Q3 2023 Whitecap Resources Inc Earnings Call
Good morning, My name is Sylvie and I will be your conference operator today at this time I would like to welcome everyone to Whitecap resources Q3, 2023 results and 2020 for budget conference call.
Speaker 1: transcript
Speaker 1: Good morning, my name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to WhiteCap Resources, Q3, 2023 Resolve, and 2024 Budget Conference Call. Note that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Speaker 1: transcript
Speaker 1: If you would like to ask a question during this time, simply press star then number one on your telephone keypad. And if you would like to withdraw your question, please press star then number two. And I would like to turn the conference over to White Caps, President and CEO , Mr. Grant Faker. Please go ahead, sir.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad and if you would like to withdraw your question. Please press Star then number two I.
And I would like to turn the conference over to White caps, President and CEO. Mr. Graham. Please go ahead Sir.
Speaker 2: transcript
Speaker 2: Thanks, Phil. Good morning everyone and thank you for joining us here this morning. Here with me today are five members of our management team, our Senior Vice President and CFO , Thanh Cang.
Thanks, Sylvia and good morning, everyone and thank you for joining us here this morning.
Here with me today are members of our management team, our senior Vice President and CFO Ken <unk>.
Speaker 2: transcript
Speaker 2: Our Senior Vice President, Production and Operations, Joel Armstrong, our Senior Vice President, Business Development,
Our senior Vice President of production and operations Joel Armstrong.
Our senior Vice President business development and.
Speaker 2: transcript
Speaker 2: Dave Monber-Ket. We also have Troy Wong, our Vice President of the West Division, and Chris Polen, our Vice President of the East Division, joining us for the first time here today. Before we get started, I would like to remind everybody that all statements made by the company during this call are subject to the same forward-looking disclaimer and advisory that we set forth in our news release issued yesterday afternoon.
<unk>, we also have Troy Wong, our vice President of the West Division and Chris Bohn, Our Vice President of our Eastern Division joining us for the first time here today before we get started I would like to remind everybody that all statements made by the company. During this call are subject to the same forward looking disclaimer and advisory that we set forth.
In our news release issued yesterday afternoon.
Speaker 2: transcript
Speaker 2: I'm happy to report that our third quarter was very successful, both operationally and financially. Our active third quarter drilling program resulted in 281 million dollars of capital spending and the drilling of 76 gross successful wells, which generated production of over 157,000 B.E. per day. When we announced our first quarter results.
I'm happy to report that our third quarter was very successful both operationally and financially.
Active third quarter drilling program resulted in $281 million of capital spending and the drilling of 76 gross successful wells, which generated production of over 157000 Boe per day.
When we announced our first quarter results.
Speaker 2: transcript
Speaker 2: We had reallocated portions of our capital program to higher oil weighted assets and since then our liquids production has outperformed our expectations.
We had reallocated.
Reallocated portions of our capital program to higher oil weighted assets and since then our liquids production has outperformed our expectations.
Speaker 2: transcript
Speaker 2: Total liquids production, including oil, condensate, and NGLs, was over 103,000 bu each per day in the third quarter. And with crude oil prices averaging $110, Canadian dollars per barrel, we were able to generate $466 million dollars of plum slow and $184 million of free funds.
Total liquids production, including oil condensate and Ngls was over 103000 <unk> per day in the third quarter and with crude oil prices, averaging $110 Canadian dollars per barrel, we were able to generate $466 million of funds flow and $184 million of free funds flow.
Speaker 2: transcript
Speaker 2: After our dividend payment of $88 million, we allocated approximately $100 million of refund flow to our balance sheet, resulting in the achievement of our $1.3 billion debt milestone that we had set earlier.
After our dividend payment of $88 million, we allocated approximately $100 million.
Our free funds flow to our balance sheet, resulting in the achievement of our $1 $3 billion debt milestone that we had set earlier.
Speaker 2: transcript
Speaker 2: Over the past three years, White Cap has undertaken a large transformation increasing from approximately 60,000 Buie per day up to approximately 160,000 Buie per day today through a series of transactions with the XCO transaction last summer being the largest at $1.88 billion. 19
Over the past three years Whitecap is undertaking a large transformation increasing from approximately 60000 Boe per day.
To approximately 160000 barrel per day today through a series of transactions with the <unk> transaction last summer being the largest at $1 $88 billion.
It was an all cash deal.
Speaker 2: transcript
Speaker 2: We were able to significantly increase current and future value for our shareholders while protecting our balance sheet through the commodity price cycle.
We were able to significantly increase current and future value for our shareholders, while protecting our balance sheet through the commodity price cycles.
Speaker 2: transcript
Speaker 2: We will now return 75% of our free funds flow to our shareholders through our 73 cent per share dividend on an annual basis on share purchases under our NCIB.
We will now returned 75% of our free funds flow to our shareholders through our 73 per share dividend on an annual basis on share repurchases under our NCI.
Since first implementing our base dividend in 2013, we are focused on strong cash returns to shareholders along with continually growing our business. Our focus will continue to provide moderate annual organic.
Speaker 2: transcript
Speaker 2: Since first implementing a base dividend in 2013, we have focused on strong cash returns to shareholders, along with continually growing our business. Our focus will continue to provide moderate annual, organic production growth of 3 to 8% per year, while growing our dividend commensurate with our targeted annual growth rate.
Production growth of 3% to 8% per year.
Growing our dividend commensurate with our targeted annual growth rate.
Speaker 2: transcript
Speaker 2: I will now pass it on to Tom to discuss our financial results. Tom?
I will now pass it onto Tom <unk>.
To discuss our financial results Tom.
Speaker 3: transcript
Speaker 3: Thanks, Red. An excellent quarter for Whitecap with production, funds flow, and free funds flow being the highest so far in 2023, and NetDead added to lowest.
An excellent quarter for Whitecap with production fund slow in free funds flow being the highest so far in 2023 and net debt at its lowest as mentioned our third quarter funds flow was $466 million or 76 per fully diluted share, which was 12% higher relative to the second quarter impact.
Speaker 3: transcript
Speaker 3: As mentioned, our third quarter funds flow was $466 million or $0.76 per fully diluted share, which was 12% higher relative to the second quarter. Impacting our third quarter funds flow was current income tax expense of $44 million, which equates to approximately 9% of pre-tax funds flow for the quarter and 4.5% for the nine months ended.
Our third quarter funds flow was current income tax expense of 44 million, which equates to approximately 9% of pre tax funds flow for the quarter and four 5% for the nine months ended we recalculate current taxes quarterly based on current strip prices and strip prices are volatile this will cause fluctuations in our quarterly current tax expense.
Speaker 3: transcript
Speaker 3: We recopulate current taxes quarterly based on current strip prices. As strip prices are volatile, this will cause fluctuations in our quarterly current tax expense as year-to-date accruals need to be true up. For 2023, we are forecasting a full year current tax rate of 4% to 6% of pre-tax funds flow. This will increase to 10% to 15% in 2024 as our 100% deductible pools will be fully exhaust.
Year to date accruals need to be chewed up for 2023, we are forecasting a full year current tax rate of 4% to 6% of pre tax funds flow. This will increase to 10% to 15% in 2024, as 100% deductible pools will be fully exhausted.
Speaker 3: transcript
Speaker 3: As Grant mentioned, our ballot sheet is in great shape and hitting our 1.3 billion net debt milestone is key to managing through commodity price volatility.
As grant mentioned, our balance sheet is in great shape, and hitting our $1 3 billion net debt milestone is key to managing through commodity price volatility.
Speaker 3: transcript
Speaker 3: Our third quarter debt to EBITDA ratio was 0.6 times, and we now have over 1.8 billion of liquidity on our credit facilities.
Our third quarter debt to EBITDA ratio was 0.6 times and we now have over $1 8 billion of liquidity on our credit facilities.
Speaker 3: transcript
Speaker 3: As a reminder, approximately 90% of our liquids production is linked to light oil or condensate pricing and although differentials on these products have widened slightly into the fourth quarter, the larger decreases that we have seen in heavy oil prices are less impactful to our Friday flow.
As a reminder, approximately 90% of our liquids production is linked to light oil or condensate pricing and although differentials on these products have widened slightly into the fourth quarter. The largest decreases that we've seen in heavy oil prices are less impactful to our funds flow.
Speaker 3: transcript
Speaker 3: As discussed in the press release yesterday afternoon, we anticipate our full year 2023 production to come in at the low end of our guidance range and with inflationary pressures that approximately 10 percent above our original expectations, we anticipate our full year capital to be at the high end of our guidance range at approximately 950 minutes.
As discussed in the press release.
Yesterday afternoon, we anticipate our full year 2023 production to come in at the low end of our guidance range and with inflationary pressures at approximately 10% above our original expectations, we anticipate our full year capital to be at the high end of our guidance range at approximately $950 million.
Speaker 3: transcript
Speaker 3: Early time outperformance of our Montney type curves has improved the economics through quicker payouts. However, at this time we have not made any adjustments to our expected reserves on a per well basis. And along with temporary suspensions of existing wells to complete fracking operations of new wells and some unplanned downtime, we now expect annual production to be 157,000 BUEs per day.
Early time outperformance of our Montney type curves has improve the economics through quicker payouts.
However at this time, we have not made any adjustments to our expected reserves on a per well basis and along with temporary suspensions of existing wells to complete fracking operations of new wells and some unplanned downtime. We now expect annual production to be 157000 Boe's per day.
Speaker 3: transcript
Speaker 3: I will now pass it back to Grant for his remarks on the 2024 budget.
I will now pass it back to grant for his remarks on the 2020 for budget.
Speaker 2: transcript
Speaker 2: Thanks, Dawn. The 2024 budget we put forward last evening represents meaningful progress towards our organic production goal of over 200,000 BUE per day by the end of 2027, along with meeting our near-term goals of high pre-cash flow generation and increasing our net asset value longer term.
Thanks, John.
2000, and 2020 budget, we put forward last evening represents meaningful progress towards our organic production goal of over 200000 Boe per day by the end of 2027, along with meeting our near term goals of high.
Free cash flow generation and increasing our net asset value.
Longer term.
Speaker 2: transcript
Speaker 2: Our Board of Directors approved the 2024 budget of 1 billion to 1.2 billion, which is expected to generate average production of 162 to 168,000 BWe per day. We plan to drill approximately 258 wells and invest $165 million on EOR projects and $150 million on EOR projects.
Our board of directors approved the 2020 for budget.
1 billion to $1 2 billion, which is expected to generate average production of 162 to 168000 BOE per day, we plan to drill approximately 200 to 258 wells and invested $165 million on infrastructure projects.
$50 million on EUR projects, our West Division will be allocated approximately $600 million to drill 42 wells, 80% of this capital will include 28 wells, which will be in the Montney and duvernay.
Speaker 2: transcript
Speaker 2: Our west division will be allocated approximately $600 million to drill 42 wells. 80% of this capital will include 28 wells which will be in the Monteney and the Duvernay.
The focus assets within our division the significant depth of Montney and Duvernay inventory supports higher growth and increased profitability with greater scale in.
Speaker 2: transcript
Speaker 2: focus assets within our division. The significant depth of Montney and Duvernay inventory supports higher growth and increased profitability with greater scale. In the West Division we anticipate investing $130 million of the $165 million towards infrastructure projects. The three primary projects are a 20,000 Bu per day battery which will service the Muswell area to the north of our Kacquois development and is scheduled to be completed in the second quarter of 2024.
In the West Division, we anticipate investing a $130 million of the $165 million.
Towards infrastructure projects. The three primary projects are 20000 Boe per day battery, which will serve service mezro area to the north of our <unk> development and is scheduled to be completed in the second quarter of 2024.
The other two projects will support the next stage of our development in the Duvernay and keyboard and our long term growth plans for the Montney development in regulatory region.
Speaker 2: transcript
Speaker 2: The other two projects will support the next stage of our development in the Duverne and K-Bub and our long-term growth plans for the Montenegro Development in the Latour region.
Speaker 2: transcript
Speaker 2: But regards to our infrastructure spending and build out. It is our intention to build facilities that we have plans to produce through, retain operational control, and consider selling down our interest to strategic partners in the future if it has beneficial to our operations and our financial position at the time.
With regards to our infrastructure spending and build out it is our intention to build facilities that we have plans to produce through retain operational control and consider selling down our interest as strategic partners in the future. If it is beneficial to our operations and our venture financial position at the time.
Sylvie: Good morning, my name is Sylvie, and I will be your conference operator today.
Sylvie: At this time, I would like to welcome everyone to Whitecap Resources, Q3, 2023 Results, and 2024 Budget Conference Call. Note that all lines have been placed on mute to prevent any background noise.
Speaker 2: transcript
Speaker 2: For our East Division, we are allocating approximately $500 million to rel 215 wells across for Central Alberta and Saskatchewan. The focus on for our East Division is to hold production of relatively flat and continue to generate outsized pre-cash flow for the company. We have also allocated approximately $150 million to EOR initiatives to improve on our already low decline rate and our sustainability over the longer term.
For our East Division, we are allocating approximately $500 million.
Sylvie: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. And if you would like to withdraw your question, please press star then number two.
Throughout 215 wells across our central Alberta and Saskatchewan.
The focus on.
For our East Division used to hold production relatively flat and continue to generate outsized free cash flow for the company. We have also allocated approximately 150 million to EUR product initiatives to improve.
Grant Fagerheim: And I would like to turn the conference over to Whitecap's president and CEO, Mr. Grant Fagerheim. Please go ahead, sir. Thanks, Sylvie. Good morning, everyone, and thank you for joining us here this morning.
On our already low decline rate and our sustainability over the longer term.
Speaker 2: transcript
Speaker 2: One of the many challenges that our business has faced over the past years has been the impact of inflation.
One of the many challenges that our business has faced over the past years has been the impact of inflation has had on our cost control since the beginning of 'twenty. Three 2020, 'twenty three we have experienced approximately a 10% inflation on our capital and operating cost higher than what we expected when we released our budget 2023 budget.
Grant Fagerheim: Here with me today, I have five members of our management team, our senior race president and CFO, Ton Kang, our senior race president, production and operations, Joel Armstrong, our senior race president, business development and IT, Dave Bomberkett. We also have Troy Wong, our vice president of the West Division, and Chris Poland, our vice president of East Division, joining us for the first time here today.
Speaker 2: transcript
Speaker 2: has had on our cost control since beginning of 23, 2012.
Speaker 2: transcript
Speaker 2: We have experienced approximately a 10% inflation on our capital and operating costs higher than what we expected when we released our budget, 2023 budget. The main drivers of inflation have consistently been steel, labor, raw materials on the capital costs side. Our labor and power costs have been higher than expected on the operating costs side.
The main drivers of inflation have consistently consistently been steel labor raw materials on the capital cost side labor and power costs have been higher than expected on the operating cost side for 2024, we have modeled certain costs to stay relatively flat, while we do expect some inflationary pressures.
Grant Fagerheim: Before we get started, I would like to remind everybody that all statements made by the company during this call are subject to the same forward-looking disclaimer and advisory that we set forth in our news release issued yesterday afternoon. I'm happy to report that our third quarter was very successful, both operationally and financially. Our act of third quarter drilling program resulted in 281 million dollars of capital spending and the drilling of 76 gross successful wells, which generated production of over 157,000 BUE per day.
Speaker 2: transcript
Speaker 2: For 2024, we have modeled certain costs to stay relatively flat while we do expect some of the place narrowed pressures to persist in labor, power, and proximity.
Pressures to persist and labor power and Frac sand.
Speaker 2: transcript
Speaker 2: At current prices, we forecast $1.8 billion of funds flow in 2024, which generates $700 million of free funds flow using the midpoint of our cap on the guidance. I will now pass the phone off to Joey from all the marks on our West Division results in 2024 budget.
At current prices, we forecast $1 8 billion of funds flow in 2024, which generate $700 million.
Our free funds flow using the mid point of our capital guidance I will now pass.
The phone off to Joey for my remarks on our West Division results and 2020 for budget Joy.
Grant Fagerheim: When we announced our first quarter results, we had reallocated portions of our capital program to a higher oil-weighted assets, and since then our liquid production has outperformed our expectations. Total liquid production, including oil, condensate and NGLs, was over 103,000 BUE per day in the third quarter, and with crude oil prices averaging $110,000 Canadian dollars per barrel, we were able to generate $466 million of fund flow and $184 million of free fund flow.
Speaker 4: transcript
Speaker 4: Thanks, Grant. Our 2024 budget for the West Division will take our Montany program to the north of our main Capitol development in Tommasro. We are currently running two rigs in the area and have had a good start to drilling operations on our first two four-well paths.
Thanks, Greg our 'twenty 'twenty four budget for the West Division, we will take our Montney program to the north of our main copper development and in Tomorrow.
Currently running two rigs in the area and it had a good start drilling operations on our first two four well pads.
Speaker 4: transcript
Speaker 4: Given the need for infrastructure, we took additional time to plan our development at Muzro and now plan to drill a total of 16 walls at Muzro by the end of 2024, eight of which will be spud in Q4 of this year and eight walls in 2024. The first eight walls is scheduled to come on production with the completion of our battery in the second quarter. The battery, which will be pipeline connected to the cap system will help the fully capitalize on our identified 55 drilling locations over 16 sections at Muzro.
Given the need for infrastructure, we took additional time to plan our development at <unk> and now plan to develop to drill a total of 16 wells that mazo by the end of 2024 eight of which will be spud in Q4 of this year and eight wells in 2020 for.
Grant Fagerheim: After our dividend payment of $88 million, we allocated approximately $100 million of free fund flow to our balance sheet, resulting in the achievement of our $1.3 billion debt milestone that we had set earlier. Over the past three years, White Cap has undertaken a large transformation increasing from approximately $60,000 BUE per day up to approximately $160,000 BUE per day today, through a series of transactions with the XCO transaction last summer being the largest at $1.88 billion.
The first eight wells scheduled to come on production with the completion of our battery in the second quarter.
The battery, which will be pipeline connected to the cat system will help to fully capitalize on our identified 55 drilling locations over 16 sections at Mizuho.
Depending on factors, such as geology, offsetting wells and localized reservoir characteristics, we will be drilling both single bench as well as multi as well as multi bench pads. We're looking forward to the results from our most row development in the second half of 'twenty 'twenty four.
Speaker 4: transcript
Speaker 4: Depending on factors such as geology, offsetting wells and localized reservoir characteristics, we will be drilling both single bench as well as multi bench pads. We are looking forward to the results from our Muzro development in the second half of 2024.
Another area that I wanted to touch on with Berlin, and given the completion of two standing ducks that were drilled in the drilled by the previous operator in 2019.
Speaker 4: transcript
Speaker 4: Another area that I wanted to touch on with Berlin and given the completion of two standing ducks that were drilled by the previous operator in 2019.
Grant Fagerheim: As an all cash deal, we were able to significantly increase current and future value for our shareholders while protecting our balance sheet through the commodity price cycles. We will now return 75% of our free fund flow to our shareholders through our 73 cent per share dividend on an annual basis and share repurchases under our NCIB. Since first implementing a base dividend in 2013, we have focused on strong cash returns to shareholders, along with continually growing our business. Our focus will continue to provide moderate annual organic production growth of 3 to 8% per year, while growing our dividend commencement with our targeted annual growth rate.
Speaker 4: transcript
Speaker 4: Given its size, this area was not as significant focus as we were evaluating this acquisition. However, it is pipeline connected to an existing third party gas plant. And if these two wells continue to outperform expectations, this area could attract more spending to develop the approximately 100 identified locations.
Given the size of this area was not a significant focus as we were evaluating this acquisition. However, it is pipeline connected to an existing third party gas plant and if these two wells continue to outperform expectations. This area could attract more spending to develop the approximately 100 identified locations.
Now moving on to the Duvernay, we are very pleased with the results from our first three wells into the play with an average IP 90 rates of approximately 500 boe's per day per well with both rates and liquid rates above our expectations. Our second pad of four well pad at 11 2014 was brought on production on October 15th and we're very encouraged with early time data.
Speaker 4: transcript
Speaker 4: Now moving on to the duvet-8, we are very pleased with the results from our first three wells into the play with an average IP-90 rates of approximately 1500 Bueh's per day per well with both rates and liquid rates above our expectations.
Speaker 4: transcript
Speaker 4: Our second pad, a four-well pad, at 11.14, was brought on production on October 15th, and we're very encouraged with early time data. Both drilling and completion operations on these first two pads have been executed very well, and we feel confident that our team can continue to this trend with the 11 DuVernay Wells Plan for 2024.
Drilling and completion operations on these first few pads have been executed very well and we feel confident that our team can continue this trend with the 11 Duvernay wells planned for 2024.
Thanh Kang: I will now pass it on to Tom to discuss our financial results. Thanks, Rhett, an excellent quarter for White Cap with production, fund flow, and free fund flow being the highest so far in 2023, and net debt at its lowest. As mentioned, our third quarter fund flow was $466 million or 76 cents per fully diluted share, which was 12% higher relative to the second quarter. Impacting our third quarter fund flow was current income tax expense of $44 million, which equates to approximately 9% of pre-tax fund flow to the quarter and 4.5% for the nine months ended.
Speaker 4: transcript
Speaker 4: With our 100% working interest, ownership of the 15 to 7 gas processing facility and K-bob's, each incremental pad that we bring on production in the Duvernae, improves the utilization of that facility and improves the overall profitability of the area.
With a 100% working interest ownership of the 15th to southern gas processing facility and keyboard each incremental ton that we bring on production in the duvernay improve the utilization of that facility and improve the overall profitability of the area.
Speaker 4: transcript
Speaker 4: The gathering system upgrades that we're making in 2024 will help facilitate future development on the West portion of our acreage at K-Bob and help fill that plant out by the end of 2025. I'll now pass it on to Chris for his comments on the East Division.
The gathering system upgrades that we're making in 2024 will help facilitate future development on the west portion of our acreage at keyboard and help fill that plant up by the end of 2025.
Pass it onto Chris for his comments on the East Division.
Thanks Joey.
Speaker 5: transcript
Speaker 5: The East Division is looking to follow up on what has so far been a successful 2023 with a strong 2024. Our assets across each region from Central Alberta to both Western and Eastern Saskatchewan have all outperformed expectations.
These divisions looking to follow up on what has so far been a successful 2023 with a strong 2020 for our assets across each region from central Alberta to both western and Eastern Saskatchewan have all outperformed expectations for 2024, we plan to drill 215 wells in the East Division approximately 65% of these wells will be.
Thanh Kang: We recalculate current taxes quarterly based on current strip prices. As strip prices are volatile, this will cause fluctuations in our quarterly current tax expense as year-to-date accruals need to be chewed up. For 2023, we are forecasting a full year current tax rate of 4 to 6% of pre-tax funds flow. This will increase to 10 to 15% in 2024, as our 100% deductible pools will be fully exhaust.
Speaker 5: transcript
Speaker 5: For 2024, we plan to drill 215 wells in the East Division. Approximately 65% of these wells will be directed towards quick payout, short cycle, light oil weighted assets in the Viking, in western Saskatchewan, and in the Probe sure in eastern Saskatchewan. At current prices, our type of areas achieve capital payout in only five months.
Correct. It towards quick payout short cycle light oil weighted assets in the Viking and western Saskatchewan and inappropriate and eastern Saskatchewan.
Current prices are.
Areas of cheap capital payout in only five months.
Thanh Kang: As Grant mentioned, our balance sheet is in great shape and hitting our 1.3 billion net debt milestone is key to managing through commodity price volatility. Our third quarter debt to EBITDA ratio was 0.6 times, and we now have over 1.8 billion of liquidity on our credit facilities. As a reminder, approximately 90% of our liquids production is linked to light oil or condensate pricing, and although differentials on these products have widened slightly into the fourth quarter, the larger decrease that we have seen in heavy oil prices are less impactful to our funds flow.
Speaker 5: transcript
Speaker 5: The second theme that is prevalent with our teams in the East Division is the constant drive to improve on our already highly economic inventory. We are continually increasing lateral lengths and drilling more extended reachhors on a well across each play type, providing for better efficiencies across our asset base.
The second theme that is prevalent with our teams in each division is the constant drive to improve on our already highly economic inventory, we are continually increasing lateral lengths and drilling more extended reach horizontal wells across each play type providing for better efficiencies across our asset base. We're also drilling more dual and triple Lake laterals in our Frobisher focused eastern.
Speaker 5: transcript
Speaker 5: We are also drilling more dual and triple league laterals in our ProbeShirt focused Eastern Saskatchewan assets, which accounts for about 80% of our 2024 program.
Got you on assets, which accounts for about 80% of our 2024 program.
Speaker 5: transcript
Speaker 5: In addition to the above, we have recently piloted our first open hole multilateral in the Viking in the Elrose area. This well just came on production so there are no results report just yet. However, if we are successful here, we believe this could enhance a substantial portion of our Viking inventory.
In addition to the above we have recently piloted our first open hole multilateral and the Viking in the Elrose area. This well just came on production. So there are no results to report just yet. However, if we are successful here. We believe this could enhance a substantial portion of our Viking inventory.
Thanh Kang: As discussed in the press release yesterday afternoon, we anticipate our full year 2023 production to come in at the low end of our guidance range, and with inflationary pressures at approximately 10% above our original expectations, we anticipate our full year capital to be at the high end of our guidance range at approximately 950 million. Early time outperformance of our Monte type curves has improved the economics through quicker pales.
Speaker 5: transcript
Speaker 5: We are also allocating approximately $150 million to EUR initiatives for 2024.
We are also allocating approximately $150 million to you our initiatives for 2024.
Speaker 5: transcript
Speaker 5: Our EOR projects are a key differentiator for WhiteCAP. As a low decline rate and subsequent low maintenance capital required requirements are coupled with the high net back nature of our light oil weighted assets, which helps to generate strong free cash flow for the company.
Our EUR projects are a key differentiator for whitecap as a low decline rate and subsequent low maintenance capital required requirements are coupled with the high netback nature of our light oil weighted assets, which helps to generate strong free cash flow for the company.
Thanh Kang: However, at this time we have not made any adjustments to our expected reserves on a per well basis, and along with temporary suspensions of existing wells to complete fracking operations of new wells and some unplanned downtime, we now expect annual production to be 157,000 BUEs per day.
Speaker 5: transcript
Speaker 5: The majority of our EOR capital will be directed towards the Waverne CO2 project, where we are very pleased to have recently signed an extension with SPC in the boundary dam facility for CO2 supply to the end of 2034. With that, I will turn it back over to Grant for his closing remarks.
The majority of our EUR capital will be directed towards the Wayburn Sidoti project, where we are very pleased to have recently signed an extension with SPC and the boundary dam facility pursued to supply to the end of 'twenty 34 with that I'll turn it back over to grant for his closing remarks.
Grant Fagerheim: I will now pass it back to Grant for his remarks on the 2024 budget. Thanks, John. The 2024 budget we put forward last evening represents meaningful progress towards our organic production goal of over 200,000 BUE per day by the end of 2027, along with meeting our near-term goals of high free cash flow generation and increasing our net asset value longer term. Our Board of Directors approved the 2024 budget of 1 billion to 1.2 billion, which is expected to generate average production of 162 to 168,000 BUE per day.
Speaker 2: transcript
Speaker 2: Thanks Chris and Joy. We're very excited about 2024 capital program and how we position Wakecap for long term including our current assets are extensive drilling inventory. And as importantly, the dedicated and very capable personnel we have within our company.
Thanks, Chris and Joey we're very excited about 2024 capital program and how we positioned white cap for long term, including our current assets, our extensive drilling inventory and as importantly, the dedicated and very capable capable personnel, we have within our company.
Speaker 2: transcript
Speaker 2: We have over 3,000 locations in our West Division that can sustain a consistent growth rate of 10% over the next 25 years with recent results supporting our look for this division. We also have 3,500 drone locations within our East Division that will provide significant pre-cash flow to the company with various technical initiatives underway to further enhance our later awaited inventory and future growth.
We have over 3000 locations in our West division that can sustain a consistent growth rate of 10% over the next 25 years with recent results supporting our outlook for this division. We also have 3500 drilling locations within our East Division that will provide significant free cash flow to the company with various technical initiatives underway to further enhance.
Grant Fagerheim: We plan to drill approximately 258 wells and invest $165 million on infrastructure projects and $150 million on EOR projects. Our West Division will be allocated approximately $600 million to drill 42 wells. 80% of this capital will include 28 wells, which will be in the Montany and the Duvernay. The focus assets within our division, the significant depth of Montany and Duvernay inventory supports higher growth and increased profitability with greater scale. In the West Division, we anticipate investing $133 million of the $165 million towards infrastructure projects.
Our lighter oil weighted inventory and future growth.
Speaker 2: transcript
Speaker 2: Lastly, I'm very pleased that our Canadian Energy sector is on the cusp of adding significant pipeline takeaway capacity for both crude oil and natural gas over the next two years. They're by allowing Canadian production.
Lastly, I'm very pleased that our Canadian energy sector is on the cusp of adding significant pipeline takeaway capacity for both crude oil and natural gas over the next two years, thereby allowing Canadian production.
That complies with high standard.
Speaker 2: transcript
Speaker 2: that complies with high standards, our environmental standards, to reach foreign markets. Not only should our pricing realizations improve, but having greater certainty of our products as we're getting to markets that need the most, should we be something that we are all proud of as Canadian.
Environmental standards to.
To reach foreign markets, not only should our pricing realizations improve but having greater certainty of our products that are getting to markets that need the most.
Should we is something that we are all proud of as Canadians.
Speaker 2: transcript
Speaker 2: With that, I will now turn the call over to the operator, Silvie, for any questions.
With that I'll now turn the call over to the operator Sylvia for any questions.
Grant Fagerheim: The three primary projects are the 20,000 BUE per day battery, which will serve service to the Missouri area, to the north of our CACWAR development and a schedule to be completed in the second quarter of 2024. The other two projects will support the next stage of our development in the Duvernay and K-BOB and our long-term growth plans for the Montany development in the Latour region. But regards to our infrastructure spending and build out, it is our intention to build facilities that we have plans to produce through, retain operational control, and consider selling down our interest to strategic partners in the future if it is beneficial to our operations and our financial position at the time.
Speaker 1: transcript
Speaker 1: Thank you sir ladies and gentlemen if you would like to ask a question please press star followed by one on your touchtone phone you will then hear a three-tone prompt acknowledging your request and if you would like to withdraw from the question queue simply press star followed by
Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star followed by one Touchtone phone you will then hear a suite.
Hum acknowledging your request and if you would like to withdraw from the question queue simply press star followed by two.
And if you're using a speaker phone we ask that you. Please lift the handset before pressing any keys. Please go ahead and Bristol one now if you have a question.
Speaker 1: transcript
Speaker 1: Speaking of phone, we ask that you please lift the hands up before pressing any keys. Please go ahead and press star one.
Speaker 1: transcript
Speaker 1: and your first question will be from Dennis Fang at CIBC. Please go ahead.
And your first question will be from Dennis Fong.
Please go ahead.
Speaker 6: transcript
Speaker 6: Hi, good morning and thanks for taking my questions. My first one really is just around...
Hi, good morning, and thanks.
Thanks for taking my questions. My first one really is just around.
Speaker 6: transcript
Free cash allocation you reach your $1 3 billion targets.
Grant Fagerheim: For our East Division, we are allocating approximately $500 million to rail 215 wells across central Alberta and Saskatchewan. The focus of for our East Division is to hold production of relatively flat and continue to generate outsize pre-cashful for the company. We have also allocated approximately $150 million to EOR initiatives to improve on our already low decline rate and our sustainability over the longer term. One of the many challenges that our business has faced over the past years has been the impact of inflation, has had on our cost control.
Here very recently.
But can you talk towards the mechanics on returning free cash flow via buybacks I know, there's the component of our allocation after you've I will call. It paid the dividend component, but can you talk a little bit around the management of cash through time as well as.
Speaker 6: transcript
Speaker 6: We'll call it Pave, the dividend component, but can you talk a little bit around the management of cash through time as well as the buyback per...
The buyback program. Please thanks.
Speaker 3: transcript
Speaker 3: Sure, it's Tom here. Thanks for that question here, Dennis. So with respect to the share buybacks on the free cash flow allocation, in the fourth quarter here, basically based on strip pricing, we have about 125 million on the NCIB in order to get to that 75% of free cash flow that goes back to shareholders. So what we'll look to do is once we finalize what that funds flow looks like.
Sure. It's Tom here. Thanks for that question here, Dennis So with respect to the.
The share buybacks when the free cash flow allocation.
In the fourth quarter here.
Grant Fagerheim: Since beginning of 23, 2020, 23, we have experienced approximately a 10% inflation on our capital and operating costs higher than what we expected when we released our budget, 2023 budget. The main drivers of inflation have consistently been steel, labor, raw materials on the capital cost side, while labor and power costs have been higher than expected on the operating cost side. For 2024, we have modeled certain costs to stay relatively flat, while we do expect some inflationary pressures to persist in labor, power, and fraction.
Basically based on strip pricing, we have about $125 million are on the CIB.
To get to that 75% of free cash flow that goes back to shareholders. So we'll look to do is once we finalize what that funds flow looks like for the fourth quarter sometime in March February March next year.
Speaker 3: transcript
Speaker 3: for the fourth quarter sometime in March, February , March next year. We'll look to execute on the NCIB going forward in 2000.
We'll look to execute on the N CIB.
And going forward in 2024.
Speaker 3: transcript
Speaker 3: As you know, from a capital spending perspective, the highest cap-ax is going to be in the first quarter, in the third quarter, and then we'll have lighter capital spending in the second quarter, and fourth quarter. So we'll look at everything on a six-month basis. Really, the first half of the year, we'll look to finalize what our free funds for those looks like.
No you know from a capital spending perspective, the highest capex is going to be in the first quarter in the third quarter and they will have lighter capital spending in the second quarter and fourth quarter. So we will look at everything on a six month basis really the first half of the year, we will look to finalize what our free funds flow looks like and then start looking at executing on the NCI b. So it is a six.
Grant Fagerheim: At current prices, we forecast $1.8 billion of funds flow in 2024, which generates $700 million of free funds flowing using the midpoint of our capital guidance.
Speaker 3: transcript
Speaker 3: and then start looking at executing on the NCIP. So it's a six month look back effectively to make sure that we're very confident that we are generating that free funds flow before we spend it on the NCIP.
Month look back effectively to make sure that we're very confident that we are generating that free funds flow before we spend it on the NCI D.
Joey Wong: I would now pass the phone off to Joey from all the marks on our West Division results in 2024 budget. Joey. Thanks, friend.
Yes.
Speaker 6: transcript
Speaker 6: Great, appreciate that color. My follow up on that question is in the press release, you highlighted a billion dollar, I don't want to call it a next target, but the expectation of achieving a billion dollars of net debt in 2024. Is that a stopping point or is the view that you want to further shrink the balance sheet or build dry powder on an ongoing basis? And does that potentially impact or influence the way you look at allocating free cash flow so I want to reach, I guess, that next level.
Joey Wong: Our 2024 budget for the West Division will take our Montany program to the north of our main capital development and into Muzro. We are currently running two rigs in the area and have had a good start to drilling operations on our first two four-well paths. Given the need for infrastructure, we took additional time to plan our development at Muzro and now plan to drill a total of 16-wells at Muzro. By the end of 2024, eight of which will be spun in Q4 of this year and eight wells in 2024.
Great I appreciate that color my follow up on that question is in the press release, you highlighted <unk> billion dollar I don't know.
On the call that next target, but the expectation of achieving a $1 billion of net debt in 2024.
Is that a stopping point or is the view that you want to further shrink the balance sheet or bill dry powder on a ongoing basis and does that potentially impact or influence. The way you look at allocating free cash flow. Once you reach I guess that next level.
Joey Wong: The first eight-wells is scheduled to come on production with the completion of our battery in the second quarter. The battery, which will be pipeline connected to the cap system, will help the fully capitalize on our identified 55 drilling locations over 16 sections at Muzro. Depending on factors such as geology, offsetting wells, and localized reservoir characteristics, we will be drilling both single bench as well as multi-bench paths.
Speaker 3: transcript
Speaker 3: Yeah, I think that when we look at where our debt levels are right now, it's very low. I mean, we're 0.6 times debt to EBITDA at the billion dollars, we're 0.5 times debt to EBITDA there. So, you know, as we continue to allocate 75% of free funds full of active shareholders, 25% against the balance sheet, you could potentially see us.
Yeah.
Think that when we look at where our debt levels are right now it's very low I mean were 0.6 times debt to EBITDA at the $1 billion, whereas they were up one five times debt to EBITDA. There. So you know as.
We continue to allocate 75% of free funds flow back to shareholders, 25% against the balance sheet, you could potentially see us drive down even lower levels of debt and I think given the volatility that we're seeing in the market here specifically on the price of oil.
Joey Wong: We are looking forward to the results from our Muzro development in the second half of 2024.
Speaker 3: transcript
Speaker 3: Drive down even lower levels of debt and I think given the volatility that we're seeing in the market here specifically on the price of
Joey Wong: Another area that I wanted to touch on was Berlin and given the completion of two standing ducts that were drilled by the previous operator in 2019. Given its size, this area was not as significant focus as we were evaluating this acquisition. However, it is pipeline connected to the existing third-party gas plant and if these two wells continue to outperform expectations, this area could attract more spending to develop the approximately 100 identified locations.
Speaker 3: transcript
Speaker 3: oil and the higher cost of borrowing. I think you're gonna see a higher cost of borrowing for a longer period of time here So having lower levels of debt, you know, is a prudent thing from our perspective here
Oil and.
And the higher cost of borrowing I think youre going to see a higher cost of borrowing for a longer period of time here, so having lower levels of debt.
Prudent thing from our perspective here, but the reality is as we continue to grow our business, 3% to 8% I think we've put together a very strong 2020 for budget here, but we're always going to look for ways to enhance that model as we move into 2024 and beyond here and having that flexibility in your balance sheet really provides that off.
Speaker 3: transcript
Speaker 3: But the reality is, as we continue to grow our business, three to eight percent, I think we've put together a very strong 2024 budget here, but we're always gonna look for ways to enhance that model. As we move into the 2024 and beyond here, and having that flexibility in your balance sheet really provides that optionality for our shareholders.
Joey Wong: Now moving on to the duvernate, we are very pleased with the results from our first three wells into the play with an average IP-90 rates of approximately 1,500 buoys per day per well with both rates and liquid rates above our expectations. Our second pad, a four-well pad, at 11 and 14 was brought on production on October 15th and were very encouraged with early-time data. Both drilling and completion operations on these first two paths have been executed very well and we feel confident that our team can continue to this trend with the 11 duvernate wells plans for 2024.
The reality for our shareholders.
Speaker 2: transcript
Speaker 2: Just to follow under that, I do think as Tom was speaking to it, our debt capacity at this particular time are only at $3.1 billion and just under $1.3 billion drawn, we have a very significant amount of significant capacity at $1.8 billion. And when we look at...
Just to follow on to that.
I do think as Tom was speaking to it which are debt capacity at this particular time online at $3 1 billion and just under $1 $3 billion drawn we have a very significant amount.
Joey Wong: With our 100% working interest, ownership of the 15-7 gas processing facility in K-bob, each incremental pad that we bring on production in the DuVernay improves the utilization of that facility and improves the overall profitability of the area. The gathering system upgrades that we're making in 2024 will help facilitate future development on the West portion of our acreage at K-bob and help fill that plant out by the end of 2025.
Significant capacity of $1 8 billion.
When we look at.
Speaker 2: transcript
Speaker 2: This relative to our share buybacks, I mean, we've always said maintain the priority to run within a responsible level of debt. But on the buyback side, we look at our intrinsic values as well from a PDP basis as well as that total fruit.
This relative to.
Our share buybacks I mean, we've always said maintain a priority to.
Run within a responsible level of debt on the buyback side, we look at our intrinsic values as well from a PDP basis as well as that total proved and this is a good time to be buying back our share. So all of that will go into the mix.
Speaker 2: transcript
Speaker 2: And this is a big good time to be buying back our shares. So all that will go into the mix as to ensuring that we're just focused on creating as much value for shareholders as we possibly can and supplementing the budget that we do have out there through share buybacks, through any acquisition activity that may come forward.
Chris Poland: I'll now pass it on to Chris for his comments on the East Division. Thanks, Joey. The East Division is looking to follow up on what has so far been a successful 2023 with a strong 2024. Our assets across each region from Central Alberta to both Western and Eastern Saskatchewan have all outperformed expectations. For 2024, we plan to drill 215 wells in the East Division. Approximately 65% of these wells will be directed towards quick payout, short cycle, light oil weighted assets in the Viking, in Western Saskatchewan, and in the Probe sure in Eastern Saskatchewan.
That is true ensuring that we're just focused on creating as much value for shareholders as we possibly can.
Supplementing the budget that we do have out there through share buybacks.
Any acquisition activity that may come forward.
Speaker 2: transcript
Speaker 2: We'll continue to look at that as well, but that all starts with protecting our shareholders today and creating as much value in the future as we possibly can.
We'll continue to look at that as well, but that's all starts with protecting our shareholders today and creating as much value as the future as we possibly can.
Speaker 6: transcript
Speaker 6: Great, thanks. Appreciate the color from both of you. I'll turn it back.
Great. Thanks, I appreciate the color from both of you I'll turn it back.
Chris Poland: At current prices, our type of areas achieve capital payout in only five months. The second theme that is prevalent with our teams in the East Division is the constant drive to improve on our already highly economic inventory. We are continually increasing lateral lengths and drilling more extended reach whores on a well across each play type, providing for better efficiencies across our asset base. We are also drilling more dual and triple league laterals in our Probe sure focused Eastern Saskatchewan assets, which accounts for about 80% of our 2024 program.
Thank you.
Speaker 1: transcript
Speaker 1: Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your t-
Reminder, ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone.
Speaker 1: transcript
Speaker 1: And your next question will be from Patrick Orwerk at ATB Capital Markets. Please go ahead.
Question will be from Patrick O'rourke.
Capital markets. Please go ahead.
Yes.
Hey, good morning, guys and thanks for taking my question.
Speaker 7: transcript
Speaker 7: Okay, good morning guys and thanks for taking my question. Just looking through the specifics of the budget for 2024, I know that you've got about $130 million allocated to infrastructure for the West unit.
Just looking through the specifics of the budget for 2024, so you've got about $130 million allocated to infrastructure for the West unit now.
Chris Poland: In addition to the above, we have recently piloted our first open hole multilateral in the Viking in the Elrose area. This well just came on production so there are no results report just yet. However, if we are successful here, we believe this could enhance a substantial portion of our Viking inventory. We are also allocating approximately $150 million to UR initiatives for 2024. Our UR projects are a key differentiator for White Cap as a low decline rate and subsequent low maintenance capital required requirements are coupled with the high net back nature of our light oil weighted assets, which helps to generate strong free cash flow for the company.
Speaker 7: transcript
Speaker 7: Now they've had some time and appreciating that things can shift around a little bit. I know you mentioned, you know, potentially drilling some wells up Berlin at some point in the future.
Now that you've had some time in appreciating that things can shift around a little bit I know you mentioned potentially drilling some wells at Berlin at some point in the future sort of what is your current infrastructure and processing capacity. There and then in terms of that $130 million, how will that evolve.
Speaker 7: transcript
Speaker 7: sort of what is your current infrastructure and processing capacity there? And then in terms of that, 130 million, how will that evolve as we move out into the outer years of kind of the multi-year plan here? Because at the hit a point where that drops off and that'll enhance the capital efficiency or do you think that that's more of like an annual run rate? the
As we move out.
Into the outer years kind of a multiyear plan here.
You hit a point where.
That drops off and that will enhance the capital efficiencies or do you think that that's more of like annual run rate.
Yes.
Chris Poland: The majority of our UR capital will be directed towards the Waver and CO2 project, where we are very pleased to have recently signed an extension with SPC in the boundary dam facility for CO2 supply to the end of 2034.
Thanks, Patrick just regarding the infrastructure build out in.
Speaker 2: transcript
Speaker 2: in what we'll call the West Division. It's our intention to continue to have, as I mentioned in my previous comments, operational control, and builds out our infrastructure in front of the drilling program that we're drilling programs that we do have. Today, the growth potential that we have available to us.
In what we'll call the West Division is our it's our intention to continue to have as I mentioned in my previous comments operational control and build out our infrastructure in front of the drilling program that we're drilling programs that we do have.
Grant Fagerheim: With that, I will turn it back over to Grant for his closing remarks. Thanks, Chris. Enjoy.
Today.
Grant Fagerheim: We are very excited about 2024 capital program and how we position White Cap for a long term, including our current assets, our extensive drilling inventory, and as importantly, the dedicated and very capable personnel we have within our company. We have over 3,000 locations in our West Division that can sustain a consistent growth rate of 10% over the next 25 years with recent results supporting our look for this division. We also have 3,500 drilling locations within our East Division that will provide significant free cash flow to the company with various technical issues underway to further enhance our light oil weighted inventory and future growth.
The the growth potential that we have available to us would.
Speaker 2: transcript
Speaker 2: would be about another somewhere in that neighborhood of another 30,000 barrels day of capacity today, but we want to stay in front of that with infrastructure build out and retaining operational control as we move forward.
It would be about another somewhere in that neighborhood of another 30000 barrels a day of capacity today.
Want to stay in front of that with infrastructure build out.
And retaining operational control as we move forward.
Speaker 2: transcript
Speaker 2: How we look at that, you know, we're talking about $130 million this year.
How we look at that.
We're talking about $130 million this year.
Speaker 2: transcript
Speaker 2: There will be a long bill, daughter, and infrastructure here, whether it...
There will be a long build ordering an infrastructure here and whether its our capital or.
Speaker 2: transcript
Speaker 2: Our capital, or we'll call it competitors capital, or third parties, there will be an inordinate amount of capital that's spent on infrastructure out here. And these can't be measured on a one-year basis. They're measured for the longer term.
They don't want to call competitors capital or third parties there.
There will be an inordinate amount of capital that's spent on infrastructure out here and these can be measured on a one year basis, they're measured.
Grant Fagerheim: Lastly, I am very pleased that our Canadian energy sector is on the cusp of adding significant pipeline takeaway capacity for both crude oil and natural gas over the next two years. Thereby allowing Canadian production that complies with high standards, our environmental standards, to reach foreign markets. Not only should our pricing realizations improve, but having greater certainty of our products as we are getting to markets that need the most should be something that we are all proud of as Canadians.
For the longer term.
Speaker 2: transcript
Speaker 2: They're in place for up to 40 year period of time.
They are in place for up to 40 year period of time so.
Speaker 2: transcript
Speaker 2: You know, we're very mindful of that, and what we want to do is make sure that
We're very mindful of that and what we want to do is make sure that we're in front of them with building our infrastructure and our preferred areas, we want to be so when we drill our wells, we can actually bring them on production. So that's how we think about as far as 25 and 26, we havent done a detailed analysis on that but you would expect similar.
Speaker 2: transcript
Speaker 2: We're in front of it with building out our infrastructure in the preferred areas we want to be. So when we drill our wells, we can actually bring them on production. So that's how we think about it. As far as 25 and 26, we haven't done a detailed analysis on that, but you would expect similar type build-out programs in excess of $100 million a year going forward. That would be our expectation.
<unk> build out.
Sylvie: With that, I will now turn the call over to the operator, Sylvie, for any questions. Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question cue, simply press star followed by two. And if using a speakerphone, we ask that you please lift the hands up before pressing any keys. Please go ahead and press star one now if you have a question.
Programs in excess of $100 million, a year going forward that would be our expectation.
And I would just add that it's you know it's really in the context of the one to $1 2 billion that we're forecasting for this year, but it'll be very similar I think as we look forward in 2025 and 26 in that one to $1 2 billion inclusive of the facility spend that we're looking at.
Speaker 3: transcript
Speaker 3: And I would just add that it's really in the context of the 1 to 1.2 billion that we're forecasting for this year, but it'll be very similar, I think as we look forward in 2025 and 26 and that 1 to 1.2 billion, inclusive of the facility spends that we're looking at.
Okay. Thank you.
Speaker 8: transcript
Speaker 8: Thank you. Again, as a reminder, ladies and gentlemen, if you would like to ask a question at this time, please press start followed by one on your touch to all the phones.
Thank you again as a reminder, ladies and gentlemen, if you would like to ask a question at this time. Please press star followed by one on your Touchtone phone.
Dennis Fong: And your first question will be from Dennis Fong at CIBC. Please go ahead. Hi, good morning, and thanks for taking my questions. My first one really is just around free cash allocation. You reach your $1.3 billion target here very recently. But can you talk towards the mechanics on returning free cash flow via buyback? I know there's the component of allocation after you've called it paid the dividend component, but can you talk a little bit around the management of cash through time as well as the buyback program? Please, thanks.
Okay.
And at this time Mr figure Hanmi. It appears we have no other questions.
Okay. Thank you Silvia and once again I'd like to thank each of you for taking the time and interest in listening on our call. Today, we are excited about and to complete the balance of our 2023 program and to advance our company forward with a strong 2020 for budget and we'll be increasing total returns to shareholders. We look forward.
Speaker 2: transcript
Speaker 2: Okay. Thank you, Sylvia. Once again, I'd like to thank each of you for taking the time and interest to listen on our call today. We are excited about to complete the balance of our 2023 program and to advance our company forward with a strong 2024 budget and we'll be increasing total returns to shareholders. We look forward to updating you on our progress through the remainder of 23 and into 24. All the best. Have a good day. Thank you.
To updating you on our progress through the remainder of 'twenty three 'twenty.
24, all the best have a good day. Thank you.
Thanh Kang: Sure, Tom here. Thanks for that question here, Dennis. So with respect to the share buybacks on the free cash flow allocation, in the fourth quarter here, basically based on strip pricing, we have about 125 million on the NCIB. In order to get to that 75% of free cash flow that goes back to shareholders. So what we'll look to do is once we finalize what that funds flow looks like for the fourth quarter sometime in March, February March next year, we'll look to execute on the NCIB going forward in 2024.
Speaker 1: transcript
Speaker 1: Thank you, sir. Ladies and gentlemen, this doesn't need to conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
[music].
Thanh Kang: As you know, from a capital spending perspective, the highest cap ex is going to be in the first quarter and the third quarter, and then we'll have later capital spending in the second quarter and fourth quarter. So we'll look at everything on a six month basis. Really the first half of the year, we'll look to finalize what our free funds flow looks like and then start looking at executing on the NCIB.
Thanh Kang: So it's a six month look back effectively to make sure that we're very confident that we are generating that free funds flow before we spend it on the NCIB. Great. Appreciate that color. My follow up on that question is in the press release, you highlighted a billion dollar. I don't want to call it a next target, but the expectation of achieving a billion dollars of net debt in 2024. Is that a stopping point or is the view that you want to further shrink the balance sheet or build dry powder on an ongoing basis?
Thanh Kang: And does that potentially impact or influence the way you look at allocating free cash flow once you reach, I guess, that next level? Yeah, I think that when we look at where our debt levels are right now, it's very low. I mean, we're 0.6 times debt to EBITDA at the billion dollars, we're 0.5 times debt to EBITDA there. So as we continue to allocate 75% of free funds flow back to shareholders, 25% against the balance sheet, you could potentially see us drive down even lower levels of debt.
Thanh Kang: And I think given the volatility that we're seeing in the market here specifically on the price of oil and the higher cost of borrowing, I think you're going to see a higher cost of borrowing for a longer period of time here. So having lower levels of debt is a prudent thing from our perspective here. But the reality is, as we continue to grow our business, 3 to 8%. I think we've put together a very strong 2024 budget here, but we're always going to look for ways to enhance that model as we move into 2024 and beyond here.
Yeah.
[music].
Thanh Kang: And having that flexibility in your balance sheet really provides that optionality for our shareholders. Just to follow on to that, you know, I do think as Tom was speaking to it, our debt capacity at this particular time, our line at $3.1 billion and just under $1.3 billion drawn, we have a very significant amount of a significant capacity of $1.8 billion. When we look at this relative to our share buybacks, I mean, we've always said maintain the priority to run within a responsible level of debt.
Thanh Kang: But on the buyback side, we look at our intrinsic values as well from a PDP basis, as well as that total fruit. And this is a very good time to buy back our shares. So all that will go into the mix as to ensuring that we're just focused on creating as much value for shareholders as we possibly can and supplementing the budget that we do have out there through share buybacks, through any acquisition activity that may come forward.
Thanh Kang: We'll continue to look at that as well. But that all starts with protecting our shareholders today and creating as much value in the future as we possibly can. Great. Thanks. Appreciate the color from both of you.
Okay.
Speaker 9: transcript
Speaker 9: I I, I I.
[music].
Sylvie: I'll turn it back. Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch tone phone.
Patrick: And your next question will be from Patrick or work at APB Capital Markets. Please go ahead. Okay.
Patrick: Good morning, guys. And thanks for taking my question. Just looking through the specifics of the budget for 2024, I know you've got about $130 million allocated to infrastructure for the West unit. Now they've had some time and appreciating the things can shift around a little bit. I know you mentioned, you know, potentially drilling some wells up Berlin at some point in the future. Sort of what is your current infrastructure and processing capacity there?
Patrick: And then in terms of that 130 million, how will that evolve as we move out into the outer years of kind of the multi year plan here? Because you hit a point where, you know, that drops off and that'll enhance the capital efficiency. So do you think that that's more of like an annual run rate? Yeah. Thanks, Patrick. Just regarding the infrastructure build out in what we'll call the West division. It's our intention to continue to have as I mentioned in my previous comments, operational control and build out our infrastructure in front of the drilling program that we're drilling programs that we do.
Patrick: Today, the growth potential that we have available to us would be about another somewhere in that neighborhood of another 30,000 barrels day of capacity today. But we want to stay in front of that with infrastructure build out and retaining operational control as we move forward. How we look at that, you know, we're talking about $130 million this year. There will be a long build out of infrastructure here, whether it's our capital or, you know, we'll call it competitors capital or third parties.
Patrick: There will be an indoor amount of capital that's spent on infrastructure out here. And these can't be measured on a one year basis. They're measured for the longer term. You know, they're in place for up to 40 year period of time. So, you know, we're very mindful of that. And what we want to do is make sure that we're in front of it with building our hard infrastructure in the preferred areas we want to be.
Patrick: So when we drill our wells, we can actually bring them on production. So that's how we think about as far as 25 and 26. We haven't done a detailed analysis on that. But you would expect similar type build out programs in excess of $100 million a year going forward. That would be our expectation. [inaudible] I would just add that it's really in the context of the $1.2 billion that we're forecasting for this year, but it'll be very similar. I think as we look forward in 2025 and 26 and that $1.2 billion, inclusive of the facility spends that we're looking at.
Grant Fagerheim: Okay, thank you. Thank you. Again, as a reminder ladies and gentlemen, if you would like to ask a question at this time, please press start followed by one on your touch. Next on the phone. And at this time, as the Fagerheim, it appears we have no other questions. Okay. Thank you, Sylvie.
Grant Fagerheim: And once again, I'd like to thank each of you for taking the time and interest to listen on our call today. We are excited about to complete the balance of our 2023 program and to advance our company forward with a strong 2024 budget and will be increasing total returns to shareholders. We look forward to updating you on our progress through the remainder of 23 and 24. All the best. Have a good day. Thank you. Thank you, sir.
Sylvie: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Thank you. [inaudible] David Mombourquette,[inaudible]