Q2 2024 Ovintiv Inc Earnings Call

Operator: Good day, ladies and gentlemen, and thank you for standing by. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode.

Good day, ladies and gentlemen, and thank you for standing by Walkinshaw bench of 'twenty 'twenty four second quarter results Conference call. As a reminder, today's call is being recorded at.

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

Operator: Following the presentation, we will conduct a question-and-answer session for members of the media. However, members of the media who wish to quote others who are speaking on this call today, we advise: The device at this conference call may not be recorded or be broadcast without the express consent of Ovintiv. Thanks, Joanna, and welcome, everyone, to our second quarter conference call. This call is being webcast, and the slides are available on our website at www.ovintiv.com.

Following the presentation, we will conduct a question and answer session.

Most of the investment community will have the opportunity to ask questions I can join the queue at any time by pressing star one.

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

Speaker Change: Please be advised that this conference call may not be recorded or rebroadcast without the express consent of <unk>.

Speaker Change: I'd now like to turn the conference call over to Jason for Hoist from Investor Relations. Please go ahead Mr. Barnhart.

Jason Barnhart: Thanks, Joanna and welcome everyone to our second quarter Conference call.

Speaker Change: This call is being webcast and the slides are available on our website.

Speaker Change: <unk> Dot com. Please take note of the advisory regarding forward looking statements at the beginning of our slides and in our disclosure documents filed on Edgar and SEDAR plus.

Operator: Please take note of the caution regarding forward-looking statements at the beginning of our slides and in our disclosure documents filed on EDGAR and CDAR Plus. Following prepared remarks, we'll be available to take your questions. I'll now turn the call over to our President and CEO, Brendan McCracken. Good morning.

Speaker Change: Following prepared remarks will be available to take your questions.

Speaker Change: I'll now turn the call over to our President and CEO Brendan Mccracken.

Brendan Michael McCracken: Good morning, Thank you for joining us.

Brendan Michael McCracken: Thank you for joining us. We announced another strong quarter yesterday. We're pleased to continue our track record of industry-leading execution. Most importantly, we continue to be relentless at converting our execution into bottom-line financial results and delivering superior and durable returns for our shareholders. We've been seeing the benefits of our culture of innovation showing up in our results for quite some time now. We're on track to generate 60% more free cash flow per share this year, largely because of the efficiency gains and value creation that our innovations have unlocked. For us, innovation is more than simply applying the latest technology to our operations. It is a mindset within our organization. It influences the way we approach challenges and manage complex operational objectives.

Brendan Michael McCracken: We announced another strong quarter yesterday, we're pleased to continue our track record of industry leading execution.

Brendan Michael McCracken: Most importantly, we continue to be relentless at converting our execution in the bottom line financial results and delivering superior and durable returns for our shareholders.

We've been seeing the benefits of our culture of innovation is showing up in our results for quite some time now.

Brendan Michael McCracken: We're on track to generate 60% more free cash flow per share this year, largely because of the efficiency gains and value creation that our innovations have unlocked.

For us innovation is more than simply applying the latest technology to our operations. It is a mindset within our organization. It influences the way we approach challenges and manage complex operational objectives.

Brendan Michael McCracken: We've been very deliberate in our efforts to cultivate this over time, and it is delivering tangible results. Ensuring the durability of returns requires a deep inventory of premium drilling locations; our multi-year strategy of both organic and inorganic inventory extension has added about 1,650 premium locations to our portfolio, delivering a huge boost to our full cycle returns and the durability of our business. The combination of execution, inventory depth, and capital discipline is driving the strong capital efficiency you see in our business today, and it is showing up in our financial results as we make sure our operational gains flow through to higher returns.

We've been very deliberate in our efforts to cultivate this over time and it is delivering tangible results.

Brendan Michael McCracken: Ensuring the durability of returns requires a deep inventory of premium drilling locations, our multi year strategy of both organic and inorganic inventory extension.

As added about 650 premium locations to our portfolio.

Brendan Michael McCracken: Delivering a huge boost to our full cycle returns and the durability of our business.

Speaker Change: Combination of execution inventory depth and capital discipline is driving the strong capital efficiency you see in our business today and it is showing up in our financial results as we make sure our operational gains flow through to higher returns.

Brendan Michael McCracken: We are raising our annual production guidance once again, and we remain on track to generate approximately $1.9 billion of free cash flow, even as realized prices are settling lower than last quarter. We delivered net earnings of $340 million and cash flow of just over a billion dollars, beating consensus estimates. Our cash flow beat was driven by both production and cost outperformance, as we exceeded the top end of our production guidance ranges on both oil and natural gas, and we came in at the bottom end of the guidance range on combined TMP and LOE costs. We generated free cash flow of $403 million, 60% of which we will return to our shareholders through our base dividend and share buybacks during the third quarter.

Speaker Change: We are raising our annual production guidance once again, and we remain on track to generate approximately $1 $9 billion of free cash flow, even as realized prices are settling lower than last quarter. We.

Speaker Change: We delivered net earnings of $340 million in cash flow of just over $1 billion, beating consensus estimates.

Speaker Change: Our cash flow was driven by both production and cost performance as we exceeded the top end of our production guidance ranges on both oil and natural gas and we came in at the bottom end of the guidance range on combined TMP and low costs.

Speaker Change: We generated free cash flow of $403 million, 60% of which we will return to our shareholders through our base dividend and share buybacks during the third quarter.

Brendan Michael McCracken: With our increased production guide, we're set to deliver more production for the same amount of capital. Our full-year oil and condensate volumes will average about 208,000 barrels a day, while our capital guidance midpoint is unchanged at $2.3 billion. This is 8,000 barrels a day higher than our original 2024 outlook. Our 2024 program is repeatable in 2025 and beyond, allowing us to sustain approximately 205,000 barrels a day of oil and condensate production with capital investment of about $2.3 billion for the next 7 to 10 years, assuming flat commodity prices. This outcome reflects our leading capital efficiency and the depth of our premium inventory. I'll now turn the call over to Corey. Thanks and good morning.

Speaker Change: With our increased production guide, we're set to deliver more production for the same amount of capital.

Speaker Change: Our full year oil and condensate volumes will average about 208000 barrels a day.

Speaker Change: Our capital guidance midpoint is unchanged at $2 $3 billion.

Speaker Change: This is 8000 barrels a day higher than our original 2020 for outlook.

Our 2024 program is repeatable in 'twenty five and beyond.

Speaker Change: Having us to sustain approximately 205000 barrels a day of oil and condensate production with capital investment of about $2 $3 billion for the next seven to 10 years, assuming flat commodity prices.

Speaker Change: This outcome reflects our leading capital efficiency and the depth of our premium inventory now.

Speaker Change: Now I'll turn the call over to Corey.

Corey Douglas Code: As Brendan mentioned, we had a very strong operational performance in the second quarter, with every item coming in at or better than our second quarter guidance midpoints. Total production came in above the high end of guidance, averaging 594,000 BOEs per day. We achieved this while coming in below the midpoint on capital. Crude and condensate production was strong across all four assets in the quarter. Permian, Uintin, Anadarko crude and condensate levels were all above our internal expectations, and the Montney demonstrated significant outperformance of about 4,000 barrels per day ahead of plan. Our track record of shareholder returns continued through the quarter. We returned $262 million through share buybacks of $182 million and base dividends of $80 million.

Corey: Thanks, and good morning, as Brendan mentioned, we had a very strong operational performance in the second quarter with every item coming in at or better than our second quarter guidance mid points.

Corey: Production came in above the high end of guidance, averaging 594000 Boe's per day, we achieved this while coming in below the midpoint on capital crude and condensate production was strong across all four assets in the quarter Permian you into an Anadarko crude and condensate levels were all above our internal expectations and the montney.

<unk> demonstrated significant outperformance of about 4000 barrels per day ahead of plan.

Corey: Our track record of shareholder returns continued through the quarter, we returned $262 million through share buybacks of $182 million and base dividends of $80 million. This represents a competitive cash return yield of approximately 8%.

Corey Douglas Code: This represents a competitive cash return yield of approximately 8%. Since the inception of our buyback program in the third quarter of 2021 through the second quarter of 2024, we've repurchased 37 million shares and distributed approximately $800 million in base dividend payments for total shareholder returns of about $2.5 billion. In the third quarter, as per our shareholder returns framework, we will pay dividends of approximately $80 million while repurchasing shares worth $162 million and allocating $162 million to the balance sheet.

Corey: Since the inception of our buyback program in the third quarter of 2021 through the second quarter of 2024, we have repurchased 37 million shares and distributed approximately $800 million in base dividend payments for total shareholder returns of about $2 5 billion.

Speaker Change: In the third quarter as per our shareholder returns framework, we will pay dividends of approximately $80 million, while repurchasing shares worth $162 million in allocating $162 million to the balance sheet.

Corey Douglas Code: We reduced debt by more than $100 million during the quarter, and our 12-month trailing leverage ratio was 1.2 times. We continue to make progress towards optimizing our capital structure, decreasing our leverage, and reducing interest expense. We have lowered our go-forward quarterly interest expense guidance by $10 million to reflect our lower debt level.

Speaker Change: We reduced debt by more than $100 million during the quarter and our 12 months trailing leverage ratio was one two times, we continue to make progress towards optimizing our capital structure decreasing our leverage and reducing interest expense. We've lowered our go forward quarterly interest expense guidance by $10 million.

Speaker Change: To reflect our lower debt levels, we remain committed to our mid cycle leverage target of one times or about 4 billion of debt assuming mid cycle prices.

Corey Douglas Code: We remain committed to our mid-cycle leverage target of 1X, or about $4B of debt, assuming mid-cycle prices. The maturity profile of our bonds will allow us to optimize our debt paydown schedule over the next couple of years as we work toward that target. Our continuous improvement in capital efficiency will allow us to generate additional cash flow and reach our debt target sooner. This bolsters the resiliency of our business and enables us to withstand market volatility. We remain investment-grade rated with a stable outlook from all four credit rating agencies.

Speaker Change: The maturity profile of our bonds will allow us to optimize our debt paydown schedule over the next couple of years as we work towards that target.

Speaker Change: Continuous improvement in capital efficiency will allow us to generate additional cash flow and reach our debt target sooner. This bolsters the resiliency of our business and enables us to withstand market volatility we remain investment grade rated with a stable outlook from all four credit rating agencies.

Corey Douglas Code: Capital efficiency remains a primary focus for us as we work to efficiently convert our inventory into cash flow and generate consistent, durable returns for our shareholders. Assuming full-year average crude prices of $80 for WTI oil and a NIMAX natural gas price of $2.25, we are on track to generate about $1.9 billion of free cash flow. This is about $750 million more than last year.

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

Speaker Change: Assuming full year average crude prices of $80 debit to oil and Nymex natural gas price of $2 25, we are on track to generate about $1 9 billion of free cash flow. This is about $750 million more than last year.

Corey Douglas Code: Third-quarter production is set to average between 565,000 and 580,000 BOEs per day, with oil and condensate volumes of about 206,000 barrels per day at the midpoint. We expect third-quarter capital investment to come in around $550 million at the midpoint, and we remain very comfortable with the midpoint of our full-year guide at $2.3 billion. We also updated our cash tax guidance for the year with expectations of lower cash tax. In the U.S., this is driven by greater certainty around certain tax attributes from last year's permitting acquisition.

Speaker Change: Third quarter production is set to average between 565 and 580000 Boe's per day with oil and condensate volumes of about 206000 barrels per day at the midpoint.

Speaker Change: We expect third quarter capital investment to come in around $550 million at the midpoint and we remain very comfortable with the midpoint of our full year guide at $2 3 billion.

Corey Douglas Code: In Canada, lower natural gas prices resulted in a lower cash tax outlook. Additionally, as we mentioned last quarter, the resolution of a legacy legal matter will result in a one-time recovery of approximately $150 million that we plan to allocate to debt reduction.

Speaker Change: We also updated our cash tax guidance for the year with expectations of lower cash taxes in the U S. This is driven by greater certainty around certain tax attributes from last year's Permian acquisition.

Speaker Change: Canada, lower natural gas prices resulted in lower cash tax outlook.

Speaker Change: Additionally, as we mentioned last quarter the resolution of a legacy legal matter will result in one time recovery of approximately $150 million that we plan to allocate to debt reduction.

Corey Douglas Code: We expect to receive the cash in late 3Q and 4Q, with minimal cash tax impact. Between this and the roll-off of our REX pipeline commitment in May, we will realize about $250 million of cash savings this year from the cleanup of legacy items. I'll now turn the call over to Greg, who will speak to our operational highlights. Thanks, Corey, and good morning.

Speaker Change: We expect to receive the cash in late <unk> and <unk> with minimal cash tax impact between this and the roll off of our Rex pipeline commitment in May we will realize about $250 million of cash savings. This year from the cleanup of legacy items.

Speaker Change: I'll now turn the call over to Greg who will speak to our operational highlights.

Greg: Thanks, Corey and good morning.

Greg: Our second quarter well performance was strong across the portfolio. In particular, we saw strong well productivity in the Permian, where we produced oil and condensate volumes of 123,000 barrels per day. With the addition of our previously planned sixth rig in the play, our second quarter turn-in lines totaled 42 gross wells, approximately double the number of wells we brought on in the first quarter. As you can see in the chart on slide 10, the wells are tracking above our 2024 type curve.

Greg: Our second quarter, well performance was strong across the portfolio in particular, we saw strong well productivity in the Permian, where we produced oil and condensate volumes of 123000 barrels per day.

Greg: With the addition of our previously planned sixth rig in the play are second quarter turned in lines totaled 42 gross wells approximately double the number of wells we brought on in the first quarter.

Greg: As you can see in the chart on slide 10, the wells are tracking above our 2024 type curve.

Greg: The dashed line on the chart shows all of the 122 wells we've brought online since the fourth quarter. As you can see, our well performance continues to paint a 2024 type curve, which is higher than our 2023 well results, incorporating all of the improved well productivity we achieved last year. We remain fully confident in our ability to deliver our 24-type curb in the Permian, which is unchanged from the start of the year.

Speaker Change: The Dash line on the chart shows all of the 122 wells, we brought online since the fourth quarter.

Speaker Change: As you can see our well performance continues to pace to 2024 type curve, which is higher than our 2023, well results incorporating all of the improved well productivity, we achieved last year.

Speaker Change: We remain fully confident in our ability to deliver our 24 type curve in the Permian, which is unchanged from the start of the year.

Greg: These gains are hard-fought and the result of multiple stacked innovations. As our industry continues to mature, we expect to see a divergence in well-performance between those operators who embrace innovation and technical complexities and those who continue to pursue the status quo. We continually push the boundaries of the efficiency frontier to execute our programs faster and with less capital, making the business more profitable. The same group of wells that exceeded our type curve for productivity also delivered some impressive pace-setting results on drilling and completions in addition to well costs. We drilled our fastest well in the quarter, a 10,500-foot lateral, in less than six days.

Speaker Change: These gains are hard fought and the result of multiple stacked innovations.

Speaker Change: As our industry continues to mature we expect to see a divergence in well performance between those operators, who embrace innovation and technical complexities and those who continue to pursue the status quo.

Speaker Change: We continually push the boundaries of the efficiency frontier to execute our programs faster and with less capital, making the business more profitable.

Speaker Change: The same group of wells that exceeded our type curve for productivity also delivered some impressive pace set of results on drilling and completions in addition to well cost.

Speaker Change: We drilled our fastest well in the quarter at 10500 foot lateral in less than six days.

Greg: When looking at our program average, our Permian drilling speed in the first half of the year was roughly 10 percent faster than our 2023 program. On completions, our fastest second quarter pad average was about 4,800 feet per day. To put this in perspective, that equates to pumping just over 14 million pounds of sand per day. Our year-to-date trimulfract wells were completed about 30% faster than our average speed in 2023 at an industry-leading 4,200 feet per day.

Speaker Change: When looking at our program average our Permian drilling speed in the first half of the year was roughly 10% faster than our 2023 program.

Speaker Change: On completions are fastest second quarter pad average was about 4800 feet per day to.

Speaker Change: To put this in perspective that equates to pumping just over 14 million pounds of sand per day.

Speaker Change: Our year to date travel Fracked wells were completed about 30% faster than our average speed in 2023, and an industry, leading 4200 feet per day.

Speaker Change: On a total program basis year to date, we've completed roughly 20% more feet per day than our 2023 program average.

Greg: On a total program basis, year-to-date, we've completed roughly 20 percent more feet per day than our 2023 program average. These cycle time improvements mean that we continue to drive our well costs lower. Our pace setting Permian well, an 11,500-foot lateral, had a DNC cost of about $600 per foot, in line with the lowest well cost in the basin.

Speaker Change: These cycle time improvements that we continue to drive our well costs lower.

Speaker Change: Our pace setting Permian well 11500 foot lateral how does E&C cost of about $600 per foot in line with the lowest well cost in the basin.

Greg: Some of our longer laterals have delivered even better cost performance. Ovintiv remains an industry leader in the Midland Basin in several key categories, including trimal frac, wet sand, drilling speed, supply chain, and logistics management. Our outstanding performance is driving the strong capital efficiency you see in our business today. We also continue to see top drilling and completions metrics in the Montany, where in the first half of the year, we delivered an average of 1,750 feet of drilled per day and over 4,275 feet completed per day, a speed similar to our trimal frac averages in the Permian. The Montany has the lowest well cost in the portfolio, and our team delivered a pay-setter DNC well cost of less than $500 per foot in a quarter.

Speaker Change: Some of our longer laterals are delivering delivered even better cost performance.

Speaker Change: <unk> remains an industry leader in the Midland Basin in several key categories, including travel Frac sand drilling speed supply chain and logistics management.

Speaker Change: Our outstanding performance is driving the strong capital efficiency that you see in our business today.

Speaker Change: We also continued to see top drilling and completions metrics in the Montney, where in the first half of the year. We delivered an average of 1700 50 feet drilled per day and over 4275 feet completed per day speed similar to our trauma frac averages in the Permian.

Speaker Change: Vermont.

Speaker Change: The Montney has the lowest well costs in the portfolio and our team delivered a pacesetter D&C well cost of less than 500 feet per quarter.

Speaker Change: $500 per foot in the quarter.

Greg: We are also bringing on some highly productive wells. During the quarter, our 11-well, 15-to-28 pipestone pad delivered initial rates well above expectations and is projected to exceed the type curve by 8% over the first 12 months. Our low well cost, superior well productivity, and strong price realizations for both condensate as well as natural gas mean that the economics in our Montney wells remain outstanding. Assuming $75 WTI and $2.50 NYMEX gas, we expect our Montney field to generate a program-level IRR of more than 60%. Armani Gas realized 129% of AECO and 72% of NYMEX in Q2 on an unhedged basis.

Speaker Change: We are also bringing on some highly productive wells during the quarter, our 11, well, 15% to 28 Pipestone pad delivered initial rates well above expectations and is projected to exceed type curve by 8% over the first 12 months.

Speaker Change: Our low well cost superior well productivity and strong price realizations for both condensate as well as natural gas, meaning that the economics in our Montney wells remain outstanding.

Speaker Change: Assuming $75 <unk> and $2 50, Nymex gas, we expect our montney to generate a program level IRR of more than 60%.

Speaker Change: Our montney gas realized 129% of ACO and 72% of Nymex in Q2 on an unhedged basis.

Greg: This is thanks to our physical transportation arrangements to markets in Eastern Canada, Chicago, California, and the Pacific Northwest. Our second quarter oil and condensate price realization was also robust at 94% of WTI. As Corey mentioned, our second quarter production in the play exceeded our expectations. We brought on 33 net wells, produced 34,000 barrels of oil and condensate, and 1.2 BCF per day of natural gas. On the condensate side, the outperformance was due to strong oil productivity and some acceleration of turn-in lines.

Speaker Change: This is thanks to our physical transportation arrangements to markets in Eastern Canada, Chicago, California, and the Pacific Northwest.

Speaker Change: Our second quarter oil and condensate price realization was also robust at 94% of <unk>.

Speaker Change: As Corey mentioned, our second quarter production in the play exceeded our expectations. We brought on 33 net wells produced 34000 barrels of oil and condensate and one two bcf per day of natural gas.

Corey: On the condensate side, the outperformance was due to strong well productivity and some acceleration of turned in lines. While in the natural gas side, we saw about 100 million cubic feet per day of outperformance due to well performance post maintenance flush production and a favorable royalty adjustments.

Greg: While on the natural gas side, we saw about 100 million cubic feet per day of outperformance due to well performance, post-maintenance flush production, and a favorable royalty adjustment. However, the outperformance was specific to the second quarter and largely one-time in nature, as we expect Montney Condensate volumes to track closer to 30,000 barrels per day in the back half of the year. Our performance in the Montany continues to demonstrate the expertise of our team and our leadership position in the market. Across numerous key metrics, Ovintiv screens as the top of the peer group.

Speaker Change: The outperformance was specific to the second quarter and largely onetime in nature as we expect montney condensate volumes to track closer to the 30000 barrels per day in the back half of the year.

Speaker Change: Our performance in the Montney continues to demonstrate the expertise of our team and our leadership position in the play.

Speaker Change: Across numerous key metrics <unk> screens as the top of the peer group, we have the best capital efficiency on both the BOE basis in our oil and gas oil and condensate basis coming in 50% to 60% better than the peer average.

Greg: We have the best capital efficiency on both a BOE basis and an oil and condensate basis, coming in 50-60% better than the peer average. Our spud to rig release time is 50% faster, we are drilling 20% longer laterals, and we have drilled 13 of the top 15 wells in the play since 2023. We are confident in our ability to continue delivering top well results in the play, generating superior asset level returns and unmatched capital efficiency.

Speaker Change: Our spud to rig release time is 50% faster, we're drilling 20% longer laterals and we have drilled 13 of the top 15 wells in the play since 2023.

Speaker Change: We are confident in our ability to continue delivering top well results in the play generating superior asset level returns and unmatched capital efficiency.

Greg: Moving to the Uintah, our significant scale and running room of the play continue to differentiate Ovintiv from our in-basement peers. With over a decade of well inventory, ample takeaway capacity, and margins similar to that of our Permian operations, the Uintah is a unique and highly competitive part of our portfolio. The refinery turnarounds in Salt Lake City were completed at the end of the first quarter, allowing us to bring constrained production back online for the duration of the second quarter.

Speaker Change: Moving to the Uinta, our significant scale and running room in the play continue to differentiate <unk> from our in basin peers.

Speaker Change: With over a decade of well inventory ample takeaway capacity and margins similar to that of our Permian operations, but you went to as a unique and highly competitive part of our portfolio.

Speaker Change: The refinery turnarounds in Salt Lake City were completed at the end of the first quarter, allowing us to bring constrained production back online for the duration of the second quarter.

Greg: Our oil and condensate volumes total 28,000 barrels per day. We brought on seven NetWells and now have more than half of our 2024 turn-in lines online. Our drilling program in Anadarko began in April but is now well underway.

Speaker Change: Oil and condensate volumes totaled 28000 barrels per day.

Speaker Change: We brought on seven net wells and now have more than half of our 2024 turned in lines online.

Speaker Change: Our drilling program in the Anadarko began in April with is now well underway.

Greg: We expect to begin bringing those wells on through the third and fourth quarters. We are targeting the oiliest parts of our acreage to leverage the strong oil performance we saw in 2023, where the wells displayed first-year oil cuts of more than 55%, with about 85% of first-year revenue coming from oil. Our oil and condensate volumes total 27,000 barrels per day in a quarter. With the lowest base decline rate and a modest development program this year, Anadarko continues to generate significant free cash flow.

Speaker Change: We expect to begin bringing those wells on through the third and fourth quarters.

Speaker Change: We're targeting the oily parts of our acreage to leverage the strong oil performance. We saw in 2023, where the wells displayed first year oil cuts so more than 55% with about 85% of first year revenue coming from oil.

Speaker Change: Our oil and condensate volumes totaled 27000 barrels per day in the quarter.

Speaker Change: With the lowest base decline rate and modest development program. This year, the Anadarko continues to generate significant free cash flow.

Brendan Michael McCracken: I'll now turn the call back to Brendan. Our team continues to build on our track record of execution. We once again met or beat all our targets, generated cash flow per share, and free cash flow per share above consensus. Maximizing the capital efficiency and the profitability of our business continue to be key areas of focus across our organization.

Speaker Change: I will turn the call back to Brendan.

Brendan Michael McCracken: Thanks, Greg.

Brendan Michael McCracken: Our team continues to build on our track record of execution, we once again met or beat all of our targets generated cash flow per share and free cash flow per share above consensus.

Speaker Change: Maximizing the capital efficiency and the profitability of our business continue to be key areas of focus across our organization.

Brendan Michael McCracken: Our industry-leading efficiencies and our strong culture of innovation are truly differentiating against a maturing resource backdrop. We are well positioned to deliver superior, durable returns to our shareholders through our focus on operational excellence, disciplined capital allocation, and responsible operations. Joanna, we're now ready to open the line for questions. Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star 1.

Speaker Change: Our industry, leading efficiencies and a strong culture of innovation are truly differentiating against the maturing resource backdrop.

Speaker Change: We are well positioned to deliver superior durable returns to our shareholders through our focus on operational excellence disciplined capital allocation and responsible operations.

Speaker Change: This concludes our prepared remarks, Joanna we're now ready to open the line for questions.

Joanna: Thank you.

Joanna: Ladies and gentlemen.

Joanna: <unk> you can join the queue to ask a question by question Star one.

Operator: We will now begin the question and answer session and go to the first call. Your question comes from Neal Dingmann at Truist Security. Good morning, guys.

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

Speaker Change: First question comes from Neal Dingmann.

Speaker Change: Please go ahead.

Neal David Dingmann: Good morning, guys nice quarter, maybe Brandon.

Neal David Dingmann: Nice quarter. Maybe, Brandon, my first question for you and Greg, really on slide 10, I really like that, on the Permian performance specifically. Could you just talk about, it shows those 42 second-quarter wells, obviously held up very, very well. Just wondering, anything different on the B&C side there?

Speaker Change: Brian My first question for you Greg.

Speaker Change: On slide 10.

Speaker Change: On the Permian performance and secondly could you just talk about.

Speaker Change: So as those 40 Q second quarter Wells, obviously held up very very well just about anything different on.

Speaker Change: On the D&C side, there and then can you remind me.

Speaker Change: Sort of generally where those wells were drilled versus kind of where our plans are for the remainder of the year. Thank you.

Brendan Michael McCracken: And then can you remind me just sort of generally where those wells were drilled versus kind of where plans are for the remainder of the year? Yeah, that's great, Neil. Appreciate that question. I'll turn it over to Greg here. You know, we brought on over twice as many wells in the second quarter versus the first quarter.

Speaker Change: Yeah, that's great Neil I appreciate the question I'll turn it over to Greg here.

Greg: We brought on over twice as many wells in the second quarter versus the first quarter. So that really kind of gives now a statistical data set to look at a year.

Brendan Michael McCracken: So that really kind of gives us a statistical data set to look at year to date. And really, what you're seeing is a consistent DNC approach with the wells, both geographically, but also just how we've been completing them and drilling them. But I'll turn that over to Greg to fill in some of the details there. Yeah, thanks for the question, Neil. And really, it didn't do anything different in the second quarter than it did in the first.

Neil: Year to date.

Greg: Really what Youre seeing is a consistent.

Speaker Change: D&C.

Speaker Change: Approach with the wells both geographically, but also just how we have been completing them and drilling them, but I'll turn that over to Greg to filling some of the details there.

Greg: Yes, thanks for the question Neil and really.

Greg: Really didn't do anything different in the second quarter that we did in the first we're completing the wells the same way as Brendan mentioned, we do have wells both in the first and second quarter scattered throughout the whole of our acreage position both on our legacy acreage and on the acquired in cap acreage. So we're just seeing the results of what we would expect to see with our average.

Greg: We're completing the wells the same way. As Brendan mentioned, we do have wells both in the first and second quarter scattered throughout the whole of our acreage position, both on our legacy acreage and on the acquired in-cap acreage. So we're just seeing the results of what we would expect to see with an average type curve. Some of the wells come in slightly above the curve, some of them come in slightly below the curve, but on average, we're very confident in our ability to deliver that type curve, and we feel very comfortable that we're going to deliver on it for not only the rest of this year but years to come, as we think it's a great defining way Greg, and maybe my follow-up for you as well, just one, or even Brent, if you want to jump in.

Greg: Type curve some of the wells come in slightly above the curve some of them come in slightly below the curve, but on average we're very confident in our ability to deliver that type curve and we feel very comfortable that we can deliver on it for for not only the rest of this year, but years to come as we think it's a great.

Greg: Defining way to talk about how our program is going to deliver going forward.

Greg: Hey, Greg and maybe my follow up for you as well.

Greg: Brad do you want to jump in on completions now not just the Permian, but maybe overall just wondering what percent.

Greg: Just on completions now, not just the Permian, but maybe top overall, I'm just wondering what percent is the broader side using tribal track, and also, you know, what you're fully going to, I guess you call it sort of that, the sand mine or sand conveyor, you know, when we were out there seeing it on site, is that what you're using on every pad now? And then sort of a completion side, have you gone to, is that more the standard after you all? Yeah, no, thanks for that, Neil.

Speaker Change: Broader side is using <unk>.

Greg: And also.

Speaker Change: What are you fully going to I guess, you call it sort of that the standby understand can bear.

Speaker Change: Theyre seeing a bottom side is that what youre used it on every pad. So I'm just wondering from sort of a completion side.

Speaker Change: Have you gone to is that more of that standard.

Speaker Change: Yes.

Greg: And yes, in the Permian, we are continuing to execute on trimal frac. It'll make up just over half of our completions this year. We're using the, you know, the wet sand from the local sand mines being delivered to the site and using the sand piles that we've pioneered in the Permian over the last few years.

Greg: Yeah, Thanks for that Neil and yes in the Permian, we are continuing to execute on travel frac it'll make up just over half of our completions this year.

Speaker Change: We're using the.

Speaker Change: The wet sand from the local sand mines being delivered to location.

Speaker Change: Using the sand piles that we've pioneered in the Permian over the last few years. So all of that is what's allowing us to have these industry leading results. It's just our focus on efficiency and logistics and our supply chain management as well as partnering with some really solid industry players to help us deliver these fracs as we think about the other.

Greg: So all of that is what's allowing us to have these industry-leading results. It's just our focus on efficiency and logistics and our supply chain management, as well as partnering with some really solid industry players to help us deliver these fracs. As we think about the other plays in the portfolio, they're also seeing very good completion cycle times. In Montany, while it's a different game, so we have a different stage architecture there, the focus on efficiency and innovation is the same as we have in the Permian.

Speaker Change: Plays in the portfolio are there also seeing very good completion cycle times.

Speaker Change: Montney well.

Greg: Play so we have a different stage architecture there the focus on efficiency and innovation is the same as we have in the Permian.

Greg: You know, in the Permian, we're leaning on completing multiple wells at the same time to improve our cycle time, while in the Montany, we're looking at our real-time frac optimization to tailor the treating schedules to each well to optimize our efficiency there. But in all cases, we feel like our cycle times and well costs and the results we're getting are industry-leading, and that's just our focus on innovation and continuous improvement. And I'm really proud of the teams and how well they're executing right now. Thanks, Greg. Thanks, Neil. Thank you. The next question comes from Arun Jayaram at JPL. Yeah, good morning.

Greg: Permian, we're leaning on completing multiple wells at the same time to improve our cycle time, while in the Montney. We're looking at a real time frac optimization to tailor the treating schedules to each well to optimize our efficiency there, but but in all cases, we feel like our cycle times are well cost and the results. We're getting are industry, leading and that's just our focus on innovation.

Greg: The continuous improvement and just really proud of the teams and how well they are executing right now.

Craig: Thanks, Craig.

Craig: Thanks Neil.

Speaker Change: Thank you next question comes from everyone.

Speaker Change: At J P. Morgan. Please go ahead.

Arun Jayaram: I have a follow-up on slide 11, maybe to Brendan and Greg. I was wondering if you could give us a sense of what you're baking in, in terms of drilling and completion efficiency gains, and if you came to a decision where cycle times continue to maybe outperform your expectations, Brendan, would you be in the camp of, you know, producing more at the same level of CapEx or trending CapEx down?

Everyone: Yes, good morning, I have a follow up on slide 11.

Speaker Change: Maybe to Brendan and Greg.

Speaker Change: I was wondering if you could give us a sense of what you're baking in in terms of drilling and completion.

Speaker Change: Efficiency gains and if you came to the decision where cycle times continue to maybe outperform your expectations. Brendan would you be in the camp of of producing more at the same level of Capex are trending capex down.

Speaker Change: <unk> and <unk>.

Speaker Change: To increase your <unk>.

Speaker Change: Reduction even above what you what you raised this this morning.

Arun Jayaram: Yeah, I love the question, Arun, and love the momentum that the team's creating here. Really, our guidance for the rest of this year and the outlook that we've given for 25 and beyond reflect all the known efficiency gains that we've captured to this point. And really, the pace setters reflect what the future potential is. And so what we baked in are the knowns.

Greg: Yes.

Brendan Michael McCracken: The question Arun and loved the momentum that the teams, creating here really what our guidance for the rest of this year and the outlook that we've given for 25 and beyond what they reflect is all the known efficiency gains that we've captured to this point and really with the Pacesetters reflect is is what's the future.

Greg: Potential.

Brendan Michael McCracken: And what we'd love to do is continue to see the efficiency gains that we've seen over the last several years continue to show up. And so we'll address that in future guidance and annual plans as we roll them out. But to date, we've baked in everything we've got, and what we're highlighting with the pace setters is that, you know, it's physically possible to do even better than the leading efficiencies that we've captured so far. Great

Greg: And so what we baked in as is the knowns and where we'd love to do is continue to see the efficiency gains that we've seen over the last several years continue to show up and so we'll address that in future guidance and annual plans as we roll them out but today, we baked in everything we've got.

Greg: And what we're highlighting with the pace centers is that.

Greg: It's physically possible to do even better than the leading.

Greg: The efficiencies that we've captured so far.

Arun Jayaram: And my follow-up, Brendan, is just on the M&A climate. You know, we continue to see a pretty active A&D market in the Permian Basin. A specific question, there is, as you are aware, a large Midland Basin trade that apparently is coming with Double Eagle. I think OVV and others have been kind of mentioned in the press, but I was wondering if you could comment about how you think about future A&D in the Permian post the unkept transactions. And just any thoughts, is there any credibility to some of these reports?

Speaker Change: Great and my follow up Brendan is just on the M&A climate continued to see a pretty active A&D market in the Permian basin.

Speaker Change: Specific question. There is as you are aware a large Midland basin trade that apparently is coming with double Eagle.

Speaker Change: I think of EV and others have been kind of mentioned in the press.

Speaker Change: But I was wondering if you could comment about how you think about future A&D in the Permian post the uncapped transaction transactions.

Speaker Change: And just any thoughts is there any credibility to some of these reports.

Brendan Michael McCracken: Yeah, for sure, Arun. So, you know, look, I think if we reflect how we've been pursuing this durable return strategy, it's really let us get ahead of the competition and deepen our inventory ahead of some of the price escalation that we've seen in the market. And the result is we've created a business that's really a proven free cash generator. And we've been using that free cash to both return cash to shareholders through buybacks, but also, importantly, by reducing our leverage.

Speaker Change: Yes for sure Arun so.

Speaker Change: Look I think if.

Speaker Change: Reflect in how we've been prosecuting this durable return strategy, it's really let us get ahead of the competition.

Speaker Change: And deepened our inventory ahead of some of the price escalation that we've seen in the market.

Speaker Change: And the result is we've created a business that's really a proven free cash generator in.

Speaker Change: We've been using that free cash to to both return cash to shareholders through buybacks, but also importantly through reducing our leverage in.

Speaker Change: That put us it puts in a place today, where we can be really disciplined and it really just focused on executing the portfolio that we've got and one of the things that we're really pleased to see in this quarter as leverage moving in the right direction, and we think Thats really an important feature for us.

Brendan Michael McCracken: And that puts us in a place today where we can be really disciplined and really just focused on executing the portfolio that we've got. And, you know, one of the things we're really pleased to see in this quarter is leverage moving in the right direction. We think that's really an important feature for us.

Brendan Michael McCracken: And you look at what we've done, you know, highlighted the 1,650 inventory locations since 2021 through a whole series of actions, including organic renewal, to do that really shows that we've got a track record to build that portfolio and make our company better. The now 20% capital efficiency gain that we're seeing year over year, I think is a great proof point of that. To your question, you know, lots of consolidation and speculation.

Speaker Change: When you look at what we've done highlighted the 1600 50 inventory locations since 2021.

Speaker Change: Through a whole series of actions, including the organic renewal to do that really shows that we've got a track record to build that portfolio and make our company better now.

Greg: Now, 20% capital efficiency gain that we're seeing year over year I think is a great proof point of that.

Greg: To your question lots of consolidation speculation.

Brendan Michael McCracken: One thing I'd highlight, it's maybe more of a hidden trend, but it's something we think is actually really important. Over time, what we're seeing is that the leading operators really continue to get more technically sophisticated, and the way that's happening, the sort of avenues that are driving that, it's really hard to catch up if you haven't been stacking these innovations across your business all the way along, and so that leaves us in a place where, you know, prosecuting our strategy means really focusing on getting better, not just on getting bigger. Great Thanks a lot.

Greg: One thing I'd highlight its maybe more of a hidden trend, but it's something we think is actually really important over time, what we're seeing is that the leading operators.

Greg: Continue to get more technically sophisticated and.

Greg: The way that's happening this sort of avenues that are driving that it's really hard to catch up if you haven't been stacking. These innovations across your business all the way along and so that leaves us in a place where.

Greg: Prosecuting our strategy means really focus on getting better not just on getting bigger.

Speaker Change: Great. Thanks, a lot.

Ryan: Yes, Thanks Ryan.

Speaker Change: Thank you. The next question comes from Josh Silverstein at UBS. Please go ahead.

Joshua Ian Silverstein: Yeah. Thanks, Arun. Thank you. The next question comes from Josh Silverstein at UBS. Good morning, guys.

Joshua Ian Silverstein: Fred, just sticking with the improving the balance sheet outlook, you do have a $600 million maturity coming up next year. Just curious what the latest thinking is to address that and how addressing that would impact the current, you know, shareholder return profile of 50% post base dividend. Yeah, hey Josh. Yeah, thanks for the question. I'll kick it to Corey to talk about that maturity in 25.

Josh Silverstein: Hey, Thanks, good morning, guys.

Josh Silverstein: Just sticking with the improving the balance sheet outlook you do have a.

Josh Silverstein: $600 million maturity coming up next year, just curious what the latest thinking is to address that and we're addressing that impact the current shareholder return profile of 50% plus the base dividend.

Greg: Yeah, Hey, Josh yes, thanks for the question I'll kick it to Corey to talk about debt maturity in 'twenty five.

Corey Douglas Code: Yeah, good morning, Josh. I think the outlook we have for free cash flow puts us in a good spot where we can handle it within our existing framework. You know, that's a May maturity, so we've got a fair amount of time before that. So we're not committing to whether we have to refinance it or put it on our credit facility. But we do have enough free cash flow; we can make a pretty significant dent in that just organically.

Corey: Good morning, Josh I think the.

Corey: Outlook, we have for free cash flow puts us in a good spot where we can handle it within our existing framework. That's our may maturity. So we've got a fair amount of time before that so we're not committing to whether we have to refinance it or put it on a credit facility, but we do have enough free cash flow, we can make a pretty significant dent in that.

Corey: Just organically.

Corey Douglas Code: And then on the capital allocation framework, Josh, what I'd say there is... You know, we've been really clear, we're using free cash to drive down that leverage towards the one-times target at mid-cycle prices, and I think sitting here today, as we make that progress, it makes sense to stay in that 50-50. And then once we get to that, it is probably a good time to take a look at, well, should Is it anything different?

Corey: And then on the capital allocation framework, Josh what I'd say there is.

Josh Silverstein: We've been really clear, where we're using free cash to to drive down that leverage towards the one times target at mid cycle prices.

Josh Silverstein: I think sitting here today as we as we make that progress it makes sense to stay in that 50 50.

Corey: Model and then once we get to that is probably a good time to take a look at what should a change is it anything different and I would just highlight we've always said it's been in the program all the way along it. It's it's at least 50% of free cash flow going back to shareholders. So so I think as we as we approach.

Corey Douglas Code: And I would just highlight, we've always said, it's been in the program all the way along, at least 50% of free cash flow going back to shareholders. So I think as we approach and get to that one times leverage, that'll be the time to take a look at that.

Corey: And get to that one times leverage that'll be the time to take a look at that.

Joshua Ian Silverstein: Then maybe looking at the money, there are some changing pricing dynamics up in Canada for condensate and ACO with the startup of TMX and LNG Canada. How are you guys positioning for the improving outlook for both? Will you want to open up some more exposure to ACO, allocate some more capital to the condensate window? How are you thinking about the plan for, I guess, maybe back after this year?

Corey: Great.

Speaker Change: Looking at the Montney, this and changing pricing dynamics up in Canada for condensate in acre with the startup of <unk> and LNG, Canada.

Speaker Change: How are you guys positioning for the improving outlook in both.

Speaker Change: Will you want to open up some more exposure to echo allocate some more capital to the condensate window are you thinking about the plan for I guess, maybe back half of this year and into next year.

Brendan Michael McCracken: Yeah, thanks, Josh. Really unchanged on the allocation front. So we're going to continue to allocate our capital to the condensate window, and really, what's underneath that is we believe strongly that the fundamentals for condensate to remain a premium product in Canada are very much intact. And you mentioned the startup of Trans Mountain being an incremental tailwind to those fundamentals. And we continue to see the need for significant condensate imports into Western Canada to supply that diluent demand from oil sands producers.

Corey: Yeah, Thanks, Josh really unchanged on the allocation front. So we're going to continue to allocate our capital to the condensate window.

Corey: Really what's underneath that is we believe strongly the fundamentals for condensates remain a premium product in Canada are very much intact and you mentioned.

Corey: The startup of Trans mountain being an incremental tailwind to those fundamentals.

Corey: And we continue to see the need for significant condensate imports into western Canada to support supply that diluent demand from the oil sands producers in.

Corey: So we see that that premium pricing staying intact.

Brendan Michael McCracken: And so we see that premium pricing staying intact. On the Condensate side, and then on the ACO side, we're probably in the cautious camp, so we're very excited and looking forward to seeing LNG Canada start up.

Corey: On the condensate side and then on the <unk> side, we're probably in the cautious camp. So we're very excited and looking forward to seeing LNG, Canada startup, we think that is going to be a real positive or Canada, and montney gas producers, but.

Neil Singhvi Mehta: We think that is going to be a real positive for Canada and Montany Gas producers, but it's probably not a structural game changer to ACO pricing relative to NYMEX, and that's just because there is a lot of gas resources in Canada, and so even taking that incremental two BCF a day offshore to international markets is going to be helpful, but probably not a long-term re-rate of ACO, and so our strategy continues Right now, we're in a really great position there with, you know, substantially all or close to all of our Canadian gas being priced outside of ACO.

Corey: It's probably not a structural game changer to echo pricing relative to Nymex and that's just because there's a lot of gas resource in Canada, and so even taking that incremental two bcf a day.

Corey: Offshore to international markets is going to be helpful, but probably not a long term re rate of <unk> and so our strategy continues to be to price diversify on the gas side and get market access to multiple downstream markets for our Canadian gas.

Corey: <unk>.

Corey: Right now we're in a really great position there with with.

Corey: Substantially all or close to all of our Canadian gas being priced outside of eco that's clearly a good thing in the current market and we think long term the right move there might be transient periods, where were co tightens in and.

Neil Singhvi Mehta: That's clearly a good thing in the current market, and we think long-term it's the right move. There might be transient periods where ACO tightens in, and that's great as well, but I think long-term we continue to believe in diversifying away from the Western Canadian market. Thank you. The next question comes from Neil Mehta. Yeah, good morning team, Brendan's team.

Corey: That's great as well, but but I think long term, we continue to believe in diversifying away from the western Canadian market.

Corey: Thank you next question comes from Neil Mehta with Goldman Sachs.

Speaker Change: Go ahead.

Neil Singhvi Mehta: Yes, good morning, Brandon.

Brendan Michael McCracken: Just want to talk about the base decline rates in their portfolio. You talked about that in the context of the Anadarko, but in general, we've seen them continue to move lower on a BOE basis. You talk about what you're seeing across the portfolio that's enabling that. Yeah, I'll kick it to Greg to talk about some of the great things that our team's been doing to drive that, but, you know, this is a combination of both active-based production management by our team, but also, as we have stayed in this maintenance-level mode over time, you get a declining decline rate, a dropping decline rate just as that production base matures and you get further out on the type curves for the work that you're doing.

Neil Singhvi Mehta: Just wanted to talk about the base decline rate in the portfolio you talked about that in the context of the Anadarko.

Speaker Change: In general we've seen them continue.

Speaker Change: Can move lower on a Boe basis.

Speaker Change: Can you talk about what Youre seeing.

Speaker Change: Across the portfolio, that's enabling that and the sustainability thereof across the four different.

Speaker Change: Thank you operator.

Speaker Change: Yes, maybe I'll kick it to Greg to talk about some of the great things that our team has been doing to drive that but.

Speaker Change: This is a combination of both active.

Greg: Base production management by our team, but also as we have stayed in this maintenance level mode over time, you get it.

Speaker Change: A declining.

Greg: Decline rate dropping a decline rate just as that production base matures and you get further out on the on the type curves for the for more wells in the mix and so we're probably in the mid thirty's on a decline rate across the whole portfolio and then the notable exception, which you highlighted was the.

Brendan Michael McCracken: And so, we're probably in the mid-30s on a decline rate across the whole portfolio, and then the notable exception, which you highlighted, was Anadarka, which is actually now, you know, well under 20% on the base decline.

Greg: Anadarko, which is actually now.

Greg: Well under 20% on the base decline, but over to Greg on some of the specifics of how we're getting there.

Greg: But over to Greg on some of the specifics of how we're getting there. Yeah, just thanks for your question, and I really just want to compliment the teams on what a great job they've done just doing the daily blocking and tackling that it takes to keep these wells on and minimize decline as well as minimize, you know, things like frack interference. That was one of the big things that we benefited from with our NCAP transaction.

Greg: Yes, just thanks for your question and it really just want to compliment the teams on what a great job they've done just doing the daily blocking and tackling that it takes to keep these wells on and minimize decline as well as minimizing things like Frac interference that was one of the big things that we benefited from with our Encap transaction.

Greg: We were able to spread out the activity across that acreage footprint, which the previous operators were not able to do, and that's allowed us to, you know, flatten that decline. But it's also the actions of the team, just things like, you know, routine maintenance, optimizing artificial lift, avoiding downtime, and just really planning and executing their business well and doing that across the portfolio. All of the assets, we're seeing a flatter base decline year over year, and we just anticipate those guys continuing to work to flatten those base declines. Thanks, yeah. The follow-up is just on 25. I recognize it's early.

Greg: We were able to spread out the activity across that acreage footprint, which the previous operators were not able to do and that's allowed us to flatten that decline, but it is also the actions of the team just things like.

Greg: Routine break fix optimizing artificial lift avoiding downtime and just really planning and executing their business well and doing that across the portfolio. All of the assets. We're seeing a flatter base decline year over year, and just anticipate those guys continuing to work to flatten those base declines.

Speaker Change: Okay. Thanks.

Speaker Change: Follow up is just on 25 I recognize it's early but.

Neil Singhvi Mehta: But, you know, if I think about CapEx, you're at 2.25 to 2.35 billion this year; it's called 2.3, I think. What are the puts and takes as you think about 2025 capital? Yeah, I think, obviously, the one that's live right now, Neil, that we're in the midst of doing is our price discovery for the service sector. And so that'll be a really important next couple of months here as we get all that in place and really understand how pricing is shaping up for 2025.

Speaker Change: Think about Capex youre at 2.25 to $2 $35 billion. This year all three at the midpoint what are the puts and takes as you think about 2025 cap at all that we should be.

Speaker Change: In the back of our minds.

Speaker Change: Yes, I think obviously the the.

Speaker Change: One that's live right now.

Speaker Change: That we're in the midst of doing is our price discovery from the service sector.

Speaker Change: And so that'll that'll be a really important next couple of months here as we as we get all of that in place and really understand how pricing is shaping up for 25 million.

Neil Singhvi Mehta: And so that could be a big driver one way or the other. And, you know, I would say, generally, our view here is probably fairly consensus, which is, given the activity levels that we're seeing across industry, there's some potential for a deflationary bias, probably rather than inflation, given the market dynamics. But, you know, look, we got to get through that work and really understand that before we make anything declarative.

Speaker Change: So that could be a big driver one way or the other.

Speaker Change: And I would say generally.

Speaker Change: Our view here is probably fairly consensus which is given the activity levels that we're seeing across the industry theres some potential.

Speaker Change: For deflation bias, probably rather than inflation given the market dynamics.

Speaker Change: But look we got to get through that work and really understand that.

Speaker Change: We make anything.

Speaker Change: Declared a.

Brendan Michael McCracken: And then, you know, really, the other thing is continued efficiency capture. And can we continue to drive some of the gains that we've seen over the last several years that have resulted in a pretty substantial enhancement of our capital efficiency? And so when we put all of that in the basket today, net-net, what we're steering people to is this outlook of, you know, $2.3 billion holding 205,000 barrels a day of crude and condensate flat year over year. And that's the best way to be thinking about the business as we work through the next several months. Yeah, thanks Neal. Thank you.

Speaker Change: And then.

Speaker Change: The other is continued efficiency capture and can we continue to drive some of the gains that we've seen over the last several years that have <unk>.

Speaker Change: Have resulted in a pretty substantial enhancement to our capital efficiency and so when we put all of that in the basket today net net where we're steering people to as this outlook of.

Speaker Change: $2 3 billion holding the 205000 barrels a day of crude and condensate flat year over year.

Speaker Change: That's the best way to be thinking about the business as we work through the next several months.

Brad: Thanks, Brad.

Neil Singhvi Mehta: Thanks Neil.

Speaker Change: Thank you next question comes from Doug Leggate at Wolfe Research. Please go ahead.

Douglas George Blyth Leggate: The next question comes from Doug Leggat at Wolfson. Hey guys, thanks for taking my question. Brendan, I know there's no precision here and we like to pretend that there is, but I want to hit your comment about the 7 to 10 years, $2.3 billion. I seem to recall at the time of the NCAP deal, we were talking about how we've addressed the inventory issues, we've gotten in front of it. The timing of the deal was obviously fantastic, given everything that was going on, but the 7 to 10 years? I thought it was probably close to the 15 plus. Can you help reconcile the gap for me?

Douglas George Blyth Leggate: Hey, guys. Thanks for taking my question.

Brendan Michael McCracken: Brendan I know there's.

Speaker Change: No precision.

Speaker Change: We like to pretend that I want to.

Speaker Change: Want to hit your comment about seven to 10 years to $3 billion.

Speaker Change: I seem to recall at the time of the uncapped deal we were talking about we've addressed the inventory issues, we've gotten in front of it timing obviously the deal was fantastic given everything that was going on but it's seven to 10 years I thought it was probably 15 plus can you help reconcile the gap for me.

Brendan Michael McCracken: Yeah, I really appreciate the question, Doug, and it's quite an insightful question. You know, what we're trying to draw a distinction between there is from a total premium inventory; we've definitely shifted ourselves into that ideal window of 10 to 15. And remember, the premium designation we use is a well that can deliver a rate of return higher than 35% at a price deck of $55 WTI and 275 NYMEX. So it's a pretty high bar to be able to do that.

Speaker Change: Yeah, No I really appreciate the question, Doug and it's quite insightful question.

Speaker Change: The what we're trying to draw a distinction there two is from a total premium inventory, we've definitely shifted ourselves into that ideal window of 10 to 15.

Speaker Change: And remember the premium designation, we use is a well that can deliver a rate of return higher than 35% at a price deck of $55 WT I and $2 75, Nymex. So it's a pretty high bar to be able to do that we deliberately whole day.

Brendan Michael McCracken: You know, we deliberately hold a, call it, a conservative view of that mid-cycle price just to create discipline in how we think about that inventory depth. And so that is the sort of 10 to 15 cutoff that you're talking about. And then what we're highlighting with the 7 to 10 is if you take our current capital efficiency, this idea of can you hold 205,000 barrels a day for $2.3 billion of capital, with our current cost structure, and current capital efficiencies, what we're seeing is we have an inventory that would be able to do that for 7 to 10 years.

Speaker Change: Call. It a conservative view of that mid cycle price just to create a discipline.

Speaker Change: And how we think about that inventory depth and so that is the <unk>.

Speaker Change: 10% to 15.

Speaker Change: Cutoff that you're talking about and then what we're highlighting with the 7% to 10 is if you take our current capital efficiency. This idea of can you hold 205000 barrels a day for $2 $3 billion of capital with our current cost structure current capital efficiencies. What we're seeing is we have an inventory that would be able to do that.

Speaker Change: For seven to 10 years.

Brendan Michael McCracken: And so buried in those two things that I just told you is that we're delivering a higher program return than 35% today. And so the question, or the transparency that we're trying to answer for our investors is, hey, how long can the business continue to deliver that return that you're generating today?

Speaker Change: So buried in those two things that I. Just told you is that we're delivering a higher program return than 35% today.

Brendan Michael McCracken: And so when we compare that across the industry, that screens really well compared to how we see peers setting up from an inventory quality and current capital efficiency perspective. So that's the transparency we're trying to illustrate for our investors. Very clear.

Speaker Change: And so the question or the transparency that we're trying to answer for our investors is hey, how long can the business continue to deliver that that return that you're generating today.

Speaker Change: So when we compare that across the industry that screens really well.

Speaker Change: Compared to how we see peers setting up from an inventory quality and current capital efficiency perspective. So that's the transparency, we're trying to illustrate it for our investors.

Douglas George Blyth Leggate: Thanks for that answer, Brendan. My follow-up is a quick one. Slide 12.

Speaker Change: Very clear thanks for that answer my follow up is a quick women's socks slide 12, Im just curious if you can.

Douglas George Blyth Leggate: I'm just curious, if you don't really talk much about the well performance and the improvements you've seen in the Montney, I'm wondering if this was just an isolated area or if there was any read-through to the broader portfolio quality, if you like, as this type of curve seems to be outperforming your legacy wells in the Montney. I'll leave it there.

Speaker Change: We don't really talk much about the well performance and the improvements you've seen in the month.

Speaker Change: I'm wondering if this was just an isolated area or if there was any read through to the broader portfolio quality of life.

Speaker Change: <unk> type curve seems to be outperforming your legacy wells in the Montney.

Speaker Change: Leave it there thank you.

Greg: Thank you. Yeah, thanks, Doug. Yeah, I really appreciate that one as well. That 15 to 28 pad is tracking above our 24 program type curve. And just like what you saw in the Permian, we'll see statistical distribution around that type curve mean in the Montney.

Speaker Change: Yes, Thanks, Doug Yeah, I really appreciate that.

Speaker Change: That one as well.

Speaker Change: That 15 to 28 pad is tracking above our 24 program type curve and just like what you saw in the Permian we'll see.

Speaker Change: Statistical distribution around that type curve, meaning in the montney and so well.

Greg: And so what we were really trying to highlight there is, hey, why was your Q2 production so strong relative to plan and relative to guidance? And, you know, on the back of two things, the 15 to 28 pad performance as well as accelerating some of the onstreams in the Montney in the corridor. And so, we would expect, I think the best way to plan the business is for us to continue to perform at that type of curve over the rest of the year.

Speaker Change: We were really trying to highlight there is hey, why was your Q2 production so strong relative to plan and relative to guidance.

Speaker Change: Is that on the back of two things the 15 to 28 pad performance as well as accelerating some of the on streams in the montney in the quarter and so.

Speaker Change: We would expect I think best way to plan. The business is for us to continue to perform at that type curve over the rest of the year.

Greg: You know, I would just say this is part of the relentless drive to keep making the business better if the team can continue to find ways to drive completion design that gives us a better type curve. We'll bake that into future guides, but for now, the type curve we've got there is the right one for the full year.

Speaker Change: I would just say this is part of the relentless drive to keep making the business better. If the team can continue to find ways to drive completion design that gives us a better type curve, we'll bake that into to future guidance, but for now the type curve. We've got there is the right one for the full year.

Douglas George Blyth Leggate: Terrific. Thanks so much, guys. Yeah, thanks, Doug. Thank you. The next question comes from Gabe Daoud. Thanks for taking my question. Whether or not the current equipment level, um, and just call it, you know, 130 net chills a year if that holds current volumes of 123,000 miles a day, including Condi flat, more or less. Yeah, I'll flip that to Greg to fill in.

Speaker Change: Terrific. Thanks, so much guys.

Douglas George Blyth Leggate: Thanks, Doug.

Douglas George Blyth Leggate: Thank you next question comes from Jade.

Speaker Change: Please go ahead.

Jade: Thanks, Good morning, everyone and thanks for taking my question.

Jade: Maybe hoping.

Speaker Change: Get a little more color on that.

Speaker Change #115: Whether or not the current equipment.

Speaker Change: Equipment level.

Speaker Change: Call. It 139 until the year that hold current volumes of 123000.

Speaker Change: They include economy flat more or less from here.

Speaker Change: Yeah, I'll flip that to Greg to to fill in.

Gabriel J. Daoud: So, yes, we're on track for the same number of tills that we've been guiding to. But, as you recall, as we came off the NCAP transaction, our rate was quite a bit higher than our long-term run rate. And so, you know, the first quarter, I believe it was around 130 in the Permian, 123 this quarter.

Greg: So yes, we're on track for the for the same number of tools that we've been guiding to but as you recall as.

Speaker Change: As we came off the Encap transaction, our rate was quite a bit higher than our long term run rate and so the first quarter I believe it was around 130 in the Permian 123. This quarter. It will continue to come down slightly as it levels out of that 115 to 120 range. So we're pretty close to a run rate there.

Greg: It'll continue to come down slightly as it levels out in that, you know, 115 to 120 range. So we're pretty close to our run rate there in the Permian, but we feel like somewhere under 120 is probably a rate that we're going to flatten out at over time for this type of activity rate. Maybe, Gabe, just to fill in across the portfolio there, what we'd expect to see through the back half of the year is the Montany sit around 30,000 barrels a day. The Uint and the Anadarko both sit in the high 20s, respectively.

Greg: In the Permian, but we feel like.

Greg: They're just under 120 is probably a rate that we're going to flatten out at overtime for this type of activity rate, maybe gave just to fill in across the portfolio there.

Speaker Change: But we would expect to see through the back half of the year as the money sit around 30000 barrels a day.

Speaker Change: You enter in the Anadarko, both sit in the high Twenty's, respectively, and then the balance.

Brendan Michael McCracken: And then the balance coming out of the Permian, which is, Greg said, probably just underneath 120 to get to that second half guidance that we've put out. Thanks, Brendan. Thanks, Greg. That's very helpful. And then maybe as a follow-up, you talked about the $2.3 billion capital number, obviously, but just curious, at the asset level, you did highlight some pretty attractive pace setters from a D&C standpoint in Midland and Mottany. Can you talk a little bit about confidence levels in those pace setters representing the new go-forward D&C figures for those two plays?

Speaker Change: Coming out of the Permian, which as Greg said in probably just just underneath 120.

Speaker Change: To get to that second half guidance that we've put out.

Speaker Change: Yes.

Brian: Thanks, Brian Thanks, Greg.

Speaker Change: That's helpful. And then maybe as a follow up you talked about the $2 3 billion in capital number obviously, but just curious at the asset level, you did highlight some pretty attractive et cetera.

Speaker Change: D&C standpoint in Midland in the Montney, just curious can you talk a little bit about confidence levels in those centers.

Speaker Change #106: Centers, representing the new go forward D&C figures for those two please thanks guys.

Gabriel J. Daoud: Thanks, guys. Yeah, the perspective we've been taking on this is, you know, we like to live in the world of this is what we're delivering today. And, you don't have to believe in some future story.

Speaker Change: Yeah.

Speaker Change: I think that the.

Speaker Change: <unk>, we've been taking on this as you know we like to live in the World of this is what we're delivering today and you don't have to believe in some future story, but these are the these are the results youre seeing today and then.

Speaker Change: The relentless drive we have is to try and always be converting those pacesetters into averages over time.

Speaker Change: We like the track record of what we've been able to do on that front and I think it's more of a stay tuned as as we proceed through the rest of this year and into next but but excited about what the team is delivering there on the leading edge.

Brendan Michael McCracken: But these are the results you're seeing today. And then, you know, I think the relentless drive we have is to try and always be converting those pace setters into averages over time. And, you know, we like the track record of what we've been able to do on that front. And, you know, I think it's more of a stage set as we proceed through the rest of this year and into next, but I'm excited about what the team's delivering there on the leading edge. Thanks, Brendan. Yeah, thanks Gabe.

Brendan Michael McCracken: Thanks Brendan.

Brendan Michael McCracken: Yes, Thanks Keith.

Speaker Change #101: Thank you next question comes from Greg Pardy at RBC capital markets. Please go ahead.

Gabriel J. Daoud: Thank you. The next question comes from Greg Pardy at RPC. Yeah, thanks. Good morning.

Greg M. Pardy: And I'd really echo the, um, the extra two strong execution again in this quarter. Wanted to come back, um, just to Uinten. I guess my question is, is it core, and can you perhaps give us a sense as to how large, Um, how large that segment could become maybe from a product? Yeah, hey, Greg, yeah, thank you. Yeah, look, we really like Uinta. It's been on an incredible trajectory over the last year, where we've doubled production. And just, you know, a couple things that are really important about Uinta. It's very oily, so over 80% oil on a BOE basis. And it's also very undeveloped.

Greg M. Pardy: Yes, thanks, good morning.

Speaker Change: I'd really accurately.

Speaker Change #110: <unk> strong execution again in this quarter wanted to come back.

Greg M. Pardy: Just to the Uinta and I guess my question is as you know.

Speaker Change: Is it core and can you, perhaps give us a sense as to how large.

Speaker Change: How large that segment becomes maybe from a production standpoint over the next few years.

Speaker Change: Yeah, Hey, Greg Yeah. Thank you.

Speaker Change: Yes look we really like the Uinta.

Speaker Change: It's been on an incredible trajectory over the last year, where we've doubled production.

Speaker Change #102: And just.

Speaker Change #102: Couple of things that are really important about the uinta, it's very oily.

Speaker Change #102: So over 80% oil on a Boe basis.

Speaker Change #102: And it's also very undeveloped so over 80% of our acreage position in the core of the play is undeveloped.

Brendan Michael McCracken: So over 80% of our acreage position in the core of the play is undeveloped. And really, what the team has done, the team's really delivered on that. It's pretty impressive what they've accomplished on both market access, but also productivity and cost. And where that puts us is where the returns and the margins that we're generating in UINT are really competitive with the Permian, you know, so competitive with one of the best plays in North America from a return and margin perspective. So, you know, I'm pretty excited about what's going on.

Speaker Change #103: And really what the team has done the team has really delivered it's pretty impressive what they've accomplished on both market access.

Speaker Change #103: But also well productivity and well cost.

Speaker Change: And where that's put us as where the returns and the margins that we're generating in the Uinta are really competitive.

Speaker Change: With the Permian.

Speaker Change: So competitive with one of the best plays in North America from a return and margin perspective.

Speaker Change: So pretty excited about what's going on I think the way to expect from a trajectory perspective is for us if we keep the company in the maintenance levels. So this is.

Brendan Michael McCracken: I think the way to expect from a trajectory perspective is for us, if we keep the company at the maintenance level, so this outlook of 205,000 barrels a day, we would see the U.N. stay pretty flat in that. And so that would be in the high 20s for barrels a day, and we think that's the right place to settle that one in. I think we have the ability to grow it if we choose, but if we're not growing total company production, there's not a motive to grow the U.N. at the expense of any of the other assets.

Speaker Change: Outlook of 205000 barrels a day.

Speaker Change: We would see the Uinta stay pretty flat in that and so that would be in the high twenty's.

Speaker Change: Sure for barrels a day and we think thats the right place to to settle that went in we have the ability to grow it if we choose but if we're not growing the total company production theres not a motive to to be growing the uinta at the expensive of any of the other assets. So I would expect it to stay pretty stable.

Brendan Michael McCracken: So I would expect it to stay pretty stable as we head through the back end of this year and into 2025. All right, that makes a lot of sense. And then maybe just a follow-up.

Speaker Change: As we head through the back of this year and into 'twenty five.

Speaker Change: Okay, Alright that makes a lot of sense and then maybe just.

Greg M. Pardy: I thought I heard Greg say that there was a one-time royalty adjustment. Um, how much of a volumetric adjustment? Yeah, it's probably, I'll just give the headline and then Greg can fill in on the nature of the adjustment, but it's probably about three quarters of the gas outperformance in 2Q, which was about 100 million a day extra. But maybe Greg can just give a little more color on what drove that royalty adjustment

Speaker Change #112: A follow up I thought I heard Greg say that there was a one time royalty adjustment the montney in Q2 and I'm just wondering.

Speaker Change #105: How much of a volumetric impact that would have had.

Speaker Change: Yeah, it's probably I'll just give the headline and then Greg can fill in on the nature of the adjustment, but it's probably about three quarters of the gas outperformance in in <unk>, which was about 100 million a day extra.

Greg M. Pardy: But maybe Greg can you just give a little more color on what drove that royalty adjustment, yes. Thanks Brendan.

Greg M. Pardy: Yeah, thanks Brendan, and that's spot on. Of the 100 million a day, about 75 percent of that was the royalty adjustment, and there are two things that go into that. One, as we see lower commodity prices, we were on a sliding scale royalty system in Canada, and so with lower commodity prices, we actually pay a lower royalty to the crown, and that means that we get to keep more of the net production for ourselves.

Greg: <unk> of the 100 million a day.

Greg: The.

Greg M. Pardy: About 75% of that was the royalty adjustment and there's two things that go into that one as we see lower commodity price. The we were on a sliding scale royalty system in Canada, and so with lower commodity price, we actually pay a lower royalty to the crown and that means that we get to keep more of the net production.

Greg: For ourselves so that caused a good portion of the beat but we also had a prior period adjustment, where we went back and looked at the actual prices being received by the the average producer in the basin and previous quarters and that was lower than we had projected and so that caused a one time adjustment there so I'd say <unk>.

Greg: So that caused a good portion of the beat, but we also had a prior period adjustment where we went back and looked at the actual prices being received by the average producer in the basin in previous quarters, and that was lower than we had projected, and so that caused a one-time adjustment there. So I'd say probably a third of the adjustment was due to low prices in the quarter, and then the PPA made up the rest.

Greg: We are a third of the adjustment was due to low prices in the quarter and then the PPA made up the rest.

Greg: And just to close that out, Greg, what that effectively means is there weren't more gross BTUs produced; we just got to keep more of them as a result of the split between us and the royalty owner. And then the other thing to just recall is that we've not allocated capital to growing gas production. That's just an associated gas stream that's coming out of our condensate investments. Thanks very much.

Greg: To close that out Greg.

Greg M. Pardy: That effectively means is there werent more gross btu's produced we just got to keep more of them as a result of the split between us and the royalty owner.

Speaker Change #119: And then the other thing to just recall back is that we have not allocated capital to growing gas production.

Speaker Change #104: Thats, just an associated gas stream thats coming out of our condensate investments.

Speaker Change #111: Understood Thanks very much.

Greg M. Pardy: Yes, Thanks, Greg.

Speaker Change #122: Thank you next question comes from Rajavi at Wells Fargo. Please go ahead.

Brendan Michael McCracken: Yeah, thanks, Greg. Thank you. The next question comes from Roger Read at... Yeah, good morning, how are you? Yeah, I agree. Good morning.

Rajavi: Yes, good morning, how are you.

Speaker Change #111: Yes, great Roger good morning.

Roger David Read: I just wanted to come back on some of the LOE guidance. It's understandable that volumes probably come down here in the second half of the year, so some of the LOE increased, you know, per unit of production going up makes sense. But I was just curious, is there any...

Rajavi: I just wanted to come back on some of the LOE guidance I mean understandable that volume, it's probably come down here in the second half of the year. So some of the LOE increase.

Speaker Change #158: Per unit of production going up makes sense, but I was just curious is there any.

Roger David Read: Anything else we should be watching, or as you think about the range of LOE, how much is controllable, and how much is just, you know, going to be volume? Yeah, thanks. Thanks, Roger. I'll kick it to Greg to talk about some of the specifics here that are some of the things we've been doing to make cost control on the LOE really show up in the results. But you've hit on the big feature, which is a little bit of the per unit effects on the production. But kick it to Greg on some of the things the team's doing on LOE.

Speaker Change #114: Thing else, we should be watching or as you think about the range of how much is <unk>.

Speaker Change #123: Controllable and how much is just going to be volume driven.

Greg M. Pardy: Yes. Thank you thanks, Roger I'll kick it to Greg to talk about some of the specifics here there were some of the things we've been doing and make cost control on the LOE.

Greg M. Pardy: Really show up in the results, but but you've hit on the big feature which is a little bit of the per unit effects on the production, but a kicker to Greg on some of the things the team is doing on LOE.

Greg: Yeah, thanks for the question. And, you know, again, just really proud of the job the teams have done to push back on, you know, we've seen general deflation on the capital side of our business, but on the expense side, the costs have been really pretty sticky due to high labor costs, and labor is a big input there on the LOE side. So the teams have done a great job just minimizing the, you know, the break-fix work, keeping their wells up and online more and doing a great job with automation. We've got our operations control centers that we use to monitor the wells to predict when they're going to come offline and then respond quickly when they do come offline.

Greg M. Pardy: Yeah. Thanks for the question and.

Speaker Change #135: I'm, just really proud of the job the teams have done to to push back on we've seen general deflation on the capital side of our business, but on the expense side. The cost have been really pretty sticky due to high labor costs and labor is a big <unk>.

Greg M. Pardy: Input there on the LOE side. So the teams have done a great job just minimizing the break fix work keeping their wells up and online more and doing a great job with automation, we've got our operations control centers that we use to monitor the wells to predict when they're going to come offline and then respond quickly when they do come off.

Brendan Michael McCracken: And all of those things together allow us to keep the wells up more and generate more production. And that, you know, while keeping the absolute costs flat, if you're able to generate more production, as you observed, then you get a lower unit metric. But really, just a great job of blocking and tackling from all the teams across all four of the plays. One of the things I'll just highlight, and we've mentioned it before, but we did remove a lot of the summertime risk of high power prices in the Permian, which we identified as a risk factor coming into this year.

Greg M. Pardy: And all of those things together allow us to keep the wells up more and generate more production.

Greg M. Pardy: While keeping the absolute cost flat, if youre able to generate more production. As you observed then you get a lower unit metric, but really just a great job of blocking and tackling from all of the teams across all four of the place.

Speaker Change #126: One of the things that I'll, just highlight and we've mentioned it before but we did remove a lot of the summertime risk to high power prices in the Permian, which which we identified as a risk factor coming into this year and so we've got about 80% of our summer power needs in the Permian there.

Brendan Michael McCracken: And so we've got about 80% of our summer power needs in the Permian there at firm prices, so forward prices, that are advantaged relative to the current market. And so that's another feature the team did a nice job of getting out in front of and managing the potential for some cost inflation in our LOE structure. Appreciate that. The other question I had was just sort of a follow-up on the Permian with the Matterhorn pipeline kicking off this quarter.

Speaker Change #126: At firm prices so forward prices.

Speaker Change #126: That are advantaged relative to current market and so that's another feature that team did a nice job of getting out in front of and managing the potential for some some cost inflation in our <unk> structure.

Brendan Michael McCracken: Any sort of immediate impacts that you would expect out of that? I mean, the most immediate impact would be the impact of WAHA pricing, where we have a small amount of exposure. It doesn't have a huge revenue influence when you think about it from the corporate perspective, but we do have a little bit of WAHA gas exposure that we inherited with the NCAP assets that we acquired last year.

Speaker Change #109: I appreciate that and the other question I had was just sort of a follow up in the Permian.

Speaker Change #109: Matterhorn pipeline kicking off this quarter.

Speaker Change #118: The immediate impact that you would expect.

Speaker Change #109: <unk> out of that.

Speaker Change #125: I mean, the most immediate impact will be the impact of Wahhab pricing, where we have a small amount of exposure. It doesn't doesn't have a huge revenue influence when you think about it from a corporate perspective, but we do have a little bit of Oaxaca gas exposure that we inherited with the <unk> assets that we acquire.

Roger David Read: So that's probably the most immediate effect, Roger, but otherwise, just good to see another piece of pipe infrastructure built out of the Permian. You know, I don't think there's any spoiler alerts here that there will need to be more in the future, but good to see this one coming and, you know, I think for us, you know, just we're well insulated on the gas takeaway side at the moment, but helpful to have more infrastructure in the basin for sure. Great.

Roger: <unk> last year, so that's probably the most immediate effect, Roger but but otherwise just good to see another.

Speaker Change #109: Piece of pipe infrastructure built out of the Permian.

Speaker Change #144: I don't think Theres any spoiler alert here that there will need to be more.

Roger: In the future, but are going to see this one coming in.

Speaker Change #107: I think for us.

Speaker Change #107: Just.

Speaker Change #107: We're well insulated on the gas takeaway side at the moment and but but helpful to have more infrastructure in the basin for sure.

Speaker Change #113: Great. Thank you.

Speaker Change #124: Thank you.

Speaker Change #113: Yes.

Speaker Change #104: Thank you next question comes from Kelly.

Roger David Read: Thank you. Thank you. Thank you. The next question comes from Carly Ackermann from Bank of America. Hey guys, good morning. My first question is about Anadarko.

Speaker Change: From Bank of America. Please go ahead.

Kelly: Hey, guys good morning.

Speaker Change #120: My first question is on the Anadarko.

Carly Ackermann: Brendan, you mentioned that the 24 program is repeatable going forward. In that program this year, the Anadarko declines, granted with an improving base, but wondering when that asset plateaus at the current activity set, and whether this asset, which isn't consuming a lot of capital, is actually a core piece of your portfolio. Yeah, great question. Yeah, we're really pleased to see the Anadarko performance.

Speaker Change #120: Brandon you had mentioned that the 24 program into thinking about going forward.

Speaker Change #138: In that program this year at the Anadarko with clients granted.

Speaker Change #117: In improving base, but wondering when that asking a plateau, we've got the current activity and whether this assay, which is consuming a lot of capital is accident quarter piece of your portfolio.

Speaker Change #127: Yes, great question.

Speaker Change #131: Really pleased to see the Anadarko performance in and we're really at that point now where it's stabilizing out in that high twenties.

Brendan Michael McCracken: And we're really at that point now where it's stabilizing out in the high 20s on the crude and condensate rate, and that would be the kind of starting point for our 25 program. And so we've got a relatively small capital program but a big free cash flow base. And that's the tremendous role that the Anadarko asset is playing in our portfolio today. Very capital efficient, the returns compete head-on with each of the other three assets in the portfolio.

Speaker Change #131: On the crude and condensate.

Speaker Change #136: And that would be the <unk>.

Speaker Change #117: Kind of going in.

Speaker Change #117: Starting point for our 25 program and so we've got a relatively small capital program, but maintaining a big free cash flow base.

Speaker Change #104: That's the.

Speaker Change #104: Tremendous role that the Anadarko asset is playing in our portfolio today.

Speaker Change #104: Very capital efficient returns compete heads up with with each of the other three assets in the portfolio and so we'll do the work here over the next several months to figure out exactly the right activity level in 'twenty five, but we think it is it's probably going to be in a maintenance level just like what we described.

Carly Ackermann: And so we'll do the work here over the next several months to figure out exactly the right activity level at 25. But we think it's probably going to be at a maintenance level, just like what we described earlier on Uinta, where now that we've got those two programs pretty balanced on scale and performing very well on returns, it probably makes sense to just have them stay pretty stable in the portfolio over time.

Speaker Change #104: Earlier on the Uinta.

Speaker Change #104: We're now that we've got those two programs pretty balanced on scale and performing very well on returns.

Speaker Change #104: It probably makes sense to just have them stay pretty stable.

Speaker Change #104: In the portfolio over time.

Carly Ackermann: I appreciate that. My next question is also on the 25 program, which is going to be repeated this year. In the Permian, you guys recently added a sixth rig, and I suppose you'll keep that running for 25.

Speaker Change #121: I appreciate that my next question is also on the 25 program, which is going to be repeated this year in the Permian you guys recently added a sixth rig and I suppose you'll keep that running per 25. So wondering if we're sending out more and more capital efficient program you guys here looks to be some room for non D&C capital.

Brendan Michael McCracken: So wondering if we're setting up for a more capital efficient program, because there looks to be some room for non-DNC capital to sort of roll on 25. Yeah, sitting here today with the efficiency gains that we've captured, and I mentioned earlier, this sort of basis of, The forward look captures all the known efficiency gains that we've got in hand today. We can probably back off from that 6th rig pace and hold the Permian flat in 25.

Speaker Change #152: Sort of roll in 'twenty five.

Speaker Change #134: Yes, sitting here today with the with the efficiency gains that we've captured I mentioned earlier that sort of basis of.

Speaker Change #146: The forward look captures all the known efficiency gains that we've got in hand today, we probably can back off of that sixth rig pace.

Speaker Change #146: Hold the Permian flat in 'twenty five so.

Brendan Michael McCracken: So, you know, we don't want to get too far over our skis on the 25 program because that's, you know, really a work in progress internally at the moment. But, you know, that's where the numbers would shake out today if we looked at the tills, just the sort of thousands of feet we need to bring on stream in 25. You wouldn't need 6 full rigs all year.

Speaker Change #121: I don't want to get too far over our skis on the 25 program because thats really a work in progress internally at the moment, but.

Speaker Change #121: That's where the numbers would shake out today, if we looked at the pills.

Speaker Change #121: Just sort of thousands of feet, we need to bring on stream in 25, you wouldn't need six full rigs all year, so that could be some time in 25, we'd make that pivot back from six to five.

Brendan Michael McCracken: So that could be sometime in 25 when we make that pivot back from 6 to 5. I appreciate it. Thanks, Mark. Yeah, thank you.

Speaker Change #121: I appreciate it thanks Morgan.

Morgan: Yes. Thank you.

Carly Ackermann: Thank you. Your next question comes from Nitin Kumar at... Hi, good morning, Brendan and team. Thanks for taking my questions.

Speaker Change #132: Thank you. Your next question comes from Nick Kumar.

Speaker Change #143: Please go ahead.

Nitin Kumar: Hi, Good morning, Brennan and team thanks for taking my questions.

Nitin Kumar: Brendan, I want to circle back on something you said when addressing M&A about getting better and not bigger, and you alluded to some technologies. I was wondering if you could maybe give us a little bit more color on what you're talking about, Expanding Recovery, Expanding Zones, or other technologies, and what the timeline looks like on some of the... Yeah, hey, appreciate it. And then, I mean, you know, you know, us that your danger here is that we're going to talk your ear off on these stuff for too long. So I'll try and be concise. But, you know, I think I would sort of highlight a couple of things.

Nitin Kumar: Brendan I wanted to circle back on something you said about addressing M&A about getting better and not bigger.

Nitin Kumar: And you alluded to some technologies I was wondering if you could maybe give us a little bit more color on are you talking about.

Speaker Change #145: Expanding recovery expanding zones.

Nitin Kumar: Or other technologies and what's the time line look like on some of those.

Brendan Michael McCracken: Yeah, Hey, I appreciate it and then I mean, you know you know us.

Speaker Change #149: Youre danger here is that we're going to talk your ear off on this stuff for two too long, so I'll try and be concise, but.

Brendan Michael McCracken: One has been the approach we've been taking on data and really being focused on building out a private data set that is quite unique, both in scope and specificity for some of the problems and challenges that we're trying to address with our innovations. And so we've really set ourselves up to be able to work using that private data set and get some really unique inferences into what's going to drive cost reductions but also what's going to drive well productivity over time. So that's the first one.

Speaker Change #140: I think I would sort of highlight a couple of things.

Speaker Change #121: One has been.

Speaker Change #121: The approach we've been taking on data and really being focused on building out a private dataset.

Speaker Change #121: Is quite unique both in scope and specificity for some of the problems and challenges that we're trying to get after with our innovations.

Speaker Change #121: And so we've really set ourselves up to be able to work using that private dataset and get some really unique inferences into what's going to drive cost reductions, but also what's going to drive well productivity over time. So that's the first one and then and then the other features that we've talked a bit about before.

Brendan Michael McCracken: And then the other features that we've talked a bit about before, particularly on the completion design front, the things we're doing with stage architecture, the things we're doing with frac fluids to drive oil recovery, and then on the real-time optimization that Greg mentioned earlier, I think those continue to be the three channels that we're seeing great returns on our efforts. And so when you look at how these innovations unspool over time, the feature that we think is maybe a bit new in the last few years is how these things are stacking together.

Speaker Change #121: Particularly on the completion design front the things we're doing the stage architecture of the things we're doing with.

Brendan Michael McCracken: Frac fluids to drive oil recovery.

Speaker Change #121: And then on the real time optimization that Greg mentioned earlier I think those continue to be the three channels that we're seeing great returns on our efforts in and so when you. When you look at how these innovations unspool overtime. The feature that we think is maybe a bit new in the last few years is how these things.

Brendan Michael McCracken: So the things that we can do today with Trimalfrac are really rooted in things we figured out how to do a couple of years ago with wet sand and sand piles and the real-time optimization stuff, and how that pairs with fluid chemistry and the rock fabric work that we're doing in the labs.

Speaker Change #121: Stacking together so.

Speaker Change #137: How are things that we can do today with triangle Frac are really rooted in things, we figured out how to do a couple of years ago with wet sand and sand piles.

Speaker Change #137: And the real time optimization stuff and how that pairs with fluid chemistry in the rock fabric work that we're doing in the labs and in all of this stuff is kind of really feed.

Brendan Michael McCracken: And all of this stuff is kind of really feeding together into an understanding of an entire system and how to optimize that entire system. You know, that's great because what it means is there's a real sense of momentum that can be built. And it also, I think, is a way for companies like ours to see differentiation, where you can drive relative return performance that's differentiated from competitors. So that's really, like I said, I could go on and on. But that's my most concise version of that discussion.

Speaker Change #137: Feeding together into an intimate understanding of an entire system and how to optimize that entire system.

Speaker Change #137: That's great because what it means is there's a real sense of momentum that can be built.

Brendan Michael McCracken: And it also I think as a way for companies like ours to see differentiation.

Brendan Michael McCracken: Where you can drive relative return performance that it's differentiated from from competitors so that.

Speaker Change #137: That's really the like I said I could go on and on but that's my bad My most concise version of that discussion.

Nitin Kumar: I mean, I guess what I was trying to get at is that, at some level, and it's been asked in different ways on the call, you know, it's a matter of scale as well. And this certainly makes you better and helps you drive more margin out of the barrel. But how does it make you get more reserves? That's, I guess, what I was trying to get at.

Speaker Change #165: Got it I mean, I guess, what I was trying to get at is at some level and it's been asked in different ways on the call.

Speaker Change #166: It's a matter of scale as well and this certainly makes you better and how to drive more margin out of.

Speaker Change #163: The barrel, but how does it make you get more.

Speaker Change #137: I guess, what I was trying to get at.

Brendan Michael McCracken: Just on my second question, I wanted to understand, we saw you add some hedges in the quarter, and I just want to talk about the long-term hedging philosophy as you approach that 1x net debt to EBITDA target. Do you expect to see less hedges be in place? Or is this just something part of the DNA of Ovintiv?

Speaker Change #150: Just as my second question I wanted to understand we saw you add some hedges in the quarter.

Speaker Change #153: And then just wanted to talk about the long term hedging philosophy.

Speaker Change #130: Approach that onex net debt to EBITDA target.

Speaker Change #167: Do you expect to see.

Speaker Change #147: Less hedges.

Speaker Change #164: The in place or is this just something part of the DNA of <unk> and how do you think over the long term.

Nitin Kumar: And how do you think of it long-term? Yeah, but let me come to the hedges in a sec. I just want to circle back to your earlier point. And perhaps I was too wonkish in my explanation.

Speaker Change #130: Yes.

Speaker Change #154: Let me come to the hedges in the stack, but I just wanted to circle back to your earlier point and perhaps I was too long cash in my explanation, but I think how youre seeing this show up in making the company better is tight curves are higher year over year and costs are lower and free cash generation is up 60% per share.

Brendan Michael McCracken: But I think how you're seeing this show up and make the company better is that type curves are higher year over year, and costs are lower. And free cash generation is up 60% per share. That's how you're seeing all that cumulative effect of all that flow through to the bottom line for our shareholders. And so that's the relentless pursuit that we're after with those innovations. So yeah, hopefully I didn't cloud that with my engineering details.

Brendan Michael McCracken: How are you seeing that all of that cumulative effect of all of that flow through to the bottom line for our shareholders.

Speaker Change: And so that's the relentless pursuit that we're after with those innovation so hopefully.

Speaker Change #148: Hopefully it and cloud that with my with my engineering.

Brendan Michael McCracken: But to your hedge question, I think what we've always maintained, and I think it continues to be our perspective on it, is that we're hedging to manage against the risk of a protracted period of very low prices. And as our debt comes down, as you're seeing it do, our need for those hedges goes down as well.

Speaker Change #141: Details but.

Speaker Change #162: To your hedge question I think we've always maintained and I think it continues to be our perspective on it is we're hedging to manage against the risk of a protracted period of very low prices.

Speaker Change #141: And as our debt comes down as Youre seeing it as Youre seeing it do our need for those hedges goes down as well and so I would expect us to be in a place where we can kind of ratchet those hedges back as we approach that leverage objective with time, but today.

Brendan Michael McCracken: And so I would expect us to be in a place where we can kind of ratchet those hedges back as we approach that leverage objective over time. But today we're managing it with a hedge program that's plus or minus 20% to 25% of volumes, um, three-way structures that give us that price floor that we're looking for but also retain exposure to the upside as well, so but in general, that hedge program should dial back as we approach that leverage target. Well, thanks for your patience in answering my questions. Yeah, you bet, man.

Brendan Michael McCracken: We're managing it with our hedge program, that's plus or minus 20% to 25% of volumes and using third.

Speaker Change #141: Three way structures they give us.

Speaker Change #141: That price floor that we're looking for but also retain exposure to the upside as well so.

Brendan Michael McCracken: But in general that hedge program should dial back as we approach that leverage target.

Speaker Change: Great well, thanks for the patience in answering my questions.

Speaker Change #142: Yeah, you bet. Thank you.

Nitin Kumar: Thank you. Thank you. Next question comes from Jeff Jay at Daniel and, Hey guys, real quick one from me. In terms of the difference, I guess, between sort of the average D&C cost by basin and the pay center D&C costs, is there service cost deflation in those figures, or is that pure efficiency?

Speaker Change: Thank you next question comes from Jeff J at Dan Your line of Jamie. Please go ahead.

Geoff Jay: Hey, guys real quick one for me in terms of the difference I guess between sort of the average to date D&C cost by basin armour pacesetter.

Speaker Change: <unk> is this service cost inflation in those figures or is that pure efficiency.

Geoff Jay: These are just pure efficiency. Yeah, so they're side-by-side on service costs. Apples to apples there.

Speaker Change #151: Those are just pure efficiency, yeah, so they're side by side on service costs apples to apples there.

Greg: Great. Thanks. That's very helpful.

Geoff Jay: Okay, great. Thanks, that's helpful. I appreciate it.

Jeff: Yes, Thanks, Jeff.

Greg: Thank you and the next question comes from Dennis Fong of CIBC. Please go ahead.

Geoff Jay: I appreciate it. Yeah, thanks Jeff. Thank you. And the next question comes from Dennis Fong at CIA. Hi, good morning, and thanks for taking my question. Most of the other questions I had came from other analysts, but I did have one that kind of jogged my memory about one of the previous questions asked.

Speaker Change: Hi, good morning, and thanks for taking my question.

Dennis Fong: Most of the other questions I had I came from other analysts, but I did have one that kind of jogged my memory with one of the previous questions asked.

Dennis Fong: Can you talk about some of the understanding that you have of the basins you operate in, especially with a focus on data, and then how does that potentially kind of further inform or revise the way that you adopt best practices, either in operations, cost savings, productivity, or even land that you target either from acquisition or swaps? Thanks. Yeah, thanks, Dennis. Yeah, I love that question.

Speaker Change #155: Can you talk towards some of the understanding that you have all of the basins you operate in.

Speaker Change #156: Essentially the focus on data and then how does that potentially kind of further inform or buy.

Speaker Change: You adopt best practices, either operation cost savings, while productivity, Oregon Lane that you target EBIT from the acquisition of our swaps.

Brendan Michael McCracken: I think that we try and really harness the advantage of being in several of these really high-quality basins. And the saying we have around here is that the only infinite rate of return project we are aware of is learning from somebody else's capital. So when one of our offsetting peers tries something new, and it either works or doesn't work, we work really hard to learn from what those peers are learning because, you know, it's their risk dollars that went into that learning. And like I said, it's an infinite rate of return, whether it works or doesn't work.

Yes, Thanks, Dennis Yes, I love that question I think the.

Brendan Michael McCracken: We try and really harness the advantage of being in several of these really high quality basins and the.

Brendan Michael McCracken: They are saying we have around here is the only infinite rate of return project.

Speaker Change #161: We are aware of is learning from somebody else's capital. So when one of our offsetting peers tried.

Speaker Change: Try something new in it either works or doesn't work.

Brendan Michael McCracken: We work really hard to learn from from what those peers are learning because.

Brendan Michael McCracken: If their risk dollars that went into that learning and like I said, it's an infinite rate of return whether it worked or didn't and so because we're in multiple basins, we could do that across an even bigger peer set.

Brendan Michael McCracken: And so because we're in multiple basins, we could do that across an even bigger peer set. You know, and then the other feature that we work really hard on is transporting ideas across each of those basins and asset teams. We've really created an internal environment where those ideas are flowing really easily and naturally across the teams, and that lets us do things like... Achieve basin-leading frack performance in the Permian, you know, up to 4,800 feet per day, and do the exact same thing in the Montney, and really rapidly, you know, within several quarters, get to that efficient frontier in both places.

Brendan Michael McCracken: And then the other feature that we work really hard on is transporting ideas across each of those basins and asset teams and we've really created an internal environment, where those ideas are flowing really easily and naturally across the teams and that lets us do things like achieve.

Speaker Change: <unk> basin, leading Frac performance in the Permian up to 40 to 800 feet per day and do the exact same thing in the Montney and really rapidly within several quarters get to that efficient frontier in both places and so really excited about that skill that we've built and then.

Brendan Michael McCracken: And then, you know, we do see quite a bit of innovation difference across the basins. It's remarkable, actually, how much idea trapping happens across these basin boundaries. And, and, you know, that's just an advantage for us because, you know, we showed that with the Montney slide, where you can see pretty large differences in outcomes across, you know, a relatively small group of concentrated peers.

Brendan Michael McCracken: Yes, we do see.

Brendan Michael McCracken: Quite a bit of innovation difference across the basins, it's remarkable actually how much idea trapping happens across these basin boundaries in and that's just advantage us because.

Speaker Change #161: We showed that with the Montney slide where you can see pretty large differences in outcomes across.

Speaker Change #161: A relatively small group of concentrated peers.

Dennis Fong: And we really think that is related to this culture of sharing and innovation that we've built across the asset team. Great. Thanks, and I appreciate the context. I'll turn it back. Thanks, guys. Thank you. At this time, we have completed our question and answer, and we'll turn the call back. Thanks, Joanna, and thanks, everyone, for joining us today. Our call is now complete. Ladies and gentlemen, this concludes your conference

Brendan Mccracken: And we really think that is related to this culture of sharing and innovation that we've built across the asset teams.

Dennis Fong: Great. Thanks, and I appreciate the context I'll turn it back.

Dennis Fong: Thanks, guys.

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

Dennis Fong: Thanks, Joanna and thanks, everyone for joining us today, our call is now complete.

Dennis Fong: Okay.

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