Q1 2024 CNX Resources Corp Earnings Call

Good morning, and welcome to the C Annex resources first quarter 'twenty 'twenty for Q&A Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Operator: Good morning, and welcome to the CNX Resources first quarter 2024 Q&A conference call. All participants will be in listen-only mode. And should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations. Please go ahead.

Operator: After todays press excuse me.

Operator: After this introduction there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.

Operator: Please note this event is being recorded.

Operator: I would now like turn the conference over to Tyler Lewis Vice President of Investor Relations. Please go ahead.

Tyler Lewis: Thanks, and good morning, everybody welcome to <unk> first quarter Q&A Conference call.

Tyler Lewis: Thanks and good morning everybody. Welcome to CNX's first quarterly Q&A conference call. Today, we will be answering questions related to our first quarter results. This morning, we posted on our Investor Relations website an updated slide presentation and detailed first quarter earnings release data, such as quarterly E&P data, financial statements, and non-GAAP reconciliation, which can be found in a document titled 1Q-2024, Earnings Results and Supplemental Information of CNX Resources. Also, we posted on our Investor Relations website our prepared remarks for the quarter, which we hope everyone had a chance to read before the call, as the call today will be used exclusively for Q&A.

Tyler Lewis: Today, we will be answering questions related to our first quarter results. This morning, we posted to our Investor Relations website, an updated slide presentation and detailed first quarter earnings release data such as quarterly E&P data financial statements and non-GAAP reconciliation, which can be found in a document titled one.

Tyler Lewis: <unk> 2024 earnings results and supplemental information are CNS resources.

Tyler Lewis: So we personally to our Investor Relations website, our prepared remarks for the quarter, which we hope everyone had a chance to read before the call. After the call today will be used exclusively for Q&A.

Tyler Lewis: With me today for Q&A are Nick DeIulis, our President and CEO, Alan Shepard, our Chief Financial Officer, Navneet Behl, our Chief Operating Officer, and Ravi Srivastava, President of our New Technologies Group. Please note that the company's remarks made during this call, including answers to questions, include forward-looking statements, which are subject to various risks and uncertainty. These statements are not guarantees of future performance, and our actual results may differ materially as a result of many factors. A discussion of risks and uncertainties related to those factors and CNX's business is contained in its filings with the Securities and Exchange Commission and in the release issued today.

Tyler Lewis: With me today for Q&A or Nicky Oes are president and CEO.

Tyler Lewis: Alan Shepard, our Chief Financial Officer, Tammy deal, our Chief operating Officer, and Ravi Srivastava, President of our New technologies group.

Tyler Lewis: Please note that the company's remarks made during this call including answers to questions include forward looking statements, which are subject to various risks and uncertainties.

Tyler Lewis: These statements are not guarantees of future performance and our actual results may differ materially as a result of many factors.

Tyler Lewis: A discussion of risks and uncertainties related to those factors and scan axis business is concerned.

Tyler Lewis: And in its filings with the Securities and Exchange Commission and in the release issued today.

Tyler Lewis: With that, thank you for joining us this morning. And operator, can you please open the call for Q&A at this time? We will now begin the question and answer session.

Speaker Change: With that thank you for joining us this morning, and operator can you. Please open the call up for Q&A at this time.

Tyler Lewis: We will now begin the question and answer session again to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press the Star then two.

Operator: We will now begin the question and answer session. Again, to ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question is from Zach Parham with J.P. Morgan. Please go ahead.

Operator: At this time, we will pause momentarily to assemble our roster.

Zachary Parham: The first question is from Zack <unk> with J P. Morgan. Please go ahead.

Zachary Parham: Hey, Thanks for taking my question first just wanted to ask on New Tech earlier. This week, you announced two new ventures in that business wanted to know what fast and one in alternative fuels could you just quantify the potential cash flow generation potential of these two ventures and give us some detail on the timing of these two ventures generating.

Zachary Parham: Hey, thanks for taking my question. First, just wanted to ask about NewTek. Earlier this week, you announced two new ventures in that business, one in OFS and one in alternative fuels. Could you just quantify the potential cash flow generation potential of these two ventures and give us some detail on the timing of these two ventures generating some cash flow?

Zachary Parham: Some cash flow.

Ravi: Exactly this is Ravi.

Ravi Srivastava: Hey Zach, this is Ravi. So our guidance for 2024 is unchanged. Our free cash flow guidance for 2024 remains at $75 million a year for the New Tech Business Unit. And as far as future potential, the commercial opportunities are still taking concrete form. I think we'll be able to talk more about these opportunities in greater detail in the coming quarters, but we expect them to start taking form towards the end of 24 and have a more meaningful impact in 25 and 26. So stay tuned.

Ravi Srivastava: So our guidance for 2024 is unchanged our free cash flow guidance for 'twenty 'twenty four remains at $75 million a year from now.

Ravi Srivastava: A new Tech business group business unit.

Ravi Srivastava: And as far as the future potential, but can you eat what you love.

Ravi Srivastava: These are still taking a pump before them I think we'll be able to talk more about.

Ravi Srivastava: These opportunities in more.

Ravi Srivastava: More in greater detail in the coming quarters that would be expected to start taking form towards.

Ravi Srivastava: The end of 'twenty, four and have a.

Ravi Srivastava: A more meaningful meaningful impact in 'twenty, five and 26, so stay tuned.

Zach: Got it thanks Robby.

Zachary Parham: Got it. Thanks, Ravi.

Alan K. Shepard: And then, shifting gears a little bit, you were aggressive with the buyback again in the first quarter, and over the last three quarters, you've been really aggressive, fighting back at about double the level of free cash flow generation. It does seem like the buyback pace slowed a little bit in April. Can you just give us your latest thoughts on how you're thinking about allocating free cash flow between buybacks and debt reduction going forward?

Speaker Change: Then shifting gears a little bit you were aggressive with the buyback again in the first quarter over the last three quarters, you've been really aggressive bought back at about double the level of free cash flow generation.

Alan K. Shepard: It does seem like the buyback pace slowed a little bit in April can you just give us your latest thoughts on how you're thinking about allocating free cash flow between buybacks and debt reduction going forward.

Alan K. Shepard: Yeah.

Alan K. Shepard: Yeah, like we talked about in the prepared commentary, our unsecured maturity runway and kind of low secured debt gives us a lot of flexibility on a quarter-to-quarter basis. We're always evaluating the pace and timing of buybacks. In Q1, we saw a real opportunity when the stock was trading in the 20s to grab a lot there, but it modulated a little bit later in the quarter as the stock kind of ran up. I think if you look at 50 million over the projected 300 million, there's still a lot of room to buy back shares for the remainder of the year. So consistent as always, we're going to be flexible, try to maintain flat to declining debt, but no real changes to the strategy.

Alan K. Shepard: Like we talked about in the prepared commentary or unsecured maturity runway and kind of both secured that gives us a lot of flexibility on a quarter to quarter basis.

Alan K. Shepard: We're always evaluating the pace and timing of buybacks in Q1, we saw a real opportunity when the stock was trading in the twenty's to grab a lot there modulate it a little bit.

Alan K. Shepard: Later in the quarter.

Alan K. Shepard: Start kind of ran up I think if you look at 50 million over the projected 300 million and there's still a lot of room to buy back shares for the remainder of the year. So you know consistent with I'll at least where we're gonna be flexible try to maintain flat to declining debt, but no real changes to the strategy.

Speaker Change: Thanks, I appreciate the color.

Zachary Parham: Thanks. I appreciate the call.

Zachary Parham: The next excuse me. The next question is from Leo Mariani with Roth M. K M. Please go ahead.

Operator: The next, excuse me, the next question is from Leo Mariani with the Roth MKM. Please go ahead.

Leo Paul Mariani: I just wanted to continue to focus a bit on the new tech, you know, businesses here, obviously, kind of a lot going on with the new kind of CNG, LNG business, as well as the OFS business. I was hoping you could speak a little bit more to kind of, you know, what the physical, you know, mechanism here is, you know, on these businesses. I mean, it sounds like from the press releases, there could be some type of proprietary devices that allow you guys to, you know, really capture the CNG without, you know, the aid of additional mechanical compression, and just also on the well flow back as well, presumably there's some kind of proprietary, you know, device that you guys are using here, so maybe can you just kind of speak to that and give us a little bit more color on exactly kind of what this product, you know, is that you're going to be rolling out to folks.

Leo Paul Mariani: Hi, I just wanted to continue to focus a bit on the new tech businesses here, obviously kind of a lot going on with the new kind of CMG LNG business as well as the <unk> business I was hoping you could speak a little bit more to kind of you know.

Leo Paul Mariani: What the physical mechanism here is a you know on these business is a I mean, it sounds like from the press releases there could be some type of proprietary devices and allow you guys to.

Leo Paul Mariani: You know really captured the C N G without.

Leo Paul Mariani: The aid of additional mechanical.

Leo Paul Mariani: Compression and just also on the well flow back as well, presumably there's some kind of proprietary.

Leo Paul Mariani: Device that you guys are using here. So maybe can you just kind of speak to that and give us a little bit more color on exactly kind of what this product.

Leo Paul Mariani: Is that you're going to be rolling out to folks.

Speaker Change: Okay. Thanks Neil.

Ravi Srivastava: Hey, thanks, Leo. And thanks for the question. I haven't heard the rest of the questions, but this might be my favorite question for this hour.

Speaker Change: Thanks for the question.

Speaker Change: I haven't heard the rest of the questions, but this might be my favorite question for this hour Vicki.

Ravi Srivastava: Because we want to talk about the technology that we have developed. We're pretty excited about it. It's been in the works for a few years now.

Speaker Change: Because we wanted to talk about the technology that you have developed we're pretty excited about it it's been a it's been in the works for a for a few years now with teased.

Ravi Srivastava: We've teased this in past earnings calls, and we're very happy that we've reached this milestone where we've engaged in partnerships where we can start to bring these technologies to market. So to talk more about the technology, what I would do is I would break the technology into two segments. And the first step involves combining various discrete functions that are performed in a conventional flow-back like pressure management, solids and sand removal, and high rate flow-back, and fluid removal.

Ravi Srivastava: In the past earnings calls and Oh, no. We're very happy that we've reached this milestone where we've engaged in deep partnerships, where we can start to bring these technologies to market. So we can talk more about the technology. What I would do is like I would break the technology to two segments.

Ravi Srivastava: And are the first step involves.

Ravi Srivastava: Combining various discrete functions that are performed in a conventional blow back like pressure management solid and Sandra removal and a high rate.

Ravi Srivastava: Flow back.

Ravi Srivastava: Fluid removal. So these are discrete stepped in a conventional slow back of what our technology does is it combines all of this into <unk>.

Ravi Srivastava: So these are discrete steps in a conventional flow-back. What our technology does is combines all this into one equipment, into one step, and we can implement all this from a highly automated piece of equipment. You know, and we can perform all this at a very high pressure and rate.

Ravi Srivastava: One equipment.

Ravi Srivastava: The one step and.

Ravi Srivastava: And we can implement all of this from a highly automated piece of equipment. You know if you can perform all this at a very high pressure and rate and and because our solution.

Ravi Srivastava: And because our solution does this in a materially smaller footprint, it reduces the environmental impact and the footprint that's required to deploy this technology. It can be deployed much faster than a conventional flow-back spread, which results in a lower cost and reduced cycle times for operators. It's a sealed system, and because of that, it eliminates any fugitive methane emissions, and it's highly automated, which results in a reduced manpower required to operate it, which results in improved safety performance and reduced costs.

Ravi Srivastava: Does this in a materially smaller footprint.

Ravi Srivastava: It reduces the environmental impact and the footprint that's required to deploy this technology.

Ravi Srivastava: It can be deployed much faster than a conventional slow back spread habits, resulting in lower cost and reduce cycle times for for operators.

Ravi Srivastava: It's a seal system and because of that it eliminates any fugitive methane emissions and it's highly automated which is up in the.

Ravi Srivastava: Reduced manpower required to operate that.

Ravi Srivastava: With regard to an improved safety performance is and and reduce costs.

Ravi Srivastava: For this particular technology, for this particular application, our estimate shows that there are 20,000 wells that are flowed back in the U.S. and 60,000 wells internationally. All of these wells, which require flowback, can be a potential application for this technology, and the operators are looking to reduce CAPEX, they're looking to reduce emissions, and that's exactly what our solution does. And we're partnered with Depot Services to deliver this solution within the United States.

Ravi Srivastava: For this particular technology for this particular application.

Ravi Srivastava: Well they all have to make sure that there's 20000 wells that are flowed back in the U S and 60000.

Ravi Srivastava: Oh well internationally.

Ravi Srivastava: All of the all of these wells, which require a flow back and get the kinds of applications for this technology and the operators are looking to reduce capex that or do you see that they're looking to reduce emissions.

Ravi Srivastava: That's exactly what our solution does so and we've partnered with depot services to deliver.

Ravi Srivastava: The solution within the United States.

Ravi Srivastava: DeepWell brings strong domain expertise and is a trusted name in the oil field service industry, and we're excited to partner with them to bring this solution to market. And then the second part of our technology involves harnessing what we call geobaric energy, which is derived from high-pressure oil and gas reservoirs like the Utica Shale, Haynesville, and Eagleford. These are formations within the U.S. and then Montmichel in Canada, and there are various international formations and offshore applications for this technology as well.

Ravi Srivastava: <unk>.

Ravi Srivastava: Depot brings a strong domain expertise and is a trusted name in the in the oilfield service industry and we're excited to partner with them.

Ravi Srivastava: To bring to the market and then the second part of our technology in.

Ravi Srivastava: In walls are not being what we call Geo Barrick energy, which is derived from high pressure oil and gas reservoirs like the Utica shale Haynesville Eagle Ford.

Ravi Srivastava: Formations within U S and then Michelle in Canada, and there's various international formation binocular applications for this technology as well.

Ravi Srivastava: So geobaric energy, like geothermal energy, is a renewable energy source but has typically been wasted by the oil and gas industry while developing these high-pressure reservoirs. I mean, not only is this renewable energy source wasted, but operations end up expending time, energy, and resources destroying this energy.

Ravi Srivastava: So geometric energy like geothermal energy renewable energy source, but it has typically been basically by oil and gas industry, while developing deep high pressure for patients.

Ravi Srivastava: Not only is this you don't even have any source wasted.

Ravi Srivastava: <unk> ended up extending time energy and resources.

Ravi Srivastava: Destroying this energy so what our technology does is it allows us to harness this energy manufacturers, the engie, LNG and potentially electricity and hydrogen right on about pets.

Ravi Srivastava: So, what our technology does is it allows us to harness this energy to manufacture CNG, LNG, and potentially electricity and hydrogen right at our wells. If you look at a typical CNG value chain, gas is produced on a well pad, energy is spent depressurizing the gas, which is then recompressed and transported to a compressor station, where additional energy is spent to compress it further and then fill a CNG trailer set according to CNG specifications, and then it's transported to a gas station.

Ravi Srivastava: A typical CMG value chain.

Ravi Srivastava: <unk> is produced on the well pad energy spent deep recognizing.

Ravi Srivastava: The gas, which is done recompression transported to a compressor station, but additional energies spent the compressive putting better and then fill in CMG trailers that see how these specifications and then expand spread to a customer.

Ravi Srivastava: Our solution allows us to manufacture CNG utilizing geometric energy and without any mechanical compression right on our Utica well pads, fill the CNG trailers, and deliver it to customers by passing several costs and energy-intensive procedures. So again, the solution that lowers costs and emissions for customers, which is what the industry is looking for, and we have partnered with NewBlue Energy to bring this technology to the U.S. market. NewBlue has a track record of developing CNG and LNG solutions, and we are excited to partner with them.

Ravi Srivastava: Our solution allows us to manufacture T N G utilizing geopolitik energy and without any mechanical compression right on our Utica well past, the limbus, PNG trailers and delivered to customers bypassing severance cost and energy intensive steps.

Ravi Srivastava: So again, the solution that lowest cost and emissions where customers and which.

Ravi Srivastava: Which is what the industry is looking for and we have partnered with nuclear energy to bring this technology to the U S market.

Ravi Srivastava: Blue has a track record of developing see NGL LNG solutions, and we are excited to partner with them.

Ravi Srivastava: Hey, Leo.

Nicholas J. DeIuliis: Hey Leo, this is Nick. Maybe two things it'll be helpful because... To your point, there are specific questions about technology and the market for these announcements we've made. But also, these announcements are sort of... Additional developments, I call them, and a much bigger thing that we've been working on now with new tech for a couple of years, and it ties in. So a couple of realities, facts out there in the world today in our industry, right?

Ravi Srivastava: This is Nick maybe two it'll be helpful. Because that's.

Nicholas J. DeIuliis: To your point, there's specific questions about technology and market for these announcements we've made.

Nicholas J. DeIuliis: But also these announcements are sort of.

Nicholas J. DeIuliis: Additional developments I call them in a much bigger thing.

Nicholas J. DeIuliis: Saying that we'd been working on now with the tax for for a couple of years and it ties.

Nicholas J. DeIuliis: So a couple of realities facts out there in the world today in our industry right. One is did you.

Nicholas J. DeIuliis: One is that you have this global demand for energy that keeps growing, and you see it in advanced economies like ours with AI and data centers. You see it in developing countries where they're looking for and insisting on a better quality of life for their people and citizens. So the world wants all these additional BTUs, horsepower, kilowatt hours, and they want lower emissions to go along with it. But there are other truths that we're seeing as well.

Nicholas J. DeIuliis: This global demand for energy that keeps growing and you see it in advanced economies like ours with AI and data centers, you've seen in developing world, where they're looking for and insisting on.

Nicholas J. DeIuliis: Better quality of life are there there are people in citizens. So the world. Once all these additional beta use horse powers, a kilowatt hours and they want lower emissions to go along with it.

Nicholas J. DeIuliis: But theres other truths that we're seeing as well.

Nicholas J. DeIuliis: Wind and solar at scale when you couple that with electrifying everything. That is a recipe for grid disaster, and the degree of subsidy probably doesn't change the physics of the matter, so that exclusively is going to have some challenges. We see ideas or opportunities to export more Appalachian gas and LNG with it to places like India, China, Europe, wherever, and that sounds great, and it's got a certain degree, I guess, of logical merit to it, but the reality there is that you're going to have to build extensive pipelines and LNG facilities to do it, and in this lifetime, that's going to be really challenging. So in terms of the near-intermediate term, that's sort of VOA, I'm sorry, as an option.

Nicholas J. DeIuliis: Wind and solar at scale when you couple that was electrifying everything.

Nicholas J. DeIuliis: That is a recipe for grid disaster and you know the degree of subsidy probably doesn't change the physics of the matter.

Nicholas J. DeIuliis: So that exclusively he's going to have some challenges.

Nicholas J. DeIuliis: We see ideas right or opportunities to export more Appalachian gas and LNG net to places like India, China, Europe, wherever and that sounds great and it's got a certain degree I guess, the logical merit to it but the reality there is that you're going to have to build extensive pipelines and LNG facilities.

Nicholas J. DeIuliis: Do it and in this lifetime, that's gonna be really challenging so in terms of the near intermediate term that's sort of D O.

Nicholas J. DeIuliis: GLA I'm sorry as a.

Nicholas J. DeIuliis: Auction.

Nicholas J. DeIuliis: And really it's sort of inefficient when you think about it because in the Grand scheme, you're importing on one hand be to use from thousands of miles away.

Nicholas J. DeIuliis: And really, it's sort of inefficient when you think about it, because in the grand scheme, you're importing BTUs from thousands of miles away to here via things like gasoline and midi soil, and then you're exporting our BTUs thousands of miles away to the other nations that I've mentioned or examples like that with LNG. So, it's not the most efficient sort of supply chain net-net. You got hydrogen.

Nicholas J. DeIuliis: A way to here.

Nicholas J. DeIuliis: Things like gasoline and Mideast oil and then you're exporting our btu thousands of miles away right to the other nations that I've mentioned are examples like that.

Nicholas J. DeIuliis: With LNG. So it's it's not the most efficient sort of supply chain net net.

Nicholas J. DeIuliis: Got hydrogen hey, the hydrogen economy, you know, it's got some really interesting attributes specifically with blue hydrogen, which means natural gas is going to play a role in that green hydrogen at scale, that's gonna be effectively from a technical perspective and enabled to scale. It in a nonstarter.

Nicholas J. DeIuliis: Hey, the hydrogen economy, you know, it's got some really interesting attributes, specifically blue hydrogen, which means natural gas is going to play a role in that. Green hydrogen at scale, you know, that's going to be from a technical perspective and able to scale at a non-starter, as well as having some economic challenges. So we think we've found a better way with this NewTek approach, and it's one that checks all those boxes.

Nicholas J. DeIuliis: As well as having some economic challenges.

Nicholas J. DeIuliis: So we think we found a better way with this new tax approach and it's one that checks all those boxes.

Nicholas J. DeIuliis: It sort of was captured within our Appalachia First, of Manufacturing, of goods that we currently also import. So, when you do this, like, we're basically shrinking supply chains, you're dropping emissions, you're declining costs, you're growing GDP, and you're expanding jobs, and family-sustaining wages with respect to those jobs as well. And our friends in labor and the trades, they love that component of it. So, this

Nicholas J. DeIuliis: Sort of was captured within our Appalachia first a vision that we laid out a while ago, which is basically make the natural gas responsibly here and then use it here through things like Ravi St. C. N G. LNG These technologies.

Nicholas J. DeIuliis: And it basically leads to an onshoring Manny.

Nicholas J. DeIuliis: Manufacturing.

Nicholas J. DeIuliis: Good that we currently also import so when you do this like we're basically shrinking supply chains, you drop in emissions youre declining cost youre growing GDP and you're expanding jobs families sustaining wages with respect to those jobs as well as our friends in labor in the trade say they love that component of it. So this is real this proprietary.

Nicholas J. DeIuliis: This proprietary technology, right, it's showing now that we can commercialize this. It is true, And Ravi called it renewable energy. So, a true alternative energy with regard to the geobaric that he mentioned in the shale formations, and when we're able to harness that, it really allows for efficient and cost-effective conversion of the energy in these high-pressure shale horizons, like Utica and Hainesville and CNG and LNG, and then on flowback technologies across all the shale horizons.

Nicholas J. DeIuliis: Terry technology right, it's showing now that we can commercialize this it is true and you're right to call. It a renewal I call a true alternative energy are with regard to the G of Barrick.

Nicholas J. DeIuliis: Did he mentioned in the shale formations and when we're able to harness that it really allows for efficient and cost effective conversion of the energy in these high pressure shale horizons like the Utica and the Haynesville into C. N G. In LNG and then on the flowback technologies across all of the shale horizons. So when you think about this.

Nicholas J. DeIuliis: So, when you think about this, are markets, instead of trying to expand existing markets and horizontally expanding, what we're really proposing here is to vertically expand into market opportunities for natural gas and virtually expand into electricity generation, whether it's microgrids or meeting demand during power crises, which we've seen recently, or, you know, feeding that growing appetite for things like AI data centers. Ground transportation is another huge market opportunity that we see, CNGLNG, right, but this is the displacement of those gasoline and diesel products, supply chains that are tens of thousands of miles cumulatively.

Nicholas J. DeIuliis: Our markets instead of trying to expand existing markets and horizontally expanding what we're really proposing here is two vertically expand into new market opportunities for natural gas.

Nicholas J. DeIuliis: They will be expanding as electricity generation, whether it's the micro grids or a meeting demand during power crises, which we've seen recently or feeding a growing appetite for things like our AI data science centers ground transportation is another huge market opportunity that we see.

Nicholas J. DeIuliis: C N G LNG right, but this is the displacing others gasoline and diesel products with supply chains that are tens of thousands of miles cumulatively.

Nicholas J. DeIuliis: The air industry and fueling it, that's another big opportunity with sustainable aviation fuel. And then our on-shoring of manufacturing, keeping it close to CNG, LNG, and frankly our environmental attributes with our waste and myomethane capture is a big one. So this past week we saw two more tangible examples of this in those press releases. Our environmental attributes with waste, methane capture, is another big example of that. And they penetrate those four markets that I talked about.

Nicholas J. DeIuliis: The air industry.

Nicholas J. DeIuliis: Feeling it that's another big opportunity with the sustainable aviation fuel and then the onshoring of manufacturing.

Nicholas J. DeIuliis: Keeping a close to D. C N G LNG and frankly, our environmental attributes with our our waste mined methane capture is a big one. So this past week, we saw two more tangible examples of this with those press releases are environmental attributes with waste methane capture is another big example of that.

Nicholas J. DeIuliis: They are penetrate those four markets that I talked about they're all individually cause for massive in terms of potential. They all are going to generate free cash flow and they're all going to positively impact our view of any deeper share of the company.

Nicholas J. DeIuliis: They're all individually massive in terms of potential. They're all going to generate free cash flow, and they're all going to positively impact our view of NAV per share of the company. But, you know, these technologies sort of come from similar opportunities that harness energy in geobaric form, and, you know, they both sort of are rooted in the same vision. So, sorry for the extensive, you know, one-two explanation, but it's something that has been front and center with us for a while. And we wanted to take the opportunity to sort of not just address your question but, you know, take a step back and look at the bigger picture.

Nicholas J. DeIuliis: But you know these technologies they sort of come from similar.

Nicholas J. DeIuliis: Opportunities with that harness energy and Geo Barents warm and you know they both sort of are rooted in the same vision. So sorry for the extensive you know once you explanation, but it is something that has been front and center with us for a while.

Nicholas J. DeIuliis: And we wanted to take the opportunity to sort of not just address your question, but you know take a step back and look at the bigger picture.

Leo Paul Mariani: Well, that's certainly helpful. I certainly appreciate all of the detail here. I think many, many folks are sort of wondering about a lot of this, so I think that's very helpful. Then just a quick follow-up to that. So, if I kind of read you correctly, it sounds like you may be kind of starting to roll this out to third-party customers later this year and start to see some revenue at the end of this year and into 2025. Can you maybe just talk about the capital side? Do you expect any meaningful capital associated with any of these new businesses that you've announced? Or is it a fairly low-capital-intensity endeavor for the company?

Leo Paul Mariani: No. That's certainly helpful and certainly appreciate all the detail here I think many many folks are sort of wondering about a lot of this I think that's very helpful and.

Leo Paul Mariani: And just a quick follow up to that so if I kind of read you correctly it.

Leo Paul Mariani: It sounds like that he may be kind of starting to roll. This out to third party customers are you know later this year and start to see some revenue into this year and into 2025 can you maybe just talk to the capital side do you expect any meaningful capital associated with any of these new businesses that you've announced or is it a fairly kind of low capital.

Leo Paul Mariani: Density endeavor for the company.

Ravi Srivastava: Hey, Leo. This is Ravi again. So...

Leo Paul Mariani: Hey, Leo this is Ravi again, so the capital needs for this deeper loosens up very very low, especially compared to what E&P program and.

Ravi Srivastava: Hey, Leo, this is Ravi again. So the capital needs for these solutions are very, very low, especially compared to our E&P program. And there are no, at this stage, any incremental capitalists planned for 2024.

Ravi Srivastava: There's no at this stage no incremental capital spend for 2024.

Ravi Srivastava: Okay, that's great. Thanks.

Operator: The next question is from Bertrand Donnes with Truist. Please go ahead.

Operator: Yeah.

Bertrand William Donnes: The next question is from Bertrand Dawn with Truest. Please go ahead.

Bertrand William Donnes: Hey, good morning, guys. Just wanted to shift gears real quick onto the activity curtailments. Maybe just get your thoughts on why you, you know, why you kind of stopped at 11 wells. I would think there's some argument that your hedging is insulating you, but, you know, probably another side of that is why don't you just pocket the hedging gains and, you know, also curtail production. You know, we had a slight recent drop. Just any thoughts on whether you are more inclined to hold at this level or are you, you know, kind of seeing prices and thinking about dropping more?

Bertrand William Donnes: Hey, Good morning, guys just wanted to shift gears real quick onto the activity curtailments, maybe just get your thoughts on why are you why are you kind of stopped at 11 Wells I would think there is some argument that your hedging of insulating you, but probably another side of that is why don't you just pocket that hedging gains and also Curt.

Bertrand William Donnes: Tail production.

Bertrand William Donnes: We had a fight recent drop it just any thoughts on are you are you more inclined to hold at this level or are you kind of seen prices I'm thinking about dropping more.

Speaker Change: Yeah, I think for right now, where we're kind of sticking with the guidance. We gave we're going to hold up the 11 deferrals for now it's something we constantly watch and tour.

Alan K. Shepard: Yeah, I think for right now, we're kind of sticking to the guidance we gave. We're going to hold it to 11 deferrals for now. It's something we constantly watch. In terms of the, you know, discrete decision on those wells, it's a function of coordinating with the operations team on where there's a clean break in terms of which wells you can stop on versus which ones might already be in process. So there's no real magic to that other than sticking with operations to get to the best answer overall from a free cash flow basis.

Alan K. Shepard: Arms of the discrete decision on those wells its a function of you're coordinating with the operations team on where there's a clean break in terms of which wells you can stop one versus which ones might already be in process.

Alan K. Shepard: So there's no real magic to it other than to take it up with operations to get to the best answer overall from a free cash flow basis.

Alan K. Shepard: Sorry, I meant, you know, what about actual shut-ins or any of that kind of activity?

Alan K. Shepard: Alright, and then.

Alan K. Shepard: What about actual.

Alan K. Shepard: Shut ins or any of that kind of activity.

Alan K. Shepard: Yeah, I'm not contemplating at this time. You know, most of our wells run at very low variable costs, so we're still making pretty healthy margins on those. As you pointed out, we're getting pretty close to hedge level, so we have very little in terms of open volumes. Kind of just working through some volumes we have in the hatchbook.

Alan K. Shepard: No not contemplating at this time, you know most of our wells run at very low variable costs.

Alan K. Shepard: So we're still making pretty healthy margins on those but as you pointed out where we're getting pretty close to hedge levels. So we have very little in terms of up and volumes. So.

Alan K. Shepard: Sure.

Alan K. Shepard: Kind of just working through some bonds, we happened to have a hedge book.

Alan K. Shepard: Yeah.

Bertrand William Donnes: That makes sense. And then just to pile on to the new tech, maybe just a little bit of a different approach for this. In the prepared remarks, you referenced the potential to be a meaningful free cash flow contributor on the DWS side. I just wasn't sure. Am I reading too much into that versus the new blue agreement? Or is there, you know, a tangible difference between the two?

Speaker Change: That makes sense and then just to pile onto the new tack, maybe just a little bit of a different approach for this in in the prepared remarks, you referenced the potential to be a meaningful free cash flow contributor.

Bertrand William Donnes: On the the dws side I just wasn't sure if am I reading too much into that versus the new blue agreement or is there a tangible difference between the two.

Bertrand William Donnes: I would say they bought it for and Rob you talked about a little bit they both have a very large addressable markets.

Alan K. Shepard: I would say they both, I mean, Ravi talked about it a little bit, they both have very large addressable markets. You know, I think that the market for flowback is a little more developed, right, it's very identifiable, and we think we'll probably ramp up quicker into that market because there's activity going on, and it's a clear superior technology to deploy. CNG and LNG, you know, we've been pushing on those. There are markets for those currently with a lot of the electric frac fleets, and market penetration there, you know, we're optimistic about, but it'll probably be a little bit slower than deep well, that's why we made that comment. Does that make sense, Ravi, on everything? That's absolutely correct.

Alan K. Shepard: I think that the market for flowback is little more developed Redford identifiable and we think we'll probably ramp quicker into that market. Because it is an activity going on and it's a clear superior technology to deploy CMG in LNG.

Alan K. Shepard: We've been pushing on those there are markets for those currently with a lot of electric Frac fleets.

Alan K. Shepard: Market penetration there, we're optimistic on but it probably be a little bit slower the depot that's why.

Ravi Srivastava: We made that comment does that make sense, Rob you all do everything.

Ravi Srivastava: Absolutely correct I think the flow back market is something that we can penetrate into everybody quickly can see energy market is going to take a little bit more time to work.

Ravi Srivastava: That's absolutely correct. I think the flowback market is something that we can penetrate into very, very quickly, and the C&G market is going to take a little bit more time to evolve.

Speaker Change: Understood. Thanks, guys.

Ravi Srivastava: Again, if you have a question. Please press Star then one.

Operator: Again, if you have a question, please press star then 1. The next question is from Jacob Roberts with TP Asian Company. Please go ahead.

Operator: The next question is from Jacob Jacob Roberts with T. P Asian Company. Please go ahead.

Jacob Phillip Roberts: I just wanted to sort of touch base on the kind of the preliminary 2025 outlook, just curious about the activity levels assumed in that $550 million program, and then maybe if you could provide any color on the kind of price outlook you might need to see to trigger that incremental 50 beyond the 500 you've spoken to about relative to maintenance.

Jacob Phillip Roberts: Good morning.

Operator: Yeah.

Jacob Phillip Roberts: I just wanted to I just wanted to touch base on a kind of a preliminary 2025 outlook.

Jacob Phillip Roberts: Just curious with your activity levels are assumed in that 550 million dollar program and then maybe if you could provide any color on the kind of the price outlook you might need to see to trigger that incremental 50 beyond the 500 <unk> spoken to you about relative to maintenance.

Jacob Phillip Roberts: Yeah. It's the same underlying activity set that we talked about on the last call that we can drive it to kind of that 500 million run rate all youre seeing there is the shifting of those 11 wells that were deferred into early next year. If we were to ramp back up from call. It $5 50, 556 area back to that 580 target.

Alan K. Shepard: Yeah, it's the same underlying activity set that we talked about on the last call that we can guide to kind of that 500 million run rate. All you're seeing there is the shifting of those 11 wells that we defer into early next year if we were to ramp back up from call it this 555, 560 area back to that 580 target. So that's, that's all we're trying to get to indicate there.

Alan K. Shepard: So that's that's all we're trying to indicate there and we're going to watch.

Jacob Phillip Roberts: And we're going to watch where the pricing develops. I think we've got a lot to be learned over the summer here in terms of how sustainable the production drops are, you know, how hot the summer is. There are a lot of factors that'll go into the ultimate planning for 2025, and once we're in a position to firm that up, we will.

Alan K. Shepard: We're kind of a pricing develops too I think we've got a lot to be learned over the summer here in terms of how sustainable the production drops our know how hot summer there's a lot of factors that'll go into.

Jacob Phillip Roberts: The ultimate plan for 2025 once we're in a position to firm that up we will.

Speaker Change: Great. Thank you.

Jacob Phillip Roberts: And then the second question looking at slide five of the deck with the debt stack kind of not really weighted to the first part of the next decade, just curious if it changes the philosophy around the duration of the hedge book as we as we enter the back half of this decade.

Jacob Phillip Roberts: And the second question, looking at slide five of the deck, with the debt stack, kind of now really weighted to the first part of the next decade, just curious if that changes the philosophy around the duration of the hedge book as we enter the back half of this decade.

Speaker Change: Yes, no great question. So there are definitely the the balance sheet and hedge broker correlated or type of relationship.

Alan K. Shepard: Yeah, I know, Greg.

Speaker Change: You know I think what we've talked about in the past on hedging is there where we're looking to shorten up the overall length of the books historically, we've got around five years.

Alan K. Shepard: Yeah, no, great question. So they're definitely the balance sheet and the hedge book are correlated or have a relationship. You know, I think what we've talked about in the past on hedging is that we're looking to shorten the overall length of the book. Historically, we've gone around five years. Kind of watching the books come in, you know, by 12 to 18 months. So we're still very much in the camp of hedging going into the near term year.

Alan K. Shepard: We've been kind of watching the books come in.

Alan K. Shepard: 12 to 18 months. So we're still very much in the camp of hedging going into the near term here.

Alan K. Shepard: But just trying to maintain flexibility and it's kind of the outer years as we see the volatility continue in our space, particularly with some of the projections you're seeing in power demand and gas men want to make sure that we're able to capture those through our hedging program, but not getting too far out.

Alan K. Shepard: But just trying to maintain flexibility and kind of the outer years as we see the volatility continue in our space, particularly with some of the projections you're seeing in power demand and gas demand. We want to make sure that we're able to capture those through our hedging program by not getting too far out.

Speaker Change: Thank you I appreciate the time.

Alan K. Shepard: This concludes our question and answer session I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Speaker Change: Thank you again for joining us. This morning, please feel free to reach out if anyone has any additional questions. Otherwise we look forward to speaking with everyone again next quarter. Thank you.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Operator: [music].

Tyler Lewis: Thank you again for joining us this morning. Please feel free to reach out if anyone has any additional questions. Otherwise, we look forward to speaking with everyone again next quarter.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Okay.

Operator: Yeah.

Operator: Yeah.

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