Q1 2024 Antero Resources Corp Earnings Call
Greetings and welcome to the Antero resources first quarter 2024 earnings call.
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A question and answer session will follow the formal presentation.
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It is now my pleasure to introduce Brendan Kruger, Vice President of Finance and Treasurer of Antero resources, and Chief Financial Officer of Antero Midstream.
Brendan E. Krueger: They begin.
Brendan E. Krueger: Good morning, Thank you for joining us for Antero <unk> first quarter 2024, Investor Conference call, we'll spend a few minutes going through the financial and operating highlights and then we'll open it up for Q&A.
Speaker Change: I would also like to direct you to the homepage of our website at Www Dot Antero resources Dot com.
Speaker Change: We have provided a separate earnings call presentation that will be reviewed during today's call.
Speaker Change: Today's call may contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures.
Brendan E. Krueger: Including reconciliations to the most comparable GAAP financial measures.
Brendan E. Krueger: Joining me on the call today are already chairman CEO and President Michael Kennedy CFO.
Brendan E. Krueger: Dave can along ago senior Vice president of liquids marketing and transportation and Justin dollar Senior Vice President of natural gas marketing I will now turn the call over to Paul.
Paul: Thank you Brandon good morning, everyone.
Paul: I'll start my comments on slide number three titled drilling and completion efficiencies.
Paul: As I started my comments off last quarter. The year 2023 was a transformational year for antero for operational efficiency gains. This year 2024 continues that trend.
Paul: Starting with the chart on the top left hand side of this slide.
Brendan E. Krueger: Days per 10000 lateral feet drilled.
Brendan E. Krueger: Averaged five four days during the first quarter down from five five days in 2023.
Brendan E. Krueger: On the completion side, we averaged a quarterly record of 11 three stages per day during the first quarter an increase from the pace in 2023 of just under 11 stages per day.
Brendan E. Krueger: These operational improvements resulted in shorter cycle times as shown on the bottom of the page.
Brendan E. Krueger: Our year to date cycle time her pad is currently trading trending ahead of last years 2023 average.
Brendan E. Krueger: There are many inputs that lead to these operational improvements as every single line item gets examined by our team.
Brendan E. Krueger: However, the most impactful change in 2024 has been improved efficiency in zipper swaps that allows us to move from well to well on a pad without having any true downtime.
Brendan E. Krueger: We estimate that this new completion technology, we will save more than an hour pumping time, each day and will result in further increases in completion times.
Brendan E. Krueger: Our operations also benefit from Antero midstream and water infrastructure, providing industry, leading water delivery, but deliverability rates for our completions.
Brendan E. Krueger: The use of water trucks significantly reduces pad site congestion that we would otherwise get from water and sand trucks accessing the pad something that many of our peers have to contend with.
Brendan E. Krueger: Now, let's look at how these improvements led to our peer leading capital efficiency.
Brendan E. Krueger: The chart on slide number four our compares capital efficiency of the natural gas peer group put simply this is the amount of capital required to achieve a maintenance level of production.
Brendan E. Krueger: <unk> has the lowest capital per Mcf equivalent of its peer group at just 55 cents per Mcf.
Brendan E. Krueger: This is 40% below the peer average of 90.
Brendan E. Krueger: For Mcf.
Brendan E. Krueger: Our best in class operating efficiency combined with significant liquids exposure led to positive free cash flow during the first quarter and is expected to generate free cash flow for the full year.
Dave: Now to touch on the current liquids and natural gas liquids or NGL fundamentals I will turn it over to our senior Vice president of liquids marketing and transportation, Dave can long ago for his comments.
David A. Cannelongo: Thanks, Paul.
David A. Cannelongo: The start of 2024 demonstrated improved fundamentals for liquids.
David A. Cannelongo: Ongoing geopolitical tension, particularly in the middle East has increased the risk premium on crude pricing in 2024 year to date.
David A. Cannelongo: Internationally the canal related challenges seen last year have diminished, but global geopolitical tensions remain high.
David A. Cannelongo: On the domestic front record propane demand occurred simultaneously with significant January freeze offs, drawing down storage and resulting in upward pressure on propane prices.
David A. Cannelongo: Propane as a percentage of WTO has averaged 44% since the start of this year compared with 36% in the fourth quarter of 2023.
David A. Cannelongo: Exports have remained a driving force in the propane market and are showing strong year over year growth driven by growing growing global demand.
David A. Cannelongo: This year, China PTH Buildout continues to progress with three new facilities placed in service in the first quarter and another three expected to start up there in the second quarter totaling nearly 170000 barrels per day of capacity additions in the first half of 2024.
David A. Cannelongo: At the same time propane exports have averaged one 8 million barrels per day in 2024 year to date, an increase of 14% over the average in 2023.
David A. Cannelongo: Notably propane exports reported an all time record high this week at over $2 3 million barrels per day.
David A. Cannelongo: This export growth as depicted on slide five.
David A. Cannelongo: The chart illustrates that the U S remains the most important source of waterborne export LPG to meet fast growing global demand.
David A. Cannelongo: As a reminder, antero exports over 50% of our C. III plus production skewed heavily towards propane directly out of the Marcus Hook terminal in Pennsylvania.
David A. Cannelongo: This year, we have elected to sell a greater portion of our waterborne barrels against international indices as well as in the spot market instead of entering into longer Mont Belvieu linked term deals.
David A. Cannelongo: In the event that Mont Belvieu propane prices disconnect from Europe, and Asian pricing due to dock constraints or rising domestic storage levels Antero is well positioned to avoid additional Mont belvieu exposure.
David A. Cannelongo: The strength in international pricing has allowed us to increase our guidance for full year 2024 C. Three plus differentials to a premium to Mont Belvieu pricing.
David A. Cannelongo: As Paul just touched on our first quarter results benefited from our significant exposure to liquids prices.
David A. Cannelongo: Slide number six illustrates the approximately 125000 barrels per day of <unk>, plus Ngls plus condensate that we produce you can see the breakout of those products in the barrel on the left.
David A. Cannelongo: The barrel on the right hand side of the slide separates the approximately 40000 barrels per day of liquids that are closely linked to WTO oil prices. This includes ISO butane and natural gasoline and condensate.
David A. Cannelongo: Yeah.
David A. Cannelongo: <unk> markets have also been a strong tailwind to Antero C. III plus realizations, mainly due to the implications of the tier three gasoline specifications enacted in the U S.
David A. Cannelongo: Many U S refiners are unable to desulphurize gasoline down to 10 parts per million without also downgrading the octane of their motor gasoline.
David A. Cannelongo: As a result, there is a strong demand for octane enhancement products made with butane as feedstock.
David A. Cannelongo: ISO butane has been particularly strong as it is used in the production of alcohol, it which is a key octane enhancement product.
David A. Cannelongo: Just this morning, you've seen ISO butane trade at over 40 per gallon premium to normal butane.
David A. Cannelongo: In conclusion, <unk> NGL strategy product diversification and pricing is distinct when compared to other producers.
David A. Cannelongo: Supportive fundamentals witnessed this past quarter illustrate the promising signs that are ahead.
David A. Cannelongo: With that I'll turn it over to our senior Vice President of natural gas marketing, Justin <unk> to discuss the natural gas market.
Justin: To open it up by turning to slide number seven titled not all transport the U S. Gulf Coast is equal.
Justin: As a reminder, we sell substantially all of our natural gas out of basin, including approximately 75% to the LNG corridor.
Justin: Our firm transportation portfolio provides us with direct exposure to growing LNG demand along the Gulf Coast and importantly in the tier one pricing points in the vicinity of the major LNG facilities.
Justin: With several new LNG facilities, starting up over the next year, we expect to see a widening spread between sales points near Henry hub.
Justin: And sales points outside of this premium market.
Justin: The Blue Callout box highlights of recent quote from a research commodity team that emphasizes this view.
Justin: They believe sales points within 100 miles of Henry hub could see prices comfortably above $5 per <unk>, while our sales points outside of that range could price at three to $4 for <unk>.
Justin: Looking closely at this map the yellow stars highlight antero sales points and are located well within this 100 mile range to Henry hub.
Justin: These sales points, where strategically selected beginning over 10 years ago in order to access the feeder lines at the doorstep of the LNG fairway.
Justin: The chart on the top left hand side of this slide highlights that antero, so 75% of our gas at Henry hub linked prices.
Justin: While our peers on average so less than 15% of their natural gas into this premium market.
Justin: Looking ahead over the next two years as LNG export capacity increases by nearly six Bcf per day.
Justin: In addition to an expected rise in Nymex pricing, we expect antero sales points to be priced at even higher premiums to Nymex.
Justin: These LNG facilities compete for supplier.
Justin: An example of this is the pricing along the <unk> 500 alcohol in the summer of 2025 and 2026.
Justin: We've watched those summer premiums increased to <unk> 40 above Henry hub on financial basis alone and.
Justin: In anticipation of venture Global's Plaquemines facility startup in the next few months.
Justin: Just last year those same implied summer premiums were only three above Nymex.
Justin: Fisher Goldman received FERC approval. This week to begin immediately introducing gas into the feeder Gator Express pipeline.
Justin: That brings supply from the <unk> 500, <unk> to the Plaquemines LNG facility.
Justin: That's the initial feed gas requirement will potentially lead to higher demand and pricing in the <unk> 500 region as well as Nymex Henry hub prices. This summer.
Justin: According to market intelligence, the Tennessee gas pipeline phase one Evangeline pass project that feeds the Plaquemines LNG facility is expected to be online by July one.
Justin: 2024 with capacity of $900 per day.
Justin: As a reminder, antero <unk> 570 million per day of the firm no every two to 500 all pool.
Justin: One of our 63% of the supply that will feed the phase one project capacity.
Justin: Next I would like to touch on the outlook for power burn demand. The chart on slide number eight depicts a third party estimate for the increasing natural gas powered car demand as a result of AI data centers crypto mining and electric vehicles.
Justin: And projects nearly eight bcf of incremental natural gas demand through 2030, and its base case scenario or 14% growth per year.
Justin: Next turning to the chart on slide number nine we illustrate the significant expected natural gas demand growth coming from LNG exports.
Justin: Mexico exports, along with this increasing electric power generation need.
Justin: Combined these are expected to result in an increase in demand of 30 Bcf by 2030.
Justin: An increase of over 100% from the same demand sources today.
Justin: It is in the early innings of increasing electrification demand.
Justin: We believe there has been a structural shift toward reliable clean and affordable natural gas that will continue to increase power burn demand annually going forward.
Justin: This demand growth combined with rising LNG and Mexico exports creates a significantly higher base demand level than we have ever experienced in the past.
Justin: We expect these fundamentals will provide support to natural gas prices and lead to periods of higher prices in the coming years.
Justin: With that I will turn it over to Mike Kennedy Antero CFO. Thanks.
Michael N. Kennedy: Thanks, Justin.
Michael N. Kennedy: I'd like to start with slide number 10, and our continued focus on reducing absolute debt.
Michael N. Kennedy: We plan to allocate future free cash flow to paying down the remainder of the credit facility balance and a higher coupon near term notes we have outstanding.
Michael N. Kennedy: We will then be in a position to return to our 50 50 strategy of 50% of free cash flow going to debt reduction and 50% going towards our share repurchase program.
Michael N. Kennedy: Turning to slide number 11. This slide compares 2020 for free cash flow breakeven levels.
Michael N. Kennedy: We highlighted our peer leading breakeven price shown on this slide during our last conference call.
Michael N. Kennedy: Our $2 27 break even level compares to the average Nymex natural gas price of $2 24 in the first quarter.
Michael N. Kennedy: Despite the low price and taro generated an unhedged $10 million of free cash flow during the first quarter.
Michael N. Kennedy: Our quarterly results benefited from low maintenance capital requirements and high exposure to liquids and as shown on this slide results in the lowest unhedged free cash flow breakeven price among our natural gas peers.
Michael N. Kennedy: I will conclude my comments today with slide number 12, titled Antero resources, the unconstrained E&P company.
Michael N. Kennedy: We believe the differentiated strategy that we built here at Antero set up for success in today's macro backdrop, we have significant scale with production volumes of three four Bcf a day and over 20 years of premium inventory.
Michael N. Kennedy: We have integrated upstream and midstream, which provides development reliability and long term visibility into our program. This is critical in the development of the asset as evidenced by recent transactions in the basin.
Michael N. Kennedy: We have the firm transportation portfolio that allows us to sell 75% of our production to the LNG fairway in the Gulf Coast.
Michael N. Kennedy: Many of our peers lack firm transportation capacity, forcing them to sell gas at discounted prices well back at the Henry hub.
Michael N. Kennedy: Startup of the Plaquemines LNG terminal. This summer is expected to lead to higher prices at our <unk> 500 sales point.
Michael N. Kennedy: Potentially leading to higher premiums to Nymex Henry hub.
Michael N. Kennedy: Lastly, we have the lowest reinvestment rate of our natural gas peer group.
Michael N. Kennedy: This peer leading capital efficiency drives higher free cash flow conversion.
Michael N. Kennedy: Our low investment rate and high leverage to liquids was highlighted during the first quarter. When we generated positive free cash flow, despite being unhedged at $2.24 Nymex Henry hub natural gas price.
Speaker Change: With that I will now turn the call over to the operator for questions.
Speaker Change: Thank you ladies and gentlemen at this time, we'll be conducting a question and answer session.
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Michael N. Kennedy: Our first question comes from the line of Iran. DRAM with J P. Morgan. Please proceed with your question.
DRAM: Yes, yes, good morning, maybe one for Justin Justin given.
DRAM: The strong demand growth potential for gas to the end of the decade I was wondering maybe if you could.
DRAM: Comment a little bit more on what you see as kind of advantage molecules from a margin perspective.
DRAM: This kind of environment.
DRAM: Obviously, historically Appalachia is has garnered.
DRAM: Discount just given the lack of takeaway capacity and some of the gas on gas competition, but rising demand.
DRAM: In that area for data centers et cetera could that start to narrow some of the discounts that we've seen for epilepsy gas.
DRAM: Good morning, Arun it's Justin.
Arun: Yes, so when we look at just.
Speaker Change: The FTE.
Speaker Change: Television Bcf down to the LNG corridor, we see those premiums continuing.
Arun: Gain value versus Henry hub in the outer years, So we think that.
Arun: Our delivery point for Anr southeast hesitation CGT onshore <unk> 500, all will continue to be very strong in terms of Appalachia averse AI data centers et cetera and basis compressing.
Arun: And gaining value back toward Henry and <unk>.
Arun: Carol will have that ability to sell local production volumes as well if.
Arun: Those prices increase.
Arun: Seasonally or in different months of the year, because we do again have you.
Arun: Transport position of 75% of the Gulf. So we can measure that on variable costs et cetera.
Arun: And make that decision over time.
Speaker Change: Great. Thanks, Justin just just a follow up on the liquids marketing front.
Arun: Dave you mentioned that maybe you're exporting a little bit more than 50% or so of your C. Three plus.
David A. Cannelongo: Molecules, what kind of flex do you have in the system and if you saw a greater arbitrage could you flex a higher mix in terms of of export volumes and maybe just give an update on what youre seeing in terms of shipping rates.
David A. Cannelongo: Yes.
Speaker Change: We've done that now.
Arun: Dave we've done that flex in particular.
Arun: <unk> got the shoulder shoulder to shoulder season through the summer so we've.
Arun: It will be reported in our second and third quarter results. Our shows the amount of volume that we export versus domestic in those percentages go higher.
Arun: In the summer, where we are at times, well over 80% of our propane in particular as go into the dock. So we flex that already.
Arun: I think there are some ways to take that higher.
Arun: If the market call for it but we don't have a lot a lot left.
Arun: And the domestic board during those times of the year to begin with.
Arun: And then on the freight rates I mean things have improved dramatically since where we were.
Arun: Late last year, you had all the concerns about the Panama Canal and how much that was got to optimize the global.
Arun: LPG shipping fleet.
Arun: What actually happened what we're seeing is more LPG ships getting through the Panama Canal since that announcement was made first.
Arun: First the canal has been able to move more ships in general through the canal and they initially had forecasted when they announce those restrictions. So we've seen now freight rates collapsed dramatically from where we were in the fourth quarter and that's that's ultimately allowing prices that the doctor be closer linked to the international price.
Arun: We had a large build out of VLCC vessels last year over 40 Vlccs.
Arun: Kind of waiting for that to have its effect and you know youre now seeing that today and the forward.
Arun: Great pricing.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Okay.
Arun: Our next question comes from the line of Sebastian Growe with benchmark. Please proceed with your question.
Sebastian Growe: Okay. Thank you probably for Dave first.
Sebastian Growe: What do you think.
Sebastian Growe: Oh pain dock capacity is and.
Sebastian Growe: Yes, I mean that 233 was it was a shocking number.
Arun: Pretty close.
Arun: And I guess those propane hedges you kind of added there show some caution to do.
Arun: December.
Arun: Maybe some updated commentary.
Speaker Change: Yes, I think we are there on the dock capacity Sebastian.
Speaker Change: The number the $2 three I mean, it is a bit of a head scratcher that can happen just kind of based on timing of when ship sufficiently loaded kind of fall a minute into the next week.
Speaker Change: That can certainly allow a number like that to happen, but we ultimately believe that's well above the average rate that you can run across the U S. Stocks. So it's somewhere in that $1 85 to $1 9 million barrels a day of propane because you still have butane that needs to move across those those docks as well so.
Speaker Change: We'll see what they are able to hit the summer it sometimes when it's hotter.
Arun: The optimizes their refrigeration a bit so.
Arun: I think we'll expect to see those docs highly utilized this summer, but I think we're we're about at the levels of what we expect that they can do.
Arun: Until the.
Arun: Call. It the second half of next year. When there is some expansion projects on the way from from the Gulf Coast Midstream players and then on the hedges yes.
Speaker Change: Great Great question.
Speaker Change: Talked about our concerns around propane pricing in kind of a decoupling of Mont Belvieu. If you saw inventory levels rise as a result of these docs being fully utilized and so we just thought it was prudent to while we do export the vast majority of our propane we still have some domestic exposure and we just wanted to be conservative with that and take that Rick.
Speaker Change: <unk> off the table with trial, we saw things play out similar to what we saw last year, where propane was.
Speaker Change: And the <unk> 65 per gallon range.
Speaker Change: A wise move at this time.
Speaker Change: Put some context around that 10000 barrels a day, which is only 15% of our total propane production because the vast majority gets international pricing that's right.
Speaker Change: Alright, thank you for that.
Speaker Change: Paul I think on the zipper Fracs just curious.
Speaker Change: Yes.
Paul: The adoption this year versus prior years.
Paul: Does it look like for the balance of the year, maybe percent of well count percent until something like that.
Paul: And sort of why.
Speaker Change: Come about now, whereas maybe another.
Speaker Change: It's been more common for a while.
Speaker Change: Allergy here.
Speaker Change: Things of that nature.
Speaker Change: Yes, so of course to Bash theirs.
Speaker Change: The zipper fracs have been around for quite a while.
Speaker Change: But.
Speaker Change: Earlier, maybe in a more primitive stage theres been a lot of decoupling iron.
Speaker Change: Re hooking it up for different wells and so we've just found a way to be much more efficient on that and with the flip of some switches and turning on and off some valves weekend flip the zipper frac to different wells is we're pumping so so.
Speaker Change: So it's become much more efficient, whereas in the past it would be at least an hour of done downtime when we're changing zipper fracs.
Speaker Change: Okay.
Speaker Change: In terms of sort of application.
Speaker Change: Here.
Speaker Change: How new is it.
Speaker Change: Versus say last year.
Speaker Change: I think it's a development in the last six months to a year, where we've we've perfected it.
Speaker Change: And it will continue.
Speaker Change: Thanks, Glen Thanks, guys.
Speaker Change: Our next question comes from the line of Mark.
Mark Jones: Jones with <unk>. Please proceed with your question.
Mark Jones: Hey, Good morning, guys just wanted to ask around the data center demand question question, a little bit differently.
Mark Jones: You've continued to kind of avoid the temptation to go overseas without an LNG contract is there maybe a thought process that if we see a data center driven.
Mark Jones: <unk>.
Speaker Change: Maybe there is no reason to lead the U S.
Speaker Change: Does that lead you to maybe trying to lock in a long term contract in the U S.
Speaker Change: Yeah no. It wasn't around the data centers is just around where we're the only company that can really get the molecule to the.
Speaker Change: So the docs are to the LNG actual facilities. So we didn't have any need to enter into long term contracts around that we've already done or.
Mark Jones: Our commitments on the pipeline in itself and so we just wanted to stay floating and retain that optionality for us on what that pricing would look like when they would have to compete for our gas.
Mark Jones: The data centers that actually adds more obviously demand for that gas. So that competition just continues to grow.
Speaker Change: Okay and no no interest in maybe boosting.
Mark Jones: Legacy northeast volumes for a long term contract or anything to rack you'd rather just say indirect for both kind of uplift.
Speaker Change: Yeah, that's that's our philosophy stay on the Gulf Coast, I mean, an interesting thing.
Mark Jones: It was highlighted in our prepared remarks.
Mark Jones: <unk> that 500 line, we talked about this time last year with a set of <unk> premiums for next year and now it's at 40, such as kind of continuing to go higher so as it gets closer and closer youre going to see the premiums continue to go higher in the Gulf Coast, and Thats, where we sell our gas.
Speaker Change: Great and then changing gears on the on the Marcellus rates.
Mark Jones: On a per foot basis, it was surprisingly strong quarter over quarter.
Mark Jones: They were shorter laterals is there may be some logic going on that.
Mark Jones: The shorter laterals or more economic and maybe 18000 foot laterals are a little bit too long or is that just the.
Speaker Change: One data point and you're not shifting gears.
Speaker Change: Yes, I'd say, it's one data point generally the longer laterals are more economic to spread our costs around longer lateral foot but.
Speaker Change: We're so good at drilling and completing these that.
Speaker Change: The longer lateral still provide the economics better.
Speaker Change: It would suggest.
Speaker Change: Okay. So maybe on the tail end there'll be a stronger later dated production from the longer laterals.
Speaker Change: Yeah I mean.
Speaker Change: I would say shorter lateral will clean up more quickly we will dewater more quickly and so it'll get to peak rate in shorter periods of time, but over the longer run.
Speaker Change: As Mike just said the economics are so much better when we're going out to 16000 18000, even 20000 feet. Those are really big wells and so you wait a little longer until you get to peak rate, but it's worth it.
Speaker Change: Thanks for the answers guys.
Speaker Change: Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.
Neil Singhvi Mehta: Good morning team.
Neil Singhvi Mehta: I had a couple of questions on capital allocation. The first one on slide 10.
Neil Singhvi Mehta: You've done a great job of getting your debt down to this level and you talk about the next.
Neil Singhvi Mehta: Area to deploy free cash flow is to pay down your credit facility balance so maybe curious on.
Neil Singhvi Mehta: On your perspective of how shareholder returns specifically buybacks fit into this equation.
Neil Singhvi Mehta: Given the strengthening of the balance sheet. When do you think you are at that inflection point to to buy back stock.
Neil Singhvi Mehta: Yeah, I said in the remarks, the first call on that free cash flow is to pay down the credit facility and that near term maturity in 2006, So that's about $500 million.
Neil Singhvi Mehta: And then after that we'll return to our 50 50 strategy.
Neil Singhvi Mehta: Paying down debt plus are you buying back shares.
Neil Singhvi Mehta: Although it just depend on commodity prices when we actually achieve those but based on today's commodity prices had been in the first half of next year.
Speaker Change: Helpful and then.
Neil Singhvi Mehta: We've seen a lot of consolidation across the E&P space across the energy space broadly.
Neil Singhvi Mehta: Really deep inventory so I just love your perspective on how do you see antero fitting within.
Neil Singhvi Mehta: The M&A landscape.
Neil Singhvi Mehta: Is the right strategy and organic strategy.
Neil Singhvi Mehta: We do believe the right strategy is the organic strategy you saw we were able to add I believe 19 locations.
Neil Singhvi Mehta: In the first quarter, we had $26 million of land.
Neil Singhvi Mehta: That's highly economic compared to how much locations go for in the M&A.
Neil Singhvi Mehta: Landscape, so and we continue to consolidate our areas of operation right, where we're drilling these terrific wells and just continue to build out our position in the liquids portion of the Marcellus. So we believe that's the best way to add value and to continue to increase our 20 year inventory position.
Speaker Change: Perfect. Thanks team.
Speaker Change: Our next question comes from the line of Jacob Roberts.
Jacob Phillip Roberts: TBH. Please proceed with your question.
Jacob Phillip Roberts: Good morning.
Jacob Phillip Roberts: Good morning Heiko.
Jacob Phillip Roberts: Dave I wanted to circle back to the liquids market and I apologize. If you. If you did hit on this in your answers I may have missed it but I was hoping you could comment just on storage levels at the moment a spin.
Jacob Phillip Roberts: Specifically them being above the five year periods as well as the production coming out of pad III and just where do you see those playing out through the summer.
Neil Singhvi Mehta: Yes, good morning, Jacob this is Dave.
Neil Singhvi Mehta: If you go back to the first quarter, we actually had.
Neil Singhvi Mehta: With that polar vortex in January went from the top of the five year range to the five year average and then kind of continuing along that trend until call. It the last five or six weeks, you've had I would say some pretty unusual EIA data. It didn't really change at all for a month month and a half and then we had a.
Neil Singhvi Mehta: Pretty significant change last week and that are below expectation build this week. So we are.
Neil Singhvi Mehta: Kind of in that.
Neil Singhvi Mehta: The five year range and the top of the range below last year, but above that five year average and we'll see what the inflection point looks like how does that slope rise over the summer I think yes. There is a lot of different forecasts out there on propane production this year.
Speaker Change: Hard to say exactly who's who's right on that.
Speaker Change: We do pay attention to the rig count in all the basins and watch that and so that's again part of what drove our earlier comments on just taking that small amount of domestic Mont belvieu propane exposure, we have doing some hedging there this year.
Speaker Change: But sorry did I answer all of your question there Jacob.
Jacob Phillip Roberts: Yes, that's perfect I appreciate it and just the second question can you remind us on the current expected timeline of the BARDA Copayments Windows correct holds will be hit and what that ultimately looks like once they are once that threshold is met.
Neil Singhvi Mehta: Yes.
Neil Singhvi Mehta: As you rightly recall.
Neil Singhvi Mehta: They've actually they no longer participate in our wells that ended March 31, 2023, but there is kind of that run off of the PDP base.
Speaker Change: That does revert back to us when they hit certain.
Speaker Change: Our rates of return and right now we're forecasting that to be at.
Neil Singhvi Mehta: Starting in 2006.
Speaker Change: I appreciate the time, thank you guys.
Neil Singhvi Mehta: <unk>.
Neil Singhvi Mehta: Our next question comes from the line of Kevin Mccurdy with Pickering Energy Partners. Please proceed with your question.
Kevin Moreland MacCurdy: Hey, good morning, and we appreciate all the detail you gave on the NGL marketing in the prepared remarks.
Kevin Moreland MacCurdy: Well my question is as it relates to your realized prices. It looks like your <unk> III plus prices were much better than the weekly average benchmark pricing.
Kevin Moreland MacCurdy: And just curious if there were some onetime items that benefited you in the first quarter versus the benchmark or do you expect that premium to continue.
Speaker Change: Yes, no there arent any one time items, we've really switched this year to more international exposure that our contracts not linked to Mt. Belvieu. So we're still kind of working through those relationships. Obviously, the international pricing has been better than domestic pricing and as that continues we see higher and higher.
Kevin Moreland MacCurdy: NGL realizations you saw that in our increased guidance increase it by a dollar.
Kevin Moreland MacCurdy: So is that as we continue to kind of watch the actuals versus kind of our forecast, we'll get a little more dialed in on that but it was really just due to us switching to internationally linked.
Kevin Moreland MacCurdy: Liquids contracts versus domestically length in prior years.
Speaker Change: Great and then as a follow up.
Kevin Moreland MacCurdy: <unk> heard from other gas companies that are changing their activity plan, given kind of the weak spot prices.
Kevin Moreland MacCurdy: What would make you consider pushing out wells till later in the year or are you overall happy with the equivalent pricing received.
Kevin Moreland MacCurdy: It's really dominated by liquids pricing I mentioned on prior calls we do have one pad I mean, we're only running two rigs and one completion crew.
Kevin Moreland MacCurdy: We do have one pad in the capital program. That's a spot had for the third quarter of this year and Thats, one thats still to be determined.
Kevin Moreland MacCurdy: It was based on current month prices today that was one that potentially be deferred.
Kevin Moreland MacCurdy: And then that would put you at the low end of the capital guidance range.
Kevin Moreland MacCurdy: The other pads, where it's just one completion.
Kevin Moreland MacCurdy: Line, so running now with our two rigs is very efficient and it's very much $12 75 to 1300 Btu.
Kevin Moreland MacCurdy: Gas, so very high and the liquids content. So that's what drives the economics I think in the first quarter of our revenue, 55% was liquids and only 45% was gas. So you can see how much the liquids prices.
Kevin Moreland MacCurdy: Really influences the economics of these wells.
Speaker Change: Thank you I appreciate the answers.
Kevin Moreland MacCurdy:
Kevin Moreland MacCurdy: Our next question comes from the line of Betty Jang with Barclays. Please proceed with your question.
Betty Jang: Hi, Betty.
Betty Jang:
Kevin Moreland MacCurdy: Hi.
Kevin Moreland MacCurdy: Yeah.
Speaker Change: Ben Your line is going in and out.
Speaker Change: Oh, alright, sorry, Sir we got them all.
Speaker Change: Alright.
Speaker Change: Can you provide a bit more detail on the startup of the lack of mines Alec.
Kevin Moreland MacCurdy: Do we need to.
Kevin Moreland MacCurdy: The first cargo loading or mechanical startup before seeing any material feed gas demand.
Kevin Moreland MacCurdy: Mentioned that the GGP lined up behind your line has a capacity of Mac on for Ann.
Kevin Moreland MacCurdy: Any view on how quickly we could see dose.
Kevin Moreland MacCurdy: Gas demand reached dose levels.
Kevin Moreland MacCurdy: Hi, Betty its Justin yes, so when we look at.
Justin: Data that we have so far on <unk> you are correct, the Tennessee project Evangeline past projects should start up July one.
Speaker Change: <unk> of 900.
Kevin Moreland MacCurdy: The marketing analysts will be tracking the vessels that.
Justin: We will be parked waiting to load so that will be a data point to watch the vessels that are.
Kevin Moreland MacCurdy: Showing up to the facility as we approach July and then we will see that gas through the nominations.
Kevin Moreland MacCurdy: And to that new advanced on past projects. So.
Kevin Moreland MacCurdy: In theory once we get to July the physical gas is flowing well start getting a better gauge of how quickly. The liquefaction trains are ramping to at least.
Kevin Moreland MacCurdy: Quote mechanical completion.
Speaker Change: Got it no that's helpful.
Speaker Change: Just follow up following up on price, but clearly.
Kevin Moreland MacCurdy: You guys have is that the current feature strip prices is not reflecting the dynamic around that hub why do you think that's the case and what will be the catalyst to drive that relative pulp pricing higher.
Kevin Moreland MacCurdy: So you are referring to the Henry hub pricing.
Kevin Moreland MacCurdy: The T J P Sondra line pricing.
Kevin Moreland MacCurdy: It would have to Henry hub.
Speaker Change: Yes, Barry we are seeing the price reaction 500 out in the forward markets and Thats just looking at financial basis alone. So looking at financial basis alone and the summers on Cal 'twenty five in Cal 'twenty six are already showing.
Kevin Moreland MacCurdy: <unk> 40 cents.
Kevin Moreland MacCurdy: That is again just financial so those points will command, a physical premium which will start to develop as we get closer to delivery, but there.
Kevin Moreland MacCurdy: It will be a physical premium component as well so if it were a dime to <unk>, let's say you're at now at 60 or 70 over Henry hub or out of that physical gas starts to price closer to delivery.
Speaker Change: Got it and is there a physical gas physical premium today.
Kevin Moreland MacCurdy: For that today.
Kevin Moreland MacCurdy: Berry's Betty we've seen different premiums last summer, we were seeing very high premiums in the summer months on the physical side and Thats because there still is power.
Kevin Moreland MacCurdy: Power generation requirements in the southeast when the temperatures get hot and AUC load starts to increase so yes, we have seen those premiums in the past, but it can trade flat.
Kevin Moreland MacCurdy: <unk>.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: If I could start on your question just on the on the certified gas side. It's good to see that you guys increased the certified gas coverage and their project Larry.
Speaker Change: Would you expect all of your production to get certified at some point.
Speaker Change: And also kudos to you guys on the emission intensity.
Speaker Change: On the production Thats.
Speaker Change: Really low relative to your peers is there much more room, you can do to reduce emissions organically from here.
Larry: Yes on your first question on project narrow, we do see that growing across all of our field where up to two Bcf a day.
Larry: So that's about two thirds, maybe around 50% of the field on a gross basis. So over time, we do see it continuing to build that out across our entire <unk>.
Larry: Tire field on the emissions, but we're getting close to being as low as we can we've eliminated probably about 85% of all our new Mac devices and done all the valve control work that.
Larry: As a necessary to limit their emissions from there. So we're getting as close as we can we ultimately think will get down into that in 2025, and a 225000 250000 metric tons level that we need to offset and that's why you saw us.
Larry: Commence with our project to offset those emissions through our <unk>.
Larry: <unk> top Cookstove in Ghana initiative.
Speaker Change: Great, Yes, no I like the project. Thank you very much.
Speaker Change: Thank you Betty.
Speaker Change: Our next question comes from the line of Steve ask Jonathan with Benchmark. Please proceed with your question.
Steve: Yes, Thanks Scott.
Steve: <unk> maintenance <unk>.
Steve: 500, so obviously the.
Steve: Forwards it's showing.
Steve: Yes, yes, yes.
Steve: Beginning with full ramp in the LNG facility.
Steve: How do you see that being addressed and over what timeframe is there.
Steve: Absolutely no chance of.
Steve: Having incremental capacity there.
Steve: Over the next couple of several years that that premium.
Steve: Shows.
Steve: Yep.
Steve: There could be other volumes drawn to that area.
Steve: <unk>.
Steve: Depending on the basis spreads and the premiums.
Steve: That corridor has a lot of pipes that traverse west to east.
Steve: Started picking up that capacity years ago or at least putting the contracts together prior to in service date.
Steve: We knew at the time that to get physical gas on the 500 lag.
Steve: <unk>.
Steve: It is a challenge to get get volume over there just with.
Steve: The market pull in the southeast. So then you add the new liquefaction facility potentially three four to three eight Bcf a day.
Steve: At least.
Steve: That competition that we expect.
Steve: Volatility and then price premiums.
Speaker Change: Okay got it okay. Thank you.
Speaker Change: There are no further questions in the queue I'd like to hand, it back to management for closing remarks.
Speaker Change: Yes. Thank you for joining us on today's call. Please reach out with any further questions. Thanks.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.