Q increases.

It's a very exciting time at Danbury, our EUR business is generating strong cash flow, we have virtually no debt on our balance sheet.

And our CCA EUR project is progressing nicely toward first production.

At the same time, we're making rapid progress towards building an industry, leading <unk> business.

I continue to believe that this company is in the right place at the right time perfectly positioned to lead in the challenge of delivering the energy, we all need today will decarbonising the future.

Okay.

Thanks, again for joining us today, and we will now open the call for your questions.

Okay.

Thank you.

Ladies and gentlemen, if you would like to ask a question. Please press star followed by one telephone keypad.

Maybe paint to ask a question please finish ensuring its only some mute locally.

We have our first question comes from team Rasmussen from Keybanc capital markets.

Your line is now open.

Hey, good morning, everybody.

Morning, Tim.

As like it's been a pretty calm quarter for everybody.

Alright.

Okay.

My first question, it's almost more of a request.

All of US here in the investment community you know we've been grasping at straws trying to really understand the value proposition of the <unk> business and some media reports it sounds like other entities, maybe trying to do the same thing.

Now that you've more than doubled that thresholds you have 20 million tons per annum of agreements in place.

When or how do you plan to pull back the curtain a little bit on kind of economics to <unk>.

Investors sort of appreciate the embedded value of CCA us.

No. Thanks for the question, Tim and then certainly I agree with you that the.

The build out of this business is something that deserves.

Deserves to be shared more broadly with our investors and with with with analyst and Thats something that were working toward and as you mentioned, we're now at a point where we have.

A decent scale that we think is one of the steps that we needed to get to to be at a point, where we could actually come out and and hold an event like that.

So we're in the process of planning that right now.

Now we haven't set a date, yet and when we do we'll be sure to share that.

One thing I would say along the way is that we do plan at this point specifically to focus on the Ccs business, we think the broader business.

It needs to wait for the budget.

Budget cycle and approval by our board and so I'd look more for.

Our outlook on our business on.

On the EUR side, when we get to our fourth quarter earnings in February , but ER, but we're working right now towards the Ccs piece and we'll we'll let you and others know as soon as we're ready to schedule that.

Okay. Okay. That's good to know thank you for that and then I guess second question.

It's a bit underappreciated or not discussed as much these days, but.

Cedar Creek Anticline is a massive project then its taking years to get to this point.

In a color here in the release and the slide deck about starting work on phase two already so clearly youre encouraged by what you're seeing.

Are you willing at this point you kind of give any more color on sort of the capital that project will needs over the next couple of years.

And what sort of production.

In response, you might see from phase one and two is as we look over the medium term.

Hey, Good morning, Tim This is David Sheppard, Yeah, I'll take that question yeah. Thanks for calling out CCA. It's just a great asset for us and I'm really excited about that you are a potential becoming a reality as soon.

There is we continue to anticipate our production response in that second half of 2023.

Phase one specific you asked about phase two in particular, where you have a drilling rig actively working in in our CCA field right now it had just wrapped up operations drilling the pilot well that is going to test phase two there so there'll be a couple of wells.

Involved with that and an injector and it.

Producer.

We'll install recycle facilities.

They're in that project.

Mid year 2023 time frame, we'll begin injection see how that responds and those results are really going to custom tailor, how we plan to flood.

This too is a big resource, though if you recall, it's 100 billion barrel targets compared to the 30 million barrel target in our phase one.

That is currently under flood there so really excited with what we're seeing right now in phase one injection has been ongoing since February we're nine months into that.

There are some learnings that are coming out of that so we're making some some adjustments we've accelerated some capital.

Into 2022, and 2023 as we want to accelerate our recycle facilities and manage some of the supply chain impacts that are out there now definitely don't want to anchor in on any cash.

Capital projections, just yet as Christopher said, we're working the those plans right now will be.

Looking to roll those out more in that February timeframe during our fourth quarter earnings update.

Yes, Thanks, David and Tim just I'd just add on there just how.

Great It is to actually be.

Working EUR at this asset right now and just the panorama of opportunities that it opens up with phase one and working through that right now as David said, and then having phase two with the resource right behind it.

Gone many years, where we're not starting up new floods and so it's very exciting for several reasons, but a lot to come in the future on that.

Okay I appreciate the color. Thank you.

Thanks, Tim.

Thank you.

Our next question comes from Nate Pendleton from Stifel. Nathan Your line is now open.

Good morning, Thanks for taking my question.

Good morning.

My first question, maybe for Nick regarding your network of sequestration side can you speak to where you project stand on the classics permit submissions and regarding the upcoming stratigraphic well test is there any indication when youll be able to share those results and if that well is designed to be converted to a plastics injection while over time.

Yes, thanks for the question.

So the classics process is doing great on all our sequestration sites, we're progressing all the sites that we're operating right now.

Expect to see a first completed permit applications middle in the very near future.

The stratigraphic well test we expect to spud in December we expect to see results from that in the first couple of months.

Probably give some details on that in the first quarter earnings.

So we expect to have good results there.

We will continue to drill stratigraphic wells in.

Sequence on or additional sites as they come.

Come up.

And then just what I'd add to that Nate just the.

Utilization of those wells.

We would likely construct those wells so that they would have some future utility in the site, whether it's as a as an injector orders of monitor well we see.

That expenditure is something that will pay off in the in the development of the field as well.

Great I appreciate the detail as my follow up regarding the continued strong results from grieve using enhanced Seo to flood design on slide six can you speak to what those enhancements are and whether that approach can be applied to other fields.

Yeah, Nate this mandate him yeah, Grieve has really taken off for US we're very happy about.

What's what's taking place there with more potential to come basically what we did is we reconfigured injection.

And putting <unk> at the bottom as to the top and that's really it's really specific to a given reservoir. So does it apply to other places, yes, but not everywhere.

Got it thanks for the detail.

Thanks, Nate Thank you.

We have our next question comes from Charles Meade from Johnson Rice Charles Niehaus.

Yes, good morning, Chris to you and Mark and the rest of the team there.

Good morning.

Chris I wanted this is kind of a big picture Big picture question as I look back at you guys and your stock price over the last year. I mean, you you guys have I mean, you've made the point you've doubled your targets on what you guys were going to do for.

For you know sequestration or capture deals over the course of 'twenty two.

You've seen new kinds of deals you you've hit a lot of great milestones.

Milestones.

But at the same time it.

It seems like a lot of the value that the market was putting in your shares for the Ccs deal.

Has diminished and that's even after they you know whenever we doubled the 45 Q. So.

Can you give can you.

Can you just give where share some of your thoughts about how you and the board are thinking about.

The REIT structure or the right setting for the Cc U S business long term I mean, it's for now it's really intimately tied to your EUR, it's probably will be for the next several years, but how are you and the board dealing with that what I imagine is kind of is unsatisfactory response in the share price.

Two the accomplishments you guys have made to date.

Sure Charles So the first thing I'd say when I think about our share price is it something that.

We can't control and it has to go to the.

We're going to change over time with the market and so what we think about is just how can we continue to drive value in this company and have the share price eventually reflect that.

Now when it does get out of sync like you like you suggested.

That's where we put in this share repurchase program and that gave us an opportunity to buy shares honestly well below where they are today and I think we did a good thing there and certainly in the future there'll be potential for that as well as the board has authorized us to do even even more.

But.

Honestly, what we see is that we will continue to drive this business. There are many many more opportunities beyond what we've announced already and we're thrilled with what we've announced already but we believe this business will be huge and we're going to keep working towards making it huge.

When you talk about structure.

Along the way, we will continue to evaluate how do we.

Set up the company and the way to attract the best investments out there and along the way there could be a potential to create a separately investable entity for CCA us but.

But we're not not quite ready to do that yet we want to continue building. This in.

And I think most investors can look through the combination of the two businesses and see the composite value and just see an incredible opportunity there.

Got it that's helpful. That's helpful, Chris and it's gonna be it's gonna be.

A bone.

I guess, we all have to we're all going to have to dawn for for a while but.

You bet second question. This is and this is more specifically specific to <unk> and and what it means for 'twenty three so it makes sense that you had some.

Basically the capex rate for <unk>.

It makes sense that you had some projects slipped from <unk> into <unk> is the four Q capex rate a good indication for the for what the quarterly run rate will be in 'twenty three.

Probably not Charles.

We had we have a lot of activity right now some of which was pushed her.

Just because of availability of equipment and services and so that gives us a pretty heavy for Q. So.

So I don't necessarily think that's a good number going forward of course, we're going to get through our planning process for next year and rolled that out at the right time, but just what we see here right now is.

David has three rigs working and and a lot of activities that are.

We're going to drive some some nice production.

Those those type of wells like like he's drilling at.

Mission Canyon up and up in the North are at Webster and the Gulf Coast.

So that program will deliver some results, but we don't necessarily intend to keep that level of rig activity going through.

Throughout next year.

That is all detailed Chris Thank you.

There's something else or.

Charles This is David I was just going to add too as well that there are several key milestone payments associated with some of the recycled facilities and our phase one CCA.

Reject as well that will if you don't have to provide some uplift in that fourth quarter, we don't expect that to continue.

That's good thank you I appreciate the detail.

Thanks Ralph.

Thank you.

We'll have our next question comes from Brian <unk> from capital one Brian Your line is now open.

Yeah.

Good morning, everybody.

Brian I had a couple of years.

Couple of quick questions on the Ccs business.

I'm trying to better understand how that network effect amplified nameplate capacity for the <unk> pipe I know the stated capacity I believe the city capacity for Green pipeline is.

$16 million per year I also know based on comments from you guys last year that there are ways to double or even triple that with relatively modest capex I guess.

Can you walk me through those opportunities to expand steady.

<unk> capacity of the pipe and am I right to think that that capacity could be significantly higher than 2016.

Youre, absolutely right and so there's a couple things that I described that should help with that Brian .

The first is just.

Yeah.

I think of it as.

Analogous to a subway where.

You have people getting on a subway and going to the next stop.

And people are getting on it the next stop and so.

But you don't need to have people riding the subway from one end to the other and as a result, you can have multiples of how many people you can actually fit in the train at any point in time and the same applies for US. It's just instead of subway stops it is.

Where emissions are sourced and they come onto the system and where they are stored and come off of the system. So that that in itself allows us to amplify the capacity without really doing anything to the system.

But going even further I'll just give you an example of our plans for the.

Massive storage site, we have that's east of New Orleans is there would be ultimately a pipeline connection from near the junction of the Green line in the J D.

That will be able to draw emissions to the east end and that would be a new line and it in itself. We can see a capacity of up to 25 million tonnes, a year or so that's not even on the system that you think about right now anyhow, and so thats, new and that adds capacity, but it doesn't.

At the same time as having the redundancy of still being connected to that system to provide you with the optionality to do other things along the way. We can do that same thing in several locations. We can draw C O two up into Mississippi, and and as we look further west we can do the same thing in.

Other parts of Louisiana, and Texas, So doing all of that just amplifies what we can move on the whole system again, we don't need to move our molecule is C O two.

Some went into the other the last thing I'd.

Out on that Brian that I think is important is the fungibility of C. O two in this system.

Just as you would have with Green power, if you want green power to your home there there's not specific electrons at green power that are coming to your home, it's being allocated and abroad system. The same principle applies in C. O. Two so when when we are moving to in our <unk>.

System, we can use storage sites and EUR sites.

Interchangeably as long as the overall system balances appropriately in line with the 45 Q regulations. So all of that combined let you expand this system far far beyond what you'd think just by looking at the capacity of one pipeline.

That's extremely helpful and exactly what I was trying to make sure that I understood is that the nameplate capacity at this pipe Thats really nothing to do with the number of agreements or the size of the agreements.

Aiming to sign up in the <unk>.

<unk> 50 that you're already in negotiation and I think as of last quarter. So so thats two number exactly pretty independent.

Okay.

Wanted to be.

Be certain about that but I appreciate the explanation I like the subway analogy.

That's all I've got thanks, very much everybody okay. Thanks, Brian .

Yes.

Thank you Brian .

With our next question comes from Sam <unk> from Jefferies.

Your line is now open.

Hey, good afternoon, guys first off congrats on winning the offtake from the Ace project, obviously, a very large number that doubles your target.

But with a large project like that.

It seems like a large amount of capex is required to build it. So I'm just curious what specific advantages of that project and what characteristics give you the most confidence that that capital can be.

Be funded I mean, presumably project debt financing will be available on an even subsidized to a degree, but there's probably going to be a good amount of equity required on that so just curious as to your take on how the project gets funded so that it can be taken in 2024.

Sure and I guess, Sam what I'd start with is just by looking at the market potential for this clean ammonia or blue ammonia, where the the produced C. O two is captured and injected.

When we look at the future utilization of that Blue ammonia.

This is not just for agricultural purposes in fact.

Most of the growth that we see over the coming 30 years would actually be as a fuel or is a hydrogen carrier and that fuel would be used in marine transportation. It would be co fired with coal and power plants worldwide.

And it can be used as a hydrogen carrier where it can be moved more easily than hydrogen and then dissociated.

The other end into its components, providing hydrogen gas for.

Some of these hydrogen hubs that wed expect to see around the world.

Putting that in perspective about shy of 200 million tons a year.

Day of ammonia demand.

Could triple by mid century, so there's just huge numbers.

So number one we think there's a lot of demand for blue ammonia and the agreements that you've seen from us already.

In the last two years, whether it was with Mitsubishi nutrients are now clean hydrogen works are just a small fraction of what we think will be needed in the future now.

When we think about it and so that gives us the project itself a strong tailwind in what I say about your question of how do you.

How does the financing come together for this.

To me.

Like any project Youre, putting together the building blocks of <unk>.

Full project.

Want to have the demand you are in this type of project you want to have security on the C. O. Two offtake. Unfortunately, we're able to provide that with the <unk>.

Super close proximity to our pipeline system from where the project will be sited.

And then a key point on the tail end as off take and I think once you once you.

Tick all those boxes and when you have offtake committed than the the financing.

Is much easier to pull together, whether its on the debt side or the equity side and so what I'd expect that we'd see in the.

The coming months here, Sam is that that will continue to progress and just like so many of these clean energy investments I think that there is an awful lot of capital chasing good investments in clean energy.

We've been looking at this project now for upwards of a couple of years and we're convinced it's a good project.

Got it all certainly makes sense sounds good good point on the uses of ammonia going forward too.

Sort of hits. This then in it in a way.

I'm curious if you've had any discussions with industrial emitters, who are thinking about retrofitting existing facilities and outfitting them with carbon capture because it seems like most of the announcements in terms of like Blue ammonia for instance, our new builds that like that but even if I did yet so is there <unk>.

Demand that you've sensed from industrial emitters, who are looking to.

Retrofit an existing facility and.

Market their offtake to you guys.

Hi, This is Nick I'll be answering this question. So yes, yes, we have we've actually already signed one agreement with a brownfield project is what we call them.

Chemical plant in Louisiana, So our pipeline of projects includes a whole host of those brownfield projects coming up.

We.

It is a pretty fair split between brownfield development in Greenfield development in terms of our portfolio of future projects that we're working on them.

They take a little longer to get to.

The completion, where they want to sign the agreement.

The reason is if you can kind of think of a brownfield development, it's kind of like remodeling your house versus building a new house. There's a few steps on the front end that has to take place on getting prepared to re range. All the processes that are in place that are currently producing the products that are generating now to accommodate the capture process.

So we remain highly engaged with our brownfield projects are great partners.

Look forward to getting them to the finish line.

Okay. Thanks for the color guys I appreciate it.

Thanks, Dan.

Thank you Sam.

Our next question comes from Doug Leggate from both on.

Your line is now open.

Hey, Good morning, guys. This is clay on for Doug Thanks for taking the question.

For my first question is for Chris and I'd like to follow up on Tim's question and now I'm not going to ask you to confirm any of your M&A intentions, but I don't want to get your thoughts on something.

Just on your conversations do you think that there is a meaningful gap between the understanding that strategic Seton U S player in Canada versus what the public investors now and would that get brings to allow you to consider M&A without having a proper built out their own valuation.

Okay, well, that's an interesting question.

I guess, what I'd say first of all we wont comment on these rumors and speculation that's that's.

Our starting point when I think about just where this.

Company is going.

We are squarely focused on building.

<unk> value, we just think that what we're doing is unique we think what we have is unique in our ability to.

Put together projects like you've seen so far is something that Danbury can uniquely do and the scale that we think is needed in this business. So we're very excited about what we're doing with the business and we're going to keep completely focused on driving ahead.

And building it as rapidly and as fully as we can.

I'm not quite sure I picked up the the question on the the bogey on the on the valuation there it is something that I'd say.

Again going off of Tim's earlier question.

It's harder to for.

The market to understand primarily just because it's so new.

A world that.

Very little.

Sequestration very little carbon capture has actually taken place in the world just putting it in perspective, the 20 million tons, we've announced.

As equivalent to half of what's being done in the whole world. Today. So we have a long way to go and we think that.

As we build it it's important for us to educate the investors in the market and what this looks like in and it's dynamic for everybody and it's dynamic for the emitters, it's dynamic for all participants in the <unk>.

I think that it's something that we just have to work that as we go forward.

Certainly, though what I'd say is when we look at what we.

Have in this business.

What the potential is where we're extremely excited about it.

I appreciate that Chris your passion for this business really comes across in that answer.

My second question is.

And like in exon are also targeting projects in Louisiana can you talk about maybe any partnership opportunities that you see between your system given the scale of the <unk> opportunity. Its just hard to imagine that it would just be.

One player in that region.

It is hard to imagine that there would be just one player and then if you step back a bit and just think about.

What is the potential for CCA west I talked quite a bit about ammonia, but I think <unk> in general it can just be enormous.

At least what we see.

I think in the United States that the volume of C. O. Two that will ultimately be moved will be.

Larger than the 12 million barrels of oil that are being produced in the United States today.

So it's a huge opportunity in that.

Of that 12 million barrels of oil being produced today is being produced by a lot of different companies and I think there'll be space for many others.

In this and certainly the ones that you mentioned.

I do think there are points for partnerships.

We want to be pretty thoughtful about those partnerships.

We think that the system that we operate talked a bit about the expansiveness of the system and just where we can go with that.

We will always look at partnerships and where.

One plus one can equal more than two.

We've been doing they've been working on.

Those conversations are really for the last couple of years and I would expect to see that continue.

And where it makes sense there will be partnerships.

I appreciate it thank you.

Thank you.

Thank you we have our next.

Next question comes from Jacob.

<unk> from PVH Jacob Your line is now open.

Good morning, Chris I think we're in Jacob's opening of the call I'm, just curious about how negotiations and discussions have evolved post the passage of the <unk>.

Really kind of what we're thinking about is are these new conversations are you revisiting conversations and subsequent to that has this changed maybe the high priority targets over the next 12 to 18 months.

Hi, Jacob this is Nick again.

Yeah. So in terms of how the negotiations have changed with the new pricing.

I would say that there is.

Building a bit of pricing difference that's necessary on the offtake side as well. So we obviously have some different costs that come into our.

But that change is.

Pricing goes up for example horse based payments, sometimes increase theres actual more liability.

Our rate increases so some of those costs go up and so our pricing goes up as well.

In terms of the market, we continue to see additional emitters come into our portfolio every week.

I think it spit up since the <unk> came out I think it will continue to grow for a longer period of time.

I think there'll be new Greenfield projects that Werent previously economic that'll come into framework.

But in terms of prioritization, we were working with.

A lot of great partners.

And we've been working with a lot of great partners for a long time now we mentioned earlier, we've been working with clean hydrogen works for nearly two years and so.

Lot of our priorities have stayed the same we want to get a lot of those agreements that we've been working for a long time to completion and so we're staying on top of the priorities. We have in place and just adding to the list and were also adding to our staff to accommodate the additional priorities that are raising up.

And Jacob I'd, just add to what Nick shared that something that I think is really interesting and maybe not broadly appreciated.

As we think about this $85 tax credit is incentivizing a whole lot of of industry.

What we see happening alongside that as that infrastructure build that preceded the 45 Q changes in the in the IRI.

That actually provides for a lot of funding of some of these projects. So if you were to look at Nick's team you would even find capture projects that are not.

What you'd think of as being well within the $85 cost of capture.

But they are working to be supplemented by <unk> grants or loans that helps them.

Get the capital in place to execute those projects. So theres a few different things at work that I think are actually again makes the pie even bigger than you might expect just from face value.

Great appreciate that.

And if I could circle back to a previous question I just wanted to confirm the brownfield Greenfield mix.

Current.

It's roughly 50 50, I think I heard.

And if I did hear that correctly can you kind of give me your guideposts on how long that that mix stays similar to those levels.

That makes sense.

Yeah. It does and this is Nick again, and so yes, you heard you heard the question correctly, it's still about half and half and the best way for me to address how long that will stay half and half as to kind of give you our data on the incoming.

Industrial partners that we're picking up on almost a weekly basis.

So just in general we continue to see additional brownfield development come into the portfolio at about the same rate as we see Greenfield development.

At some point of course, there'll be we'll run out of a brownfield development because there's just not that many play.

Plans are.

Emissions in place right now to to go on forever, but but right now we don't see it slowing down.

Yeah, and again I'd just add to what Nick said he is right on point, there, but when I go back to that network effect that I talked about Jacob.

Other aspect of that.

Is that win win Nick's team builds a pipe in Alabama for example.

Will that pipe that was not there before.

Get close to new emissions sources that may be on their own could not have economically captured their C. O two but now that there is a pipeline in the neighborhood they can.

Or to what we talked about with what were doing in lake Charles as well so that network effect creates a cycle that builds.

It builds the capacity and the opportunity of the system for more emitters to come into it.

Just wanted to add that on top of what next year.

I appreciate it thanks for the time guys.

Thanks Jacob.

Thank you Jacob.

We have a follow up question from team mess, then some keybanc capital market. Your line is now open.

Hi, Thanks for letting me back in a couple of quickie here.

You all were aggressive on the repurchase front.

On weakness in the third quarter with shares where they are now and what looks like a much bigger backlog.

Projects over the next couple of years, how much do repurchases makes sense and how you're thinking about them over the medium term.

Hey, Tim This is mark now good question.

Going to continue to look at it I mean, obviously share prices moved up and we generate a lot of our free cash in the first half of the year.

And executed the buyback at that time as we look forward here, especially as you saw this quarter and next quarter, probably more balanced and so we're going to be disciplined and remain opportunistic about how we think about future repurchases.

Okay. Okay.

That makes sense and then if I know people have mentioned I think enlink.

Earlier.

Enlink has talked a lot about retrofitting natural gas pipes to make them accommodate.

Two you also have quite a bit of natural gas pipelines in the area.

I'm not a metallurgy expert so I'll defer to you all but is that something that you can look at it as a possible bolt on and.

In general your thoughts on the feasibility of that work.

Thank you sure Tim it's something that we've we've looked at and thought about and then and even in our history and some smaller cases, we've done it ourselves.

When I think about the network and what we wanted to do with that.

Certainly the most efficient way that we see of operating the network is to run the <unk> and supercritical.

Supercritical phase.

At which requires a certain pressure thats typically beyond.

The natural gas pipeline rated pressure.

So for us to have this flexibility and optionality in just the ability to do a lot of things with the system. We like the the higher rated pipelines that we have.

Having said that there's always an opportunity I think in specific cases, two to do what you described but it's not something that I think we'd look to do broadly on the system just because of the different pressure regimes that the Sidoti with BN.

Okay. Thank you.

Thanks, Tim.

Thank you Tim.

We have no more further questions on the line I will now hand back to Pat Walsh for closing remarks.

Sure Thanks, and thanks to everybody for joining us today and for your interest in Denmark.

If you have any other follow up over the coming days, please don't hesitate to reach out to the best or myself.

This concludes our call for this morning.

Thank you ladies and gentlemen. This concludes today's call. Thank you for Tony you May now disconnect your lines.

Okay.

Yeah.