Q3 2023 Magnolia Oil & Gas Corp Earnings Call
Good morning, everyone and thank you for participating in Magnolia oil and gas Corporation third quarter 2023 earnings conference call.
My name is smartly and I will be your moderator for today's call.
At this time.
All participants will be placed in a listen only mode as our call is being recorded.
I will now turn the call over to Mike know his management for their prepared remarks, which will be followed by a brief question and answer session.
Please go ahead.
Thank you Marlene and good morning, everyone welcome to Magnolia oil <unk> gas third quarter earnings Conference call.
Participating on the call today are Chris Stavros, Magnolia is president and Chief Executive Officer.
Ryan Corral senior Vice President and Chief Financial Officer.
As a reminder, today today's conference call contains certain projections and other forward looking statements within the meaning of the federal Securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements additional information on risk factors that could.
Cause results to differ is available in the company's annual report on Form 10-K filed with the SEC.
A full safe harbor can be found on slide two of the conference call slide presentation.
The supplemental data on our website you.
You can download Magnolia <unk> third quarter 2023 earnings press release as well as the conference call slides from the investors section of the company's website at Www Dot Magnolia oil gas dot com.
I will now turn the call over to Mr. Chris Fabrice.
Thanks, Jim and good morning, everyone. We appreciate you joining us today for a discussion on our third quarter 2020 financial and operating results.
Planet briefly speak to our latest quarter, then review some of our team's accomplishments this year on reducing costs associated with our capital program. I'll also discuss how we've allocated our free cash flow over the last three years and noting how our shareholders benefitted from the increase to our free cash flow profile from consistently strong cash.
<unk> charge.
I'll finish up by providing some broad comments around Magnolia is 2020 for capital and operating plan.
Ryan will then review, our third quarter financial and operating results in greater detail and provide some additional guidance before we take your questions.
As we've previously outlined mcnealy its primary objectives are to be the most efficient operator in best in class oil and gas assets generating the highest return on those assets, while applying the least amount of capital for drilling and completing wells.
Strive to return a substantial portion of our free cash flow to our shareholders in the form of share repurchases and a secure and growing dividend.
Finally, we plan to utilize some of the excess cash generated by the business to pursue attractive bolt on oil and gas property acquisitions, yes.
The acquisition is targeted to not simply replace the oil and gas has already been produced but importantly, if you improve the opportunity set of our overall business enhances the sustainability of our high returns and increase our dividend per share payout capacity.
That can only have continued to execute its business model delivering solid operating and financial results during the third quarter and consistent with principles that help us achieve our overall goals.
Third quarter production volumes at base to 7000 barrels of oil equivalent per day established new quarterly records for the company.
Getting back to driving overall growth both year over year and sequentially.
<unk> continues to represent a greater proportion of total company production now comprising approximately 75% of our total volumes.
Our D&C capital spending of $104 million during the quarter was only 44% of our adjusted EBITDAX, leading to free cash flow generation of approximately $128 million.
Solid operating income marine at margins of 47% are indicative of our focus around reducing overall cost.
Looking at slide three in the earnings presentation found on our website, our proactive efforts taken earlier this year toward elevated material service cost have allowed us to capture a significant reduction in total cost per well.
Lower our overall capital spending this year.
Our original guidance and outlook called for D&C capital spending of approximately $505 million during 2023.
Both our supply chain of D&C teams worked collaboratively with our materials vendors at service partners to reduce costs, while maintaining continuity of supply and consistency of high quality crews and services.
These cost reductions are expected to result in 15% lower capital spending this year or savings of $75 million compared to our original outlook.
We now expect our full year 2023, D&C capital to be approximately $430 million, which represents 7% reduction.
Through our 2022 capital levels, while still delivering year over year organic production growth of 8%.
Point to point, our cost for drilling a similar well in giddings are currently down about 20% compared to the end of 2022 et.
Said another way the cost reductions achieved this year effectively allows us to drill and complete more wells.
Lower cost and provides us with greater capital flexibility around our drilling program into next year.
The lower well costs ultimately help to reduce our F&D costs, leading to higher operating margins and improve free cash flow.
Turning to slide four this shows Mcnally as production growth and how we've also allocated our free cash flow after capital spending during the last three years.
Over this period Magnolia has generated more than $1 $7 billion of free cash flow returning approximately 60% of this to our shareholders through dividends and share repurchases.
Thanks, Tony has repurchased approximately 23% of its outstanding shares since the initiation of our share repurchase program.
$700 billion of free cash flow generated by the business. During this time accrue to the balance sheet like Magnolia in a net cash position.
We expect to return approximately 70% of our full year 2023 estimated free cash flow to shareholders, Florida share repurchases and dividends.
A portion of the accumulated cash was used during the past year to execute on several small accretive bolt on oil and gas property acquisitions, primarily around our giddings asset warnings.
One example includes our most recent transaction, we announced in September and which is expected to close by the end of this month.
This opportunity improves our overall business by adding high margin oil weighted production, while also enhancing the depth of development locations in both Eagle Ford and Austin chalk formations.
The transaction brings our total giddings acreage positions more than half a million net acres.
Current development area of more than 150000 net acres.
We plan to follow this.
Asset into our existing getting fast which shall be included as part of our 2024 development plan.
This is an excellent example of our strategy to pursue smart bolt on assets, adding to our high quality patch and leveraging the significant knowledge gained through operating and they're getting scale to enhance our per share metrics and improve the overall business.
As we look towards 2020 for our strategy and will remain largely unchanged.
All position with a strong balance sheet, a significantly improved cost structure and a larger footprint in the giddings field, allowing for efficient development, which should continue to drive our high return production growth.
We currently plan to operate two drilling rigs and one completion crew into next year and remain fully unhedged product prices.
Our cost for drilling and completing wells as part of this year, so that should answer which I spoke to earlier.
In addition to efficiency gains.
To provide a moderate increase in our D&C activity in 2024, while allowing for flexibility within our program.
Assuming current product prices, we expect to spend less than half of our EBITDAX for drilling and completing wells in 2024, which should deliver high single digit year over year total production growth with our total oil production expected to grow at a similar rate.
And normally a strategy, we will continue to be guided by our founding principles of load at high operating margins capital discipline moderate growth and significant free cash flow generation.
Utilizing this framework Alaska business to continue to achieve moderate annual growth, while providing a sizeable steady and growing return of cash to our shareholders. We believe this model will provide an increase to our per share value over time.
Magnolia is expected to exit the year at a high note both financially strong with an improved asset base and confident in our plan for 2024 and I'll now turn over the call to Brian to provide more details on our third quarter financial and operating results.
Thanks, Chris and good morning, everyone I'll review some items from our third quarter results and refer to the presentation slides found on our website.
I'll also provide some additional guidance for the fourth quarter of 2023, as we close out a strong year for Magnolia.
Beginning with slide six I know you delivered an excellent quarter as we continue to execute on our business model. During the third quarter. We generated total GAAP net income attributable to class a common stock of $102 million with total net income of $117 5 million or <unk> 56 cents per diluted shares.
Our adjusted EBITDAX for the quarter was $239 million with total capital associated with drilling and completions and associated facilities of $104 million.
44% of our adjusted EBITDAX.
Third quarter production volumes grew 1% sequentially to 82 7000 barrels of oil equivalent per day.
During the third quarter, we repurchased two 5 million shares and our diluted share count fell by 4% year over year.
Looking at the quarterly cash flow waterfall chart on slide seven we start in the third quarter was $677 million of cash cash flow from operations before changes in working capital was $217 million with working capital changes and other small items impacting cash by $13 million.
During the quarter, we allocated 57 million towards share repurchases and paid dividends of $26 million.
We added $73 million of bolt on acquisitions, which included a 23 million dollar deposit on the acquisition, we announced in September and we ended the quarter with $618 million of cash.
Looking at Slide eight this chart illustrates the progress and reducing our total outstanding shares since we began our repurchase program in the second half of 2019.
Since that time, we have reduced our total diluted share count by $59 4 million shares or approximately 23%.
<unk> weighted average fully diluted share count declined by more than 2 million shares sequentially, averaging $209 1 million during the third quarter we.
And we have 11 7 million shares remaining under our current repurchase authorization, which are specifically directed towards repurchasing class a shares in the open market.
Turning to slide nine our dividend has grown substantially over the past few years, including a 15% increase announced earlier this year to 11 five cents per share on a quarterly basis. Our next quarterly dividend is payable on December one and provides an annualized dividend payout rate of 46 per share.
We plan to reevaluate our current annual dividend rate early next year based on our 2023 financial results our plan for annualized dividend growth of at least 10% is an important part of that noise investment proposition and sort pork and supported by our overall strategy of achieving moderate annual production growth and reducing our outstanding shares by at least one.
Per cent per quarter.
I know you have benefit.
The benefit of a very strong balance sheet and we ended the quarter with a net cash net cash position of $218 million.
Our $400 million of gross debt is reflected in our senior notes, which do not mature until 2026, including our third quarter, ending cash balance of $618 million and our undrawn $450 million revolving credit facility. Our total liquidity is approximately $1 1 billion, our condensed balance sheet and liquidity as of September 30 are shown on.
Slides 10 and 11.
Turning to slide slide 12, and looking at our per unit cash costs and operating income margins total revenue per BOE declined by approximately 36% due to the substantial decrease in product prices and especially natural gas prices when compared to the third quarter of 2022, our total adjusted cash operating costs, including G&A were $10.
68 <unk>.
Per Boe in the third quarter of 2023, a decrease of $2 39 per Boe or 18% compared to year ago levels the year over year.
Decrease was primarily due to lower production taxes G. P. A T in G&A or operating income margin for the third quarter was $19 49 per Boe.
<unk>, 47% of our total revenue the year over year decrease in our pretax operating margin was driven by the significant decrease in commodity prices.
Turning to guidance for the fourth quarter. We are currently operating two drilling rigs and plan to continue this level of activity through the end of the year, we expect D&C capital for 2023 to be approximately $430 million, which represents $75 million reduction or 15% from our original guidance. This year, despite lower capital spending.
We are increasing our full year 2023, organic production growth guidance to 8% or 9% when including the important acquired volumes.
For the full year 2023, we expect our effective tax rate to be approximately 21% with most of this being defer our cash tax rate is expected to be between six and 9% for 2023.
[laughter].
Looking at the fourth quarter of 2023, we expect the recently announced transaction to close in November and helped contribute to our fourth quarter volumes. We expect total production volumes to be approximately 85000 BOE a day and our D&C capital is estimated to be approximately $100 million oil price differentials are anticipated to be a $3 per barrel <unk>.
M H, our fully diluted share count for the fourth quarter is estimated to be approximately 207 million shares, which is 4% lower than year ago levels.
We are now ready to take your questions.
Okay.
Thank you we will now begin the question and answer session to ask a question you May press star.
Then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
Okay.
Next question comes from Neal Dingmann from Suntrust. Neil. Please go ahead.
Good morning, Alex Congrats on another good quarter, Chris My first question just on your 24 expectations. Specifically you all suggest that the 24 operating plan will be again, assuming the price of about the same will be similar to this year. So I'm just wondering could you speak to the potential for the BOE and B O production growth, assuming kind of a <unk>.
Similar type of plan, maybe just generalities behind those two.
Yeah sure.
Yeah, I expect the plan to be broadly similar as I said, we will we will go into the year running running two rigs operating two rigs and the completion crew and.
That that'll go fine.
I'm not going to be you know you shouldn't look for magnitude shifts in terms of activity or capital or whatnot. These are more sort of around the edges, but you know as you've seen we've done a lot in terms of some some things in terms of acquisitions and as I pointed out we will fold some of that answer.
The activity next year purposefully.
Not only to sort of see how it's going to go which we have a lot of confidence around to begin with but also to see how much more of it we want to continue to fold in with time.
But I'm quite optimistic that you know.
We've done some things here and there.
Our plan as well that largely arrest you know any any issues around the oil production if that's been an issue.
But I fully expect the oil production to sort of climb at a similar rate as we've talked about relative to our overall.
Growth. So if we said sort of high single digits on total volume.
Volume growth I would expect to see something similar for our production too.
Great details, Chris just a quick second question I was curious if you all can maintain your industry, leading reinvestment rate going forward, obviously, it's very notable.
Which all continue to be able to spend well under 50% and just wondering maybe you could just talk a little bit about that going forward to get them, how well it continues to be.
Yeah.
I think we can I mean, I think part of the.
If there's a trick around this I mean.
Part of it is to not necessarily.
Get overly aggressive with the money or the spending or the growth over time, or you know way yourself down necessarily with.
Large PDP adds vis vis acquisition so.
Our focus is to actually try to do things that enhances the capability of the organization in the business over time so.
The the type of reinvestment that you've seen us sort of kick out over the last several years I don't see why that should be meaningfully different here going forward I still anticipate us.
Now providing are creating a ceiling around our capital and reinvestment rate in the of the 55% and we can grow sort of moderately within that so I sort of see the same outcome.
Well, it's great to hear thanks, Chris.
Thanks.
Yeah.
Our next question comes from Omar sure Duffy among.
Among you May go ahead.
Hi, Thank you good morning, Thank you for taking my questions.
First I wanted to get your thoughts around the recently acquired assets and how that compares with your legacy code.
And then on my second question now that you've doubled your development ADN Giddings, how should we think about your longer term growth rates beyond the next five years.
And how should we think about your plans around double digit dividend growth can you sustain that for a longer period of time.
Yeah, so around the the acquisition as I mentioned, we expect to close the transaction by the end of the Mark.
The acquired assets included a round 48000 net acres and came with <unk>.
5000 equivalent a day of production approximately.
That was about 70% of oil.
And as I mentioned, we plan to fold that into the Giddings program and drill some wells on the acreage that'll be interspersed throughout the year.
And so we expect to get a lot out of it and and you know what.
Something that we viewed as quite attractive where it is exactly on what is it sort of.
A little different than others.
What we've been doing exactly in giddings in terms of the bit of an oily in nature to it.
But you know broadly it's not I would I would.
Think about it as you know the giddings field because it is in the giddings field and so theres a lot of similarities to it. So I don't expect to see anything in terms of our approach to it that are.
Hum.
Very very different in terms of what we've been doing I, just think that it has the capability to enhance the outcome.
With more liquids volumes.
It could be a little bit better margin than what maybe the same with with gas prices certainly as weak as they've been.
Gotcha, that's helpful and then for my second question.
Any color you can provide in terms of how we should think about the longer term growth rates. Given you believe this asset is really comparable to your core.
Good and then you also have doubled.
My data and getting so how should we think about the longer term growth rates beyond the next favorite is thinking about it from a high level perspective.
Yeah, well my high level I wouldn't I wouldn't go out there and say because it's not really been part of our business plan to sort of seek out you know double digit growth is that sort of answered. The question previous you know our goal is not to.
Grow that much faster and at work ourselves out of the growth that much quicker.
You know I think our asset base is capable of delivering the plan at that moderate mid single digit growth over a long period of time that I considered sort of 5% to 8% per year.
You know we have the ceiling on our capital. So we tried to be disciplined around that.
And spend up to what we consider a reasonable amount to achieve those those levels of growth, but could we do more of the answer is yes do I think it's the best in REIT thing to necessarily do more Oh long term probably not.
I just think that you know this is.
More than sufficient in a balanced way and balanced approach to not only grow at a reasonable rate generate a lot of free cash flow and return a good portion of that to our shareholders, which is what they want while providing us with optionality to it and a little bit of extra cash if you will to seek out other.
Opportunities are these small M&A to improve the business overtime.
That makes a lot of sense. Thank you.
Yeah.
Our next question comes from Charles Meade from Johnson Rice.
Charles Please go ahead.
Thank you good morning, Chris Brian and are in the rest of mobility team there.
Chris I wanted to.
Maybe but I think it's a simple question.
Since you haven't told us really what's your what's your M&A.
M&A you guys since you Havent given us details on these two recent acquisitions is it fair influence.
That you guys still think theres more work to do on the acquisition front around giving.
The answer is yes, and the short answer is yes.
Yeah.
You know my expanded response to this question.
Oh look there's.
And what we've seen there's lots of different types of.
Our several different types of upstream M&A.
Oil and gas or approaches towards M&A that companies can participate in.
It is the type of M&A that act only engages in which as you know usually smaller variety focused on assets, where we worked.
Look to improve the business by extending or expanding our competitive advantage and an area that we know.
And you could describe this type in the situation, where the buyer may know more than a seller.
The other way around this type of M&A also has the benefit of limiting your risk.
And then there's the type of M&A, that's more transformational than companies that engage in this type of M&A believed that they have either run out of time or they're in a corner or that they need to do something big and old in order to change things.
Or the management or the boards and the boards of the companies in May.
Maybe been convinced by investment bankers that this is the best thing to do.
This can obviously be riskier.
Yes.
Either need to time, the commodity price right or somehow acquire a lot of upside of the asset it wasn't factored into the purchase price so basically buying.
<unk> analogy for free and are on a variable cost and I think to some extent that's what what the acquirers recently with a large acquisitions fielding die and that's fine.
And then there's M&A that and buy seek out some sort of diversification, meaning I've either run out of stuff to do where I currently operate or simply want to get bigger and the best way to do this is by moving into a different area that hopefully is less expensive in terms of the entry cost.
The risk here is that hopefully your skills are transferable to this new area and that is compatible with your workforce and can figure out how to do it.
As I said, Magnolia first engage and the smaller bolt on variety of M&A and mainly because we're currently not in a situation that requires us to pursue other big an older types of M&A. So I believe we currently have a competitive advantage in getting and we seek ways through this.
Smaller M&A to expand that advantage.
So that's sort of my longer winded version of <unk>.
The response to the question.
Well. Thank you for not just given the one word answer to my to my simple question.
And then my my my follow up I think is maybe take another run at the at the at the mix question that you got earlier.
Absent. This this most recent acquisition, which is a little earlier you guys had been actually getting a little.
Slowly getting the oil percentage from sticking down and natural gas really really more ngls was picking up.
If if that's if you're going to hold you if youre going to grow each of those product or product categories.
You know more or less equally in 'twenty.
24 does that mean that you guys are shifting or looking to shift activity towards more oily areas and it does that you know to what extent if that's true does that a is that a reflection of this all your asset that you're bringing into the portfolio.
You know not not necessarily Charles I Wouldnt read it that way exactly I mean.
Some of what what's happened with us in oil as we've talked about before I've mentioned. This several times already is that theres been a shift purposefully and activity and capital a way from karnes and giddings because.
The well results and get them getting sort of better than the full cycle returns and getting better and so that's how we we prefer to allocate the money and so we occasionally do go back to car and so we will see some non op activity in karnes that it might be.
Bump up our oil volumes for a little bit but broadly.
Effort on our R&R part from an operating basis level has been to you now.
Spend more money proportionately getting so you've seen that so that's been really what's occurred.
What's going to occur here I mean, yes, the asset the acquisition does bring it a little bit more well injected into the business immediately.
And and the drilling plan will provide.
Provide us with a little bit more oil.
But the goal for us is to drill the best wells in the Gulf for any good operators to drill the best wells.
At the lowest cost and at the highest returns. So I think broadly our program is going to continue to focus on that it'll be a mix.
Oil natural gas and you know timing this on the commodity necessarily it's sort of a bit of a fool's errand. So I'm not I'm not going to sort of play that game, we look to drill consistently look to drill the best wells.
Got it thank you.
Thanks.
Our next question comes from Zach <unk> from JP Morgan.
Zach you May proceed.
Hey, guys. Thanks for taking my question.
In the release, you mentioned strong well productivity and getting it as a driver of the horrible you've got that's just looking at the state data, which has its own issues, but you know.
It seems like well, particularly productivity, particularly oil productivity has trended lower year over year in giddings, and that's down versus prior years as well can you just give us your thoughts on how well productivity oil productivity in giddings trends going forward.
I don't expect it to change very much.
I mean, one way or the other materially.
Compared to what we've done this year could be a little bit better, but I don't think it'll be a very different or at worse going forward I don't anticipate that.
You know there may have been some nuances or one offs in our program. This year that drove some of that but I would think it would be similar if not a bit better.
And to next year and going forward.
Got it thanks for that and then I had one follow up on Opex.
Specifically it was down for the second consecutive quarter, it's down over a dollar per Boe <unk>.
Any color on how low you should trend in <unk> and into 2024.
Yeah look I think at current product prices it should be sort of similar.
Theres, a workover element to it that that would vary if oil prices rise further relative to where they've been here very recently that that could make a difference.
But you know this is sort of a relentless effort on our part to continue to push costs lower.
I think this is sort of a good place for us to be generally again, there. There's there might be an occasional sort of lumpiness, but generally I see sort of thing similar at the current.
Product price area that we're in.
Got it thanks for the color.
Sure. Thanks.
And now we have.
I'm sorry.
Now we have a question from Oliver Huang from Tudor Pickering Holt.
Oliver Please go ahead.
Good morning, Chris, Brian and team and thanks for taking my questions.
As we kind of look into next year beyond some I guess activity on the new acreage anything that we should be keeping an island that might be different from what we've seen the last couple of years, whether it was.
With respect, our well design or spacing tweak tweaks any increase step out or appraisal projects that we might want to keep an eye out for.
Not much I mean.
You know we.
The development program at Giddings for continue with that that's delivered a lot of good growth for the company and were producing in excess of 60000 Boe per day now getting it.
It's very capital efficient and it provides a lot of free cash flow.
We've developed a very thorough understanding of the asset.
This larger 150000 acre development area continues to be the focus for now.
And you know I think.
We saw decided a smaller development area and I think people got aboard with it. So you know.
It's it's bigger now and I believe it'll get bigger still over time through some appraisal efforts that we have that will extend into each year.
And you know that program has already produced.
Very positive results and we have a large expanse to sort of go over them with time and will continue to get at it.
In terms of you know completion changes or you know.
I want to surround that not not a whole lot really I mean, we continue to learn more.
And I, what I hope is that there may be some upside to some of the new areas that will tackle in 2024 and will learn and additional or get some additional data to focus on so maybe that provides us with some upside in terms of learning how to approach things.
Okay. That's helpful color and maybe just kind of switching over to the Eagle Ford I know activity levels, there have been a bit tough to pin down, but any sort of update with respect to how we should be thinking about.
The non op side of things on that asset.
On our last call you all previously spoke towards a flattish.
Half of the quarter, but just kind of given the lumpy nature of a half rate give or take program. How should we be thinking about the volume trajectory out of that asset for next year is there any reason for us to kind of not extend this asset to continue declining given the current capital allocation split and draw on capital from Giddings in the near term whether respect.
Any sort of mpc's or anything else like that.
Yeah, I would expect it to continue to taper down based on the activity, but probably at a lesser rate.
And what we've seen I mean, I think there was a more substantial dip in the non op activity and I'm not suggesting that that's going to change or increased necessarily all I'm, saying is that as a result of some of the lesser activity. The rate of decline has sort of tapered into probably into next year and in recently.
So I you know, it's just not much going on there on a on a non op level. So.
A tapering, but at a lower rate.
Okay. Thanks for the time Chris.
Thanks.
Okay.
We have a question from Paul Simon <unk> from Citi.
Paul Please go ahead.
Thank you and good morning, all I appreciate you taking my call just a quick one and I'm looking forward in 'twenty four I guess, just shifting magnitude and fundamentals would've required a really shifts 24 operating plan.
I think similar to move we saw earlier this year or is it something more substantial.
I'm not quite sure what you're asking are you, saying well how does our 24 plan.
How is that different from 'twenty three.
No I guess more Howard's what would cause more did you see in the market to really shift off of that plan.
Yes.
I understand so.
If if you're suggesting you know something more similar to what we saw in 2022 with much higher product prices.
We didn't I mean, we may have spent a little bit more a bit a little bit more active but generally not we don't sort of tailor the plan specifically around.
Believing that oil prices are or where gas prices are going to sort of run much higher you know we sort of go.
Go into the year with a generally a set plan and yes should things be a whole lot better in terms of pricing.
The money sort of our cruise just like like it did in 2022.
I wouldn't expect to sort of follow along there and just use all the money to.
To drill more and grow at much higher rates. So if that's what you're asking the answer is really no.
Uh huh.
Okay.
In 2022, we spent about a third of our money a third of our EBITDAX to put in perspective.
No understood I appreciate it and then just one more quick a quick one on more on a deflationary beds I know earlier. This year you guys talked about how cost includes were well above what we thought was an appropriate price I guess I just wanted to get your idea of how close you think we are now or in coming quarters too.
Got more I guess, you sort of run rate level.
Long term.
Yeah look our teams have done a great job around that and I'm real pleased that we got at it early this year because we wouldn't have seen the realized benefits that we have.
We saved a bunch of money and we also positioned ourselves very good in the back half of the year and it gives us a lot of flexibility.
More certainty going into next year so.
You know sort of 20% as I said point to point I think it is pretty good.
My sense around this is that for gas, it's gonna be sort of a very weather driven event here in terms of pricing and how it feels and this is just me talking it feels like like the rig count and just some of the commentary around activity feels like it's bottoming.
And so if that's if that's correct are you may have seen most of the improvements.
Lower costs that you'll likely see I say most of it will we see a little bit more perhaps if the economy softens into next year, there could be some some additional savings that work their way in but I'm not I'm not necessarily counting on that.
I'm just counting on what I, what I know right now and I know is that.
We have some things locked in for a portion of 24 that makes me feel pretty good.
Understood. Thanks for the clarity.
Okay. Thanks.
And we'll take a question now from Sean Mitchell from Simmons, Sean. Please go ahead.
Hi, Thanks for taking the question.
I just wanted to.
Back to the question. It was just as you guys talked last quarter about Oh C. T T. B O C D G being down almost 30%.
It seemed like you guys were feeling really good about where you were from a service cost perspective, and obviously the cost are rolling through.
Given the rig count has taken another pretty substantial leg lower here sequentially relative to where we were the last time, we talked to you on the call.
Is it.
I assume you're feeling better about your position is there any one particular area that you're.
Seeing.
Kind of more pricing.
Sensitivity than others, I mean O C. T. He was a great example, in the last call I'm just wondering if theres anything you can point to on the skull.
Yeah. Thanks, Sean.
I guess I would say steel for now steel prices have been still working in our favor.
Again as I said just previously.
It's hard to really say, how this might change just in terms of the impact of.
You know steel inventory steel productivity steel.
Outcome at.
Mills steel imports et cetera, I, yeah hard for me to really say, but it still feels pretty good as we exit this year and start to move into 2020 for much of this is going to be centered around the global economic picture and.
What we see around the world, which you know.
Some people would tell you not not all that great right now.
On the other hand, there there might be some people that feel differently, but right now I think there's there's softness there.
Got it.
Thanks, guys I appreciate it okay.
Okay. Thanks.
Yeah.
Yeah.
And this concludes our question and answer session and this conference.
We thank you very much for attending today's presentation and you may now disconnect.
Okay.
Yeah.