Q1 2023 Baytex Energy Corp Earnings Call
Okay.
Thank you for standing by this is the conference operator welcome to the Beta ex Energy Corp, first quarter 2023 financial and operating results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad.
Should you need assistance during the conference call you May signal, an operator by pressing star Zero I would now like to turn the conference over to Brian Ector, Vice President capital markets. Please go ahead.
Thank you Ariel good morning, ladies and gentlemen, and thank you for joining us to discuss our first quarter 2023 financial and operating results.
I'm joined by Eric <unk>, our President and Chief Executive Officer, Chad <unk>, Our Chief Financial Officer, and Chad Lundberg, our chief operating and sustainability officer well.
While listening please keep in mind that some of our remarks will contain forward looking statements within the meaning of applicable securities laws I refer you to the advisory regarding forward looking statements oil and gas information and non-GAAP financial and capital management measures in yesterday's press release.
All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified.
And following our prepared remarks, we will be taking questions from the analysts.
In addition, if you are listening in today via the webcast you will have the opportunity to submit an online question and we will do our best to answer all questions submitted.
With that I would now like to turn the call over to Eric.
Thanks, Brian and good morning, everyone.
Welcome all of you to our first quarter conference call.
Before discussing our Q1 results I want to provide a brief update on our Ranger acquisition, which is expected to close late in the second quarter.
The transaction materially increases our Eagle Ford scale, while building a quality operating capability and the Premier Texas Gulf Coast base.
We believe the combined company will deliver a powerful combination.
Substantial free cash flow and increase shareholder returns on a per share basis.
Importantly on a pro forma basis, we will be in a strong financial position that is supported by significant liquidity and a balanced note maturity profile.
Since announcing the transaction on February 28, we have achieved a number of key milestones.
On April 10th we filed our information circular and merger proxy statement for our annual and special meeting to be held virtually on may 15th and these documents can be found on our website.
We encourage all shareholders to vote in advance of the cutoff date of May 11th.
On April 12, we announced the proposed U S $750 million private offering of senior unsecured notes due 2030.
We subsequently upsized the offering to the U S $800 million on strong demand.
Closing occurred on April 27th and the notes bear interest at a rate of eight 5% per annum.
This was a key part of our financing strategy for the Ranger acquisition and we are very pleased with the support we received from fixed income investors.
Lastly April 13th was the expiration of the waiting period under the Hart, Scott Rodino Antitrust improvement Act, which satisfied one of the conditions of the merger.
I'm also pleased to announce that T. J C pack will join <unk> as one of the two independent directors from Ranger, we intend to appoint to the bait Teck's board of directors.
Behind the scenes, we are working seamlessly with ranger to ensure a smooth integration at closing and beyond.
We remain committed to allocating capital efficiently to generate meaningful free cash flow.
For <unk> Standalone, excluding Ranger, our 2023 production guidance range is unchanged at 86000 to 89000 Boe per day.
With budgeted exploration and development expenditures of 575 million to 650 million.
Based on the forward strip for 2023 for <unk> stand alone, we expect to generate approximately $115 million of free cash flow in Q2, 23, and approximately $325 million of free cash flow for the full year 2023.
Following closing of the merger, we will provide revised guidance for 2023.
I'll now shift to our Q1 results, where we continued to deliver on our operating and financial targets, which included strong results from our <unk> Clearwater development.
Production during the first quarter averaged approximately 86800 Boe per day, which was up 7% from Q1 'twenty two.
We delivered adjusted funds flow of $237 million 43 per basic share and net income of $51 million or <unk> per basic share.
Exploration and development expenditures totaled $234 million in Q1, 2023, 38% of our budgeted full year expenditures and we participated in the drilling of 118 gross $96 six net wells.
Our 2023 exploration and development program is heavily weighted to the first quarter, which is expected to drive strong free cash flow generation over the balance of the year.
Operationally the highlight continues to be our Clearwater develop.
We generated production of.
Just under 12000 barrels per day in Q1 'twenty three.
The first 12 wells from our 2023 drilling program at Viva and generated an average 30 day initial production rate of 661 barrels per well.
Barrels per well per day.
Independent of Duvernay, we drilled four wells of our planned six well program.
The remaining two wells will be drilled during the second quarter.
Completion activities for the two three well pads will commence late in the second quarter.
This is an early stage high netback light oil resource play.
I now want to spend a couple of minutes discussing our shareholder return framework.
In 2022, we made a commitment to return 25%.
Free cash flow to shareholders through a share buyback program.
We executed on this program in 2022, repurchasing four 3% of our shares outstanding.
Upon closing of the merger, we intend to increase direct shareholder returns to 50% of free cash flow generated by the combined company, allowing us to increase the value of our share buyback program and introduce a dividend.
Our share buyback program was placed on hold at the beginning of the year due to the pending merger, but will recommence following close.
To meet our shareholder return commitment we intend to include 25% of the free cash flow generated from January one 'twenty three until closing in our 2023 a share buyback program.
Our existing normal course issuer bid is set to expire on May eight 2023, following closing of the merger we intend to file an updated and CIB application with the <unk> for a share buyback program, representing approximately 10% of our public float.
In addition, we will recommend at Bay tax pay a quarterly dividend of $2 <unk> per share or nine cents per share annualized.
The initial dividend is expected to be paid in October 2023.
To summarize we delivered strong operating and financial results during the first quarter consistent with our full year plan.
We're on track to deliver substantial free cash flow in 2023 <unk>.
And we are excited to progress the Ranger acquisition, how do we build an even stronger North American energy company with a high quality diversified oil weighted portfolio across the western Canadian sedimentary basin.
And the Texas Gulf Coast.
And now operator, we are ready to open the call for questions.
Thank you.
We'll now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any teeth to withdraw your question. Please press Star then two we will pause for.
A moment as colleagues join the queue.
Our first question comes from Amir <unk>.
Of ATB capital. Please go ahead.
Thanks. Good morning, guys. Just a couple of quick questions just on the hedges I noticed you did add another.
Quite a bit of impact as you went from I think like 10000 15000 barrels a day.
I know you were to look at that increase the heidrick heading into this closing this transaction, what's the target range on the hedging in terms of how much volume are you looking to hedge post the deal.
Yes. So this is Eric Amir thanks, Thanks for the question.
I'll hit at a high level, and then I'll pitch it to Chad Kalma costs.
We are looking to get off to on a pro forma basis.
Approximately 40%.
NRI production, so net production net oil production.
Up to for up to 40%.
And that the basic structure of those instruments and it's important to understand this.
These are going to be.
Wide two way collars generally $60 plus.
100 dollar calls.
And Youll.
Youll see this continue to manifest itself in the structure chat over to you to add anything you might want to add in terms of just how we intend to.
Sure sure Thanks, Eric.
Yeah, So as Eric said, we're looking to have 40% of the production hedge.
For the next 12 months post closing transaction really targeting that $50 floor.
We have a fair bit done today Ranger is active in their hedge book.
Through Q1 here so come to close will have the opportunity to kind of restructure a little bit of their hedge book, our kind of Norway hedges in SBC.
Again looking kind of.
So the absolute dollar Florida.
And then kind of getting a five as color as we possibly can.
On a go forward basis after that I think abbvie reduced leverage below one times.
Reduce our hedging target though.
At one time I think it was 40% nine times kind of 30% and then kind of work your way way down.
To get to that that part of the $1 5 billion, which better represents one six times.
At a $75 world.
Got it that's helpful.
The second question just on the guidance I know pro forma guidance our guidance on the combined company will be out till after the deal closes, but just curious we've seen some companies to acquire assets, where they slow down the pace of activity and use it as a free cash flow engine, others view it as a non core asset or asset thats been under capitalized and accelerate capital ratio, It's a pure play Eagle Ford.
Research just direct it.
But what youre thinking of pace of capital relative to where a range of what with their capital program.
Yeah. Thanks, Sameer so.
We're thinking.
We slow it down a little bit and the reason for that but is is to be <unk>.
Pretty consistent with the balance of our portfolio and our.
Organic production growth rate.
Generally pointing toward about 4% per year organic production growth.
<unk> was growing at faster than that and we like this plan for a couple of reasons.
One it allows us to.
Take the teams.
Talent and resources and effort and time and focus.
Little bit more on.
<unk>.
Kind of deeper technical insights working the assets technically and operationally around just operating efficiency.
And then not growing at quite so fast so we're thinking.
Two rigs level loaded maybe a little bit more than two rigs so there might be.
Our spot rig that comes in from time to time, but generally speaking we're going to hold the asset.
To a slight incline, but not but not growing as fast as ranger.
Ranger Standalone had it growing again, that's going to liberate resources time, and energy and gifts and talent to focus on.
Squeeze squeezing out costs, improving operational efficiencies. We also think generally speaking level loading.
Assets across the portfolio.
As is the best way to extract operational efficiency.
And synergies out of the assets and so it's not unique.
Two eagle Ford that will level out at <unk> level load the balance of our operations as well targeting the south east.
Level loaded nodes or channels of efficiency, where the asset works really well.
In our capital efficiencies are are optimized.
So that's our plan.
Slow it down just a little bit.
And that will allow a number of things kind of naturally fall in place.
Great color, Eric and just one final question for me just on that New Clearwater Wells that you had could you give us a sense of what the capital cost is on that well and just initial decline rates youre seeing from that 30 day IP rate.
Yes, im not sure that.
That's a 30 day IP or the production so far that we've actually even been able to formulate out or hang off the decline so it.
It would be too soon to know what I, what I will say is that.
It's basically half of lateral length.
As part of our Clearwater plan.
It's going to be entering delineation, which is the second phase of kind of four phases of commerciality.
Exploration delineation and demonstration in development.
And.
This reservoir of this accumulation is higher pressure than <unk> P vines higher pressure Nip San Martin Hills, we see strong mobility and high recoveries. So we're really encouraged by all of that.
And I think the other thing that makes this really interesting for US is we are in.
Operating team in place gas and water handling facilities in place the proximity to Edmonton and market Optionality is really impressive.
So for lots of reasons, we're excited about this about this play.
I think the resource itself is a subsurface resource quality is exciting.
And there is going to be more to talk about but I'm actually not sure we have sufficient.
Real data collected yet to actually hang off the decline curve on this well.
Okay do you have a sense of the well cost even if it was just half the lateral oh, yeah. So well cost is going to be I would say.
$2 million Canadian it's it's very much in line with.
With what you would expect that at <unk>.
Okay perfect. Thank you.
Okay.
Yeah.
Our next question comes from Menno <unk> Shah of TD Securities. Please go ahead.
Thanks, Tim Good morning, everyone I'll start with the Duvernay yeah. It sounds like completion activity is.
So to kick off pretty shortly with that in mind do you feel like Youre still on track too.
Make a decision on how the duvernay kitchen by early 2024.
Yes, we do so hey, Matt Thanks for the question.
We do feel like we're on track. These these two three well pads.
Have gone right to plan.
And we're very excited about what we've seen so data collection doesn't just just happen.
During stimulation and flowback. It also happens during drilling and we've been we've drilled.
Three different laterals, we better understand in these areas now two pad III three laterals, each or three wells each.
Better understand the variability of the reservoir in these areas in terms of drilling quality.
And.
Things like resistivity and gamma those form out formation evaluation data that you collect while drilling.
And so we're pretty excited about what we've learned again, the actual operation drilling casing cementing.
Quality of zonal isolation has all gone really really well very proud of the team for executing the plan.
And we're really excited now we gotta get break up behind us.
And then we'll put the balance of our design of experiment.
In the ground through stimulation drill outflow back.
And we'll have the information we need to better understand and really I think expand our characterization and booking across a much larger cross section of our <unk>.
Aerial extent of our Duvernay acreage.
Okay. Thanks for that and then just a follow up on the Eagle Ford what are your options on your non operated.
Acreage is status quo still the most likely scenario or could we see some adjustments.
Adjustments there as well.
Well I think.
When you think about kind of what what's going on with our.
Our relationship with marathon, it's really fantastic like we talk to those guys. All the time at every level of the operation.
We represent a significant portion.
<unk> working interest in the a M I.
And it's.
Important to us it's important to them I think we represent something like 24 hour hour production is is is not nothing relative to marathons production I think you probably read in there.
Our release.
I think they produced 144000 BOE a day out of their Eagle Ford assets.
On a net basis and in Q1, and we produced 26000 BOE a day, so you know that.
It's not nothing it's like one third or one six.
And that's pretty meaningful.
We have a great relationship with them. We review the data very carefully that we get they work very well with us very openly with us.
And so and there are very good operators so.
We're happy with the way the assets performing.
And now that we've got this ranger operating capability very close by I think what you could expect is that we'll start working more closely with the Ranger team, who has worked closely in their own right with marathon.
In and around the range of land.
To start increasing our own.
Operated working interest in and around our own lands and using our working interest in the Ami as a currency that is kind of in short swapping and trading to to increase both companies operated working interest.
If you do so.
Dollar value equivalent basis, it's just good for everyone right. This is the way.
Operators with large interest in each other's operation sort of get out of each other's hair.
And given the quality of the relationship and the quality of the resource on both sides.
I feel really good about that so.
These swaps and trades I think are going to be a meaningful part of increasing our operated working interest.
In exchange for marathon, increasing their operating working interest and it is going to be good for everyone. All the way around.
So that's what I would expect.
Just see is more coordination more close cooperation.
And it's a great partnership so.
We think thats going to be a good catalyst in and in.
In the Gulf Coast kind of over time, and all the way around.
I appreciate the color.
That's all I had thanks Eric.
Menno.
This concludes the question and answer session from the phone lines I'd like to turn the conference back over to Brian Ector for any questions from online.
Okay, great. Thanks, and yes, we do have a couple of questions that have come in via the webcast and so the first one I'm going to turn it over to Chad Lundberg, our chief operating officer for a little more color on the economics in the Duvernay and the question is what are the <unk> payoffs and recycle ratios that we would see in.
In the Duvernay development maybe.
<unk> are different.
Scenarios with WTO cases, Jeff.
Great. Thanks, Brian and this stems to the questions from the caller earlier, so I'm gonna anchored a $70 notionally that suri fit.
Today basically at $70, we are generating an 80% rate of return about three times recycle ratio in 16 months payout and then if I just think about that high level for flexing it up and down based on oil prices.
Every $10 move that West, Texas May it's about a 30% adjustment on rate of return up and down.
Half turn on recycle ratio and plus minus four months on the payout I think the bigger picture is just how does that fit into the overall construct of the portfolio.
No doubt <unk> would be the highest rate of returns that we ultimately generate.
Followed by Eagle Ford and Lloyd Minister or heavy oil cold cold. So fairway, the duvernay slots in quite nicely below that and then when you extrapolate that one step further just thinking about the ground or unconventional resource construct this it's very attractive and competitive rates of return when you look really across <unk>.
North America.
Great. Thanks, Chad.
Next question from the webcast.
And this is for back to Eric in a little bit more elaborating on the Ranger assets are there meaningful as opposed to incremental opportunities to improve well productivity of the ranger assets.
On closing of the merger.
Yes, Thanks, Brian I appreciate the question.
I think there are both incremental and meaningful opportunities and I.
I think this really kind of speaks to the comment I made earlier, but I'll take it maybe a little bit.
Deeper.
When.
Pure play companies like Ranger and others I've been involved in when you are moving fast it's important.
With smaller scale to stay very very lean and when you are moving fast and youre in youre growing the business.
You focus on continued execution of the growth program and the growth profile.
As I mentioned earlier stepping back just a little bit slowing down the pace of growth.
To fall kind of in line with our low to mid single digits and I'll, just say a single number kind of point to 4% per year organic production growth.
And at that pace.
Little over two rig level loaded throughout the year to get that done.
This.
Slowing the pace down a little bit bringing.
Broader.
Resources from our Canadian enterprise, both in and around Duvernay and also resources that we've been exploring along the way and combining those with the substantial and impressive.
Performance that that Ranger has brought forward in the last couple of years just since the new management team has been in charge of the asset that was late 'twenty and of course <unk>.
Creasing, new management through 'twenty, one and 'twenty two.
They have made a substantial improvement in performance, we think there's more that can be done.
We think this this is at a number of levels.
Sometimes there is theres a little bit more active geo steering that can take place to reside or live with every foot of the wellbore in the highest quality reservoir.
And Thats.
Something that can and will be explored using obviously real time, while drilling data collection to ensure that we remain in the in the highest quality reservoir. The team has done a really good job, but again when you are moving really fast.
Sometimes there are opportunities.
They get missed.
Stimulation design I think there are things we can do.
To step up the intensity.
The team has extracted a great deal of quality.
Value accretion.
And performance out of the assets, but we think there is there is a little bit more of that can be done with regard to applied math and science.
In and around those assets involving machine learning capabilities.
And we're really eager to put our heads together.
With the technical team at Ranger in the subsurface.
And the technical team here and I've got some frameworks in my own mind that we want to explore and combine so I'm impressed with what the team has done so far just in the last couple of years and they have really demonstrated that these assets can punch above.
Their weight in terms of what the world had come to expect prior to 2020, but.
But I do think there are incremental opportunities to continue that trajectory and I think for that for the sake of just having something to stare at I do want to point to one slide in our.
Base X plus range, a deck that actually helps to to put kind.
Kind of words to data and I'm going to stare at slide nine for just a minute here and I won't belabor, the slide but I just want to point the audience to this slide because this in the upper right shows year over year performance improvement and you can see in the lower left how much better the 2023 wells to date are.
And then 'twenty two and then those are incrementally better than 'twenty, one and so on.
And then on the lower left measured against the best operators in the area you can see that that performance is.
Strong and getting stronger with time as you see that 24 month period closing in on the top call on and so.
I think it goes beyond just drilling and stimulation, though there are.
Nuances around.
Pvt, and the unique characteristics of pressure volume temperature in the petroleum fluids and how they behave.
As they flow through the reservoir through the Frac pack through the wellbore into the surface and we're going to employ sophisticated nodal analysis to ensure and sophisticated pvt to ensure that our reservoir pressure drawdown and management.
Is.
Pulling as much oil value end of the curve and forward as possible and there are <unk>.
Certain best practices to ensure that that gets done and again by slowing down a touch we're able to focus.
The very talented team and Ranger.
On on some of these more detailed.
Technical on an analytical pieces. So thank you for that.
Okay, Eric another question.
For use of a pro forma range or can you comment on pro forma free cash flow for the first 12 months following the close of the Ranger acquisition.
Generally what are your expectations, yes, so at 75, WTO, which which we think is a very reasonable.
Price file.
You just take 75 flat out in time.
And this is on a combined entity. So I'll also.
Set a benchmark for WCS depth, if you use that if you've used the WCS differential to <unk>.
$17 50, so is that 75 is a benchmark ti and $17 50 as the basis to WCS and then you roll the company together pro forma in the first four quarters. After close the combined business will generate a $1 billion a year of free cash flow and that $1 billion a year will be allocated 50.
Sent to debt Paydown, so that's $500 million per year to debt paydown and $500 million per year to return of capital to shareholders.
And Eric just kind of ties into the maybe the free cash flow and free cash flow allocation question, but do you believe the current share value reflects our future growth expectations.
What will be done.
To enhance the value of the share price more consistent with.
With your expectations for the business, yes, so implied in the second part of that question is no I don't think our current share price.
Reflects the value I see in this business I think we're pretty deeply undervalued.
And that is exciting for me because it creates a lot of opportunity for those of us sitting on this call.
The way, we're going to unlock that potential is through.
Blocking and tackling in the business finding more and bill.
Because oil is where oil was in this business that's on $1 7 million net acres of HCP lands.
I promise you there is more of that to come I can I can simply tell you. We've been engaged in an organic exploration program of cost across all of our lands.
And more anvil.
Is one bite of a pretty steady diet.
So that's one thing the other the other part of this that I think is really important is return of capital to shareholders will continue to take to take up and cancel shares as.
As we did last year and as we will do increasingly as this business grows in scale and growth and free cash flow on a per share basis, we'll be able to.
Allocate both more of the absolute free cash flow and it's a bigger number and on a per share basis, we will be able to allocate more of it buyback and cancel those shares and so there's that natural.
<unk>.
If you like upward pressure on all of the per share metrics that will make its way through to the.
Our share price.
And it'll take some time for that to happen, but as that happens there will also be natural appreciation in the share price and that natural appreciation in the share price just through good execution blocking and tackling and discovery.
Assets.
Productive high quality profitable assets within our current franchise will add a great deal of sort of real value along the way.
And if the share price appreciation doesn't close in on our intrinsic value as it should that just tells me that there are inefficiencies in the marketplace that will result in a discount between our intrinsic value in our share price and we will buy that desk out using our using our free cash flow generation to do so.
I couldnt be more excited about the business to just add a great deal of capability today.
And.
One of the things about the oil and gas industry globally today, but especially in North America is the inefficiency is creating opportunities where assets are mispriced and materially mispriced.
One of them and we're going to take advantage of it by buying back our shares at this discount.
It will take a couple more here on the webcast and we've got a pretty tremendous response to.
Adding historical quarterly conference call.
Eric are there any meaningful non core assets of the combined company might be looking to divest.
And second part any meaningful reduction in drilling costs or relaxation of inflationary pressures.
So I'm going to try to answer the first one and then I'll pitch the second one that Chad lundberg.
We the way we've been thinking about our portfolio and I am going to stare out a different slide within our rollout deck. Because this is one that has been really handy.
To us in the conversation around our portfolio and Im staring at slide 10, again I'm in the latex plus Ranger Deca, if youre in front of your computer.
And I like to look at this starting in the lower left panel, which is our portfolio ran at $75 W. Ti. So youll notice in the footnotes. It is what I described earlier as our benchmark.
Price.
And.
You look at the Y axis UCP by in Clearwater is spectacular and.
And you see our karnes acreage that that's Eagle Ford in Orange and then you see in Blue. This is the range of your Eagle Ford lands.
And then as this trails off to the right the way to think about the portfolio as it probably won't be whole asset so don't think.
Duvernay is a whole asset our Viking as a whole asset or Lloyd has a whole asset but think about these areas our peace river as a whole or Eagle Ford as a whole asset think about taking each of these assets and this assembling them into.
Packages of four tier reservoir tier areas tier one tier two tier three.
And then think about how kind of tier three.
Sure.
Assets would perform in a portfolio there because we're always going to be creaming.
Allocating our capital resources to the highest returns within our portfolio.
To the extent that those assets can accept.
Efficiently accept more capital I can expand on that too but to the extent that they can they can efficiently accept more capital in process that capital we.
We will continue to put capital to the highest returning asset but what that means is if you maintain this 4% per year production growth maintain this kind of 50% reinvestment rates, which generate a great deal of free cash flow for all of the things we talked about earlier then.
It also implies that there are going to be assets within this portfolio that cannot compete for capital and in a discounted cash flow world those assets might be at six eight years 10 years.
And in our portfolio they might not compete but in someone else's portfolio, they might and if they can command cap.
Capital funding on year, one or year, two in someone else's portfolio and year after year 10 in our portfolio.
And it's clearly better for our shareholders and they're worth more to us if we sell them that if we keep that and that's the way we're thinking about it as a very systematic corporate development portfolio management and optimization strategy and we actually had that work underway.
Which is why that the skyline plots were so readily available.
But we've disrupted by adding this major asset in.
In the Eagle Ford and so we wanted to re evaluate.
But that's the way we're thinking about it but.
But rather than talk about specific assets I just wanted to take it maybe a level deeper.
And suggest that's probably going to be parts of major assets as opposed to whole major apps.
That's a great question. Thank you.
And just down to the inflationary question so ill.
I'll just anchor everybody to where we are today. So as you recall, we picked up about 25% inflation through to the end of 2022 that's basis the lowest through 'twenty one we.
We budgeted 23 with an incremental 5% for that so net net we're running the year at about 30% overall increase over the past few years.
We're starting to see.
<unk>.
Relief in our tangible items.
But not really as much in this in the cost of the services themselves. So for example, casing that nearly doubled through that time period is off about 15% as we sit today.
Diesel another one that that climbed quite readily through the time period is off about 35%. So that's providing relief to our over overall ftes.
In the U S. We're also seeing some relief with respect to rig rates just notionally with gas.
Seeing some weakness compared to <unk> as well as our Frac fleet.
Not overly meaningful yet, but certainly not the large step changes that we have seen through 2022.
Thanks, Chad.
Two more questions here.
The first one Eric is paychex, considering a reverse stock split to either before or after the merger with Ranger. It's.
It's a great question.
There's a lot to be considered.
<unk>.
Stock stock splits stock consolidations. These are by their very nature, neither accretive nor dilutive.
It's just it's just arithmetic right youre dividing are multiplying.
To affect a particular.
Targeted share price for reasons related to.
Okay.
The larger broad North American investment community and actually even beyond that in UK and Europe and so on but the point is you want to try to attract the broadest possible.
The investment community and sometimes share prices that are low.
Because total shares outstanding are high.
Can.
Can fall below a certain floor in terms of what funds can buy just based on certain certain fund criteria.
And so that might be a motivation to engage in a stock consolidation, which would take up the share price and take down proportionately the number of shares outstanding.
Again, neither accretive nor dilutive, but pretty straightforward arithmetic.
We have not spoken with the board directly formerly about that.
So I wouldn't expect it to happen it will certainly not going to happen in conjunction with the merger or ahead of the merger so.
That's not something we are contemplating we do believe that there there is an opportunity.
And if you've ever been involved in an IPO you know that investment banker spent a great deal of time with their clients targeting are figuring out what is the best.
Initial price and it's some of the same dimensions.
Debt of consideration in terms of capital markets that go into this conversation what I will say in the near term as we haven't had the conversations with our board.
And we do understand some of the capital market's dynamics.
What.
If it happened.
It would be thoughtful and would be targeted toward.
The price that might be in the middle of a family of our closest peers.
And in terms of our North American E&P community. So you can almost guess at what that what that value might be but again, we have no formal plans to do so okay. Thanks, Sir one last question for today's call your thoughts on crude marketing and the WCS WCS differential.
Yeah. So.
It has been encouraging to see.
The WCS WCS basis differential compressed.
It has come in some in the last couple of couple of months and even quarter.
Q1 actually didn't show it because its.
Some of what was happening was.
After the formal.
Closing our end of the formal calendar Q1.
We anticipate Q2 is going to have a substantially.
Lower.
<unk> shown in all the numbers and Youll see this in all of our peers who publish.
Data on Q1 with WCS exposure.
<unk> is going to help.
Theres just no question about that when you add inch miles of egress.
Two.
Our producing region like WCS be.
There's just no question thats going to help.
We don't have we are not an anchor tenant we don't have firm transport on <unk>.
But because the egress is increasing out of the basin.
We think.
Bob.
WCS WT IDF is probably heading towards the pipeline economics defined by.
The mainline to the Gulf Coast, and so pipe economics to the Gulf coast or in the 10 to $12 range.
We think thats, probably the equilibrium price over time.
There'll be opportunities, where it dips lower for reasons that are unique in time.
And location, we will try to capture those but.
But we are definitely.
Watching the marketplace watching <unk> progress watching line fill expect and understand that to be taking place.
In Q4, and then <unk> best we understand it.
Should be flowing in Q1 Q2. So this this kind of defines the way we're thinking about it but we do think it's headed towards buyback anomalous to the Gulf coast and that should define the WCS based step over time.
Okay, Great Eric Thank you for that and operator. Thank you thanks to everyone for participating on the phone lines and via the webcast today.
And this will conclude our first quarter conference call have a great day.
Everyone.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Yes.
Okay.
Okay.
Yes.