Q3 2023 Baytex Energy Corp Earnings Call

Thank you for standing by this is the conference operator, welcome to the beta ex energy third quarter 2023 financial and operating results conference call.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad. You may also submit questions in writing at any time using the form or in the lower right section of the webcast frame.

Should you need assistance during the conference call you May signal, an operator by pressing Star then zero I would now like to turn the conference over to Brian Ector, Senior Vice President capital markets and Investor Relations. Please go ahead.

Thank you Ariel and good morning, ladies and gentlemen, and thank you for joining us to discuss our third quarter 2023 financial and operating results.

I am joined by Eric <unk>, our President and Chief Executive Officer, Chad <unk>, Our Chief Financial Officer, and Chad Lundberg, our Chief operating officer.

While listening please keep in mind that some of our remarks will contain forward looking statements within the meaning of applicable securities laws.

I refer you to the advisories regarding forward looking statements oil and gas information and non-GAAP financial and capital management measures in yesterday's press release.

All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified.

And following our prepared remarks, we will be taking questions from the analysts. In addition, if you are listening in today via the webcast you will have the opportunity to submit an online question and we will do our best to answer all questions submitted.

With that I will now turn the call over to Eric.

Thanks, Brian Good morning, everyone and welcome to our third quarter Conference call.

For <unk>. This represents the first full quarter of combined operations. Following the Ranger acquisition and demonstrates the strength of our diversified North American oil weighted portfolio.

The integration has progressed extremely well and we have delivered strong results from Western Canada, and the Eagle Ford in Texas.

During the third quarter, we delivered top quartile results from our operated Eagle Ford assets continued exceptional clairvoyant Clearwater results at <unk>, where we now hold the top 30 wells drilled across the entire Clearwater fairway and significantly progressed, our permanent Duvernay play with six wells drilled.

<unk> trouble free earlier, this year, which are all tracking to our type curve performance expectations.

Right on this well performance in a few minutes.

I'm also excited to announce two new land extensions at <unk> in Cold Lake as we continue to leverage our heavy oil expertise and recent exploration successes.

We continue to execute on our 2023 plan and now anticipate fourth quarter production of 158 to 160000 Boe per day, 84% weighted to oil and Ngls.

We are forecasting full year 2023 exploration and production expenditures of just over 1 billion.

Which is consistent with our previous guidance.

Based on the forward strip for the balance of 2023, we expect to generate free cash flow of approximately $400 million during the fourth quarter and $650 million for full year 2023.

As a reminder, we increased our direct shareholder return to 50% of free cash flow on closing the Ranger acquisition, which has allowed us to increase the value of our share buyback program and entered introduce a dividend.

The remainder of our free cash flow continues to be allocated to the balance sheet.

Our normal course issuer bid allows us.

For the purchase of up to $68 4 million common shares during the 12 month period, ending June 28, 2024, and as a result of our free cash flow profile. We have increased the pace of our share buyback program during the fourth quarter.

Through October 31, 2023, we repurchased $28 1 million shares for $155 million, representing three 3% of our shares outstanding at an average price of $5 51 per share.

In addition, we paid an initial quarterly cash dividend of two and a quarter cents.

Per share on October <unk>, 2023, and our board has declared our Q4 cash dividend of two and a quarter cents per share to be paid on January <unk>.

2024.

I'll now shift to our Q3 results.

Production during the quarter was 150 600 Boe per day, and we delivered adjusted funds flow of $582 million 68 per basic share.

We generated free cash flow of $158 million 19 per basic share.

Exploration and development expenditures totaled $409 million during the quarter consistent with our full year plan and we brought 87 eight net wells on stream.

As of September 32023, our total debt was $2 7 billion.

A total debt to EBITDA ratio clear Q3, 'twenty three annualize up one one times.

During the third quarter, we repaid our 150 U S $150 million U S currency term loan.

Our total debt at quarter end increased relative to Q2 'twenty three due to the impact of the strengthening U S dollar relative to the Canadian dollar and our U S dollar denominated debt along with working capital adjustments.

Based on current commodity prices.

And forecast free cash flow for the fourth quarter, we expect to exit 2023 with total debt of approximately $2 5 billion.

I'm going to shift now and talk more about our recent activity.

In the Eagle Ford, Our Q3 program reflects strong results across the black oil and condensate thermal maturity windows of the lower Eagle Ford.

In our operated assets. The 13 wells generated an average 30 day initial production rate of 500 Boe's per day.

78% oil and Ngls per well ranging from 769 Boe's per day to 2300 55 Boe's per day.

Seven wells from three pads.

These pads are the bloodstone, the bubinga and the Hickory generated an average 30 day initial production rate of 2000 Boe per day, 65% oil and Ngls per well.

When we compare these results to a dataset of 784 wells source from public data.

Our Q3 performance ranks in the top quartile of all wells drilled in 2023 and the Eagle Ford.

And on a production per lateral foot basis, we are solidly in the second quartile. So very pleased with this performance.

In addition to delivering strong results, we remain focused on base optimization and continue drilling and completion performance.

Our permanent Duvernay light oil assets are in the demonstration stage of commerciality and offer high operating netback with strong economics and the potential for significant organic growth, we brought six wells Onstream mid summer.

The six wells generated average production rates of approximately 950 Boe per day, 89% oil and Ngls.

In September ranging from 790 Boe per day to 1080 Boe per day and continue to track to type curve performance expectations.

Production from the permanent Duvernay increased to over 7500 BOE per day in September up from 2000 Boe per day in <unk> 2023.

And the 2023 program has significantly advanced our understanding of the reservoir as we continue to progress this light oil resource play.

On the heavy oil side following a relatively quiet second quarter due to spring breakup.

Our program ramped up during the third quarter with 28 net heavy oil wells on stream 14 at <unk> eight at Lloyd Minster and three at Peace River.

At <unk>. The 14 wells generated an average 30 day initial production rate of 725 barrels per day per well ranging from 330 barrels per day to 1073 barrels per day.

Production at <unk> and averaged almost 14000 barrels per day in Q3 23.

Up 69% from Q3, 'twenty, two and increased to 16400 barrels per day during the month of September.

We are also following up our recent heavy oil exploration success at more Anvil, Alberta, and Cold Lake Alberta.

During the fourth quarter.

Building on our heavy oil expertise, we have expanded our heavy oil development fairway through two land extensions, including a 10 section extension at the <unk> settlement adjacent to our existing 80 section land position at <unk> and a farm in on 17, and three quarter sections of land perspective for Manville development.

Cold Lake.

In northeast Alberta.

We've included a map of these incremental land positions and our updated Investor relations presentation.

Shifting to risk management, we employ a disciplined hedging program to help mitigate the volatility in revenue due to changes in commodity prices for the first half of 'twenty. Four we have entered into hedges on approximately 40% of our net crude oil exposure utilizing two way collars with a floor price of $60 per barrel U S.

And a ceiling price of $100 per barrel.

<unk>.

For the second half of 2024, we have entered into hedges on approximately 25% of our net crude oil exposure utilizing two way collars with a floor price of $60 per barrel U S and a ceiling price of $98 per barrel U S.

As I wrap up my prepared remarks, I would like to reiterate our commitment to operational excellence and delivering long term value and enhance shareholder returns.

I am very pleased with the operating results across our portfolio, which has set the stage for a strong finish to 2023.

We do see our shares as undervalued and we have stepped up our share buyback program during the fourth quarter.

We are a strong north American energy company with a high quality diversified oil weighted portfolio across Western Canada, and the Texas Gulf Coast.

And now operator, we're ready to open the call for questions.

Thank you.

We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear Tony acknowledging your request to submit a question in writing please use the form in the lower right section of the webcast frame if youre using a speakerphone. Please pick up your handset before pressing any keys.

Yes.

To withdraw your question. Please press Star then Q, we will pause for a moment as callers join the queue.

Our first question comes from Greg Pardy of RBC capital markets. Please go ahead.

Yes. Thanks, Thanks for the thanks for the rundown Eric.

I know, it's still early but.

What are you what are your broad strokes I think in terms of.

Sure.

Spending.

And any guidance, maybe around production and so forth for 2024.

Yes, it's a good question, Greg Thank you and good morning.

We like to think about 2024 as an extension of the second half of 2023. So if you were to take H two.

Capital.

On a on a half year basis, and extend that out into 2024 and the range of 155 to 160000 BOE a day and extend that across 2024, there'll be a little bit of lumpiness seasonally.

But I think that would be a really good way to think about 2024.

Thanks for that and then I'm going to shift gears on you.

Production rates like you've done the land extension now in the Clearwater. So good ol at getting that done does any of this really change that 12% to 15000 mill at a range that you've been kind of guiding us towards where you think you could stabilize production in the Clearwater or does that it's a great question.

We are pushing kind of the top of that range here in Q3.

And continue to see encouraging results as we as we develop.

Across the body of what now looks like a green headed prairie chicken on our map.

And so.

I do expect Gregg that.

The 12% to 15000 is probably something we will continue to say, but I would expect to live near the high end of that.

More often than I might have expected even six months ago. So.

It is it is a good strong.

Our development plan over time, we continue to want to be very disciplined.

And really thoughtful about how we March forward.

Social license to operate is very important to us in maintaining a strong and transparent relationship with with the communities in which we operate including here.

The <unk> settlement, it's very important to us so I'll reiterate the 12% to 15 and I'll, probably follow that up by saying, we could live at the high end of that consistently but.

Youll, probably hear us keep saying that.

Okay got it thanks very much.

Thank you Greg.

Our next question comes from Menno <unk> of TD Securities. Please go ahead.

Thanks, and good morning, everyone.

Start with a question on Lloyd Mr. Mann Bill since you farmed in on another rough number 17 sections you have a lot of running room in the play and then I'm just looking at the slide deck, just that's a relative returns.

It looks like the manville.

I'm going to say a distant second to the P volume, but comparable to your Eagle Ford assets. So what does all of this mean for activity levels in 2024 and beyond.

Thanks Menno.

I think it means we're going to continue to.

Employ our geoscience exploration program, what we you and I have talked about the success that our two geoscience teams have had across the heavy oil fairway.

We're going to continue to fund that exploration program with.

What we believe to be a unique petro physical understanding of the rock and this has led to the success at <unk>. It has led to the.

With CCAR at Cold Lake.

And it has led to additional extensions and so.

It competes very well in our portfolio as you as you suggest and it's a good problem to have.

WCS basis depths have widened a little bit here in Q4, but we fully anticipate those will narrow back up.

In 2024.

And.

As <unk> starts line fill and comes on delivery.

So we're very confident that the oil the heavy oil fairway, we'll continue delivering.

New discoveries new accumulations.

As well as continued extensions around the.

The places where we've had good good success already so.

Very fond of the heavy oil fairway very fond.

The place that.

It lives in our portfolio and fully expect to continue funding the.

The good news is with the with the very significant cash flows.

Coming out of our Gulf coast asset that 60% of our production price at a premium to Ti.

Those significant cash flows not only.

Kerry the development freight in.

In the U S along the Gulf Coast in the Eagle Ford, but also provide very substantial cash flows back into the business. So we can continue leaning into.

All the rest of the strength of the portfolio continue exploring and developing places like the permanent duvernay and the exploration success and <unk>.

Seek at Cold Lake and around the Rex at more Anvil and all the other places where we are currently excited to explore.

Okay.

Terrific. Thanks for that Eric and my follow up is on share buybacks, a big step up in October.

Can you remind us of your overall strategy as it programmatic or more opportunistic how do you how.

Does your measure intrinsic value factor into how aggressive you are day to day and is it possible that we see a big.

<unk> participate in the next Juniper secondary which is coming up pretty quick quickly potentially yeah, yeah. So to sort of put it to put a timeframe on that thought that last part Menno you recall that it was.

Three escrow periods 90 days 90 days and 90 days.

Each representing a third of the total block and so the first 90 days executed an overnight bought deal not us but.

<unk>.

Executed an overnight bought deal and that was September 18th I believe the next 90 day escrow period will expire on December 17th I believe.

And.

The.

The question around us participating as really a legal and regulatory one as long as juniper holds more than 10% of our total outstanding shares.

We are prohibited from participating as a buyer in that book and Juniper. Currently holds I think right at or just under 12%.

And so I don't think as much as we would love to I don't think we will be able to participate in the book and it's the same reason, we couldnt participate when they were at a little over 18 and took it down to 12.

The good news is there was a lot of demand for the shares.

It traded it traded well and.

We certainly do expect the next book to do just as well.

So what I would say around the CIB is.

We expect to be programmatic and opportunistic because right now were undervalued. So it's a great opportunity to be buying back shares at a pretty good pace.

And to do so on a kind of a cost averaging basis, which is the programmatic element of the CIB, we really like the NCI because it has this cost averaging.

Functionality.

But also because.

As a as a company we go in and out of blackouts and so we can set up instructions and.

And let it run through the blackout, whereas if we were being opportunistic that would have to lineup with an open window and that doesn't always happen. So so right now we're doing both.

Programmatic and opportunistic, but it's because we're undervalued and both present themselves, but its all taking place via and CIB, just just to be clear.

And then I would say relative to intrinsic value I mentioned couple of times already.

We're not currently close to our fair value as we see it.

So with the discount.

We're buying back as much as we can and intend to continue at a pretty aggressive pace through Q4 of 'twenty three.

There will be a time I suppose if we're if we're really fortunate that.

The share price begins to approach fair value I hope that's the case that will be a good problem to have.

And one of the linkages, we really like here is.

As we buy up and take out shares.

Outstanding shares.

And let's just say for the sake of argument at an NC IV limit of 10% per year. Then every year, we can rebase the fixed base dividend by that same amount because you've taken out those shares the total quantum of fixed base dividend would would decline over time.

On an absolute value basis, and so that would give us the opportunity to rebase it periodically.

And Thats, a linkage linkage, we really like to.

To be clear, we haven't we haven't announced that that plan, but it is a linkage we like because it creates a systematic approach to.

Share repurchases and and your fixed based dividend. So that's something we like and it also helps answer the relationship between our current share price intrinsic value and other ways too.

Return capital to shareholders. So let me just pause there Minto and see if you want to follow up.

No that was that was really thorough Eric.

Eric.

That's it for me I'll pass it back.

Thank you Mel.

Our next question comes from Amir Arif of ATB capital. Please go ahead.

Thanks, Good morning, Eric just a couple of questions on the Eagle Ford just can you give us a sense of.

The cadence of drilling plans in the Eagle Ford I think you brought Onstream 22, net wells roughly this quarter and that's dropping to 11 next quarter. As this is more of a level loaded program. When you operated assets and you just sprinkle and the non op wells when they come in just trying to get a sense of how 24 drilling activity will look in the Eagle Ford on a quarterly basis.

Yes, Q4 on a quarter over quarter basis Amir.

Going to be some lumpiness, it's it has seasonality.

Impacts to it.

Broadly speaking quarter over quarter, but then specifically in Q4 and specifically because we have.

A substantial <unk>.

Non op asset the capital that gets allocated to the non op assets in Q4. It is of course beyond our control.

And if the operator.

Pulls back on capital in Q4, because thats, they've essentially spent the capital and developed a program that they wanted to develop then that sort of kind of is what it is on the operated side of the business.

We try to run the businesses as operationally efficient as we can and for our operated Eagle Ford position. This means.

Ricks level loaded running running basically full time.

And those will feed.

One frac crew at the tailgate of the rigs clearing the DUC inventory that comes off the drilling program.

<unk>.

That'll be a little bit lumpy based on pad size and some seasonality effects, but generally speaking our operated program will be more level loaded I think.

But Q4 is definitely seasonality related to towards the end of the year and related more towards the non op assets.

I appreciate that color and then just on the operating cost side of the third quarter results were $12 57, a BOE I know you mentioned there was some additional workovers going on in that quarter can you give us a sense of your comfort level and bringing that number down below $12.

Q4.

The updated guidance.

Yes.

I think you're referring to you.

You're talking about Opex Opex, yes, yes, yes, yes, okay.

So it's come down.

By a couple of box on a unit basis.

Since closing of the deal and Thats certainly related to the.

Blending effects of the.

Lower cash cost structure, along the us Gulf coast, and just the dilution and blending effects of that lower cash cost structure.

Always.

<unk> to work on.

Both sourcing labor costs, and just operational efficiency to maintain.

As best we can.

Flat to declining Opex.

I think over time, we're going to see.

Probably consistent but light downward pressure on those on those costs that is to say I think if there's a bias it's biased downward.

But it's not going to be I think.

Earth shattering in terms of just how much it moves the needle so from.

$12 75, a Boe.

Is it going to is it going to dramatically drop under 10 for 2024 I don't think so what I would say is we'll probably see consistent steady downward pressure on that number as we continue to.

Make.

Yes, as we continue to make improvements operationally, we tend to continue to do the things that work and not repeat the things that don't work and squeeze out waste.

Waste in excess out of that system I would target of 11 to 12, if I were if I were pushing out into 2024 is a range.

And I think that would be pretty pretty responsible.

In terms of our 24 cost range.

Got it appreciate that and then just final question shifting gears over to the Duvernay or you have six wells that are now that you've brought on you've got some good production results behind it can you.

Give us a sense of what your next steps are in the Duvernay.

Yeah, Yeah. So we're very excited about the duvernay I couldnt be more proud of the team.

We have built.

Really powerful models statistical models mathematical models and continue to populate those models build those out history match those models and converge on.

Results that that we think will continue to push higher going forward.

But as you know we're also rigorous in terms of our.

Commercial expectations and we want to do this on a basis that is.

Systematic.

So I would expect even though we don't have the budget built for 2024, yet I would expect more than six wells.

And I would expect probably less than nine wells, so somewhere between six to nine is a reasonable.

Step up.

As we approach kind of the second year of demonstration probably the last year demonstration if I were to if I were to lean in a bit.

And then.

We'll step up the pace of development. After 2024, so there is still more science to do.

We want to better understand all of the nature of variability.

But we've got a lot of data both delineation and all of the various.

Independent independent variables that drive variation in the output.

Got a strong understanding of those and so I think next year.

We will be another really good year of development progress.

Progress in terms of performance and cost and another year of.

Really strong demonstration towards full commerciality and.

Development full development.

Pace. So let me, let me pause there and see if you've got a follow up on on the Duvernay.

No that was great color. Thank you.

Thank you.

Our next question comes from Jasper, which.

Paul Please go ahead.

Thank you for taking my question most of my questions have already been offset by one about the bundling expenses, which has been a bit trading trending down for the entire year could you add some color to this and what we could expect spending expenses per barrel of heavy oil to average for next year.

Yes, Im sorry, Im not Jasper I'm, not quite sure I'm picking up which category of expense Youre asking about just try me one more time sorry.

Alright blending expenses.

Lindsay blending blending experience daily Okay, Yes, yes, yes, okay.

I would expect that that blending expenses are going to be related to the value of condensate relative to the value of our heavy oil crude stream. So I think the value of our heavy oil crude stream that needs to be blended with the diluent is going to trend up over time, I think thats going to be on a benchmark at a benchmark.

<unk>.

And also at.

At a higher kind of <unk>.

Asset level net back level.

And so.

And I think condi or all the diluent are probably also going to be linked to that.

So maybe the blending expenses.

We're going to be flat to potentially declining a little bit, but I would expect in the same way.

That I mentioned on <unk>.

Opex on unit, Opex, probably slight downward pressure, but I wouldnt expect it to be a real needle mover I just think it's going to feel like and look like operational efficiency improvements.

Thank you for me.

Thanks Jasper.

Okay.

Yeah.

This concludes the question and answer session from the phone lines I'd like to turn the conference back over to Brian Ector for questions received online.

Okay, great. Thanks, So real and we do have a few questions that have been submitted from the webcast and saw moderate he's now for you Eric.

And there are a number of investors that have reached out this morning, looking for a little bit more color or clarity around our sort of free cash flow allocation policy. So how do we decide eric between share buybacks.

Growing the dividend.

And debt repayment.

What are the decisions that go into that type of criteria and then as a follow up.

An investor asking should we be paying debt down versus prior to share buybacks and dividends. So I think they're all kind of interrelated you bet. Those are those are great questions and I wish there was just a mathematical calculation one could do to arrive at the precise allocation, but it is.

In the end it boils down to a couple of things it boils down to.

Subjective judgment on the part of the management team and the board as well as listening carefully to our investors right. The shareholder base, taking in that feedback and having these conversations and so as I introduced this idea of the linkage between our buyback program and the idea of potentially re basing the dividend.

Time on a proportional kind of basis.

Then we will listen to the feedback on that conversation and we will.

Try to figure out is is the balance of the feedback leaning towards that being a good idea or that not being a good idea.

Yeah.

As everyone knows there is a fixed base dividend, which is the way we have it structured.

Which is a function of the.

One dollar per share or in our case <unk> per share per quarter paid out obviously quarterly.

So thats a function of the share count.

And then there are variable dividends that can expand and contract on a quarterly basis. According to some.

Mathematical model and then there are special dividends and generally speaking.

You get less credit in your share price for special dividends than you do for variables and you get less credit in your share price or variables than you do fixed because the investment community can.

Largely really begin to build in the return of a fixed base dividend predictably, whereas variables are a little harder.

And specials are very hard to predict and so.

Don't tend to get a lot of a lot of value back in your share price for those on a go forward basis. So when it comes to what kind of dividend.

We tend to lean toward fixed base dividends as a function of shares out and we like this linkage to our to our.

Share repurchase plan as a functional linkage between the two when it comes to the allocation between share repurchases and a dividend.

It really is about.

The our view of our cost of equity relative to.

Our view of the cost of debt on a risk adjusted basis, and then how much you return between.

Between the dividend and the repurchase plan as a function of the linkage I talked about but when you when you go away from <unk>.

Dividends versus share repurchases and you ask yourself share repurchases versus paying down debt.

If you think about our cost of debt.

As let's just call it 8% for the sake of illustration.

And then you compare that to.

Our cost of equity, which let's say for the sake of argument is in the high teens.

20% based on our free cash flow yield.

And then you risk adjust between.

The.

Riskiness or uncertainty around the share repurchase versus debt reduction you would make a little bit of an adjustment to that but still.

16, 18% is far higher return than say, 8% on reduction of debt and so on that basis, we would say when you have such a high free cash flow yield.

<unk> cost of that reflects your cost of equity and you should pay down the highest source of capital, which is your most expensive source, which in this case is equity and so we would say biased toward toward paying down your equity or buying back your shares.

But as soon as that free cash flow yield comes down because our share price is appreciating intuit that yield will come down and it will make that balanced harder, which is the natural conversion of.

Share repurchases toward.

Debt repayment and that's why we've been kind of 50 50, and this allocation I know, it's messy and I noticed that a lot of words, but in the end. These are the considerations we have to roll around with.

And in the end Thats Thats the decision we have to make now.

I also think it's really important to make progress on paying down debt. Even though you are comparing an 8% cost of debt capital to a 16% cost of equity capital on a risk adjusted basis that's still.

Important to pay down the debt and the reason I think it's important is because for every dollar of debt.

Debt you pay down within your EV construct if <unk> stays the same enterprise value stays. The same then one dollar of debt reduction moves over to a $1.

Market capitalization accretion, so theres that linkage as well in the end it's subjective.

<unk>.

For that reason, we're going to have to keep having this conversation I think we have to continue listening to our shareholder base.

And implementing what feels like <unk>.

Scratches the edge of the broadest cross section of shareholders. Let me just stop there Brian you think that gets it I think you've captured it okay alright.

Keeping along the same theme if we were to fully execute our longer in CIB program, So purchasing 10% of our public float during the year would <unk> consider a substantial issuer bid if the free cash flow supportive.

Yes, I think I think put very plainly we would consider it.

And have.

<unk> thought about it and talked about it just just like the individual who is asking the question has thought about it.

Right now its pretty early I think the NCI.

Given us plenty of room.

And I would anticipate that our NCI before for the <unk>.

July one of 2024 ended into June 30 of 2025 is also going to be substantial in terms of its total number of shares.

Based on the float we project so.

We may not have to have that conversation and make that decision soon but we do consider it for sure.

And then the last question I think on along this theme of capital allocation and share repurchases.

We've talked a little bit today.

The view that our shares are undervalued and a couple of investors are asking what do you consider to be the sort of current fair value of over ishares or kind of a tough question to answer but I wanted to put that upfront. Yes. It is it is a tough one because it depends on your view of pricing.

I think if you take some.

Some fusion of a consensus estimate consensus bank forecast over time, combined with the forwards, which I think underrepresent.

The future price environment, but if you take some fusion of a consensus estimate and a forward strip, maybe thats closed and if you assume that.

I think you probably could take.

Some average of the analyst estimates.

They are all very good models.

Brian in the analysts were carefully together to ensure the models are.

Our well informed.

<unk>.

Theres not theres not a scale there is not a steal forecast out there. So I would I would say taking some average median.

Or central tendency to the analyst target prices might be the best the best place to look.

Thanks, Eric I'm going to pass this question over to Chuck <unk>, Our Chief Financial Officer, we've talked a little bit about the debt repayment. The question relates more to our debt structure Chad.

Could you comment on the components of our debt is at floating rate interest rates, we pay any interest rate swaps associated with our debt structure sure. Thanks, Brian Yeah.

So Q3 like we mentioned earlier, we have $2 7 billion Canadian dollars outstanding in that in that we'd have one 7 billion of that being our long term notes those are all U S. Dollar denominated notes of $1 2 billion.

Dollar denominated notes those interest.

Interest rates have eaten happened, 875%, so a $1 two or $800 million.

Eight 5% 400 million at 875%. So obviously those are fixed.

2027 and 2030.

Remainder of our debt is on our credit facility. That's so call. It 1 billion Canadian dollars on the credit facility.

Floating debt structure.

Generally speaking, it's going to be from a margin, but think of that as kind of silver plus 225.

We will keep that floating so we have not we do not have an interest rate swaps against that debt.

Thanks Chuck.

And then a couple of questions related to free cash flow most of the free cash flow with US four months has been directed towards the share repurchases.

And if you looked at our Q3 free cash flow of $158 million.

Maybe lower than some might have expected I think there is some seasonality around capital Eric can you just elaborate on that.

The free cash flow profile as it relates to our business and capital spending on a quarterly basis and how it averages out over the course of the year, yes, there is definite seasonality so.

Folks remember back to Q1.

Q1 is always a strong start to the year.

And a lot of because it's frozen ground really good operating conditions in terms of the ability to execute a program reliably.

Although it's cold you can you can execute well and so drilling capital you really get after your program in Q1 and that was a <unk>.

<unk> capital program.

And remember that was <unk> Standalone and then in Q2, you've got a lot of.

Production with a lower.

Capital program, So we generated almost $100 million of free cash flow in Q2, as a beta Standalone unit.

And then in Q3 as the.

The listener and rider rightly points out $158 million free cash flow.

But we spent $409 million in capex in that $409 million as Brian pointed out is a function really of seasonality Q3 is a really good quarter for getting after it.

Lots of drilling and completions activity.

And all of our active area so across the entire portfolio.

And then Q4, we're getting the benefit of a rising production into Q4, so as everyone noticed in our release, we are forecasting 158 to 160000 BOE a day.

For Q4 and in that strength.

Against a lower.

Capital spend means theres, a great deal of free cash flow leftover. So free cash flow kind of is what comes out the bottom and it's very dependent on not only operating cash flow or ASF, but also the lumpiness of our capital program and the capital program is lumpy because of seasonal effects.

And at one point in the year also these sort of base effects around.

Budget season that comes at the end of the year, which I talked about earlier, so let me stop there, Brian and see if that.

And then a couple one more sort of financial related question that I think will shift into a couple of more operational or conversations with.

Maybe Chad over to you again on our recurrent WCS hedging program on the heavy oil side.

So we do have some heavy oil hedge them here Q4 I think.

Myles hedging maybe.

8000 barrels a day.

<unk> hedged at around $14 here for Q4 into 2024, we are pretty minimal hedging all WCS basis, we have a bit of transportation hedging for the first half of the year than the rest of the year we were.

We're unhedged.

Eric do you want to add some color around our expectations on WCS as we.

Move through 2024, yes, thanks, Brian.

Zinc at.

At least from what we've read and.

The intelligence, we can gather.

It sounds like <unk> will be sort of mechanically complete.

In Q1 of 24. This is what we read this as what we're told and there's a dispersion in data but.

The central tendency of the various pieces of intelligence, we get seems to point at.

Q1, mechanically complete that same dispersed bit of intelligence also it tends to point toward.

Line fill which is kind of already some of it is already taking place because this is a big project and it's been built in segments.

I think some of the line fill is already complete and this is what we've been able to ascertain and so Q1 mechanically complete Q1 continuing line fill.

And really landfill progressing.

And then we are.

Certainly expecting Q.

Q2 deliveries through <unk>. This is the best information, we can gather I think everyone has access to disperse.

Intelligence on this so we might all have slightly different collection of data, but that's what we think and Thats, what we expect and we think once <unk> comes on.

In early 2024, we expect the.

WCS <unk> basis differential to narrow into the kind of 10 to $12 per barrel range, and we think that becomes effectively.

As described by the pipe economics to the Us Gulf Coast on the Enbridge mainline.

Thanks, Eric we're going to shift now to talk a little bit more because some questions come in on the on the assets themselves and the performance during the third quarter first question relates to the Eagle Ford operated acreage Eric the.

The results that we're seeing are they in line with our expectations.

And any <unk> planned on the assets.

So the answer to the first question is yes in line.

We've been modeling expectations like this we've been working through the.

The designs and the well performance expectation so yes Q3.

Meets our expectations and we feel good about the way it represents the assets on a go forward basis.

We do have re Fracs plan.

And we continue to run we continue to think about the re Frac program as kind of a parallel if you like a sidecar to the primary channel of drilling and completions development.

Mary Capital development in the play along our operated portion of the play as I described earlier two rigs level loaded running full time through the program.

That's a very efficient operation because these two HMP rigs are some of the best rigs and Hmp's fleet certainly some of the top performing rigs in the Eagle Ford.

And they've been with Ranger now <unk> four years. So they are very efficient and then the <unk>.

Liberty Frac crew also bandwidth bandwidth the team on an extended basis runs very very well, so thats clear and DUC inventory, that's a nice level loaded.

Really operationally efficient.

Channel of progress on development capital and then our sidecar to that is re fracs in the re Frac program, there's a lot to think about theirs.

There is the candidate selection, which is can you can you get in and get out with your Workover operations and prep the line or do you have good zonal isolation.

And is it a.

Well that you think you can contain the fracture stimulation energy in the fairway or the stimulated reservoir volume that youre trying to re frac and so theres a lot to think about in re fracs, but we are quite encouraged and continue to progress that sidecar channel of capital development, and our Eagle Ford and we're going.

Learn a lot there from our peers in the area, who have more experience doing it.

We sit on task groups and technical groups and so theres a lot to learn but we're very excited about it.

Eric can you comment on the range of expectations for the current exploratory wells in our two new areas here in Western Canada range of expectations on the program yeah. So.

The.

The Rex at more infill we've describe these in our prior conversations.

As.

30% to 100 locations each so the raxit more anvil somewhere in that range I am confident in the higher end of that range because.

The lower and lower and has a pretty tight.

Risking on it that is to say, it's heavily risked and I feel good about the fact that we will probably get higher on the on the range. There in terms of the locations and the Rex at more anvil.

And similar kind of 30% to 100 locations at the West Zika at Cold Lake.

We're continuing to develop those in Q3.

And even and even today and so we've got additional multi last that we have underway and that we will continue to drill.

And bring online in Q4, and so there'll be more to talk about in Q4.

Even though those are not needle moving assets in terms of the number of locations in the production.

Do continue to really demonstrate that.

This is a substantial footprint across.

Our highly prospective fairway and we feel really good about the steady diet of both discoveries and the geoscience team leading to new accumulation discovery and extensions and so that just it feels like a steady diet that will continue on.

Eric I think we're approaching almost an hour. So are there are more questions. If we don't get to your questions. Here, we will still try to follow up with you individually.

Maybe two more Eric.

And investors, who are asking about the expected cost savings from the merger have we achieved what we expected from a synergy standpoint.

We certainly have made.

<unk> made a lot of progress.

The basis of the merger between <unk> and <unk>.

<unk> was not ultimately predicated on synergy savings the synergies values were pretty modest.

In the outset, and we have accomplished all of those that we that we set out to accomplish again they were pretty modest it was eliminating duplication in things like back office.

Financial audit.

<unk> or independent reserves audit.

The redundant boards the redundant leadership at the top part of the organization. So all of those including a whole bunch of.

Kind of redundant and software subscriptions all of that has been extracted and so yes, given the fact that they were pretty modest to start with we have achieved them.

There's still a lot of additional meat on the bone and we will continue to.

Drive additional savings forward.

And that'll be that'll appear like operational efficiency over time, the way, we describe say the Opex unit Opex and the blending expenses over time, just consistently getting a little bit better over time.

So that's the way I'd think about synergy progress.

Another question, a little bit different morven, ESG focus and it might relate a bit towards towards duvernay completions, but the shareholders asking if <unk> has any interest.

In low energy <unk> chemical or filter wastewater treatment technologies. So it's a bit of a different question that I followed US yes. So one of the one of the ways to think about this is.

In both the Viking and the Duvernay.

We are we are working very hard to.

Lower our freshwater intensity and in particular in the Duvernay for example.

Use municipal wastewater effluent.

As makeup fluid for fracture stimulation and.

That's particularly helpful because it.

Helps lower the freshwater intensity of the operations.

In the Viking of course, we use affluent from.

Our our corroborate thermal operation and we use that as makeup fluid for a fracture stimulation and Viking. So these are really helpful.

On intensity measures on an ESG perspective, or from an ESG perspective in our fracture stimulation work in Canada, and we're always looking to.

Apply new technologies to creating better freshwater streams less expensive freshwater streams and in particular the ability to use wastewater sources as freshwater for makeup.

Two last quick questions Eric.

<unk>.

Breakeven on oil pricing.

Breakeven on oil pricing down into the I would say low to mid forty's across the entire portfolio.

And getting better as we squeeze.

More efficiencies out of both the capital program and the operating expense program.

And we are going to wrap up with this one question because I know its something that youre clearly passionate about.

This comment comes from a shareholder who says that there are others out there are shareholders that are frustrated with our share price.

Unable to gain traction besides the buybacks.

How do you plan.

To work to get that <unk> share price reflective of the fair value you see in it yes, it's a great question I too.

Feel like it's been a long time I'm reminded by the fact that.

We we started this conversation about.

The merger between Ranger and <unk> on February 28.

<unk>.

It was several months to close.

And we released just a partial Q2. So Q3 is really the first full quarter.

And when.

You find yourself in a show me status for Xiaomi mode.

Basically all you can do is deliver results and I think because Q3 is the first full quarter of delivering results. It really is it really is the first opportunity for us to have showcased the full strength of the portfolio. The full strength of the assets the skills and talents and experience of our team.

And.

I think Q3 will go a long way too.

Firming up the confidence that others have in the asset base and the team that I've had all along Q4 will also reinforce that and then full year and then reserves.

But it is a process, but it takes time to show the world.

Because these have to come out on quarterly.

Cycles and so here we are in November releasing our first full quarter of results and I am quite pleased.

And expect the good performance to continue through the year and well into the future.

That's terrific thanks, everyone for spending the last hour with us today.

This is going to conclude the Q3 conference call and webcast. Thanks, everyone for participating have a great day.

Thanks, everyone.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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