Q4 2023 Ovintiv Inc Earnings Call

Good day, ladies and gentlemen, and thank you for standing by and welcome to <unk> 2023 fourth quarter and yearend results Conference call. As a reminder, today's call is being recorded at.

At this time all participants are in a listen only mode.

Following the presentation, we will conduct a question and answer session members of the investment community will have the opportunity to ask questions and Ken joined the queue at any time by pressing star one.

Operator: Thank you. Thanks, Joanna, and welcome, everyone, to our fourth quarter and year-end 23 conference call. This call is being webcast, and the slides are available on our website at Ovintiv.com. Please take note of the caution regarding forward-looking statements at the beginning of our slides and in our disclosure documents filed on EDGAR and CDER Plus. Following prepared remarks, we will be available to take your questions. Please limit your time to one question and one follow-up. Then, I'll turn the call over to our President and CEO, Brendan McCracken. Good morning.

All members of the media attending in a listen only mode. Today, you may quote statements made by any of your bench of Representatives. However members of the media who wish to quote others, who are speaking on this call today, we advise you to contact those individuals directly to obtain their consent.

Please be advised that this conference call may not be recorded or rebroadcast without the express consent of all vintages.

I would now like to turn the conference call over to Jason for Hoist from Investor Relations. Please go ahead, Mr by hoist.

Jason: Thanks, Joanne welcome everyone to our fourth quarter and year end 'twenty three conference call.

Jason: This call is being webcast and the slides are available on our website at <unk> Dot com.

Jason: Please take note of the advisory regarding forward looking statements at the beginning of our slides and in our disclosure documents filed on Edgar and SEDAR plus.

Jason: Following prepared remarks, we will we will be available to take your questions. Please limit your time to one question and one follow up.

Jason: I will now turn the call over to our President and CEO Brendan Mccracken.

Brendan Mccracken: Good morning, Thank you for joining us.

Brendan Mccracken: Thank you for joining us. 2023 marked another year of execution against our durable return strategy. We beat and reset our targets twice over the course of the year, and this trend continued into the fourth quarter in every aspect of our business. We converted our operational success into bottom-line financial results with full-year net earnings of $2.1 billion and cash flow of $3.9 billion. With capital investment totaling $2.7 billion, we generated free cash flow of approximately $1.2 billion, of which $733 million, or 63%, was returned directly to our shareholders.

Brendan Mccracken: 23 marked another year of execution against our durable return strategy.

Brendan Mccracken: We beat and reset our targets twice over the course of the year and this trend continued into the fourth quarter in every aspect of our business.

Brendan Mccracken: We converted our operational success into bottom line financial results with full year net earnings of $2 $1 billion in cash flow of $3 9 billion with.

Brendan Mccracken: With capital investment totaling $2 $7 billion, we generated free cash flow of approximately $1 2 billion of which $733 million or 63% was returned directly to our shareholders.

Brendan Mccracken: We continue to lead the industry by delivering efficiency gains in each of our assets. Completion design innovations, record-setting execution performance, leading well productivity per lateral foot, and base decline management are a few of the areas contributing to our excellent return on invested capital. In June, we more than doubled our premium drilling inventory in the Permian with a set of three highly accretive acquisitions. Our team has seamlessly integrated the new assets, and we are very pleased to report on the excellent results from our first end-to-end wells in the former NCAP Aquifer. These Permian acquisitions, combined with our strategic bolt-on additions and our organic assessment and appraisal programs, have added 1,650 premium drilling locations to our portfolio in the last three years.

Brendan Mccracken: We continued to lead the industry by delivering efficiency gains in each of our assets completion design innovations record setting execution performance, leading well productivity per lateral foot in base decline management are a few of the areas contributing to our excellent return on invested capital.

Brendan Mccracken: In June we more than doubled our premium drilling inventory in the Permian with a set of three highly accretive acquisitions. Our team has seamlessly integrated the new assets and we are very pleased to report out on the excellent results from our first end to end wells in the former and cap acreage.

Brendan Mccracken: These Permian acquisitions combined with our strategic bolt on additions.

Brendan Mccracken: And our organic assessment and appraisal programs have added 650 premium drilling locations to our portfolio in the last three years.

Brendan Mccracken: We identified the importance of this inventory renewal years before others, and we pursued a multi-year, disciplined strategy of both organic and inorganic investment. The result is a huge boost to our full cycle returns and the durability of our business. We made great progress against our 50% greenhouse gas emissions intensity reduction target. For 2023, we achieved a 42% reduction from our 2019 baseline. Over the course of the year, we repurchased approximately 10 million shares and increased our base dividend by 20%.

Brendan Mccracken: We identified the importance of this inventory renewal years before others and we prosecuted the multiyear disciplined strategy of both organic and inorganic investment.

Brendan Mccracken: The result is a huge boost to our full cycle returns and the durability of our business.

Brendan Mccracken: We made great progress against our 50% greenhouse gas emissions intensity reduction target for 2023, we achieved a 42% reduction from our 2020, but from our 2019 baseline.

Brendan Mccracken: Over the course of the year, we repurchased approximately 10 million shares and increased our base dividend by 20%. This.

Brendan Mccracken: This reflects our commitment to maintaining financial strength, generating superior returns on capital investment, and returning significant cash to our shareholders. Our strong execution in 2023 has set us up for continued success in 2024. We'll cover more of the details later in the call, but year over year, we are set to deliver 40% more free cash flow at lower commodity prices. Our strong execution momentum continued through the fourth quarter.

Brendan Mccracken: This reflects our commitment to maintaining financial strength generating superior returns on capital investment.

Brendan Mccracken: And returning significant cash to our shareholders. Our strong execution in 2023 has set us up for continued success in 2024.

Brendan Mccracken: We will cover more of the details later in the call, but year over year, we're set to deliver 40% more free cash flow at lower commodity prices.

Brendan Mccracken: Our strong execution momentum continued through the fourth quarter.

Brendan Mccracken: At 240,000 barrels per day, our oil and condensate volumes significantly exceeded expectations, coming in 7% above the midpoint of guidance. This outperformance was driven by faster drilling and completions and strong well results from both our legacy and newly acquired Permian assets and excellent base production performance across our portfolio. Our seamless ACID integration in the Permian allowed us to accelerate our expected turn-in-line schedule, meaning that the vast majority of our fourth quarter turn-in lines came on in October and November. This, along with strong well performance, drove our fourth quarter oil volumes, which peaked in November. The higher volumes were achieved with lower capital, which came in at the low end of our guide, driven by operational efficiency.

Brendan Mccracken: At 240000 barrels per day, our oil and condensate volumes significantly exceeded expectations coming in 7% above the midpoint of guidance. This.

Brendan Mccracken: This outperformance was driven by faster drilling and completions and strong well results from both our legacy and newly acquired Permian assets and excellent base production performance across our portfolio.

Brendan Mccracken: Our seamless acid integration in the Permian allowed us to accelerate our expected turn in line schedule.

Brendan Mccracken: Meaning that the vast majority of our fourth quarter turned in lines came on in October and November.

Brendan Mccracken: This drove our fourth this along with strong well performance drove our fourth quarter oil volumes, which peaked in November.

Brendan Mccracken: The higher volumes were achieved with lower capital, which came in at the low end of our guide driven by operational efficiencies.

Corey: Our per-unit cost performance for both T&P and operating expense came in well below the midpoints of our guide, by margins of 15 and 4%, respectively. And finally, we reduced our total debt by $426 million, further strengthening our balance. Our message in 2024 is simple: we will continue to focus on maximizing returns on our invested capital and maximizing our free cash flow to enhance shareholder returns and further reduce our leverage. In 2024, we expect to generate about $1.6 billion of free cash flow. This is $450 million more than in 2023, with flat production and assuming lower commodity prices, and 2024 oil and condensate capital efficiency... reflects an 18% gain compared to our original pre-acquisition 2023 guide. This is driven by disciplined capital allocation and operational efficiency. I'll now turn the call over to Corey, who will cover the 2024 plan in more detail. Thanks and good morning.

Brendan Mccracken: Our per unit cost performance for both <unk> and operating expense came in well below the midpoint of our guide by margins of 15 and 4% respectively.

Brendan Mccracken: Finally, we reduced our total debt by $426 million further strengthening our balance sheet.

Brendan Mccracken: Our message in 2024 is simple we will continue to focus on maximizing returns on our invested capital and maximizing our free cash flow to enhance shareholder returns and further reduce our leverage.

Brendan Mccracken: In 2024, we expect to generate about $1 $6 billion of free cash flow. This is 450 million more than in 2023 with flat production and assuming lower commodity prices.

Brendan Mccracken: Our 2020 for oil and condensate capital efficiency reflects an 18% gain compared to our original pre acquisition 2023 guide.

Brendan Mccracken: This is driven by disciplined capital allocation and operational efficiencies I will now turn the call over to Corey who will cover the 2024 plan in more detail.

Corey: Thanks, and good morning, as Brendan mentioned, we entered the year with strong momentum from 2023, which sets us up to deliver a highly efficient development program and a substantial increase in free cash flow. We're currently producing about 20% more oil and condensate and we were just one year ago, and our 2000 <unk>.

Corey: As Brendan mentioned, we entered the year with strong momentum from 2023, which sets us up to deliver a highly efficient development program and a substantial increase in free cash flow. We're currently producing about 20% more oil and condensate than we were just one year ago, and our 2024 plan is focused on exploiting the most oil-rich areas in each of our fields. Additional catalysts supporting strong free cash flow include the expiry of our REX pipeline commitment, which represents about $100 million in savings year over year. We also expect about $100 million less in current tax expense year over year. As a reminder, we will pay our 2023 current tax in the first quarter. This will not affect free cash flow, but it will result in a cash outflow of about $250 million.

Corey: Four our plan is focused on exploiting the most oil rich areas in each of our plays.

Corey: Additional catalysts supporting strong free cash flow include the expiry of our Rex pipeline commitment, which represents about $100 million in savings year over year. We also expect about $100 million less in current tax expense year over year.

Corey: As a reminder, we will pay our 2023 current tax in the first quarter. This will not affect free cash flow, but it will result in a cash outflow of about $250 million.

Corey: We are currently well underway on our first quarter buyback program of $248 million. Collectively, we will return $330 million to shareholders in Q1 between our base dividend and share repurchases. We are well protected against potentially weak natural gas prices as we have hedged about 50% of our 2024 gas volume. Additionally, more than three-quarters of our gas hedges have hard protection at prices exceeding $3, paired with upside participation to the mid $4 range. For a $0.25 drop from our base assumption NYMEX price of $2.50, the impact on our full-year cash flow would be limited to about $50 million.

Corey: We are currently well underway on our first quarter buyback program of $248 million collectively will returned $330 million to shareholders in Q1 between our base dividend and share repurchases.

Corey: We are well protected against potentially weak natural gas prices as we have hedged about 50% of our 2020 for gas volumes.

Corey: More than three quarters of our gas hedges have hard protection at prices exceeding three paired with upside participation to the mid $4 range for.

Corey: For a 25 cent dropped from our base assumption Nymex price of $2 50, the impact to our full year cash flow would be limited to about $50 million.

Corey: Capital efficiency remains a primary focus for our teams as we work to efficiently convert our inventory into cash flow and generate consistent, durable returns for our shareholders. Our 2024 capital plan reflects a resilient, level-loaded program. We are leveraging our multi-basin, multi-product flexibility and focusing 100% of our investment on oil and condensate across the portfolio. And, as always, we have the optionality to shift capital if economic factors dictate it over the course of the year. The 2024 program will deliver annual total production volumes of about 560,000 BOEs per day, essentially flat with 2023 volumes for about 450 million less capital. The savings will translate directly into increased free cash flow.

Corey: Capital efficiency remains a primary focus for our teams as we work to efficiently convert our inventory into cash flow and generate consistent durable returns for our shareholders.

Corey: Our 2024 capital plan reflects our resilient level loaded program, we're leveraging our multi basin multi product flexibility and focusing 100% of our investment on oil and condensate across the portfolio and as always we have the optionality to shift capital as economic factors dictate over the course of the year.

Corey: For 2024 program will deliver annual total production volumes of about 560000 Boe per day, essentially flat with 2023 volumes for about $450 million last capital the savings will translate directly into increased free cash flow.

Corey: As expected, our first quarter production is set to be the high point for the year, at a midpoint of about 568,000 BOEs per day, including about 210,000 barrels per day of oil and condensate. This includes the impact of refinery turnarounds at Salt Lake City, weather, and planned maintenance that total about 8,000 barrels per day in the first quarter. From an activity and capital investment perspective, 2024 will be relatively low-leveled and rateable.

Corey: As expected our first quarter production is set to be the high point for the year at a midpoint of about 568000 Boe's per day, including about 210000 barrels per day of oil and condensate.

Corey: This includes the impact of refinery turnarounds at Salt Lake City weather and planned maintenance. The total about 8000 barrels per day in the first quarter.

Corey: From an activity and capital investment perspective, 2024 will be relatively low levels and ratable or.

Greg: Our development program will see less variation in turn in line cadence, setting us up for a more consistent production profile starting in the second quarter and going forward. Annual oil and condensate volumes are expected to average about 205,000 barrels per day, with production exceeding 200,000 barrels per day in every quarter. This is about 5,000 barrels per day higher than our previous 2024 guidance for the same amount of capital and is a credit to the strong capital efficiency delivered by our teams. Importantly, our development program is highly repeatable beyond 2024. Now I'll turn the call over to Greg, who will speak to our operational highlights. Thanks, Corey.

Corey: Our development program will see less variation in turn in line cadence setting us up for a more consistent production profile starting in the second quarter and going forward.

Corey: Annual oil and condensate volumes are expected to average about 205000 barrels per day with production exceeding 200000 barrels per day in every quarter. This is about 5000 barrels per day higher than our previous 2024 guidance for the same amount of capital and is a credit to the strong capital efficiencies delivered by our teams.

Corey: Shortly our development program is highly repeatable beyond 2024, now turn the call over to Greg who will speak to our operational highlights.

Greg: Thanks Corey.

Greg: 2023 was an exceptional year for our Permian team. Efficiency records, seamless asset integration, and strong well performance were consistent themes throughout the year. Our execution across drilling and completions continued to redefine the efficient frontier and operational performance in the basin. Our enhanced completions have resulted in well performance exceeding type curve expectations, and that performance has been included in our 2024 guide. While our cube development approach has stayed consistent, we are constantly looking for ways to improve cycle time and reduce the number of days on location. For example, our average completion speed at well over 4,000 feet per day for our trimulfract wells was about 9% faster than our average speed in 2022 and tops the performance quoted by our peers. We pumped 29% more slurry and increased our equipment utilization by 14% for an average of 18 pumping hours per day.

Greg: 2023 was an exceptional year for our Permian team <unk>.

Greg: Efficiency records seamless asset integration and strong well performance were consistent themes throughout the year.

Greg: Our execution across drilling completions continued to redefine the efficient frontier and operational performance in the basin are.

Greg: Our enhanced completions have resulted in well performance exceeding type curve expectations and that performance has been included in our 2024 guide.

Greg: While our cube development approach has stayed consistent we are constantly looking for ways to improve cycle time and reduce the number of days on location.

Greg: For example, our average completion speed at well over 4000 feet per day for our travel Fracked wells was about 9% faster than our average speed in 2022 and tops the performance quoted by our peers.

Greg: We pumped 29% more slurry and increased our equipment equipment utilization by 14% for an average of 18 pumping hours per day.

Greg: We continue to demonstrate industry-leading drilling efficiency with an average of 12 days spud-to-rig release, which is 5% faster year-over-year. We expect to utilize Trimalfrac on more than half of our program this year. This approach yields a 15% savings in completions cost per foot and essentially doubles the completed feet per day versus a traditional zipper frap. Importantly, the results from our trimal fracked wells are right in line with the rest of our program, meaning they will see no degradation in well performance. So what does all this mean?

Greg: We continue to demonstrate industry, leading drilling efficiency with an average of 12 days spud to rig release, which is 5% faster year over year.

Greg: We expect to utilize trauma frac or more than half of our program. This year.

Greg: This approach yields of 15% savings in completion cost per foot and essentially doubles, the completed feet per day versus a traditional zipper frac.

Greg: Importantly, the results from our trial well Fracked wells were right in line with the rest of our program, meaning that we'll see no degradation in well performance.

Greg: So what does all this mean it means we were able to more efficiently convert resource to cash flow and enhance shareholder returns.

Greg: It means we are able to more efficiently convert resources to cash flow and enhance shareholder returns. As a result, in 2023, Permian generated an incremental $150 million in free cash flow due to our unique, innovative approach. Across our acreage, our Permian well performance continues to be very strong. The chart on the right shows our results for 2023. The orange line includes all wells on our legacy acreage and all the NCAP wells since the start of the year. The dashed line shows the 19 Ovintiv-designed end-to-end wells we brought online on the NCAP acreage during the fourth quarter.

Greg: As a result in 2023, the Permian generated an incremental $150 million in free cash flow due to our unique innovative approach.

Greg: Across our acreage our Permian well performance continues to be very strong.

Greg: The chart on the right shows our results across 2023 the.

Greg: The Orange line includes all wells on our legacy acreage and all of the Encap wells since the start of the year.

Greg: The dashed line shows the 19 Obento designed end to end wells, we brought online on the Encap acreage during the fourth quarter.

Greg: And finally, the green line is our 2024 Permian type. The initial results from the 19 fully Ovintiv-designed wells on the NCAP acreage are impressive, showing a 10% productivity uplift compared to prior operators. These cubes were designed and used the same well stacking and spacing that we use across our Permian position.

Greg: And finally, the Green line is our 2020 for Permian type curve.

Greg: The initial results from the 19 fully open to design wells on the Encap acreage are impressive showing a 10% productivity uplift compared to prior operators.

Greg: These cubes were designed and use the same state well stacking and spacing that we use across our Permian position.

Greg: Our efforts on completion design and particularly on stage architecture delivered stellar well performance in 2023, and we expect this to continue in 2024.

Greg: Our efforts on completion design, and particularly on stage architecture, delivered stellar well performance in 2023, and we expect this to continue in 2024. Our well results have been consistent across our legacy acreage and the acquired acreage position, and our new type curve was used to generate our 2024 plan. This improved well performance and faster cycle time is the major driver behind our increased oil guidance to a midpoint of 205,000 barrels per day for the year versus the previous guidance of 200,000 barrels per day. Our 2023 actual oil production per foot of lateral is in line with the best we've ever delivered in the Permian and is among the best in the basin. In fact, when you compare our 2023 legacy wells combined with the NCAP wells we controlled from end-to-end, our well productivity per foot ranks second versus our peers in the Midland Basin.

Greg: Our well results have been consistent across our legacy acreage and the acquired acreage position and our new type curve was used to generate our 2024 plan.

Greg: This improved well performance and faster cycle time is the major driver behind our increased oil guide to a midpoint of 205000 barrels per day for the year versus the previous guidance of 200000 barrels per day.

Greg: Our 2023 actual oil production per foot of lateral is in line with the best we've ever delivered in the Permian and is among the best in the basin.

Greg: In fact, when you compare our 2023 legacy wells combined with the Encap wells, we controlled from end to end, our well productivity per foot ranked second versus our peers in the Midland Basin.

Greg: We expect these results to be highly repeatable in 2024 and this expansion in type curve has been baked into our full year guidance.

Greg: We expect these results to be highly repeatable in 2024, and this expansion in the type curve has been baked into our full-year guide. In 2024, we plan to run an average of 5 to 6 rigs throughout the year with 1 to 1.5 frac spreads to bring on 120 to 130 net wells. The Monty is one of the largest remaining role plays in North America. Our performance in the play continues to demonstrate the expertise of our team in maximizing value from this incredible resource. In both B.C.

Greg: In 2024, we plan to run an average of five to six rigs throughout the year with one to one and a half frac spreads to bring on 120 to 130 net wells.

Greg: The Montney is one of the largest remaining oil plays in North America.

Greg: Our performance in the play continues to demonstrate the expertise of our team in maximizing value from this incredible resource.

Greg: In both BC and Alberta, we have unleashed cross based on learnings and innovation to drill some highly prolific oil and condensate wells.

Greg: and Alberta, we have unleashed cross-basin learnings and innovation to drill some highly prolific oil and condensate wells. Since the third quarter of 2023, our 10 best Montany wells have averaged more than a thousand barrels per day on an IP30 basis. Supported by our oil and condensate productivity, the economics on our Montney wells remain outstanding. Even with the low natural gas prices reflected in the current strip, we expect to generate a program-level IRR of more than 60 percent.

Greg: Since the third quarter of 2023, or 10, best Montney wells have averaged more than 1000 barrels per day on an IP 30 basis.

Greg: Supported by our oil and condensate productivity the economics on our Montney wells remain outstanding even with the low natural gas prices reflected in the current strip, we expect to generate a program level IRR of more than 60%.

Greg: These great returns are driven by our superior well productivity, low D&C costs, and strong price realization. As a reminder, our condensate trades in line with WTI. In 2023, we realized 96% of WTI, making the Montany competitive with the top oil basins in North America. In our portfolio of fixed transportation outside of ACO, we realized 106% of NIMEX for our 2023 natural gas volumes on an unhedged basis

Greg: These great returns are driven by our superior well productivity low D&C cost and strong price realizations.

Greg: As a reminder, our condensate trades in line with <unk>.

Greg: In 2023, we realized 96% of <unk>, making the montney competitive with the top oil basins in North America.

Greg: And with our portfolio of fixed transportation outside of ACO, we realized 106% of Nymex for our 2023 natural gas volumes on an unhedged basis.

Greg: So, despite weaker natural gas prices, we are continuing to deliver exceptionally robust returns in this play. This year, we plan to run 3-4 rigs to turn in line 60-70 net wealth. In UINTA, we continue to deliver leading well results.

Greg: So despite weaker natural gas prices, we are continuing to deliver exceptionally robust returns in this play.

Greg: This year, we plan to run three to four rigs to turn in line 60 to 70 net wells.

Greg: In the Uinta, we continue to deliver leading well results.

Greg: A recent third-party report noted that our six-well AMIPAD is yielding higher per acre oil EUR than over 75% of the developed DSUs in the Delaware Basin. So with a similar cost structure, our wells are outpacing one of the top basins in North America. This strong oil performance, combined with our continued progress on cost reductions, continues to make the U.N. competitive in our portfolio, generating a margin similar to our Permian operation. Our large, contiguous land base of approximately 137,000 net acres has multiple benches across about 1,000 feet of collective pay.

Greg: A recent third party report noted that our six well Amy pad is yielding a higher per acre oil EUR and over 75% of the develop the issues in the Delaware Basin.

Greg: So with a similar cost structure, our wells are outpacing one of the top basins in North America.

Greg: This strong well performance combined with our continued progress on cost reductions continues to make the uinta competitive in our portfolio generating a margin similar to our Permian operations.

Greg: Our large contiguous land base of approximately 137000 net acres has multiple benches across about 1000 feet of collective pay.

Greg: It is greater than 80% undeveloped, which translates into a significant inventory runway.

Greg: It is greater than 80% undeveloped, which translates into a significant inventory runway. Our scalable rail capacity to the Gulf Coast diversifies market exposure and supports our future development plan. In 2024, we plan to average one rig in Uinta to turn a line 25 to 30 net wells. Our 2024 program in Anadarko is designed to target the oiliest parts of our acreage to leverage the strong performance we've seen from our most recent wells. The early production from these wells has displayed first-year oil cuts of more than fifty-five percent, with about 85% of first-year revenue coming from oil.

Greg: Our scalable rail capacity to the Gulf Coast diversified end market exposure and supports our future development plans.

Greg: In 2024, we plan to average one rig in the Uinta to turn in line, 25% to 30 net wells.

Greg: Our 2024 program in the Anadarko is designed to target the oily parts of our acreage to leverage the strong performance we've seen from our most recent wells.

Greg: The early production from these wells is displayed first year oil cuts so more than 55% with about 85% of first year revenue coming from oil.

Brendan Mccracken: This, combined with year-over-year DNC cost reductions of $1 million per well, significantly enhances the economics of the program, which we expect to deliver highly competitive returns in 2024. The team has also managed our base production very effectively and has cut base declines in half to less than 20% since 2021. Our planned one-rig program will bring on seven to ten net wells. I'll now turn the call back to Britain.

Greg: This combined with year over year, D&C cost reductions of $1 million per well significantly enhances the economics of the program, which we expect to deliver highly competitive returns in 2024.

Greg: Team has also managed our base production very effectively and has kept base declines in half to less than 20% since 2021.

Greg: Our planned one rig program will bring on six 7% to 10 net wells.

Greg: I'll now turn the call back to Brendan.

Brendan Mccracken: Thanks, Greg accessed premium resource is an essential component to generating durable returns in total since 2021 with cost effectively added about 650 locations by two thirds of which were in the Permian.

Brendan Mccracken: Thanks Greg. Access to premium resources is an essential component to generating durable returns. In total, since 2021, we've cost-effectively added about 1,650 locations, about two-thirds of which were in the Permian. Since the beginning of this year, we've added 65 premium 10,000-foot equivalent locations in the Permian through three bolt-on transactions, averaging less than $3 million per location. These inventory additions are immediately competitive for capital and are contiguous with our existing acreage in the core of the Midland Basin. We've continued to invest in assessment and appraisal to convert our inventory into the premium bucket. This generally represents about 10% of our total capital spend, and appraisal wells are often included in our cube developments to prove up prospective zones. This is something we are currently advancing in our new Permian acreage, where we're testing up to six zones in some parts of that position. We are seeing promising results which could add significant potential upside to our inventory. At the time we acquired the assets, our acquisition case was underwritten with only three development zones.

Greg: Since the beginning of this year, we've added 65 premium 10000 foot equivalent locations in the Permian through three bolt on transactions, averaging less than $3 million per location.

Greg: These inventory additions are immediately competitive for capital and are contiguous with our existing acreage in the core of the Midland Basin.

Greg: We've continued to invest in assessment and appraisal to convert our inventory into the premium bucket.

Greg: This generally represents about 10% of our total capital spend and appraisal wells are often included in our cube developments to prove up perspective zones missed.

Greg: And this is something we are currently advancing in our new Permian acreage wherever you are testing up to six zones and some parts of that position.

Greg: We are seeing promising results, which could add significant potential upside to our inventory.

Greg: At the time, we acquired the assets our acquisition case was underwritten with only three development zones.

Greg: We are committed to staying disciplined and opportunistic in our bolt on efforts and only transacting when we can generate strong full cycle return at mid cycle pricing.

Greg: In closing as a leading operator with more than a decade of high quality drilling locations and a deep commitment to capital efficiency. We are positioned to deliver consistent durable returns to our shareholders through our focus on operational excellence disciplined capital allocation and responsible operations.

Brendan Mccracken: We are committed to staying disciplined and opportunistic in our bolt-on efforts and only transacting when we can generate strong full-cycle returns at mid-cycle prices. In closing, as a leading operator with more than a decade of high-quality drilling locations and a deep commitment to capital efficiency, we are positioned to deliver consistent, durable returns to our shareholders through our focus on operational excellence, disciplined capital allocation, and responsible operations. In 2024, we're focused on maximizing capital efficiency and margin, generating significant free cash flow, reducing debt, maintaining our strong balance sheet, all while continuing to bolster our premium return drilling inventory. I'd like to thank our team for their safe work, their dedication, and for delivering these outstanding results. This concludes our prepared remarks. Joanne, we're now ready to open the line for questions. Good morning, all.

Greg: In 2024, we're focused on maximizing capital efficiency and margins generating significant free cash flow, reducing debt, maintaining our strong balance sheet, all while continuing to bolster our premium return drilling inventory.

Speaker Change: I'd like to thank our team for their safe work their dedication and for delivering these outstanding results. This concludes our prepared remarks.

Speaker Change: And we're now ready to open the line for questions.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one.

Speaker Change: I'll now begin the question and answer session and go to the first caller.

Speaker Change: First question comes from Neal Dingmann of Suntrust. Please go ahead.

Neal Dingmann: Hi, Good morning, Nice quarter, Brian. My first question is just maybe for you Greg on the notable capital efficiency specifically.

Neal Dingmann: Good morning, I'll discuss what's driving I think you all talked about this year is 18% year over year improvement from the original 23 guide I'm just wondering how repeatable are the drivers and what maybe is driving the bulk of this.

Greg: Yes, Neil Thank you and look this is Ben.

Ben: Our multi year effort.

Neil: Nice quarter. Brandon, my first question is maybe for you and Greg on the notable capital efficiency specifically. Could one of you all discuss what's driving it? I think you all talked about this year's 18% year-over-year improvement from the original 23 guide. I'm just wondering how repeatable these drivers are and what maybe is driving the bulk of this?

Ben: We use the culture and the expertise of our team through innovation to really drive those capital efficiencies and so.

Speaker Change: I think thats it.

Speaker Change: Great to see the 18% if you remember when we transacted on the Encap, we had programmed or or guided to a 15%. So we've even outperform that already.

Speaker Change: And so we're excited about that and I think I. Thank the team for that and I guess I would tell our investors, we're hungry for more but ill turn it over to Greg to comment on the specifics of those efficiency gains.

Brendan Mccracken: Yeah, Neil, thank you. And, you know, look, this has been a multi-year effort where we use the culture and the expertise of our team through innovation to really drive those capital efficiencies. And so, You know, I think that's great to see the 18%. If you remember, when we transacted on the NCAP, we had programmed or guided to a 15%.

Greg: Neil Thanks for your question and before I start I do just want to say quickly I know congratulations and thank you to our team for this year.

Greg: They had an excellent performance in 2023, and especially in the fourth quarter I think they exceeded all of our expectations, including ours, so, but as far as the efficiencies and whats, allowing us to improve that.

Brendan Mccracken: So we've even outperformed that already, and so we're excited about that. And I thank the team for that.

Speaker Change: About half production improvement in about half our capital efficiency or just doing the wells faster and less expensively.

Greg: And I guess I would tell our investors that we're hungry for more. But I'll turn it over to Greg to comment on the specifics of those efficiency gains. Yeah, Neil, thanks for your question. And before I start, I do just want to say, you know, congratulations and thank you to our team for this year. You know, they had an excellent performance in 2023, and especially in the fourth quarter, I think they exceeded all of our expectations, including ours.

Speaker Change: Everything we do is driven around trying to drill and complete our wells faster and more efficiently quarter over quarter and year over year, and you've seen that improvement over the last several quarters on both the drilling and completion side on the drilling side, it's about more more effective BHA and minimizing trip times on the stage architecture, sorry completion.

Speaker Change: Side stage architecture.

Speaker Change: Really focusing on our completion designs to try to get the most production out of each foot of lateral that we complete and.

Speaker Change: And we've done a lot of work on the on the surface on the efficiency of how we handle our sand. Some of you came out and saw our field tour. The earlier this year and saw how we're able to move significant amounts of sand very efficiently stockpile on location. So that we can stay ahead of our very efficient frac crews were working really hard to be able to handle that.

Greg: So, as far as the efficiencies and what's allowing us to improve that, you know, it's about half production improvement and about half capital efficiency, or just doing the wells faster and less expensively. I mean, everything we do is driven around trying to drill and complete our wells faster and more efficiently quarter over quarter and year over year. And you've seen that improvement over the last several quarters on both the drilling and completion side. On the drilling side, it's about, you know, more effective BHAs and minimizing trip times. On the stage architecture, sorry, completion side, it's stage architecture, you know, really focusing on our completion designs to try to get the most production out of each foot of lateral that we complete.

Speaker Change: Recycled water, we need to keep up with our frac rates and all of that allows us to trial will frac. It. What we think are some of the most efficient rates and efficient cost anywhere youre going to see an industry and on top of that we're using a real time market real time.

Speaker Change: Optimization of these frac jobs to make sure that we're putting in the sand and the water, where we need to and all of that's just resulting in a in a much more efficient operation.

Speaker Change: It's not any one little thing that we're doing it's the stacked innovations one of these things by themselves wouldn't move the needle, but when you stack them all together it makes a really big impact and without doing all the pieces you can't do the whole. So the reason why we're able to travel frac and able to execute the way. We are is just the results of years' worth of a bunch of small innovations.

Greg: And we've done a lot of work on the surface, on the efficiency of how we handle our sand. Some of you came out and saw our field tour earlier this year and saw how we're able to move, you know, significant amounts of sand very efficiently and stockpile it on location so that we can stay ahead of our very efficient frack crews. We're working really hard to be able to handle the recycled water we need to keep up with our frack rates.

Speaker Change: <unk> on each other and that's what's leading to the better efficiency year over year.

Speaker Change: It's Greg here, Greg maybe just I'll take my second maybe just a little bit of a follow on on that I'm. Just wondering if my second is really around that slide eight where you all lay out kind of your 'twenty four programs and I'm. Just wondering if you continue to have these efficiencies like let's say the perm continues to that trend.

Greg: And all of that allows us to trimal frack at what we think are some of the most efficient rates and efficient costs anywhere you're going to see in the industry. And on top of that, we're using real-time market, real-time optimization of these frack jobs to make sure that we're putting the sand in the water where we need to. And all that's just resulting in a much more efficient operation. You know, it's not just any one little thing that we're doing. It's the stacked innovations. One of these things by itself wouldn't move the needle, but when you stack them all together, it makes a really big impact. And without doing all the pieces, you can't do the whole.

Speaker Change: Trend in this direction would you.

Speaker Change: And you were able to bring on even more wells because these efficiencies would you continue to do so in that area and lessen the amount of activity in another area or.

Speaker Change: Maybe Brendan even for you would you think about I guess.

Speaker Change: My point is would you continue to have more production in these areas or would you stay with the same production and just rich.

Greg: So the reason why we're able to trimal frack and able to execute the way we are is just the results of years worth of a bunch of small innovations stacked on each other. And that's what's leading to better efficiency year over year. It's great to hear, Greg. Maybe just, I'll take my second, maybe just a little bit of a follow on that.

Brendan Mccracken: Rich return more to shareholders.

Brendan Mccracken: Yes, I think that that comes down to really a return on invested capital question in a value question and we'd look at that point at which the macro telling us from that as the world asking for more barrels and more beta use in.

Brendan Mccracken: Clearly the dynamic we have today is the world doesn't need any more beta use and so that's why all of our capital is focused on on oil targets. This year.

Neil: I'm just wondering, my second question is really around that, slide eight, where you all lay out kind of your twenty-four programs. And I'm just wondering if, if you continue to have these efficiencies, like, let's say the perm continues to trend in this direction, would you, you know, and you're able to bring on even more wells because of these efficiencies, would you continue to do so in that area? And lessen the amount of activity in another area, or, you know, maybe, Brandon, even for you, would you think about, you know, I guess my point is, would you continue to have more production in these areas? Or would you stay with the same production and just return more to shareholding?

Brendan Mccracken: So I think your question around whether to save the capital and maximize free cash flow or whether to let production creep up and grow cash flow per share over time, I think really is a fundamental question and we'd take that in turn today, where we're running the business in that maintenance level and so.

Brendan Mccracken: Really what that's saying is today, we don't think the market is asking for more barrels and more btu. So it makes sense for us to maximize that free cash flow in and stay in the maintenance mode and really the last thing I'd leave you with that and I think it was Corey that address this in his in his earlier comments is this 24.

Brendan Mccracken: Run rate, where you are seeing us $2 3 billion in 202 to two weighed on the oil and condensate, we see that as very repeatable again in 'twenty five and beyond.

Brendan Mccracken: Yeah, I think that that comes down to really a return on invested capital question and a value question. And, you know, we'd look at that point at what the macro is telling us. Is the world asking for more barrels and more BTUs? And, you know, clearly, the dynamic we have today is that the world doesn't need any more BTUs.

Speaker Change: Good answer thanks, Brett Thanks, guys.

Speaker Change: Yes, thanks Neil.

Speaker Change: Thank you. The next question comes from Evan <unk> from J P. Morgan. Please go ahead.

Evan: Yes. Good morning, Brendon lot has been written analyzed around your completion optimization program in the Permian Basin.

Brendan Mccracken: And so that's why all of our capital is focused on oil targets this year. So I think your question around whether to save capital and maximize free cash flow or whether to let production creep up and grow cash flow per share over time is, I think, really is a fundamental question. And we'll take that in turn today.

Evan: We did see that you've tweaked up your type curves, but if we're going to compare and contrast.

Evan: The productivity per foot that you expect to deliver in 2024.

Evan: And compare that to your pre 2023 completions.

Evan: Can you give us a sense of what type of productivity benefits youre generating with the new completion design.

Brendan Mccracken: We're running the business at that maintenance level. And so really, what that's saying is today we don't think the market's asking for more barrels and more BTUs. So it makes sense for us to maximize that free cash flow and stay in the maintenance mode. And really, the last thing I'd leave you with, and I think it was Corey that addressed this in his earlier comments, is this 24 run rate where you're seeing us with 2.3 billion and 202 to 208 on the oil and condensate. We see that as very repeatable again in 25 and beyond. I really like that answer.

Speaker Change: Yes, it's it's over 10% from those pre twenty-three results Arun and just as a reminder, there. We've we've stayed consistent in the cube development mode and have not shift.

Speaker Change: Shifting into up spacing or skipping benches in fact, we've added benches.

Speaker Change: Benches, as we've been pointing to with our assessment and appraisal work.

Speaker Change: And the reason that's important is we're delivering that inflection.

Speaker Change: And enhanced and really as Greg pointed out leading productivity per foot without sacrificing those zones and destroying inventory for the future, which when you combine that with the amount of premium inventory. We've added to the company over the last several years and then having preserved and added organically as well.

Neil: Thanks for that. Thanks guys. Yeah, thanks Neal. Yeah, good morning.

Arun: Brendan, a lot has been written and analyzed around your completion optimization program in the Permian Basin. We did see that you've tweaked up your type curves, but if we're going to compare and contrast, bear going to conduct ready to walk. Read up on the productivity per foot that you expect to deliver in 2024 and compare that to your pre-2023. Give us a sense of what type of productivity benefits you're generating with the data. Yeah, it's over 10% from those pre-23 results, Arun, and just as a reminder there, we've stayed consistent in the cube development mode and have not shifted into upspacing or skipping benches. In fact, we've added benches, as we've been pointing out with our assessment and appraisal work. And the reason that's important is we're delivering that inflection and enhanced, and really, as Greg pointed out, leading productivity per foot without sacrificing those zones and destroying inventory for the future, which, you know, when you combine that with the amount of premium inventory we've added to the company over the last several years, and then having preserved and added organically as well, I think is a distinguishing story. That's helpful. I'm gonna switch gears. I want to talk a little bit about the Montany.

Speaker Change: As a distinguishing story.

Speaker Change: That's helpful.

Speaker Change: Let me switch gears I want to talk a little bit about the montney.

Speaker Change: Let's talk about the 2024 program, 60% to 70 wells $450 million of capital Brendan can you discuss just your general inventory depth in the play would love to hear about the free cash flow potential.

Speaker Change: Relative to the $1 $6 billion.

Brendan Mccracken: Guide for the quarter for the year pardon me at the deck that you've highlighted and maybe just discuss the A&D landscape in the Montney.

Brendan Mccracken: Yes, yes for sure and so but.

Brendan Mccracken: From an inventory perspective in the Montney, we're blessed so we've had a.

Brendan Mccracken: Our historic position in that play.

Brendan Mccracken: And that's important for two reasons one.

Brendan Mccracken: The acreage there we can hold that without the continuous drilling programs that folks are may be used to in the us. So we've had a massive acreage footprint in the play for a long time.

Brendan Mccracken: And so that sets us up with a with a deep premium inventory on both the oil side, where we're over 10 years of inventory on the oil side and then on the gas side.

Arun: Let's talk about the 2024 program, 60 to 70 wells, $450 million in capital. Brendan, can you discuss just your general inventory depth in the play?

Brendan Mccracken: Decades of inventory is probably the way to describe that I mean, we're not currently drilling any any gas wells. So.

Brendan Mccracken: Would love to hear about the free cash flow potential, you know, relative to the $1.6 billion corporate guide for the quarter, for the year, pardon me, on the deck that you've highlighted. And maybe just discuss the A&D landscape and the MOT. Yeah, yeah, for sure. And so, look, from an inventory perspective in the Montany, we're blessed. So we've had a, you know, a historic position in that game. And that's important for two reasons.

Brendan Mccracken: But deep inventory on the on the gas side of the play as well, which we think becomes real value on the road ahead, obviously today it doesn't look like a great return.

Brendan Mccracken: From a competitiveness in our portfolio and that's why we're not putting capital there, but so as the inventory side of things.

Brendan Mccracken: I'd say from a from a competitiveness perspective.

Brendan Mccracken: Look.

Brendan Mccracken: We've got that big position.

Brendan Mccracken: One, you know, the acreage there, we can hold that without the continuous drilling programs that folks are maybe used to in the U.S. So we've had a massive acreage footprint in the play for a long time. And so that sets us up with a deep premium inventory on the oil side, where we're over 10 years of inventory on the oil side. And then on the gas side, you know, decades of inventory is probably the way to describe that. I mean, we're not currently drilling any gas wells.

Brendan Mccracken: There is an incumbency advantage in the Montney, where.

Brendan Mccracken: The historic producers in the play have got access to market, which is which is really the big differentiator I think everybody recognizes the rock is is globally unique and competitive.

Brendan Mccracken: But it's the access to market that really unlocks the returns and again because of our historic position in the play we've been able to.

Brendan Mccracken: Deliver really high return on invested capital by having great market access and again I'd just remind you we have almost no <unk> exposure out through the end of 2025 and the condensate.

Brendan Mccracken: But, you know, deep inventory on the gas side of the play as well, which we think will become real value on the road ahead. Obviously, today doesn't look like a great return on competitiveness in our portfolio, and that's why we're not putting capital there.

Brendan Mccracken: Which is the oil we're producing in the play and targeting in the play trades.

Brendan Mccracken: Today, just two or $3 back from from Ti.

Speaker Change: Great. Thanks, a lot.

Brendan Mccracken: But so that's the inventory side of things. I'd say from a competitiveness perspective, look, we've got that big position. There is an incumbency advantage in Montany where the historic producers in the play have got access to the market, which is really the big differentiator.

Speaker Change: Sorry.

Speaker Change: Thank you. The next question comes from Gabe Daoud from TD Cowen. Please go ahead.

Gabriel J. Daoud: Hey, good morning, everyone. Thanks for taking my questions.

Gabriel J. Daoud: Brendan was hoping we could maybe just start with <unk> <unk> impact that you you all know that it is.

Brendan Mccracken: I think everybody recognizes the Rock is globally unique and competitive, but it's the access to the market that really unlocks the returns. And again, because of our historic position in the market, we've been able to deliver really high returns on invested capital by having great market access. And again, I just remind you, we have almost no environmental exposure out through the end of 2025, and that condensate, which is the oil we're producing in the play and targeting the play trades today, just two or three dollars back from TI. Great, thanks a lot. Thanks, everyone. Hey, morning, everyone.

Gabriel J. Daoud: We're now just about in March is that fully in the rearview or does that also impacting the rest of the quarter through March.

Speaker Change: Yes, Gabe thanks for the question.

Gabriel J. Daoud: So obviously the weather is in the rearview here.

Speaker Change: And then the.

Speaker Change: Piece, that's still active as the refinery turnarounds so.

Speaker Change: There is there is a number of refiners in that Salt Lake City market and they all run on a four to five year maintenance turnaround schedule.

Speaker Change: And as it happens we've got two of those five refiners currently down for for their routine planned maintenance in and that will persist.

Gabe: Thanks for taking my questions. Brendan was hoping we could maybe just start with one cue, that 8 KBD impact that you all noted. We're now just about in March. Is that fully in the rear view, or does that also impact?

Speaker Change: Into March here.

Speaker Change: But obviously, we're we're dialogues with them closely and understanding their schedule to be back up but and then using our rail access to try and move barrels that way so.

Brendan Mccracken: the rest of the quarter. Yeah Gabe, thanks for the question. So obviously, the weather is in the rear view here, and then the piece that's still active is the refinery turnaround. So there are a number of refiners in that Salt Lake City market, and they all run on a four to five year maintenance turnaround schedule. And as it happens, we've got two of those five refiners currently down for their routine planned maintenance.

Speaker Change: But otherwise the other pieces the other planned maintenance is an and.

Speaker Change: And whether in the in the rearview.

Speaker Change: Got it got it Okay. That's helpful. And then my follow up would just beyond 24 capital if I just look at slide eight.

Speaker Change: And do the math of sales times lateral fee, our average lateral foot times D&C, you get a capex number that.

Brendan Mccracken: And that'll persist into March here, but obviously, we're dialoguing with them closely and understanding their schedule to be back up, and then using our rail access to try and move barrels that way. But otherwise, the other pieces, the other planned maintenance is in weather in the rear view, got it, got it, okay, that's helpful, and then my follow-up would just be on 24 capital. If I just look at slide 8 and and and and and and and and, and do you know the till math of filled times lateral feet or average lateral foot times DNC, you get a capex number that, and then really, the last little bits Okay, okay. Thanks, brother.

Speaker Change: Maybe $2 million to $300 million are still below the full year range, So and I think I know the answer but just kind of wanted to confirm is that maybe like infrastructure spend or that appraisal bucket that you had noted maybe just a little bit of help with that delta would be would be helpful. Thanks. Thanks, Jeff.

Jeff: Yes for sure Gabe, yes, so the biggest piece of that bucket is our capitalized G&A.

Speaker Change: If you recall we.

Jeff: We have some of that capitalized G&A. That's traditionally for years been done that way. So that's the biggest piece of that and then really the last little bits of it are some land and some.

Jeff: Facility capital.

Jeff: But they are pretty minor.

Speaker Change: Okay. Okay. Thanks, Brendan thanks, everyone.

Speaker Change: Thanks Keith.

Speaker Change: Thank you. The next question comes from Neil Mehta from Goldman Sachs. Please go ahead.

Brendan Mccracken: Thanks, everyone. Yeah, thanks, Gabe. Hey, good morning, Brendan and team.

Neil Mehta: Hey, good morning, Brandon and the team a couple of capital allocation questions.

Neil: A couple capital allocation questions. Just your perspective on continuing to shrink the share count here, especially as the balance sheet is now in good shape. How should we think about the priority? and Ron Sherwood.

Neil Mehta: Just your perspective.

Neil Mehta: Hearing to shrink the share count here.

Neil Mehta: Especially yeah, especially at the balance sheet is now.

Speaker Change: In good shape.

Neil Mehta: How should we think about the priority around around share repurchases.

Brendan Mccracken: Yeah, thanks, Neil. And hey, great to have you back on The Name. You know, really, our thinking here has been consistent, so with our cash return to shareholders, we've been using buybacks, and I would expect us to continue to use buybacks at current market conditions. And really, what we look at there is just a straight value question: What's the best allocation of capital, and today we trade at still a very significant intrinsic value discount at mid-cycle prices, and so because of that, we believe the best Brandon, it's great to be back.

Speaker Change: Yes, Thanks, Neil and Hey, Great to have you back on the name.

Speaker Change: Really our thinking here has been consistent so with our cash return to shareholders.

Speaker Change: <unk> been using buybacks and I would expect us to continue to use buybacks at at current market conditions.

Speaker Change: Really what we look at there is just a straight value question, what's the what's the best allocation of capital and today, we trade at.

Speaker Change: Still a very significant intrinsic value discount at mid cycle prices and so because of that we believe the best uses the buyback and to create cash flow per share and free cash flow per share growth through.

Speaker Change: So we're buying those shares back.

Speaker Change: Okay.

Speaker Change: Thanks, Brendan it's great to be back to the follow up is just in terms of.

Brendan Mccracken: The follow-up is just in terms of your M&A commentary. I think you use the language of you want to be disciplined and opportunistic, and you also highlighted that you have over a decade of inventory, so maybe you should step back, take a picture, and think about, you know, how you think about the strategy around M&A in terms. Yeah, you know, I think, you know, if we take that step back, you know, we formed this durable return strategy three years ago, and that really has let us get ahead of the competition in deepening our premium inventory. And, you know, what we see is we've added more premium inventory depth at a lower cost than just about anybody over that period. And the great part of that is that means we're in a place today where we can be very disciplined and really focus on execution. You know, just a reminder about the numbers. We've added, you know, 1,650 premium inventory locations since 21. And that's not just the NCAP transaction. Obviously, that was the biggest single mover of the needle.

Speaker Change: Your M&A commentary I think you used the language. If you wanted to be disciplined and opportunistic and you also highlighted you have over a decade of inventory. So maybe you could just step back big picture.

Speaker Change: How do you think about that.

Speaker Change:

Speaker Change: Yes.

Speaker Change: The strategy around M&A in terms of bolt ons from here.

Speaker Change: Yes, Neil I think if we take that step back.

Speaker Change: We formed this durable return strategy.

Speaker Change: Three years ago, and that really has led US get ahead of the competition on deepening our premium inventory.

Speaker Change: And what we see as we've added more premium inventory depth at a lower cost than just about anybody over that period.

Speaker Change: The great part of that is that means we're in a place today, where we can be very disciplined and really focus on execution.

Speaker Change: Just a reminder, on the numbers we've added 650 premium inventory locations since 'twenty, one and that's not just the Encap transaction, obviously that was the biggest single mover of the needle, but we also did over 200 bolt on transactions through that period and have also had great success.

Brendan Mccracken: But we also did over 200 bolt-on transactions through that period and have also had great success with our organic conversions to premium as well. And then I would add, you know, we've also integrated the assets that we acquired seamlessly. And that's really demonstrated by the performance of the business that you're seeing. So I think, you know, exactly as you asked, we're going to remain very disciplined. But also, as you saw in 1Q24 here, we've added 65 locations at a cost that delivers really excellent full cycle returns. So we like that.

Speaker Change: Our organic.

Speaker Change: Conversions to premium as well.

Speaker Change: And then I would add we've also integrated the assets that we acquired seamlessly.

Speaker Change: And that's really demonstrated by the performance of the business that youre seeing so so I think exactly as you as you prompted we're going to remain very disciplined.

Speaker Change: But also as you saw in <unk> 24 here already we've added 65 locations at a cost that that delivers really excellent full cycle returns. So we like that.

Brendan Mccracken: Thanks, Brennan. Thank you. Yes, good morning.

Speaker Change: With credit.

Speaker Change: Thank you.

Speaker Change: Thank you. The next question comes from Scott Gruber from Citigroup. Please go ahead.

Scott Gruber: Yes, good morning.

Scott: Wanted to ask about Additional Locations in Permian. As you test new zones, would you think you'd be in a position to make a call on whether the 250 additional zones qualified as Permian did include an account? Yeah, I think you should expect us to keep updating on that through the year here, Scott. You know, a bit of an internal process, but usually, in spring, we really round up our view and look at it on a year-over-year basis. So I think as we go through the year, we're going to obviously be getting more data and results on those tests, and we'll keep the market updated. But I don't think this is something you've got to wait until next year for.

Scott Gruber: Wanted to ask about the.

Scott Gruber: Potential additional locations in the Permian as well.

Scott Gruber: New zones, when do you think you'll be in a position to.

Scott Gruber: To make the call on.

Scott Gruber: There's 250 additional zones.

Speaker Change: Qualifies as premium and get included in the count.

Speaker Change: Yes, I think you should expect us to keep updating on that through the year here Scott.

Speaker Change: In a bit of internal process, but we usually in the spring is where we really round up our view and look at it on a year over year based basis. So.

Speaker Change: So I think as we go through the year, we're going to obviously be getting more data and results on those tests.

Speaker Change: And we will keep the market updated but but I don't think this is something you've got to wait until next year on I think we'll keep updating as we go through the year.

Brendan Mccracken: I think we'll keep updating as we go through the year. Great And then another question on the Permian. You mentioned improving cycle times, and I imagine, you know, on the uncapped acreage, your learnings there will continue throughout the year. But then when I look at the activity set, you know, on the slide on 24 activity by basin, it looks like the rig counts up, you know, maybe a half a rig.

Speaker Change: Great.

Speaker Change: And then another question on the Permian, you mentioned improving cycle times and I imagine.

Speaker Change: And Kathy acreage learnings there will continue throughout the year, but then when I look at the activity set.

Speaker Change: On the slide.

Speaker Change: <unk> four activity by days and it looks like the rig counts up maybe a half a rig.

Scott: So, you know, as you think about the drilling cadence relative to that till cadence, is the drilling cadence going to be, you know, a bit faster than the till cadence in the Permian this year? You set up for a few more fills in the basin in 2025? Yeah, so we're not in this plan building any ducts, Scott.

Speaker Change: So.

Speaker Change: And as we think about the drilling cadence relative to that kill cadence is the drilling cadence is going to be the.

Speaker Change: But faster than the til cadence in the Permian This year when you set up for a few more.

Speaker Change: And based on a 25.

Speaker Change: Yes, so we're not in this plan building any ducks Scott. So we'll just have our normal operational run rate of docs, where you just have wells in between drilling and completions, but we're not we're not deliberately investing to build those ducks up.

Brendan Mccracken: So we'll just have our normal operational run rate of ducts where you just have wells in between drilling and completion, but we're not, we're not deliberately investing to build those ducts up in this plan. So I think what you'll see is, you know, if we continue to catch a gear on drilling speed and completion speed, that'll just show up as well as on stream earlier. And that kind of takes us back to Neil's question, do you save capital or do you let production volumes grow? And I think we'll have to answer that as we go through the year and just keep our eye on the fundamentals of the market. Yeah, but at least relative to the second half of last year, I mean, it looks like there's a little bit more drilling in the Permian, a little less in the Montaner. Is that fair? You're absolutely right there.

Speaker Change: In this plan so I think what Youll see is.

Speaker Change: If we continue to catching gear on on drilling speed and completion speed that will just show up as as well as on stream earlier.

Speaker Change: And that kind of takes us back to Neil's question on DSA.

Speaker Change: Save the capital or do you.

Speaker Change: Let the production volumes grow and I think we will have to answer that as we go through the year and just keep our eye on the fundamentals of the market.

Speaker Change: Got it but at least relative to the second half of last year I mean, it looks like there's a little bit more drilling in the Permian a little less correct yes.

Speaker Change: Paul <unk>.

Speaker Change: Youre absolutely right there, yes, we're going to be adding a sixth rig later in the first half of the year to the Permian So year over year capital is down in the Permian, but really that's a function of us absorbing all of those wells in progress from end cap.

Scott: Yeah, we're going to be adding a sixth rig later in the first half of the year to the Permian. So, year over year, capital is down in the Permian, but really that's a function of us absorbing all those wells in progress from NCAP. And so, yeah, what you'll see is us shifting into a six rig run rate in the Permian later in the second half of this year. You're right about that. Okay, great.

Speaker Change: So yes, what youll see is us shifting into a six rig run rate in the Permian later in the second half of this year Youre right about that.

Speaker Change: Okay. Okay. Thank you Greg.

Speaker Change: Thank you. The next question comes from Greg Pardy at RBC. Please go ahead.

Scott: Thank you. Yeah, thanks. Thanks. Good morning.

Greg Pardy: Yeah. Thanks, Thanks, good morning.

Greg Pardy: What is the window look like in three to five years and I'm trying to get a better sense.

Greg: What will the winner look like in three to five years? And I'm trying to get a better sense as to what kind of role it's going to play in the portfolio. I mean, you've set the table.

Greg Pardy: As to what kind of rule, it's going to play in the portfolio I mean <unk> set the table.

Brendan Mccracken: Pretty nicely, right, with the acreage margins you've got and how much you've done. I just, I wonder how big this is going to become. Yeah, Greg, and I would just highlight it's obviously gotten a lot bigger just in the last 12 months, you know, really, basically doubled oil production in the play over the last 12 months. But that's not going to be the continued trajectory. So I think what you're going to see is, is it level out here in 2024, you know, maybe some growth over the year, but leveling out generally compared to that, that, you know, more aggressive or more significant ramp up. Really, the multi-year look at Uinta is really, again, back to a fundamental decision.

Greg Pardy: Pretty nicely right with the acreage margins, you've got and how much you've done I just I wonder how big this is going to be coming over that timeframe.

Speaker Change: Yes, Greg I would just highlight it's obviously.

Speaker Change: And a lot bigger just in the last 12 months, you know really really basically doubled oil production in the play over the last 12 months, that's not going to be the continued trajectory. So I think what youre going to see is is it level out here in 2024.

Speaker Change: Maybe some growth over the year, but leveling out generally compared to about that.

Speaker Change: More aggressive or more more significant ramp up really the multi year look on the Uinta is really again back to our fundamental.

Speaker Change: Decision.

Brendan Mccracken: Really, what we've built here is, alongside our other assets, another asset that can compete for capital and create modest growth for the company over time. And, you know, we've got the ability to continue to scale the takeaway to the Gulf Coast through rail, and we're seeing good performance in returns that could compete for capital and be part of growth. So we really have that option in the decision around how to allocate capital; there is going to rest on the fundamentals for the company and the larger macro really more than any kind of constraint at a play level. Okay, that's that's a great context. And I wanted I wanted to come back to the.

Speaker Change: What we've built here is alongside our other assets.

Speaker Change: Another asset that can compete for capital and create modest growth for the company over time.

Speaker Change: We've got the ability to continue to scale the takeaway to the Gulf coast through rail and we're seeing the well performance and returns that could compete for capital in and be part of.

Speaker Change: The part of growth. So we really have that option and the decision around how to allocate capital there is going to rest on the fundamentals for the company.

Speaker Change: Larger macro really more than any kind of constraint out of play level.

Speaker Change: Okay. Okay. That's.

Speaker Change: That's great context.

Speaker Change: And I wanted to I wanted to come back to the.

Greg: I guess the strategic decision, the M&A decision, more as it relates to, you know, the backdrop and what we've seen in trends and just the tidal wave of M&A in the U.S. and then obviously the replenishing that you guys did last year in terms of, you know, bulking up on the portfolio. So with where you sit now, with the three big plays within. Is there any inherent advantage for you from a cost of capital or portfolio diversification standpoint or what have you? Where it would make sense to get bigger, or is it really just a case that you're very content with the portfolio at this juncture? I'm just trying to get a sense as to where you're from. Yeah, Greg, no, thanks for the question.

Speaker Change: I guess the strategic decision in the M&A decision more.

Speaker Change: As it relates to the backdrop and what we've seen in trends in just a tidal wave of M&A in the U S. And then obviously the replenishing that you guys did.

Speaker Change: Last year in terms of bulking up on the portfolio, So with where you sit now.

Speaker Change: The three big plays within the company is is there any inherent advantage for you from that cost of capital or portfolio diversification standpoint, and what have you.

Speaker Change: Where it would make sense to get bigger or is it really just a case that you're you're very content with the portfolio.

Speaker Change: At this juncture I'm, just trying to get a sense as to where your head's at.

Speaker Change: Yes, Greg Thanks for the question.

Brendan Mccracken: And, you know, we are entirely motivated about better, as opposed to bigger. And so the focus for us is on, you know, capital efficiency and margin expansion in order to drive free cash flow and return on invested capital. The reality is we've got the sophistication and the capability to do that with the portfolio that we have today, and that's really what we're excited about, making that business better. I think, as the track record shows, we've been able to inorganically add to that and make ourselves better. I think the 18% capital efficiency is a great proof point of that just in the last 12 months, but we're really focused on better rather than necessarily bigger. Thanks very much. Thanks, Greg. Hey, good morning, everyone.

Speaker Change: We are entirely motivated about better.

Greg Pardy: As opposed to bigger and so the focus for us is on.

Greg Pardy: That capital efficiency and margin expansion in order to drive free cash flow and return on invested capital.

Speaker Change: I think.

Speaker Change: The reality is we've got the sophistication and the capability to do that with the portfolio that we have today and.

Speaker Change: That's really what we're excited about is making that business better.

Speaker Change: I think.

Speaker Change: Is the track record shows we've been able to inorganically add to that and make ourselves better I think the 18% capital efficiency is a great proof point of that is just in the last 12 months, but.

Speaker Change: But we're really focused on better rather than necessarily bigger.

Speaker Change: Understood. Thanks, very much thanks, Craig.

Speaker Change: Thank you. The next question comes from Jeffrey landfill John from.

Speaker Change: Company. Please go ahead.

Speaker Change: Hey, good morning, everyone. I appreciate the time my first one is a follow up on the location adds in the Permian and the success you've had with that program, which is obviously continued here into Q1 with what you've done year to date and I realize it may be complicated to speak to expectations for the pace of these gains that maybe I could ask if you could maybe frame the opportunity set or what the market.

Jeffrey Leon Campbell: I appreciate your time. My first one is a follow-up on the location ads in the Permian and the success you've had with that program, which has obviously continued here into Q1 with what you've done year to date. And I realize it may be complicated to speak to expectations for the pace of these things. Maybe I could ask if you could maybe frame the opportunity set, or what the market looks like in the near term as you see it, or even just what you all would like to get done in general as you continue that initiative. Yeah, I think Jeffrey. A great question.

Speaker Change: Like over the near term as you see it or even just what you all would like to get done in general you continue that initiative.

Speaker Change: Yes, I think Jeffrey yes, great question I think look the.

Speaker Change: The ability to do these.

Brendan Mccracken: I think what the, The ability to do these very attractive bolt-ons, it's not getting easier, and I think that's been true for some time, it's not just a recent phenomenon, but the team's been really creative and I think what we look for is those situations where we've got a differential advantage where it's either a natural owner situation or I think in a lot of these opportunities we're bringing something to the table that the seller can benefit from that nobody else does and I would highlight our combination of cube development, the density that we attack this acreage at with the leading well results that we garner, I think that is a relatively unique proposition and so we use those to try and create differential advantage for us in a competitive market. So I think you nailed it, it's really hard to be predictive about what those look like over time, but I think it's safe to say it's not getting easier to find those opportunities where the full cycle return really makes sense for the strategy that we've laid out. Perfect, that makes sense.

Speaker Change: Very attractive.

Speaker Change: Bolt ons, it's not getting easier I think and I think that's been true for some time, it's not just a recent phenomenon but.

Speaker Change: But the team has been really creative and I think what we look for is those situations, where we've got a differential advantage where where it's the.

Speaker Change: Either a natural owner situation or I think in a lot of.

Speaker Change: These opportunities, we're bringing something to the table that the seller can benefit from that nobody else does and I would highlight our combination of cube development.

Speaker Change: The density that we attack this acreage at with the leading well results that we garner I think that is a relatively unique proposition and.

Speaker Change: So we use those to try and create.

Speaker Change: Create differential advantage for us in a competitive market. So I think you nailed it it's really hard to be predictive about what those look like over time, but I think it's safe to say, it's not getting easier to find those opportunities where the full cycle return really makes sense for the the strategy that we've laid out.

Speaker Change: Perfect and that makes sense and then for my follow up just maybe a nuanced one on the guidance for oil and condensate. If we should think about the midpoint of the range. There for the year is kind of a P. 50 type outcome. What are the factors that you consider that movie around within that range or even beyond it and with the low and the result of items similar to that.

Jeffrey Leon Campbell: And then for my follow-up question, just maybe a nuanced one on the guidance for oil and condensate, you know, if we should think about the midpoint of the range there for the years, kind of a P50-type outcome, what are the factors that you consider that move you around within that range or even beyond it? Would the low end be, you know, the result of items similar to the Q1 factors like maintenance or turnarounds, for example, if those were to extend beyond what's been planned? And then on the high end, would that mainly be, you know, continued capital efficiencies that you mentioned, maybe more IMOFAC, perhaps potentially coming in the program, just trying to get a sense for what kind of risk is baked in just thinking of the track record throughout last year, especially in Q4 in terms of the operational B-Plan results compared to guidance and expectation.

Speaker Change: Q1 factors like maintenance or turnarounds for example, if those were to extend beyond what's been planned and then on the high end would that mainly be continued capital efficiencies that you mentioned maybe more back.

Speaker Change: Fracs potentially coming on the program just trying to get a sense for what kind of risking is baked in just thinking of the track records throughout last year, especially in Q4 in terms of the operational beats on results compared to guidance and expectations.

Speaker Change: Yes.

Jeffrey Leon Campbell: Yeah, I think that's a really fair question, given how much we've outperformed here in recent quarters. And, you know, I would just highlight that if you look at the fourth quarter, we really had everything come together, which is great to see. And I'm particularly pleased about how that flowed all the way through to the bottom line, to free cash flow generation. And so, you know, I think you've nailed it.

Speaker Change: Recognize that's a really fair question given how much we've outperformed here in recent quarters.

Speaker Change: I would just highlight if you look at the fourth quarter, we really had everything come together, which is which is great to see and I'm, particularly pleased about how that flowed all the way through to the bottom line to free cash flow generation.

Speaker Change: And so I think I think you've nailed it I think there is there is.

Brendan Mccracken: I think there are a range of risk factors that we have to consider when setting guidance, and we're very thoughtful about how we do that and give our investors the best picture for what we think that we're going to deliver in the coming period, whether it's the coming quarter or the full year. And so I think we are really confident in the guidance range that we've provided here today and look forward to executing against that as we go through the year. Great Thanks to all. I'll turn it back. Thanks. Thank you, and good morning. This morning,

Speaker Change: Oh range of risk factors that we have to consider when setting guidance.

Speaker Change: We're very thoughtful.

Speaker Change: About how we do that and give the give our investors the best picture for what we think that we're going to deliver in the coming period, whether it's the coming quarter or the full year and so I think we really are confident in the guidance range that we've provided here today in <unk> and <unk>.

Speaker Change: Look forward to executing against that as we go through the year.

Speaker Change: Great. Thanks, I'll turn it back.

Speaker Change: Thanks, Jeff.

Speaker Change: Thank you. The next question comes from Roger read at Wells Fargo. Please go ahead.

Roger Read: Okay. Thank you and good morning.

Roger Read: Good morning.

Roger: I wanted to come to two items. One, slide 10, the end-to-end OVV pads on the results, and then what's the right way to think about that particular structure as we look into 2024, right? A handful of wells in this pad in the fourth quarter, good results, but what's the right way to extrapolate that as we look at 24 and it sounds like 25 kind of looks similar, so what's the right way to think about it? Yeah, and I really appreciate you digging into this one, Roger, because I think it's a really important update. It's obviously been one that we've been talking about since we announced the deal. So the end-to-end wells, we now have 19 wells on stream with a meaningful amount of production data that were designed, drilled, and completed by Ovintiv. So it's across three different paths that are spread out across the acreage position, and those collective 19 wells are delivering at a level consistent with our legacy 2023 wells. So, I mean, that's just a tremendous outcome.

Roger Read: I wanted to come to two items, one slide 10 the end.

Roger Read: And.

Roger Read: The pads on.

Roger Read: The results and then what's the right way to think about.

Roger Read: That particular structure as we look into 2024 right. So I mean.

Roger Read: A handful of wells on this pad in the fourth quarter good results, but what's the right way to extrapolate that as we look at 'twenty four and it sounds like 25 kind of look similar so what's the right way to think about it over the next say.

Roger Read: 24 months.

Speaker Change: Yes, and really appreciate you digging into this one <unk> I think it's a really important update it's obviously been one that.

Roger Read: <unk> been talking about since we announced the deal.

Roger Read: So the end to end wells, we now have 19 wells onstream with with a meaningful amount of production data that were designed and drilled and completed by <unk>.

Roger Read: So it's across three different pads that they're spread out across the acreage position.

Roger Read: And those <unk>.

Roger Read: Collective 19 wells are delivering at a level consistent with our legacy 2023 wells. So that that's just a tremendous outcome I know that was one of the questions that the market had for US is how is this acreage going to compete within our portfolio and there you go right out of the gate 19 wells three pads spread across.

Brendan Mccracken: I know that was one of the questions that the market had for us, "How is this acreage going to compete within our portfolio?" And there you go, right out of the gate, you know, 19 wells, three pads spread across our rate in line. So that's given us the confidence to be able to underwrite that 2024 curve, which you can see is actually a little bit higher from the 23 overall average. And really, that's what's baking in is the full end-to-end Ovintiv design in 2024 across the combined NCAP and legacy acreage. Okay, thanks for that. And then, to follow up on the 65th location... How much of that is like a brand-new location, and how much of that is like a brand-new location? In a sense, the ability to drill the longer laterals, right? In other words, you're acquiring additional acreage that... a location that might not have previously been on the list. I'm just trying to understand what the bolt-ons are really providing.

Roger Read: Or are right in line. So that's given us the confidence to be able to underwrite that 2024 curve, which you can see is actually a little bit up from 23.

Roger Read: Overall average and really that's what's that baking in is the is the full end to end <unk> design in 2024 across the combined and cap and legacy acreage.

Speaker Change: Okay. Thanks for that and then to follow up on the 65 locations.

Roger Read: You've acquired year to date, how much of that is like a brand new location and how much of that is.

Roger Read: The ability to drill the longer laterals right in other words youre acquiring additional acreage that <unk>.

Roger Read: Proves.

Roger Read: Location that might not have previously been on the list I'm just trying to understand the bolt.

Roger Read: Bolt ons or are really providing yes.

Brendan Mccracken: Yeah, it's a mix of both of those things, Roger. So, you know, it's the extending longer laterals and getting that across existing acres that we control onto new acres, as well as just pure, as you put it, pure new locations where we're adding acreage adjacent to our existing position. So it's a mix of both of those things.

Speaker Change: Yes, it's a mix of both of those things Roger So.

Speaker Change: It is.

Speaker Change: Both the extending longer laterals and getting that across existing acres that we control onto new acres as well as just pure as you as you put it in pure new locations, where were adding acreage adjacent to our existing position. So it's a mix of both of those things.

Roger: Alright, thank you... Yeah, great. Thank you. Thank you for taking our question. The first question is on M&A; you have the advantage of being both in the U.S. and in Canada. We've seen a lot of industry deals in the U.S. What are your thoughts about industry consolidation in Canada? Yeah, I don't think any different, John. I think, again, because of the actions that we've taken to get out ahead of the crowd, so to speak, I think that leaves us in a place where we can be really disciplined and just focus on executing within the portfolio that we've got. And as you've seen in the 1Q update here, we continued to be pretty focused on adding in the Permian, but I would say out of the 1650, the biggest, I think two-thirds of it was Permian. And then the next biggest place where we did bolt-ons was in the Montney.

Speaker Change: Alright, thank you.

Speaker Change: Yeah, great. Thank you.

Speaker Change: Thank you. The next question comes from John Abbott from Bank of America. Please go ahead.

John Abbott: Thank you for taking our questions.

John Abbott: First question is on M&A.

John Abbott: The advantage of bringing both in the U S and in Canada.

John Abbott: <unk> seen a lot of industry deals in the U S. What are your thoughts about industry consolidation in Canada at this point in time.

Speaker Change: Yes, I don't think any different.

Speaker Change: John I think the again because of the actions that we've taken to get out ahead of the crowd. So to speak I think that leaves us in a place where we can be really disciplined and just focus on executing.

Speaker Change: Within the portfolio that we've got and as you've seen in the in the <unk> update here, we continued to be pretty focused on adding in the in the Permian but.

John Abbott: I would say out of the $16 50, the the biggest I think two thirds of it was Permian and then the next biggest place where we did bolt ons was in the Montney. So I don't think our view is any different in Canada versus the U S.

John: So, I don't think our view is any different in Canada versus the US. And then for the follow-up question, if you make the decision... to maintain production, if, you know, even if you achieve this efficiency gain in the return capital share code.

Speaker Change: Appreciate it and then for the follow up question, if you make the decision.

Speaker Change: To maintain production.

Speaker Change: Even if you achieve efficiency gains have returned capital to shareholders.

Brendan Mccracken: What do you see for long-term maintenance? Yeah, so we really see this guide that we've laid out here in 24 as repeatable for 2025. So obviously, we're not guiding the 25 and beyond, but, You know, as we look out in the business, that's what we're seeing is the rateable activity program that we put in place this year. We can just roll that rate into next year again, and you know, barring some big change, inflation, or deflation, we just see the same guide numbers that we rolled out today.

John Abbott: Do you see long term maintenance capex for the tragic.

John Abbott: Yes, so we really see this guide that we've laid out here in 'twenty four is repeatable for 2025, So obviously, we're not guiding to 25 and beyond but.

John Abbott: As we look out in the business. That's what we're seeing is the the ratable activity.

John Abbott: Activity program that we put in place. This year, we can just roll that rate into next year again and barring some big change inflation deflation. We just see the same guide numbers that we rolled out today.

Speaker Change: Thank you very much for taking our questions.

John: Thank you very much for taking our questions. Thanks, John. Thanks, Joanna, and thank you, everyone, for joining us today. Our call is now complete.

Speaker Change: Thanks, John.

Speaker Change: Thank you at this time, we have completed the question and answer session I will turn the call back over to Mr. <unk>.

Speaker Change: Thank you Joanna and thank you everyone for joining us today, our call is now complete.

Speaker Change: Okay.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.