Q1 2024 Civitas Resources Inc Earnings Call
Good day, and thank you for standing by welcome tissue because resources first quarter 'twenty 'twenty four earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question Jim just I'm sorry.
Sorry, what was the number one on your telephone keypad, if you'd like to withdraw your question actually start and number one again. Thank you. Please be advised that today's conference is being Crazy I would now like to hand, the conference over to Brad Whitmarsh head of Investor Relations. Please go ahead.
Thank you Allie and good morning, everyone and thank you for joining us.
Yesterday, we issued our first quarter earnings release, our dividend release, Santa buyback announcement.
With our 10-Q and we've provided some supplemental materials.
You've had a chance to review those items, which should all be available on our website.
I'm joined today by our CEO, Chris Doyle CFO, Marianne also ski and CFO Hodge Walker.
After our prepared remarks, we will conduct a question and answer session.
As always please limit your time to one question and one follow up so we can work through the list efficiently.
We will make certain forward looking statements today, which are subject to risks and uncertainties that could cause actual results to differ materially from our projections. Please make sure and read our full disclosures regarding these forward looking statements in our most recent SEC filings.
We also may refer to certain non-GAAP financial metrics reconciliation of these items to GAAP.
Measures can be found in yesterday's release and in our SEC filings with that ill turn the call over to Chris for opening comments. Thanks, Brian Good morning, everybody and welcome to our first quarter call 2023 was truly a transformational year for our company.
Now in 2024. This is the first quarter that all of our new businesses are put together.
I'll highlight just the beginning of civitas bright future ahead.
And we are benefiting from our scale and more diverse portfolio and our teams are finding innovative ways to drive capital efficiency.
A couple of key takeaways first our perm.
<unk> assets are performing very well through successful integration were already reducing drilling and completion cycle times and lowering cash operating costs now, it's only one quarter, but I'm Super excited about the results. This team is already delivering.
Our teams continue to optimize development of the DJ Basin, and we achieved our $300 million divestment target ahead of schedule. These divestments are accelerating value to civitas peeling away assets that simply don't compete for capital on an annual basis, the $300 million of assets would have generated approximately $70 billion.
EBITDA at $75 oil.
So connecting the dots here these noncore assets traded at a material step up in value from where our remaining core assets currently trade.
Importantly, the quality of our portfolio, our strong operational execution and our confidence in achieving this year's targets will allow us to maintain full year volume guidance. Despite selling 5000 Boe per day. This is essentially a one 5% increase in our sales volume guidance for the year with no Capex change.
Also during the quarter, we continued our strong shareholder return program, returning $215 million between our peer leading dividend and.
And share buybacks hopefully you saw our press release yesterday announcing another share repurchase agreement, where we're buying back more than 1 million shares from diesel it was now down to under 2% of our outstanding shares.
This is the beginning of last year, we've repurchased $462 million of our stock at $63 30 per share and our total return, including dividends is approaching $1 $3 billion over that same timeframe.
Approximately 18% of our market cap return to shareholders and a little over a year.
In addition to our capital return, we paid down debt in the first quarter, reducing our revolver borrowings by $350 million.
Our first quarter operational and financial performance drove a significant beat on both consensus earnings and cash flow sales volumes for the quarter were higher than planned averaging 336000 barrels of oil equivalent per day and oil was 156000 barrels per day or 47% of total volumes.
This was driven by strong well productivity along with accelerated turning one entirely in both DJ and Permian.
Cash operating costs were in the lower half of our annual guidance at <unk> 19 per Boe.
Although it was the primary driver here doing $4 31 per Boe.
Capital expenditures were $650 million or approximately a third of our annual guidance is a slightly higher than planned, but largely due to the acceleration of drilling and completion activities in the Permian as well as certain long lead items purchased for the DJ in the first quarter. As a reminder, we will likely spend $60 to 65% of our full year capex in the first half of the year.
As we progress through the remainder of the year, our focus remains on maximizing free cash flow enhancing the balance sheet and returning capital to our shareholders as we build a long term and sustainable business.
Now, let me turn to some of the operational highlights.
Starting with the Permian.
We will be investing about 50% of this year's capital in the Permian, We're continuing to show that assets are better in our hands in today's supplemental slides slides, we provide a number of household comparisons to highlight this exact point on the drilling side. We have increased average footage drilled per day by nearly 30% from prior operators and according to third party data we drilled more.
Footage per day per rig than any other operator in the Permian during the first quarter of the year.
A particular note we recently drilled a three mile lateral in the Midland Basin in under 10 days spud to rig release.
We have also had similar achievements on the completion side. Our teams have increased daily fluid throughput by 20% Accordingly cycle times are coming down as our D&C cost. So far we've captured approximately 5% cost reduction on a per foot basis, and theres much more to come.
We're also finding ways to lower cash operating costs in the first quarter low.
We're more than a one dollar below expectations driven by ongoing field level synergies primary primarily labor related and the optimization of chemicals program, particularly in the Delaware.
In March we commenced production on alert large number of new Delaware Wells early production performance is in line with expectations production from these wells along with additional tools through the summer should drive oil growth in the Permian through the year.
The first wells fully drilled and completed by <unk> costs are anticipated to commence production in the third quarter.
We continue to find ways to optimize our portfolio through asset trades acreage swaps with small farm ins acquisitions.
Our ground game has added valuable inventory extended laterals and increased working interests and near term development.
As a result of the success, we have now lowered our 2020 for expected Permian well count by about 10, while still completing the same lateral footage as our lateral lengths have increased by more than 10%.
Now switching to the DJ the highly prolific Watkins area comprises about 70% of our 2024 D. J investments we continue to be encouraged by performance and you can see on our slides how production continues to track well versus our recently uplifted type curve.
During the first quarter, we completed 13 four mile laterals and Watkins. These are the longest wells ever drilled and completed in the basin.
As well as allow us to access additional resource, while reducing surface impact and were looking forward of production relative results in the second half of the year. We have 320 remaining development locations that work into the majority of which are covered by comprehensive area plans. The box elder cap is approved and represents much of our 2024 and 2025 planned activity.
And we're working on the Lowry cap approval, which we expect to happen later this summer.
Also during the first quarter, we drilled our first U turn wells in the DJ So another accomplishment in our strategy to maximize returns and resource development with longer laterals.
Briefly on the Colorado regulatory front I want to thank the governor and legislature for their work to reach a compromise that withdrawal of the competing ballot measures and in process bills regarding oil and gas development.
The new compromise builds are not yet finalized they are aligned with our emissions reduction commitments and a raise important funds for low carbon transportation options for all coloradans.
<unk> for producers it provides certainty that the government will oppose any future ballot measure in any legislative agenda that would up end of certainty at least through the 2027 legislative session.
This is a win win for all parties, including our shareholders as it removes risk of near term regulatory changes in the state and the 2028.
Wrapping up our first quarter performance reflects the benefits of a high quality portfolio and the team's ongoing ability to make the most out of our asset base.
We're encouraged by the early efficiency gains and strong results, we're seeing in the Permian and the DJ Basin continues to perform exceptionally well.
<unk> has all of the key ingredients to deliver long term shareholder value.
High quality assets inventory debt, a strong balance sheet significant free cash flow and a track record of returning cash to owners through cycle. Thank.
Thank you for your interest in Civitas, operator, we're now happy to take questions.
We are now opening the floor for your question and answer session. If you'd like to ask a question. Please press star and number one on your telephone keypad.
First question comes from Neal Dingmann from Securities. Your line is now open.
Good morning, Chris and team and.
Neal David Dingmann: Congrats on nice quarter. My first question is really on the notable upside you all already seen on the Permian.
Typically what I'd like to add Chris is for your hides just on the wealth of productivity in the play it appears to be advancing very quickly I'm. Just wondering are there a few items I know we've had a number of companies now with earnings this week talked about the well productivity and what's driving that what's most impressive with years of just a short amount of time and so maybe you could talk.
The type of drilling completion, and what we're seeing there and maybe future D&C upside the remainder of the year.
So thanks for the question Neil.
It's very easy and what we've done at this 0.2 very notable capital efficiency gains drill times cycle times start to mine cycle times all of those are hitting on all cylinders I think what's what's not necessarily.
Out there quite yet is what this team is doing in terms of how we're developing those resources to your point there is additional zones of interest uphold and in the Delaware, We've talked about the Wolfcamp b in the Midland and the reason that we targeted entering the Permian is exactly what you're pointing to.
There is tremendous resource up and down the hole.
We're testing those zones some of those zones candidly.
While there are upside we did not underwrite value for these acquisitions, we're seeing how they perform that one that will inform how we allocate capital going forward I will say, we're very excited by early results that we're seeing in many of the secondary zones.
Neal David Dingmann: And that will have impact on how we allocate capital going forward.
Yes.
Great point, and then Chris since you've come in you've done tremendous job not only doing what youre, what youre going to say, but just just on the shareholder return and I'm. Just wondering now when we look at sort of maybe going forward do you still think sort of the flat growth makes the most sense now that you've got these.
Hi returned Permian assets to go along with the DJ assets, maybe just talk about what you think what strategy. You believe is still best for shareholders going forward.
Yeah, and I would point to the collective at Civitas really executing on this on this business model that was put in place formation in November of 2021, we think it still makes the most sense long term not to focus on production growth, but focus on cash flow focus on maximizing free cash and returning.
That to shareholders now some years that may mean, a little bit of a little bit of growth whether you saw that early in 2022, and when service costs Werent necessarily aligned with commodity prices you saw the run up in commodities. So what did we do we accelerated and we grew production.
The flip side was what's true as well in 2023, where there is a mismatch and we pulled activity back.
Again this is about how do you how do you maximize shareholder value over the long term and I would say right now there's still a lot of flex in the system and this is why it's a difficult question to answer for US right now as we stand up operations in the Permian So much of that capital efficiency equation. So much of what this team can deliver and what these assets will deliver it.
Still yet to be determined I think whats truly exciting for our team as there were a lot of folks that wanted to see us execute they wanted to understand could we integrate <unk>.
Three new businesses in the Permian and not stumble and look again, it's one quarter.
We're not spiking the football or anything like that but we're super proud that this team has started out of the gate as strong as we have I think what you will see year over year is likely to be broadly flat production and how do we peel out as much capital as possible.
Now I will say another hallmark of our board and a hallmark of our executive leadership team is that we are always in the lab trying to figure out how to improve our business and if that means we grow a little bit we will look at that as a potential option. My gut is it's going to be broadly flat production minimize capital.
I think that makes the most sense. Thank you.
Speaker Change: Thanks Neil.
Okay.
Question comes from Tim Bresnan.
Keybanc capital markets. Your line is now open.
Hey, good morning folks and thank you for taking my questions.
I wanted to start first I guess, the Colorado Legislative News, obviously, a really big deal.
Can you give any more insight on.
The timing when we like.
Speaker Change: Like how it works being sort of pass through the legislature.
Right now and then while we're talking about timelines can you give us any more details on what you think for the Lowry caps and then the third cap in Colorado. Thank.
Thank you.
Hey, Tim this is hodge.
With regards to the <unk>.
Alleged ablation.
Reference.
Legislation is moving through right now as we speak the session ends here next week. So expectation is that we'll move through the process and get voted on hereby by the end of next week.
As far as the application is.
As I think you might be aware, there's a sliding scale thats associated with pricing on oil and gas separately.
Sliding scale will go into effect in 2025.
One of the benefits of this discussion and this compromise is really.
Through the work of the governors the legislature Ngos.
The industry and the governors announcement on Monday.
Three companies were named in we were one of those companies through the work that we've been doing over the last few weeks, what we've agreed to through this compromises that the governor and legislature of stack and to say that there will be no negative legislation that will come out against legislation and ballot initiatives that have a negative impact on this industry.
And that's through the legislative session of 2027, so for all intents and purposes that clears until the 2028 legislative session.
Lyrica.
On Lowry gap, we're expecting Larry cap to be moving through this summer.
In the.
The next one is our rapid cap and that'll be probably at the end of this year beginning of next year.
And Lowry cap, we've got a.
Scheduled in June hearing so we're feeling really good about that I think the only thing I would round out the.
The sliding scale at current price dropped 60, a barrel of oil about one five pennies.
For gas if you if you apply that to our production stream.
Over the entire Civitas production series about 25 a Boe.
And how we've made more than that to build more than that out of LOE.
In the first quarter now, we're not happy about paying additional taxes, but we are happy about building a coalition that shows the importance of this industry in this state.
Removing regulatory uncertainty for the foreseeable future and as that is Hodge mentioned as we work the Lowry through.
The process.
Roll a rapid path through the process, we have real line of sight to developing while they're great resources in the DJ over the next three or four years without that that overhang. So we're excited.
And happy to work together with the Governor legislators.
And Ngos to get this done.
Okay. That's great color. Thank you for that and then as my follow up I wanted to shift gears a little bit.
I know you all have been out meeting with investors more this year.
A growing debate out there about your differentiate it David and outlook.
Obviously repurchases had been in favor and I know for you all it's a little more complex issue because it is sort of a meaningful part of the comp structure. That's been put in place. So Chris I don't know if you can put your director had honored and address this or if Mary now that you have some views, but just kind of curious what you're hearing from investors.
On repurchases versus this differentiated dividend.
And maybe how the board is thinking about this going forward now that you've you're digesting. These acquisitions. Thank you.
Yes, I'll kick us off and then let me see if Mary Alice Smith.
Smooth out the edges.
As an executive team is very well aligned with shareholders.
And so this is a debate that we have internally to say nothing of.
What we hear from investors.
At formation, we felt like it was important that the commitment to getting cash back to shareholders was.
It was real and I think what I'm really proud about is as a company. Since November 2021, we've really lived up to that commitment now that the really interesting thing in my view is because of the strength of the assets the cash flow generating power of these assets, we've been able to really deploy and all of the above.
Strategy and so we've been able to hit.
The dividends at the same time deliver on buybacks in tandem return a significant portion of.
Our value back to shareholders just over the past couple of years.
It's something I would say, we consider as a capital allocation decision and so it's something the board debates management will continue to debate. It to this point, we've had the strength to be able to do all of the above but it is something that we evaluate.
Hey, Matt I would add that.
As you know we've been on the conference circuit out a lot of our last 45 60 days or so I would say the feedback from the buy side in general it's just been the flexibility in our capital plan as you know how do you think about committing to returning a certain percentage of our cash.
Justin dividends versus thinking about a more flexible.
Framework I would argue that based on our balance sheet based on the strength of our cash flow and based on the caliber of our asset base, we do retain that flexibility right and do a lot of everything.
Consistent with the comments, we made last quarter I think it's important to remember that we continue to return cash through the cycle, we definitely want to position our company to do that over the long term and if you look at what we've done to date, we have an extremely strong track record of doing that as good as anybody.
Going forward you can expect us to continue to execute on that.
Mike or all of the above philosophy, we believe this strategy.
Served as well and on the buyback front. We've seen is still a lot of that certainly our last couple of quarters and even more so our last 15 months, we will continue being opportunistic and countercyclical. One thing you know very well is this industry is full of examples of companies that buy back their equity at the wrong.
Time, right in and some of the frameworks out there that are.
Just leverage base such as by definition.
Because your leverage would be lower and higher commodity prices and that's where your stock would be highest while we just get yourself in trouble with buying at the wrong time. So from our perspective, we are at $330 million authorization still outstanding were extremely in the money in terms of the weighted average price of repurchase of shares and we will continue to be opportunistic we're going to be.
Patients and there will likely be some lumpiness in how we deploy the remaining authorization of the result.
Okay.
I appreciate the comments thank you.
Our next question comes from Bill Ginola from Mizuho. Your line is now open.
Yes. Thank you good morning, Chris I wanted to ask one more on the Colorado fee proposal I know you've been very involved in the process here. So I am curious if you could give us a sense of where that stands in terms of legislative support if youre seeing any opposition to it coming in from anywhere and how likely you think it can be.
When that happens next week and I would think that room is a pretty big headwind for the year.
<unk> at least the next three and half years.
Yes. Thank you thanks, Bill for the question and really it's a.
Typically capped the Hajj and his team we've been involved over the past few weeks it was critical.
And the governor or I will say did a good job, making sure that both sides of the aisle within legislature, the Ngos and industry.
Together and ready to stack hands on.
We can we can go forward with this and so we believe that it will work through the system.
That coalition was was developed over the past few weeks.
With an agreement that works for all I think importantly in.
Our industry brings in a lot of tax revenue for the state.
And to individuals and a lot of our.
Go into hitting local communities in a very very positive way I think what this tax doesn't and the governor was very clear that it starts to build a coalition at the state level and when you fast forward to the legislative session of 2028 is.
The state will be looking to balance its budget and all of a sudden and extremely important industry within the state in terms of jobs and tax revenue also has us additional fee.
I think we will strengthen a coalition.
Will there be noise four years from now.
Probably.
But this I think will go a long way to really strengthening the ties between.
The state of Colorado in this great industry that we are blessed to work in.
That's very helpful. Thank you.
Thanks Bill.
Question comes from Oliver Huang from Tpa <unk>. Your line is now open.
Good morning, all and thanks for taking the questions.
On the op side it seems like the FX piece has come in a bit faster than you all would've been vision.
It looks to be pretty much across the board, which is going to see just wanted to kind of see if theres anything else that we should be keeping on our radar for that can drive further efficiency gains in the near term and any initial takeaways on kind of getting the venture side up to the same speed as the Hibernia assets just kind a get to know you all had the keys to that one for a few extra months sustained level.
Be a bit more expedient, if youre not already there, but just any comments there would be helpful.
Yes, we're there.
We had TSA is for the covered all three of the transactions.
<unk>, the TSA with with denser.
Late last month.
So this is real time news, but these assets are all in our hands I think to your point, we saw some some real encouraging results towards the end of the year as we're pulling our budget together, we rolled in some of those efficiency gains into the 'twenty four plans.
But to your point, we did not anticipate nor did we assume that this team.
Hit the ground running.
And again I want to reiterate this is only one quarter in but the DNA of this team that we've pulled together in the Permian is so much like the team that we have in the DJ Super Hyper competitive we want to lead our industry in both basins that we're operating in.
And I'm, just so proud to be a part of a team that has been able to knock down those results as quickly as they have.
I think as we go forward.
And into the next quarter or a couple of quarters as we continue to gain confidence in our ability to extend laterals and drive cycle times down if the first quarter's any representation of what we're going to see it in the past in the next three quarters, whereas some decisions to make on all of them do.
We want to redeploy some capital to to the drill bit and potentially increase going into 2025, we want to extend inventory through our ground game or do we want to get that cash back to shareholders. I think it's going to be a fond discussion to have because any of those three options is a win for our share.
Holders.
And we're just super excited to see what this team continues to deliver.
Awesome, that's helpful and maybe a follow up just on the asset sales get to see the completion of that mid year target on the divestitures are you all pretty much done on this front for the time being or are there other assets that kind of remain within the portfolio, which you might look to kind of <unk> that brings more value for it.
Yes, I think with this executive team and the broader team.
I don't know that I'd say wherever truly done I think.
We are always looking for ways to optimize shareholder shareholder volume by value and how to optimize our portfolio and sometimes that will mean assets are more valuable than others hands.
It was important for us when we announced the first two transactions to say look.
We're essentially about double the size of the portfolio, let's make a commitment to ourselves and to our shareholders that we are going to take a hard look at what is core and what is non core.
And commit to hitting $300 million by midyear to be able to do that.
Head of schedule and and honestly at a value for noncore assets that I would have taken the under.
On a year ago.
As again, a testament of our very.
<unk> capable very strong team. So I'd say, we will continue and always look at ways to optimize our overall portfolio.
But I will say that we're happy with with what we've achieved.
And and excited to get this behind us.
All are and also asset correctly correct that our focus is to create shareholder value. There is an opportunity to do that in a lot of the.
Noncore.
They're back in the schedule Australian acreage, we can use that to to sell it right. It as like we did but we can also.
<unk> traded REIT and Chris alluded to the ground game. The I will say that that is an incredibly.
Huge opportunity for us to create value I will give you an example, and some of the trade.
Suddenly dead in the Permian, specifically, we traded into net more acreage that allows us to extend laterals and any thoughts about.
Ken Rosewall decline in an account for this year, but that worked for us before and extending lateral lengths from two miles to two point until that trade just to put in perspective, Dallas 4 million.
<unk> of proved reserves that we got for zero cost and so if we can do that for no cost I mean imagine what we can deal with with some cash.
And part of our budget, but just wanted to underpin that because it's.
It's something that we don't spend a lot of time necessarily talking about but it's creating a lot of value just behind the scenes pretty well.
Makes sense, that's great to hear thanks for the time guys.
Speaker Change: Our next question comes from Steven with Kirby from Pickering Energy Partners. Your line is now open.
Yes, hi, its actually Kevin Mccarty.
Yes, I would agree you got a pretty healthy price on those asset sales in fact, it looks like you sold those assets at a higher valuation than where your stock is currently.
<unk>.
But my question is on efficiencies.
You brought online more wells than we anticipated specifically in the DJ Basin, you talked about balancing growth and free cash flow, but I guess at what point does it make more operational sense to keep activity steady.
Which.
Could be an acceleration of your capital plan and is that a decision that is driven by cost or commodity price.
Yes, Thanks, Kevin for the question I think.
Youre hitting on.
A key part of how you ultimately drive capital efficiency, and if Youre yoyo ing activity, sometimes that that can be difficult we did.
We did accelerate activity in both basins actually because it was a more efficient use of capital.
So it created a little bit of Lumpiness and put some capital into the first quarter.
Many respects to level set activity across both basins I will lead to the most efficiency gains I think in the Permian that the issue that we have right. Now is you have a team that is rapidly changing the equation peeling out days on the drilling side and completion side all good things but.
It is leading to a little bit of Lumpiness I would say that we look at this on a continual basis.
Whether that is they will go to level load and keep things flat and just see if we can run harder that way or or if we can.
Add in a little bit of Lumpiness, whatever is the best most efficient way to generate cash flow and get that back to shareholders, what we're going to do.
Great. That's the only question for me. Thank you.
Okay.
Comes from Leo Mariani from Roth MTN. Your line is now open.
I wanted to follow up a little bit on the regulatory environment here, obviously, good to see that there is a compromise between Ngls the legislature the governor in industry here, but.
Just wanted to kind of clarify a couple of things. So I know there was a bill going around that essentially would put some kind of summer stipulations on sort of largely on frac activity and just wanted to verify that that's going to be going away. As a result, maybe it already has in the past any committees and then just with respect ballot initiative.
I'm not an expert in Colorado, civics or anything like that but presumably there could still be groups that could put forward a ballot initiative I think under the current rules.
Certainly I guess, the governor can impose it publicly and legislature can oppose it publicly but isn't it just a matter of having kind of enough signatures at the end of the day.
And kind of getting that approved by the right agencies in the state were still could be anti oil and gas <unk> initiatives just wanted to get some more color on that.
Hey, Leo this is thanks for the question with regards to the one.
Legislation piece that was out there.
That has the potential for the pause during the summer that has been and that is a part of this compromising will be pulled down as a part of this this broader compromised so that is.
That is in motion as we move through this legislative session.
Good question on the ballot initiatives and to your point.
From from position people can bring forward valid initiatives part of what we've agreed to with this broader discussion not only with the governor and legislature, but also with the Ngos.
We are going to stand down the valid initiative efforts.
Meaning them being bringing forward.
<unk> initiatives against the actions of this industry and quite honestly the industry, putting some countermeasures out there. So that is a part of the broader agreement.
To the same point, having the governor come out.
I'd say that he is against these types of valid initiatives gives even more strength behind this this compromise in agreement.
Okay No I appreciate that.
And I guess, just on well costs in the Permian I just want to make sure I understood. The comments correctly I think you guys said that youre down about 5% year to date on D&C cost per foot. Obviously, that's great progress here in one quarter I just wanted to verify is that mostly just kind of related to efficiency gains are now if theres any oss.
Isn't that number in.
It sounds like you have a lot of momentum there.
That 5% reduction it sounds like that can get a lot better.
During the year, just wanted to get a sense of where that might go in the second half.
Yes, Leo this is hodgkin.
To your 0.5% down.
This is one quarter.
We're very excited about where we are I think we're seeing efficiencies faster than where we thought we would be at this time.
But at the same time, we're we're doing a few high fives, but we're not spiking. The ball. There is there is continuous work to be done here. We've got a team that is focused on and has a foundational DNA of continuous improvement and they are challenging themselves on how to do things safer better faster every single day.
The cost savings, we're seeing here are attributed to operational and equipment that we're using we've changed out some some rigs and we've added horsepower on on our completions. So that we can increase our ability to do work and do it in a timely manner and we're shortening our cycle times associated with.
We are seeing some reductions in pipe cost, but the majority of the savings that we're seeing here.
Are around <unk>.
Processes and equipment that were using <unk>.
Excited to see where this team is going to go.
We will continue to focus on continuous improvement and we will see how this progresses over the course of the year.
<unk> the only thing Thats all.
We haven't talked about.
We haven't rolled those those savings all the way through.
Our 24 plan and don't know, where we will be a quarter or two quarters three quarters from now and I think that is going to provide a tremendous amount of flexibility in terms. How we how we can redeploy that capital I think there is a lot of noise in the system.
We're being conservative rightfully conservative because it's early to <unk> point.
Super excited about what this team is already delivering and more exciting to see what we can talk about next quarter and the following quarters.
Yes, I appreciate all that color I know it can be hard to quantify the future, but it sounds like youre confident those costs will be lower in the second half.
Thanks Leo.
Our next question comes from Phillips Johnston from capital One your line is now open.
Hey, guys. Thank you most questions were asked and answered but.
I'll just leave it with two quick housekeeping questions first.
Do you guys have any material infrastructure needs over the next 12 to 18 months.
Secondly, NGL realizations were stronger than I would've expected in Q1 at about 30% of Ti or so towards the high end of your annual guidance range.
I realize the range is unchanged, but can you maybe talk about that.
Dynamics, there and what your expectations are for the rest of the year.
Sure. So I'll address your first question and let me know if that's not what you're trying to get at in terms of infrastructure.
And gas takeaway Permian why specifically.
So everything that we think we need to spend it is in our budget right I would say from a.
From our Permian takeaway perspective.
We have two very supportive.
<unk> partners and <unk>.
Those partners have their budget for what they believe they need frame perspective, where this year.
I will say to underpin that over the last couple of quarters, we've seen of planned and unplanned maintenance in some of the players down there and we really haven't seen any impact on flow.
Obviously, we felt the pricing impact on Baja widening but by no constraints that cell.
Hi.
It just speaks to the strength that we partner with right target enterprise again.
Two largest part of our gas they really provide a lot of flow assurance in that regard just because both entities.
Neat there they are wide great weather brought complex as an export dock downstream and so from our from a profit from our perspective. After these three acquisitions. We just have very limited exposure to some of the smaller processor, but to your point like a lot of time to pass on some of those infrastructure budget to their producers.
And then on your second question on the NGL realization.
<unk> strength quite a bit quarter are from Q4, a lot of that is related to the fact that if you.
Think about the propane seasonality in Q1 that we saw which is about 30% to 40% of our of our product mix has a lot of that is what drove those higher NGL relocation.
Relative to Q4.
Speaker Change: Okay perfect. Thanks, so much.
Thanks Ross.
We don't have any questions at the moment I would now like to hand back over to Brad Whitmarsh for final remarks.
Yeah. Thank you I appreciate everybody joining us today for the Civitas call. We continue to look forward to sharing our continued progress on upcoming calls and certainly we will see you all at the conference circuit to here in the second quarter Hope you have a great rest of the day and a safe weekend.
Thank you everyone for attending today's call. We hope you have a wonderful weekend you may now all disconnect.