Q2 2023 Baytex Energy Corp Earnings Call
Thank you for standing by this is the conference operator welcome to the Beta ex Energy Corp, second quarter 2023 financial and operating results Conference call. As a reminder, all participants are in listen only mode. The conference is being recorded after the presentation there will.
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.
I would now like to turn the conference over to Brian Ector, Senior Vice President capital markets and Investor Relations. Please go ahead.
Oh. Thank you good morning, ladies and gentlemen, and thank you for joining us to discuss our second quarter 2023 financial and operating results.
Today, I'm joined by Eric Gregor, our President and Chief Executive Officer, Chad <unk>, Our Chief Financial Officer, and Chad Lundberg, our Chief operating officer.
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 advisories regarding forward looking statements oil and gas information and non-GAAP financial and capital management measures in yesterday's press release.
Although lower amounts referenced in our remarks are in Canadian dollars unless otherwise specified.
And following their prepared remarks, following our prepared remarks, we will be taking questions from analysts and.
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.
I would now like to turn the call over to Eric.
Thanks, Brian Good morning, everyone and welcome to our second quarter Conference call.
We reached an important milestone this quarter with the closing of the Ranger acquisition on June 20th.
This transaction has added quality operating scale in the Eagle Ford and has reinforced what was already a resilient and sustainable business.
We have emerged as a well capitalized and diversified North American E&P company, and we're poised to deliver a powerful combination of increased free cash flow and increase shareholder returns on a per share basis.
Before discussing our Q2 results I'd like to take a minute and highlight the three key pillars to our business as we move forward.
Number one is disciplined capital allocation, we are committed to a disciplined returns based capital allocation strategy targeting modest single digit organic production growth.
Each of our core assets as 10 or more years of quality development inventory at our current pace of development and.
And this provides us the ability to efficiently allocate capital in response to changes in regional commodity prices, another economic cultural or regulatory circumstances.
Number two is our focus on free cash flow generation.
Our commitment to efficient capital allocation across our portfolio is expected to generate meaningful free cash flow.
We intend to allocate 50% of this free cash flow to debt repayment and 50% of free cash flow to shareholder returns.
And number three is maintaining financial strength.
We have a strong balance sheet today with significant financial liquidity. This commitment to a strong balance sheet is unwavering we've.
We've established a total debt target of $1 5 billion Canadian dollars, which represents 1.0 times total debt to EBITDA at U S $50 per barrel W. T I D.
Debt level will provide us with full flexibility to run our business through commodity price cycles and generate meaningful returns.
For 2023, we continue to forecast exploration and development expenditures of approximately $1 billion, which are expected to generate an average production rate of 120500 to 122500 Boe per day.
For the second half of 2023, we expect production to average 153150 7000 Boe per day.
Based on the forward strip, we expect to generate over $400 million of free cash flow in the second half of 2023, and approximately $500 million of free cash flow for the full year 2023.
With the closing behind US we have moved quickly to enhance shareholder returns to date in July we have repurchased four 9 million shares and I'm very pleased to announce that our board of directors declared a quarterly dividend of $2 two five per share or nine cents per share on an annual basis.
Yes.
I'll now shift to our Q2 results, which include 11 days of operations from Ranger.
Production during the quarter was 89800 Boe per day.
86% oil and Ngls, which exceeded the high end of our Q2 guidance range due to the timing of operated Eagle Ford Wells brought Onstream late in the second quarter.
It is important to note that our Q2 production was reduced by approximately 4500 Boe per day due to the curtailment of production caused by wildfires in Alberta.
Wildfires continue to burn in northwest, Alberta, and we could see further interruptions through this summer and into the fall.
For the month of July we expect production to be curtailed by approximately 2000 Boe per day.
We are incredibly proud of how our personnel have responded to these challenging conditions with sound safety focused decision, making and genuine concern for our communities.
I would also like to thank the emergency responders firefighters, who courageously continue to protect our communities.
We delivered adjusted funds flow of $274 million 47 per basic share in Q2 and generated free cash flow of $96 million or <unk> 17.
Per basic share.
Exploration and development expenditures totaled $171 million during the quarter consistent with our full year plan.
And we brought 34 nine net wells on stream.
Operationally the highlight was the completion of our six well Duvernay program.
And new heavy oil exploration success in the Sika near Cold Lake Alberta.
As a reminder, our pembina Duvernay light oil assets are in the demonstration stage of commerciality and offer high operating net backs with the potential for strong economics and organic growth.
Our completions and facility execution tracked ahead of plan, which allowed for an acceleration of the on streaming of wells.
Four of the six wells are in the early stages of flow back and are tracking the type curve initial rate expectations. The remaining two wells are expected to be onstream by mid August .
And of of Sika, we drilled a sixth leg exploration well that was brought on stream in April .
The Vascepa formation is analogous to the Clearwater across the fairway and is highly amenable to open hole development, which drive strong returns and capital efficiencies.
We are planning three follow up wells in the second half of 2023.
We have an active second half of 2023 development program ahead of us in the Eagle Ford, We expect to bring approximately 24 net operated and eight net non operated wells to sales.
In the Viking we expect to bring a 46 net wells on stream.
In our heavy oil development program has ramped up with four rigs running two at P. Vie one at Peace River and one at Lloyd Minister.
We expect to bring 40 net heavy oil wells Onstream 19 at P line 18 at Lloyd Minister and three at Peace River.
We also have three Sag D well pairs and corroborate that are expected to be onstream during the fourth quarter.
With respect to risk management, we employ hedge program to help mitigate the volatility in revenue due to changes in commodity prices.
For Q3 23 in Q4 'twenty three we have entered into hedges on approximately 40% and 35% of our net crude oil exposure.
Utilizing a combination of two way collars with a floor price of $60 U S per barrel and a ceiling price of $100 U S per barrel and a 5000 barrel purchased put at U S 60.
For the first half of 'twenty four we have entered into hedges on approximately 22% of our net crude oil exposure utilizing two way collars with a floor price of USD 60 per barrel and a ceiling price of USD <unk> 99 per barrel.
I also want to highlight our 2022 ESG and Tcf D reports, both were published yesterday and are available on our website.
We have built into our culture, a strong connection and sense of responsibility to our communities and stakeholders.
We remain focused on key ESG initiatives, including ghd emissions abandonment and reclamation strong and mutually beneficial indigenous relations safety and climate risk management.
These ESG initiatives are essentially a dry essentially driving our long term sustainability alongside shareholder returns.
I would encourage everyone to read through the reports as they contain a tremendous amount of information and get great insights into the <unk> team and our culture something I'm immensely proud of.
As I wrap up my prepared remarks, I would like to reiterate our commitment to operational excellence and delivering long term value and enhance shareholder returns.
With a ranger acquisition behind US we are building, 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 Eagle Ford.
And now operator, we're ready to open the call for questions.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
We'll hear a tone acknowledging your request.
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The first question comes from Greg Pardy with RBC capital markets. Please go ahead.
Good morning. This is Jonathan Ho on for Gregg Party. Thank you very much for taking my question.
Just for my first question. We were wondering now that the Ranger deal has been closed for about a month now.
If you could provide us with an update on how the integration process is going so far and hope it is.
Any low hanging fruit or synergies that you see with respect to the integration with Grainger.
Thanks, Jeff and good morning, Thanks for the question.
Yeah. So so it is it is a month past close and that's important but we were well ahead of closing with the integration work so people integration.
Technical and operational workflow integration.
And business process integration was all well underway we.
We feel really good about about all of the integration steps.
And it feels it feels to me like as we proceed through.
The Q3 in the second half of the year planning.
Like we've been a combined business longer than it might look on paper so update wise, we have taken.
<unk> taken.
A number of substantial steps I think too.
Begin to unlock additional value through <unk>.
Efforts around <unk>.
Managing and optimizing the surface gathering system.
We're working to add compression horsepower, which should reduce the gathering system pressure expressed at the wellhead, we've been working very diligently with the team on the ground in Houston and in the field.
On nodal analysis and optimizing artificial lift.
And have actually liberated.
Quite a lot of quite a lot of horsepower from.
Gas lift into compression back back into sort of compression and move to sales horsepower.
By optimizing gas lift and optimizing other artificial lift approach is and this is just the kind of blocking and tackling you would expect.
These integrated teams to be doing.
And we will continue to focus on continued technical work around.
Improving and extending stimulate stimulated reservoir volumes.
Improving economic returns around drilling and completions, but also the artificial lift and the gathering and processing analysis at the surface. These are leads these take a comprehensive kind of systems wide engineering approach.
You Tinker with one piece and it has knock on it has knock on impacts, but we're working on a handful of integrated optimization steps, but I think the biggest steps right now that we've focused on through the summer.
And since close has been around gathering and processing optimization on artificial lift.
That's great that's great. Many thanks, maybe just shifting gears, we're also hoping to get a bit more color on the exploration wells that you've drilled.
And then cold Lake and the expectations for the IP 30 of the remaining three wells do you view this as another big potential play and how does it stack up versus the Clearwater, which I heard you mentioned that was analogous to.
Yeah, Yeah. So.
We're very excited about this I think it's really important to point out that both of our Zika at cold Lake as well as the racks to Clearwater equivalent at more infill that we'd that we actually disclosed in Q1. Both of these are very exciting players theyre small.
Cold flow heavy conventional discoveries, but what's really important to point out while neither one of them are going to be sort of needle movers.
A larger business. Each one is each one represents somewhere between $30 100 locations, depending on how you risk adjust.
<unk> ability of outcomes.
And given the fact that each one of those locations is.
$4 million to $5 million of PV, and all of that value accretion and value creation essentially came out of thin air at Materialise out of the efforts and the intellectual property of our geoscience teams and the operational and technical prowess of the organization.
<unk> when it comes to coal.
Cold flow heavy development, so I'm immensely proud of.
Making something meaningful again hundreds of millions of dollars of value accretion effectively materializing out of the.
Just the intellectual property and time it takes to run an exploration program I would point out that this is the third discovery in three years two years ago. It was the <unk> line.
And then two more this year so three discoveries in three years and cold flow heavy.
We sit on a very large acreage position and $1 7 million net acres and because oil is where oil was we're going to continue to create a steady diet of these meaningful valley.
Value accretive opportunities and I just couldn't be more proud of the technical.
The operating capability of the team so in terms of expressing.
The.
The next wells IP is.
I can be bold, but I'm not going to be that bold because I, just it's one exploration well, but the team is pretty confident and understanding.
The trapping structure of this of these plays.
And I think we can continue to put up good numbers as we continue to release.
The results of the second half exploration and development program, both in and around Cold Lake and in around more anvil.
That's great I'll turn it back now and thanks again.
Thank you Jessica.
The next question comes from Amir <unk> with ATB capital. Please go ahead.
Thanks. Good morning, just one quick question for you Eric just on the pace of buybacks could you just gives us a sense of how you plan to do those relative to your free cash generation is it going to be essentially lined up quarter to quarter. So third quarter cash flow looked lineup with do you expect your buybacks in the third quarter.
Or is there a lag expected.
Good morning, Amir. Thanks for the question. So July was a little bit interesting because we had to catch up.
And also because for the first half of the year, we wanted to honor.
The 25% framework, which was in place technically right up to close and so we hadn't been in the market because we were essentially blacked out for the entire first half of the year, we generated free cash flow in Q2.
And essentially we had to catch up in July that allowed us to take advantage of that accumulated free cash flow, but out of 25% level. So when you try to reconcile against why the $4 9 million shares in.
In July those are like kind of the mechanics of the arithmetic that go into that consideration.
Going forward with.
With the $400 million of expected free cash flow generation through the balance of the year.
If you just do the simple arithmetic given the amount of months outstanding and $400 million of free cash flow generation expected you could see us ramp that up and it would also be logical that we would ramp that up given the fact that.
Where we sit today is likely to be a better opportunity to buy at a lower price than then it's likely to be in the future just given some reasonable expectations.
And so if you if you expected that $400 million.
Kerry.
<unk>.
Kind of proportionally through the year.
That would make sense, we do however don't want to get we do want to be diligent about not getting too far ahead. For example, if we're generating substantial free cash flow and its forecasted in December we're not going to spend all of that.
On the Com in say August and so we're threading the needle between trying to be really diligent about.
Buying as much back as we can today, while still recognizing.
That this is a commodity business and things can change dramatically.
Very quickly and so we're threading the needle I think I've, given you maybe enough bits and pieces to the mechanics of the math, but you'd be right to expect us to spend.
Half of that $400 million and to do so as quickly as we can get comfortable doing so based on based on the way things are looking.
I appreciate that color and just as a second question.
Just going back to the Eagle Ford acquired assets I know, it's only been involved but as.
As you put out as you develop it at a slower pace similar range of what was developing it could you give us a sense of what the low cost are and do you see any synergies on the capital side I know you talked about the operational side of it.
Yes, yes.
On the capital side were.
Substantially larger business in that in that larger business will allow us to.
Negotiate.
Better terms with suppliers steel suppliers proppant suppliers hydraulic horsepower suppliers and drilling contractors and all of these things.
We've got an opportunity to utilize that that new scale.
Two to leverage agreeable terms are more agreeable terms.
And we're also planning to run all of our business.
As close to level loaded as we can finding the optimal points of efficiency within each asset and that will also give us opportunities as you level load.
The drilling and completions business and your steel supplies.
That level loaded nature allows your suppliers your vendors to also find opportunities to lower costs and that flows through.
And so what I would say is we.
We continue to see opportunities to to make commercial gains in terms of better terms, but also.
The two technical teams coming together and working together within the Eagle Ford We've had our team that was running our investment side of our Eagle Ford Karnes interest in marathon operated latex non operated together with our operating and technical teams in Houston.
On the Ranger operated assets together with our Duvernay team because those are very analogous assets and combining.
Combining.
Their ideas and their tools and optimizing.
Capital efficiencies and so we continue to see opportunities to both create higher performing wells.
While holding the line on capital and that should flow through over time into better and better capital efficiencies.
Together with better commercial terms.
Okay. Thanks for the color.
The next question comes from Jeremy Mccrea with Raymond James. Please go ahead.
Yeah, Hi, guys, just a couple of questions here.
Your exploration success.
Well, she couldn't and then warrenville and even <unk>.
Can you give me some more sense of how aggressive you're geoscience team is in terms of finding potentially more of these prospects and how.
<unk> commercial and relevant could this be in the overall portfolio here now still.
Well.
I think in terms of how aggressive they are we will fund we will continue to fund.
For the foreseeable future.
In exploration in organic exploration program in western and the WCS B.
And it's let's let's say notionally, it's going to be somewhere in the $10 million range and that should.
Fund 10.
10 to 15 <unk>.
<unk> wells.
And <unk>.
Pilot wells deepening and additional.
Kind of Petro physical reservoir characterization.
As we expand our.
Interpretation of <unk>.
Court of logs and tightened these things up.
We will continue that investment I would I would fully expect that the team is continuing to build out prospect locations and continuing to move around our land position and.
Develop opportunities I can't give you any specifics.
Because I think that would be wrong in an exploration environment to do so, but we've got a lot of land and a lot to discover.
And I just.
Again, it's very exciting to see.
Two discoveries in a single year and.
And every expectation that that.
Steady diet should continue and because in most of these cases in fact in every case so far.
At least in these two this year we have.
Already.
Ownership of the.
The rights to the land.
Have teams in place we have locations in infrastructure.
And so the.
The ability for this to be.
Material depends on the size of the discovery, but each one of these.
Is highly accretive.
Based on the very very low.
Cost of entry of the exploration and analogical property, which already exists in the organization I know thats a lot of words, but I don't.
I can't really speak to the scale going forward I would just say two discoveries in one year in a pretty steady diet. It feels like to me as we move throughout.
Our lands and continue to apply these new interpretations.
Yes.
The stratigraphic sequences that we've learned over the last couple of years.
Does this then as a follow up there does this change your.
The way you look at M&A up in Canada here once again in terms of the potential for these.
Type of exploration wells or other guys, where you're thinking it is being missed by different operators.
Like what's I guess, what's the M&A look like here.
Yes, it's possible I think you know M&A is always about creating value and so.
You'd have to look at.
The opportunity set.
And how the competitive environment has either bid it up or failed to recognize in the case of <unk> and a couple of years ago. The Clearwater IP line I think the team did an exceptional job.
Finding it ring fencing it early and have that first mover advantage and then as you well know.
The Clearwater.
Kind of caught fire and was price to the point.
Where it couldnt really create any value and this is obviously one of the reasons why you want to have opportunities in various places because these factors will come and go they will ebb and flow as you have opportunities too.
<unk>.
<unk> EBITDA in terms of.
Real M&A in the near term I would say we are absolutely laser focused on execution. Today, we are going to deliver Q3 Q4 full year 2003, and our budget and our reserves book that.
That we're going to be very very proud of and.
That is our singular focus.
What happens in 'twenty, four 'twenty, five and beyond will depend on factors that present themselves in the future, but we're always looking for.
Opportunities to create value over time, but I would say in that in the next short while we are absolutely laser focused on demonstrating this business is as good to everyone else as we know it is given given what we understand about it so.
That's right.
Best I can do Jeremy Thank you.
Thanks.
Yeah.
Okay.
The next question comes from Jasper Birch with Vaupel. Please go ahead.
Hi, Thanks for taking my taking my call. So.
Yes.
The Eagle acquisition, you have become or will you arrange acquisitions have become a significant operator in the Eagle Ford formation and you still have ample liquidity. So my question would be what's the potential.
Do you see for some smaller tuck in acquisitions in your core areas. Both in the Eagle Ford, but also in Canada.
Hi, Jasper Thanks for the question.
Yeah, I think in the Eagle Ford in the short term, we're going to be focused on.
Execution, we're going to be focused on integration, we're going to be focused on delivering on the second half of the year and also one of 'twenty for budget.
Budget that again demonstrates the strength of this company.
To the outside world as much as we believe.
From.
From the inside and.
I think specifically around the kinds of activity, it's going to be.
Swaps and trades that create value building, perhaps a larger.
<unk> working interest.
And continuing to create.
Create opportunities for longer laterals for higher working interest on our lands in which we already operate small tuck ins.
But you really shouldn't expect.
Anything substantial.
To be taking place in the Eagle Ford or the <unk> in the near term in the longer term.
We are very very.
Strong believers in the economies of scale, we believe that the.
Manville has a very high quality resource and we've got an expansive position and understand it as well as anyone.
And we want to continue both exploring and developing on the lands that we already own and so manville's really good that includes the Clearwater. We're very very excited about our continued organic growth opportunities in the duvernay.
And what that.
That growth leg represents organically and then continued development in and around our Eagle Ford position.
But.
As I said earlier, we're laser focused over the next.
A couple of quarters and into 'twenty for <unk>.
Delivering on this new base tax and demonstrating the strength and resiliency of this business.
Thank you.
And my second question would be if you would.
To add some color on what your internal estimate this for the IP 365 on the Doctor at Cisco.
Boy, that's going to be that's going to be a really tough one for me.
As we sit here today with one exploration well.
These are always designed to be proof of concept Jasper so I can't really.
Forecast at $3 65.
What I can tell you is its high quality reservoir.
We understand the structure of the reservoir and we understand what drives its performance.
<unk>.
We're one well and I think there'll be a lot more to share towards the end of the year when we get when we get our reserves work done because.
These wells.
You really don't even have enough production data yet to hang a reasonable decline curve off so it would be just rank at rank speculation for me, but we're pretty excited about both the with seek at cold Lake as well as the.
The Rex our Clearwater at more anvil.
I look forward to seeing the results of the upcoming.
Upcoming drilling campaign.
And the decline curve, Florida.
For the Doctor for CECO.
Sort of Michael over thank you. Thanks.
Thank you Jesper.
This concludes the question and answer session from the phone lines I would like to turn the conference back over to Brian Ector for any questions received online.
Okay. Thank you.
And I do have a few questions that have been submitted from the webcast. So I'm going to moderate these now for you Eric.
The first question.
Rates to sort of capital allocation can you. Please discuss the allocation of E&P spending between Canada and the U S. So your thoughts on how we allocate capital.
Yes, so what we've been saying up to this point really isn't changed.
We were saying essentially half of our capital would be allocated to.
Our what would have been and in all of our prior language Standalone Ranger assets and the other half of the capital allocated to what would have been Standalone Bay tax including.
The non op Eagle Ford.
That's a way to tie what I'm, what I'm, saying today to the past that hasn't changed that that half and half.
And over time, I think it's going to depend on economic conditions things like how the WCS basis, diff widens or narrows and what.
What other kind of circumstances express themselves in these various parts of our business, we will be allocating capital to the highest returns first.
But we're also keenly aware that.
Each one of our assets has.
<unk>.
Points of points of development efficiency, where you really want to run and for example in our <unk>, we've been pretty clear that 12% to 15000 BOE a day.
Though this is an absolutely spectacular asset just anywhere in the world, It's a spectacular asset.
It runs most efficiently.
And this 12 to 15000 BOE a day band.
And we've been asked why don't you put all your capital into <unk> and it's just I realize that's sort of a philosophical question, but.
None of these assets can handle that much. So so P line will run.
At a point, where it's where it is maximum operational efficiency.
For lots of reasons and we have also talked about Eagle Ford our Ranger assets in the same way, we like to level loaded rigs running on the Ranger lands because that level loads a single Frac crew. It allows us to build a responsible re frac program into the system and this is a way that we liberate.
Intellectual horsepower out of the organization to work on all the other demands and dimensions of the business to continue to unlock value and it's why we've actually been able to.
Focus on things like artificial lift optimization, and gathering and processing optimization and other things and when we talk about capital allocation, we always start with Xiaomi, where these assets. Each one of these assets runs most efficiently operationally and from a capital efficiency perspective.
And then we will we will select capital allocation. According to the returns where each of the assets are running most most efficiently.
Yeah, Thanks, Erik for that.
Question regarding the balance sheet.
You highlighted in your prepared remarks.
$1 5 billion dollar total debt target and the question really is around the timeline to achieve that target.
Eric if you want to comment or maybe even Chad Tom Mccall sure. Yeah, Let me, let me pitch it over to Chad K.
Sure I think we've generally been saying, we do see that being around two years' time I think.
We think that's still that's still holds obviously if you just take the back half of the of the $400 million.
Using that as a proxy that would be closer to two and a half maybe just a touch over two and a half years, obviously, we're pretty exposed to oil and foreign exchange price for exchange rates.
<unk>.
Could change materially obviously, a $5 change in oil breakup would be also a $220 million increase in our <unk>. So we still think we're marching towards around the two year Mark approximately so.
That hasn't changed okay. Thanks Chuck.
And maybe almost along the similar lines related to capital allocation balance sheets, we have introduced a dividend now Eric.
Eric can you just discuss the potential or the outlook, maybe towards future dividends and could we see dividend increases yes.
Yes, we certainly could Brian and I. Appreciate the question there is always a tension between.
Using your free cash flow allocated to shareholder returns the tension between those who prefer larger dividends and those who prefer.
Share repurchases.
And.
As it stands today, we are our plans are to continue with the.
The nine cent per share per year dividend as a fixed base dividend with no plans to as we sit here today.
Raise that dividend, but what I will say is one of the one of the nice and elegant mechanisms.
As you.
Buyback and cancel shares.
That reduces the number of shares outstanding against which you end up paying your fixed base dividend and it lowers the absolute value of the.
The total value of the dividend.
That is paid out out of the company, which allows you to then take that additional cash flow and if the board so chooses and if our feedback from our investment community is such that it supports then we could decide to take that additional cash and then grow the fixed base.
Dividend over time, but it was a very thoughtful.
This was this was a very kind of thoughtful dimension of our discussion during.
Our stand above the fixed base dividend, where do we start in order to give us some room. So that we can grow and this is one of the reasons why we started at this kind of notionally, 2% fixed base dividend yield to give us some room.
To raise it over time should the board decide they'd like to do so and should the investment community support that.
Okay. Thanks, Eric I think we have time for just maybe two more questions.
One question relates to.
The juniper position that they now hold in latex Eric with the merger now behind US can you just characterize.
Our long term relationship with beautiful yes.
Yes. So so juniper is our largest shareholder at I would say right now probably as I sit here I'm going to guess at about 19, 5%.
And the relationship is very strong we've been.
In communication with them like we are with all of our shareholders in terms of gaining.
Feedback from the investment community.
And.
I think what these guys are our long energy investors.
They believe in the business.
They believe in this business they believe in the business overall of oil and gas worldwide and the role it plays in fueling.
Economic society over time and they are in they are in no particular rush as they tell me.
Two two.
<unk> to <unk>.
Get out and so that feels really good to me, although we do recognize that at 19, 5%, that's a large position and I think.
Over time, they will <unk>.
Probably want to get that position down just a little bit so it creates opportunities for us one it is a very strong relationship and we understand where they are and how they feel about the business. Both Bay Tech specifically pro forma Ranger, but also more broadly oil and gas in North America, but very specifically around.
The steps, we need to take and so.
I get great feedback from them as you know.
Common shareholders. They tell me what they think.
And we season that in with thoughts from all the rest of the investment community along the way.
Alright, Thanks for that question and the last one it's a bit of a technical question Eric related to the drilling of wells on the Ranger lands and just maybe just to summarize then.
Wells being drilled today versus perhaps the older vintage wells are.
Or are we seeing increased performance are there opportunities to to drive better performance and.
Maybe I'll add to the question on the vintage wells do you see opportunities for essentially re entries or re frac opportunities.
Question on spacing in the technical side of the Eagle Ford, Yes, So it's a yes.
Basically Brian all three of those questions. The answer would be in short, yes, yes, we're seeing better performance.
In the more recent wells a lot of this has been driven by.
Just industrial progress and the progress of <unk>.
Our space in general in the unconventional fracture stimulation in the art and science of fracture stimulation and unconventional.
Higher fracture intensity.
Tighter stage spacing tighter perf cluster spacing higher total higher pressure differentials between the inside surface on the pipe and the end of the perf tunnel drives more and more kinetic energy into the reservoir and that breaks more rock shattered.
Rocket creates more fracture surface area in the reservoir from which to liberate or deliver oil and natural gas off the surface of the fractures all of that has been progressive over time and so in any unconventional if you look at the vintages of the wells you can see why.
Well performance on a per thousand foot basis go up so Boe per 1000, if you look at 2015 and 16 and so on and this is in our deck you can see the progression overtime, the wells get better over time, and they get better on a unit basis as well as overall there is still room to continue driving that performance higher.
And one of the ways in which <unk> seen the industry do this and we're doing it in spades across our unconventional.
Is.
Larger bore tubular is delivering more horsepower to the reservoir to be converted into kinetic energy.
To fracture the rock and that is a continued evolution you will also see.
Things like in the industry, you will read about it as a terminal simulcast.
Whereby you are able to drive more kinetic energy to deliver more kinetic energy to the rock given the unit of horsepower you have got at the surface and it's a way of managing.
The parasitic losses through the pipe due to friction.
All of these are very technical but yes, they've gotten better yes, we see opportunities to continue to get better.
Despite the fact that we've got development on the land, we see lots and lots of opportunities to continue to get better and sharing those opportunities across our non op technical team with experience in the karnes trough, our new operated technical team and the Ranger lands and our existing technical team in the Duvernay.
To share those learnings and then around unconventional performance in Geo mechanics.
I would say.
The last question around re Fracs. It takes advantage of many of the same technical.
Technical progression.
These older wells many of them were completed.
With.
Very substantially.
Substantially more.
Muscular fluids zircon eight cross link stimulation fluids hybrid fluids.
And those fluids had a tendency to.
Create very very dilated fractures, but limited to fracture surface area, because it tended to warmer dilate fractures today, we use what we call slick water fluids.
And we deliver larger jobs, but also driving more fracture surface area.
Per unit of kinetic energy delivered to the reservoir and so the fact that again, let me repeat this kind of in its true in unconventional as well as conventional oil is where oil was and it's in the srv's inside these existing fracture stimulated wells from a decade ago.
We can go back into these wells and we can clean them out set new liners resubmit, those new liners and re stimulate those well bores and unlock existing resource because.
Something like 90% of the resource remains in those existing old well bores that are have an opportunity to be re stimulated.
Alright, Thanks, Eric So great answer to a really good question.
<unk> got one last question that just came in so I think we will try to get to this one as well before we wrap up and this relates to the sort of the legacy Eagle Ford position with Mediatek and can you just comment on the relationship that we have with the operator, yes. So we have a great relationship with the operator have have for a long time.
These assets came into the <unk> business in 2014.
And the team has worked long and hard over almost a decade to build it.
A good high quality technical and management relationship with the operator and continue to do so they're a great operator, they do and they do an excellent job.
And their performance speaks for themselves.
<unk> itself.
And we benefit from that expertise from the scale, but.
But we also recognize that.
Having such a large non op position within <unk> as a standalone organization prior to our Ranger merger.
Presented certain risks to the business.
It was our largest asset and because it was entirely non op.
But the risks werent, because we had a bad relationship or werent, because they arent. Good operator, it was because the capital allocations were entirely the decisions for capital allocation into and out of those assets were entirely beyond our control and that was added to route the.
The risk but.
We couldnt be happier with the relationship and we couldnt be happier with the performance of the operator.
And want to continue leaning in on both of those.
Alright, Thanks, Eric and that does conclude the questions coming in from the webcast. Today again I think it's been a great success, providing this opportunity to facilitate some additional questions from our shareholders.
So everyone. Thank you. Thank you operator, and thanks, everyone for participating in our second quarter conference call have a great day.
Yes.
Yes.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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