Q2 2024 Chesapeake Energy Corp Earnings Call

July 30, 2024

Good morning and welcome to the Chesapeake Energy Corporation Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.

Unknown Attendee: 34 - Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance? Please send a conference specialist by pressing the start key followed by zero.

Unknown Attendee: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then when your telephone keypad. To withdraw from the question, please press star, then two. Please note this event is being recorded.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: To withdraw from the question queue, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Chris Ayres, VP of Investor Relations and Treasurer. Please go ahead.

Chris Ayres: I would now like to turn to conference with Chris Ayres, VP of Investor Relation and Treasure. Please go ahead.

Operator: All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw from the question queue, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Chris Ayres, VP of Investor Relations and Treasurer. Please go ahead.

Unknown Attendee: Thank you.

Chris Ayres: Thank you. Good morning, everyone, and thank you for joining our call to discuss Chesapeake's second quarter 2024 financial and operating results. Hopefully, you've had a chance to review our press release and the updated investor presentation we posted to our website yesterday. During this morning's call, we will be making forward-looking statements, which consist of statements that cannot be confirmed by reference to existing information, statements regarding our beliefs, goals, expectations, forecasts, projections, and future performance, and the assumptions underlying such statements.

Nick Delosso: Good morning, everyone. And thank you for joining our call to discuss Chesapeake's second quarter 2024 financial and operating results. Hopefully, you've had a chance to review our press release and the updated investor presentation. We posted to our website yesterday.

Chris Ayres: Please note that there are a number of factors that could cause actual results to differ materially from our forward-looking statements, including factors identified and discussed in our press release yesterday and in other SEC filings. Please also recognize that, as permitted as required by applicable law, we undertake no duty to update any forward-looking statements, and you should not place undue reliance on such statements. We may also refer to some non-GAAP measures, which will help facilitate comparisons across periods and with peers. For any non-GAAP measure, we use a reconciliation to the nearest GAAP measure, which can be found on our website.

Nick Delosso: During this morning's call, we will be making forward-looking statements, which consist of statements that cannot be confirmed by reference to existing information, statements regarding our beliefs, goals, expectations, forecast projections, and future performance. In the assumptions underlying such statements, please note there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including factors identified and discussed in our press release yesterday and in other SEC filings. Please also recognize that, as accept is required by applicable law, we are undertake no duty to update any forward-looking statements, and you should not place undue reliance on such statements.

Speaker Change: During this morning's call, we will be making forward-looking statements, which consist of statements that cannot be confirmed by reference to existing information.

Speaker Change: statements regarding our beliefs, goals, expectations, forecasts, projections, and future performance.

Speaker Change: and the assumptions underlying such statements. Please note there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including factors identified and discussed in our press release yesterday and in other SEC filings.

Speaker Change: Please also recognize that as except as required by applicable law, we undertake no duty to update any forward-looking statements, and you should not place undue reliance on such statements.

Nick Delosso: We may also refer to some non-GAAP measures, which will help facilitate compared persons across periods and with peers. For any non-gap measure, we use a reconciliation to the nearest gap measure, which can be found on our website.

Speaker Change: We may also refer to some non-GAAP measures, which will help facilitate comparisons across periods and with peers. For any non-GAAP measure, we use a reconciliation to the nearest GAAP measure, which can be found on our website.

Nick Delosso: With me on the call today are Nick Delosso, Mohit Singh, and Josh Beats. Nick will give a brief overview of our results, and then we'll open up the teleconference to Q&A.

Chris Ayres: With me on the call today are Nick Delosso, Mohit Singh, and Josh Viets. Nick will give a brief overview of the results, and then we'll open up the teleconference to Q&A. So with that, thank you again, and now I'll turn the time over to Nick.

Speaker Change: With me on the call today are Nick Delosso, Mohit Singh, and Josh Viets. Nick will give a brief overview of the results, and then we'll open up the teleconference to Q&A. So with that, thank you again, and now turn the time over to Nick.

Nick Delosso: So, with that, thank you again, and now turn the time over to Nick.

Nick Delosso: Good morning, and thank you for joining us today. We are pleased with our quarterly results, which further demonstrates that our strategy designed to provide the greatest level of flexibility to manage unpredictable market conditions is working. And we are achieving meaningful improvements in capital efficiency and reductions in operating costs, which we believe will be durable when prices recover.

Nick Delosso: Good morning, and thank you for joining us today. We are pleased with our quarterly results, which further demonstrate that our strategy designed to provide the greatest level of flexibility to manage unpredictable market conditions is working, and we are achieving meaningful improvements in capital efficiency and reductions in operating costs, which we believe will be durable when prices recover. Today, we are primarily focused on three key elements of our business. First, Reducing Costs and Improving Breakeven.

Speaker Change: and we are achieving meaningful improvements in capital efficiency and reductions in operating costs which we believe will be durable when prices recover.

Nick Delosso: Today, we are primarily focused on three key elements of our business. First, reducing costs and improving break events. We have recognized a 50% improvement in our cellist drilling performance since 2022. We have achieved this by steadily increasing our feet drilled per day over the last two years by approximately 50%, as well as by growing the average lateral length of our wells by nearly 3,000 feet in the second quarter. The increase in drilling pace, lateral length, and deflation all combine to recognize a 20% decrease in drilling costs over the last two years. In the Hainesville, efforts to lower production expense continue to pay dividends, as evident by a 25% decrease in saltwater disposal costs per barrel since the third quarter of last year.

Speaker Change: Today, we are primarily focused on three key elements of our business. First, reducing costs and improving breakevens.

Nick Delosso: We have recognized a 50% improvement in Marcellus drilling performance since 2022. We have achieved this by steadily increasing our feet drilled per day over the last two years by approximately 50%, as well as by growing the average lateral length of our wells by nearly 3,000 feet in the second quarter. The increase in drilling pace, lateral length, and deflation all combine to result in a 20% decrease in drilling costs over the last two years.

Speaker Change: We have recognized a 50% improvement in Marcellus drilling performance since 2022. We have achieved this by steadily increasing our feet drilled per day over the last two years by approximately 50%, as well as by growing the average lateral length of our wells by nearly 3,000 feet in the second quarter.

Speaker Change: The increase in drilling pace, lateral length, and deflation all combine to recognize a 20% decrease in drilling costs over the last two years.

Nick Delosso: In Haynesville, efforts to lower production expenses continue to pay dividends, as evident by a 25 percent decrease in saltwater disposal costs per barrel since the third quarter of last year. This improvement is due to the team optimizing routes, increasing the utilization of owned assets, strategic partnerships with vendors, and deflation. Combined, these operational improvements allowed us to lower our full-year capital and production expense guidance by $50 million and approximately 8 percent, respectively.

Speaker Change: In Haynesville, efforts to lower production expense continue to pay dividends, as evident by a 25 percent decrease in saltwater disposal costs per barrel since the third quarter of last year.

Nick Delosso: This improvement is due to the team optimizing routes, increasing utilization of owned assets, strategic partnerships with vendors, and deflation. Combined, these operational improvements allowed us to lower our full year capital and production expense guidance by $50 million and approximately 8%, respectively. Lowering break even costs is critical to delivering sustainable value to our shareholders and ensuring the market remains well supplied for the affordable natural gas. We expect the majority of savings recognized will be durable through cycles, which will only continue to improve the strength and competitiveness of our Marcellus and Haynesville positions.

Speaker Change: This improvement is due to the team optimizing routes, increasing the utilization of owned assets, strategic partnerships with vendors, and deflation.

Speaker Change: Combined, these operational improvements allowed us to lower our full-year capital and production expense guidance by $50 million and approximately 8 percent, respectively.

Nick Delosso: Lowering breakeven costs is critical to delivering sustainable value to our shareholders and ensuring the market remains well supplied with affordable natural gas. We expect the majority of savings recognized will be durable through cycles, which will only continue to improve the strength and competitiveness of our Marcellus and Haynesville positions. Second, maintaining production flexibility to match market conditions. Through the first half of the year, we have deferred 46 orders and built 29 ducts.

Speaker Change: Lowering breakeven cost is critical to delivering sustainable value to our shareholders and ensuring the market remains well supplied with affordable natural gas.

Speaker Change: We expect the majority of savings recognized will be durable through cycles, which will only continue to improve the strength and competitiveness of our Marcellus and Haynesville positions.

Nick Delosso: Second, maintaining production flexibility to match market conditions. Through the first half of the year, we have deferred 46 tills until 29 ducks. By year end, we expect to have up to 1 VCF a day of productive capacity available to meet demand when conditions warrant. In addition to the deferral of tills and completions, we proactively curtailed volumes during the week or spring shoulder pricing months and are prepared to do so again as necessary in the fall. We will be disciplined in activating the deferred capacity, with market conditions dictating the pace and timing of our approach. We are confident this strategy will provide a distinct competitive advantage when natural gas demand recovers, given the inherent flexibility it provides and the speed and limited capital needed to bring volumes to market.

Speaker Change: Second, maintaining production flexibility to match market conditions.

Speaker Change: Through the first half of the year, we have deferred 46 tills and built 29 ducts. By year-end, we expect to have up to one BCF a day of productive capacity available to meet demand when conditions warrant.

Nick Delosso: By year end, we expect to have up to one BCF a day of productive capacity available to meet demand when conditions warrant. In addition to the deferral of tills and completions, we proactively curtailed volumes during the week or spring shoulder pricing months and are prepared to do so again as necessary in the fall.

Speaker Change: In addition to the deferral of tills and completions, we proactively curtailed volumes during the week or spring shoulder pricing months and are prepared to do so again as necessary in the fall.

Nick Delosso: We will be disciplined in activating the deferred capacity, with market conditions dictating the pace and timing of our approach. We are confident this strategy will provide a distinct competitive advantage when natural gas demand recovers, given the inherent flexibility it provides and the speed and limited capital needed to bring volumes to market. Finally, we are focused on our pending merger with Southwestern, and our confidence in our ability to deliver the planned synergies is only growing.

Speaker Change: We will be disciplined in activating the deferred capacity with market conditions dictating the pace and timing of our approach. We are confident this strategy will provide a distinct competitive advantage when natural gas demand recovers, given the inherent flexibility it provides and the speed and limited capital needed to bring volumes to market.

Nick Delosso: Finally, we are focused on our pending merger with Southwestern, and our confidence in our ability to deliver the planned synergies is only growing. We are using the extended time between signing and closing to focus on our integration planning efforts and on delivering the synergies identified at the announcement of the merger, which we expect to close in the back half of the year. I have been extremely impressed with the openness and creativity of both organizations as we seek to establish a business that has more talent, better assets, and greater overall strength than either could have achieved as a standalone company.

Speaker Change: Finally, we are focused on our pending merger with Southwestern and our confidence in our ability to deliver the planned synergies is only growing.

Nick Delosso: We are using the extended time between signing and closing to focus on our integration planning efforts and on delivering the synergies identified at the announcement of the merger, which we expect to close in the second half of the year. I have been extremely impressed with the openness and creativity of both organizations as we seek to establish a business that has more talent, better assets, and greater overall strength than either could have achieved as a standalone company.

Speaker Change: We are using the extended time between signing and closing to focus on our integration planning efforts and on delivering the synergies identified at the announcement of the merger, which we expect to close in the back half of the year.

Speaker Change: I have been extremely impressed with the openness and creativity of both organizations as we seek to establish a business that has more talent, better assets, and greater overall strength than either could have achieved as a stand-alone company.

Nick Delosso: We look forward to seeing what we can achieve together once the deal closes and we can fully unlock the power of our two organizations for the benefit of consumers and our shareholders. Our long-term outlook for natural gas, the affordable, reliable, lower carbon energy the world needs, remains strong, and we are working diligently to ensure our pro-form emerged company with Southwestern is poised to meet consumer demand at the most efficient price. I look forward to continuing to update you on our progress as we move through the year.

Nick Delosso: We look forward to seeing what we can achieve together once the deal closes, and we can fully unlock the power of our two organizations for the benefit of consumers and our shareholders. Our long-term outlook for natural gas, the affordable, reliable, lower-carbon energy the world needs, remains strong, and we are working diligently to ensure our proforma-merged company with Southwestern is poised to meet consumer demand at the most efficient price. I look forward to continuing to update you on our progress as we move through the year. We're now pleased to answer your questions. Operator, if you'd like to assemble the queue, we will now begin.

Speaker Change: We look forward to seeing what we can achieve together once the deal closes and we can fully unlock the power of our two organizations for the benefit of consumers and our shareholders.

Speaker Change: Our long-term outlook for natural gas, the affordable, reliable, lower-carbon energy the world needs, remains strong, and we are working diligently to ensure our proforma-merged company with Southwestern is poised to meet consumer demand at the most efficient price.

Speaker Change: I look forward to continuing to update you on our progress as we move through the year. We're now pleased to answer your questions. Operator, if you'd like to assemble the queue.

Unknown Attendee: We're now pleased to answer your questions. Operator, if you'd like to assemble with Q.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question will come from Bert Donnes on Truist. You may now go ahead.

Unknown Attendee: We will now begin the question and answer session. To ask a question, you may press start the one on your telephone keypad. If you're using a speaker phone, please pick up your hands before pressing the keys.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Unknown Attendee: To withdraw from the question, Q, please press start the two. At this time, we will pause momentarily to assemble our roster.

Bert Donas: Our first question will come from Bert Donas with Tuist. You may now go ahead.

Speaker Change: Our first question will come from Bert Donnes with Truist. You may now go ahead.

Unknown Attendee: Good morning, team. Morning, Bert.

Bertrand William Donnes: Hey, good morning team.

Nick Delosso: Morning. On the deferred activity, I just wanted to maybe clarify the strategy when you bring on the production. Does a price move qualify as improving market dynamics, or does it need to be, you know, tangible supply-demand? And then what do you think about rock-bottom production levels? I'm assuming at one point you kind of hang up your coat and go, listen, we've done our part. Is that 4Q24 guidance kind of where you'd level out at, or would you let it go below that?

Bert Donas: Good morning. On the deferred activity, I just wanted to clarify the strategy when you bring on the production. Does the price move qualify as improving market dynamics, or does it need to be tangible supply demand, and then how do you think about rock bottom production levels?

Speaker Change: Morning Bert

Bertrand William Donnes: Morning. On the deferred activity, I just wanted to maybe clarify the strategy when you bring on the production. Does a price move qualify as improving market dynamics, or does it need to be tangible supply-demand? And then how do you think about rock-bottom production levels? I'm assuming at one point you kind of hang up your coat and go, listen, we've done our part. Is that 4Q24 guidance kind of where you'd level out at, or would you let it go below that? Thanks.

Bert Donas: I'm assuming at one point you kind of hang up your coat and go, listen, we've done our part. Is that 4Q24 guidance kind of where you level out at, or would you let it go below that? Thanks.

Nick Delosso: Yeah, those are both great questions. Look, at the price signal, we see price as nothing but a signal, and we do pay a lot more attention to the underlying supply and demand than we do just to price. Price is, in fact, a signal, so we will pay attention to that as well. But in terms of bringing on the deferred activity, we want to see the underlying fundamentals improve. As far as the bottom level of production we could see things fall to.

Nick Delosso: Those are both great questions. Look, on the price signal, we see prices nothing but a signal, and we do pay a lot more attention to the underlying supply and demand than we do just price. Price is, in fact, a signal, so we will pay attention to that as well. But in terms of bringing on the deferred activity, we want to see the underlying fundamentals improve. As far as the bottom level of production we could see things fall to, I guess, you know, we see the market improving while we aren't great at predicting the exact day or quarter it will improve.

Speaker Change: Yeah, those are both great questions. Look, on the price signal, we see price as nothing but a signal, and we do pay a lot more attention to the underlying supply and demand than we do just price. Price is, in fact, a signal, so we will pay attention to that as well.

Speaker Change: But in terms of bringing on the deferred activity, we want to see the underlying fundamentals improve.

Nick Delosso: I guess we see the market improving while we aren't great at predicting the exact day or quarter it will improve. The overall dynamics that are setting up for us are pretty positive. So we're not too worried about that. I don't think we'll face that decision.

Speaker Change: As far as the

Speaker Change: bottom level of production we could see things fall to. I guess we see the market improving while we aren't.

Nick Delosso: The overall dynamics that are setting up for us are pretty positive. So we're not too worried about that. I don't think we'll face that decision. We're going to continue to be prudent with how we manage our volumes and our capital program. And we are happy to be building the ducks and details that we are now because it gives us a lot of operational flexibility. And at some point, you would just slow down building those tools and ducks by reducing your capital if it continued into a much, much longer period of time. So we'll continue to monitor that.

Speaker Change: great at predicting the exact day or quarter it will improve, the overall dynamics that are setting up for us are pretty positive. So we're not too worried about that. I don't think we'll face that decision.

Nick Delosso: We're going to continue to be prudent with how we manage our volumes and our capital program. And we are happy to be building the ducts and details that we are now because it gives us a lot of operational flexibility. And at some point, you would just slow down building those tills and ducts by reducing your capital if it continued for a much, much longer period of time. So we'll continue to monitor that. That would be how we would think about this. But right now, we're pretty comfortable with where we are, doing what we're doing.

Speaker Change: We're going to continue to be prudent with how we manage our volumes and our capital program and

Speaker Change: We are happy to be building the ducts and details that we are now because it gives us a lot of operational flexibility.

Speaker Change: And at some point, you would just slow down building those tills and ducts by reducing your capital if it continued into a much, much longer period of time. We'll continue to monitor that. That would be how we would think about this. But right now, we're pretty comfortable with where we are, doing what we're doing.

Nick Delosso: That would be how we would think about this, but right now we're pretty comfortable with where we are doing what we're doing.

Nick Delosso: Makes sense, and then for the second one, I'm gonna I'm gonna try to help you out here and get the words data center and your transcript a few more times. There have been some developments since last quarter with a lot of people talking about behind the meter deals. Do you think this is going to become maybe a catalyst-driven story where you know you announce an LNG contract or you announce a data center contract, or is it just way too early in the cycle for you guys to start thinking about it? I don't know if it's too early for us to start thinking about it.

Bert Donas: Makes sense. And then from the second one, I'm going to try to help you out here and get the words "data center" in your transcript a few more times. There's been some development since last quarter, with a lot of people talking about behind-the-meter deals.

Speaker Change: Makes sense. And then for the second one, I'm going to try to help you out here and get the words data center in your transcript a few more times. There's been some developments since last quarter with a lot of people talking about behind-the-meter deals. Do you think this is going to become maybe a catalyst-driven story where, you know, you announce an LNG contract or you announce a data center contract? Or is it just way too early in the cycle for you guys to start thinking about that?

Nick Delosso: Do you think this is going to become maybe a catalyst-driven story where, you know, you announce an LNG contractor, you announce a data center contract, or is it just way too early in the cycle for you guys to start thinking about that. I don't have a story for us to start thinking about it. We're talking to all of the people you would imagine we talked to on a regular basis, whether they be tech companies or utilities. And we're pretty excited about the fact that the market is doing a better job of recognizing that electricity demand is growing.

Nick Delosso: I don't know if it's too early for us to start thinking about it. We're talking to all of the people you would imagine we talk to on a regular basis, whether they be tech companies or utilities. And we're pretty excited about the fact that the market is doing a better job of recognizing that electricity demand is growing, and we think that's been an underappreciated and underforecasted element of the economy for quite some time.

Speaker Change: I don't know if it's too early for us to start thinking about it, we're talking to all of the people you would imagine we talk to on a regular basis, whether they be tech companies or utilities.

Speaker Change: And we're pretty excited about the fact that the market is doing a better job of recognizing that electricity

Nick Delosso: And we think that's been an underappreciated and under-forecasted element of the economy for quite some time. And when we when you really start to very to borrow into electricity demand growing, you figure out where it's going to come from and natural gases and obvious answer that is going to be a fuel choice. There's some things to consider here about how this will all work together. You need to bring together, starting with the technology providers, the users of data, back to the electricity generators, back to then the fuel for the generation. And so there are three elements that have to come together.

Speaker Change: Demand is growing, and we think that's been an under-appreciated and under-forecasted element of the economy for quite some time. And when you really start to burrow into electricity demand growing,

Nick Delosso: And when you really start to burrow into electricity demand growth... You have to figure out where it's going to come from, and natural gas is an obvious answer that is going to be a fuel of choice. There are some things to consider here about how this will all work together. You need to bring together, starting with the technology providers, the users of data, back to the electricity generators, and then to the fuel for the generation. So there are three elements that have to come together. All three of those elements are, I would say, actively discussing a lot of solutions right now. But not all the answers are perfectly clear.

Speaker Change: You need to figure out where it's going to come from, and natural gas is an obvious answer that is going to be a fuel of choice. There's some things to consider here about how this will all work together. You need to bring together...

Speaker Change: starting with the technology providers, the users of data, back to the electricity generators, back to then the fuel for the generation. So there's three elements that have to come together.

Nick Delosso: All three of those elements are, I would say, actively discussing a lot of solutions right now. Not all the answers are perfectly clear. We're all going to have to work together to work through what are challenges around geography, what are challenges around the regulatory environment because every single, all three of those pieces need infrastructure. And it's going to be a not super easy thing to accomplish, but one that the world is going to demand, and therefore we are going to be ready to fulfill. So I think it's a really exciting opportunity for our company. We're just as focused on that as we are on the LNG opportunities, which we think are probably a little near term.

Speaker Change: all three of those elements.

Speaker Change: are, I would say, actively discussing a lot of solutions right now.

Nick Delosso: We're all going to have to work together to work through what are the challenges around geography, what are the challenges around the regulatory environment, because every single, all three of those pieces need infrastructure. And it's going to be, you know, not a super easy thing to accomplish, but one that the world is going to demand, and therefore, we are going to be ready to fulfill. So I think it's a really exciting opportunity for our company.

Speaker Change: Not all the answers are perfectly clear. We're all going to have to work together to work through what are challenges around geography, what are challenges around regulatory environment because all three of those pieces need infrastructure.

Speaker Change: And it's going to be, you know, a not super easy thing to accomplish, but one that the world is going to demand, and therefore we are going to be ready to fulfill. So I think it's a really exciting opportunity for our company.

Nick Delosso: We're just as focused on that as we are on the LNG opportunities, which we think are probably a little nearer term. But yeah, I think there's a potential catalyst for all of it. But I think the more important point isn't just a singular contract or catalyst that could be created with an announcement; it's the overall trend and what it means for the supply and demand fundamentals of our business. That makes great sense.

Speaker Change: We're just as focused on that as we are on the LNG opportunities, which we think are probably a little nearer term. But yeah, I think there's potential catalysts in all of it.

Nick Delosso: But yeah, I think there's potential catalyst in all of it.

Nick Delosso: But I think the more important point isn't just a singular contract or catalyst that could be created with an announcement. It's the overall trend and what it means for the supply and demand fundamentals of our business.

Speaker Change: But I think the more important point isn't just a singular contract or catalyst that could be created with an announcement, it's the overall trend and what it means for the supply and demand fundamentals of our business.

Bert Donas: That makes great sense. Thanks.

Speaker Change: That makes great sense. Thanks.

Doug Leggett: Our next question will come from Doug Leggett with Wolfries. Research.

Operator: Our next question will come from Doug Legate with Wolf Research.

Speaker Change: Our next question will come from Doug Legate with Wolf Research. You may now go ahead.

Unknown Attendee: You may now go ahead.

Doug Leggett: Hey guys, thanks for having me on. I know the FTC process, as you have observed, many times is still rumbling on, but I'm just wondering, you could opine on the extent of which you've been able to really dig deep on the full potential, whether it be drilling efficiency, days to drill. The fact that at last summer running, obviously very high fluid loadings, all that good stuff. What is your thinking on the $400 million at this point in terms of risk to that number? Well, the longer period of time of integration, I think, helps us feel confident that we're de-risking that number every day.

Nick Delosso: Hey guys, thanks for having me on. Nick, I know the FTC process, as you have observed many times, is still rambling on, but I'm just wondering if you could give an opinion on the extent of which you've been able to really dig deep on the full potential, whether it be drilling efficiency, days to drill, the fact that Leslom is running obviously very high fluid loadings, all that good stuff. What is your thinking on $400 million at this point in terms of risk to that number?

Doug Legate: Hey guys, thanks for having me on.

Doug Legate: the full potential, whether it be drilling efficiency, days to drill, the fact that Leslom is running obviously very high fluid loadings, all that good stuff. What is your thinking on the $400 million at this point in terms of risk to that number?

Nick Delosso: Well, the longer period of time of integration, I think, helps us feel confident that we're de-risking that number every day. We feel really good about achieving that number. There are a lot of opportunities when you bring together two organizations of this size, and we think that over the last many months of working on this integration, we've achieved a true best of both mentality by the teams that are working on integration. We're looking really hard at everything from the IT systems that each company uses to the processes that each company follows to the philosophies of things like fluid loading in a well.

Speaker Change: Well, the longer period of time of integration I think helps us feel confident that we're de-risking that number every day. We feel really good about achieving that number.

Nick Delosso: We feel really good about achieving that number. There are a lot of opportunities when you bring together two organizations of this size. And we've achieved, we think, over the last many months of working on this integration, a true best of both. Mentality by the teams that are working on integration. We're looking really hard at everything from the IT systems that each company uses to the processes that each company follows to the philosophies of things like fluid loading in a well. And we are trying to optimize a plan for new code going forward that really brings together the best of what both companies can do.

Speaker Change: There are a lot of opportunities when you bring together two organizations of this size. And we've achieved, we think, over the last many months of working on this integration, a true best-of-both mentality by the teams that are working on integration.

Speaker Change: We're looking really hard at everything from the...

Nick Delosso: And we are trying to optimize a plan for NUCO going forward that really brings together the best of what both companies can do. And we believe that there is, that synergy number is well within our reach. We expect to deliver on that for sure, and then we expect to keep working beyond that point. So we're excited about what all that represents, we think. Obviously, you'd love to announce a deal and close it immediately thereafter, and so we wouldn't have wished for this delay, but we're absolutely making the best of this time.

Speaker Change: And we are trying to optimize a plan for NUCO going forward that really brings together the best of what both companies can do.

Nick Delosso: And we believe that there is that synergy number is well within our reach. We expect to deliver on that for sure, and then we expect to keep working beyond that point. So we're excited about what all of that represents. We think, obviously, you'd love to announce a deal and close it immediately thereafter. And so we wouldn't have wished for this delay, but we're absolutely making the best of this time.

Speaker Change: And we believe that there is, that synergy number is well within our reach. We expect to deliver on that for sure, and then we expect to keep working beyond that point. So we're excited about what all that represents.

Nick Delosso: So maybe a quick Part B to that: would you expect, on closing, to give an update on the synergies or not?

Nick Delosso: Okay, so maybe a quick part beat it up. Would you expect on closing to give an update on the synergies or no? I think we'll give an update on how we think about achieving them and timing, for sure.

Speaker Change: Okay, so maybe a quick Part B to that. Would you expect on closing to give an update on the synergies or no?

Nick Delosso: I think we'll give an update on how we think about achieving them in time.

Speaker Change: I think we'll give an update on how we think about achieving them in timing for sure.

Doug Leggett: Okay, all right, my follow-up, and I know you missed me on last year's call, so I'm going to try this one. We made it. Welcome back. Yeah, thank you. Well, your variable dividend that you announced in the first quarter was paid out of your balance sheet in this quarter. You're inheriting a lot of debt, assuming this deal closes.

Nick Delosso: All right, my follow-up, and I know you missed me on the last Diamond call, so I'm going to try this one. We did, and welcome back. Yeah, thank you.

Speaker Change: Alright, my follow-up, and I know you missed me on the last Diamonds call, so I'm going to try this one. We did, and welcome back.

Nick Delosso: Your variable dividend that you announced in the first quarter was paid out of your balance sheet this quarter. You're inheriting a lot of debt, assuming this deal closes. Can you give some thought as to whether you're going to prioritize the allocation of free cash flows, assuming the forward curve plays out, in the context of dealing with your combined balance sheet versus transitory, dare I say, cash distribution that really has no impact on your valuation?

Nick Delosso: Can you give some thought as to whether where you're going to prioritize the allocation of free cash loads that assuming the forward curve plays out in the context of dealing with your combined balance sheet versus Transit three. Yeah, I say cash distribution that really has no impact on your valuation. Yeah, we are absolutely considering all of that, Doug, and we like our return framework. We're going to continue to think constructively about that return framework, but clearly pro forma a company will incorporate into that return framework a reduction in debt. And so we're going to work through that, and once we close, we can talk more about how that's going to play out, but the company needs to have less debt than it will day one when we close.

Speaker Change: Can you can you give some thought as to whether where you're going to prioritize the allocation of free cash flow of the Assuming the forward curve plays out in the context of dealing with your combined balance sheet versus Transitory, dare I say, cash distribution that really has no impact on your valuation

Nick Delosso: Yeah, we are absolutely considering all of that, Doug. And we like our return framework. We're going to continue to think constructively about that return framework. But clearly, Proforma Company will incorporate into that return framework a reduction in debt.

Speaker Change: Yeah, we are absolutely considering all of that, Doug, and we like our return framework. We're going to continue to think constructively about that return framework. But clearly, Proforma Company will incorporate into that return framework a reduction in debt.

Nick Delosso: And so we're going to, you know, work through that. And once we close, we can talk more about how that's going to play out. But, you know, the company needs to have less debt than it will on day one when we close. And so, we'll take that into consideration. Mohit probably has some things to add here. Yeah, Doug.

Speaker Change: And so we're going to work through that, and once we close, we can talk more about how that's going to play out. But the company needs to have less debt than it will day one when we close, and so we'll take that into consideration. Mohit probably has some things to add here.

Mohit Singh: And so we'll take that into consideration, but probably have some things to add here.

Mohit Singh: Yeah, Doug, hey, it's good to hear your voice again. Just to add to what Nick said, you know, when you take a step back from it, we are extremely proud of the $3.5 billion that we have returned to our shareholders since 2021. And obviously, as you identified it, the variable dividend is one of the components of it. We've done buybacks, and we've done the base dividend in addition to that. The company – we do recognize we will have more leverage once the transaction closes.

Mohit Singh: Yeah, Doug, hey, it's good to hear your voice again. Just to add to what Nick said, you know, when you take a step back from it, we are extremely proud of the three and a half billion dollars that we have returned to our shareholders.

Mohit Singh: It's 2021. And obviously, as you identified it, variable dividend is one of the components of it. We've done buybacks. We've done the base dividend; in addition to that. We do recognize we will have more leverage once the transaction closes.

Speaker Change: And obviously, as you identified it, variable dividend is one of the components of it. We've done buybacks, we've done the base dividend in addition to that.

Speaker Change: The

Speaker Change: We do recognize we will have more leverage once the transaction closes. It's a little bit too early for us to talk about what the plans would be post-closing.

Mohit Singh: It's a little bit too early for us to talk about what the plans would be post-closing, but we will share some more details around all of that, but the commitment from our side to shareholder returns remains unwavering. And at the right time, we'll share some more details around that.

Mohit Singh: It's a little bit too early for us to talk about what the plans would be post closing. We will share some more of the details around all of that, but the commitment from our side to shareholder returns remains unwavering, and at the right time, we'll share some more details around that.

Speaker Change: We will share some more of the details around all of that, but the commitment from our side to shareholder returns remains unwavering. And at the right time, we'll share some more details around that.

Doug Leggett: Alright guys, I'll keep pushing on this.

Operator: Alright guys, I'll keep pushing on this. Thank you.

Neil Mehta: Thank you. Our next question will come from Neil Mehta with Goldman Sachs.

Speaker Change: Alright guys, I'll keep pushing on this. Thank you.

Operator: Our next question will come from Neil Mehta with Goldman Sachs. You may now go ahead.

Speaker Change: Our next question will come from Neil Mehta with Goldman Sachs. You may now go ahead.

Neil Mehta: You may not go ahead. Yeah, good morning, Nick and team up.

Joshua J. Viets: Yeah, good morning, Nick and team. Maybe you could spend some time talking about some of the deflationary trends that you're seeing. I think you called out a 10% deflation number. And, you know, as you think about the efficiency gains and the lower cost structure, has anything changed around that 350 mid cycle view that you've spoken to in the past?

Josh Beats: Maybe you can spend some time talking about some of the deflationary trends that you're seeing that you think you called out a 10% deflation number. And, you know, as you think about the efficiency gains and the lower cost structure, has anything changed around that 350 mid-cycle view that Nick, you've spoken to in the past.

Neil Singhvi Mehta: Yeah, good morning Nick and team. Maybe you could spend some time talking about some of the deflationary trends that you're seeing.

Neil Singhvi Mehta: think you've spoken to in the past.

Josh Beats: Good morning, Neil. This is Josh. I'll take the first part of that question. You know, if you look back, maybe into the fourth quarter of last year. You know, we have seen a continual softening of service pricing. And of course, that's, you know, largely just driven by the, you know, pretty significant reduction we've seen: around a 40% reduction in gas rigs between Appalachian and Haynesville. And so we've been trying to take advantage of that. You know, I would say in the Haynesville, we've probably seen in the high single digits, type of deflation; the Marcelluses, you know, going to be a couple of takes above that, around 10%.

Joshua J. Viets: Good morning, Neil. This is Josh.

Joshua J. Viets: I'll take the first part of that question. You know, if you look back, maybe into the fourth quarter of last year, we have seen a continual softening of service pricing. And of course, that's largely just driven by the pretty significant reduction. We've seen around a 40% reduction in gas rigs between Appalachian and Haynesville. And so we've been trying to take advantage of that. You know, I would say in Haynesville, we've probably seen the high single-digit type of deflation. The Marcellus is going to be a couple of ticks above that, around 10%.

Neil Singhvi Mehta: Good morning Neil, this is Josh. I'll take the first part of that question. You know, if you look back, maybe into the fourth quarter of last year,

Neil Singhvi Mehta: You know, we have seen a continual softening of service pricing, and of course, that's largely just driven by the pretty significant reduction we've seen, around the 40% reduction.

Speaker Change: in gas rigs between Appalachian and Haynesville. And so we've been trying to take advantage of that. I would say in the Haynesville we've probably seen in the high single digits type of deflation, the Marcellus is going to be a couple ticks above that, around 10 percent.

Josh Beats: You know, I will say, though, that, you know, we're incredibly thoughtful about, you know, how we think about our service partners. We really value strong safety cultures, you know, vendors that are going to be focused on driving performance. And so we're always going to be a little bit careful about just taking on the next lowest cost provider. We just don't think long term; that makes an awful lot of sense. But I think, as we look ahead, I think to the back half of this year in 2025, you know, I would say we are anticipating a little bit more weakness as we exit this year and some, you know, specific services.

Joshua J. Viets: You know, I will say, though, that we're incredibly thoughtful about how we think about our service partners. We really value strong safety cultures, you know, vendors that are going to be focused on driving performance. And so we're always going to be a little bit careful about just taking on the next lowest cost provider. We just don't think, long term, that makes an awful lot of sense. But I think as we look ahead, I think to the back half of this year in 2025. I would say we are anticipating a little bit more weakness as we exit this year and some, you know, specific services. And then I would expect that, you know, pricing starts to moderate as we get into 2025.

Speaker Change: You know, I will say, though, that, you know, we're incredibly thoughtful about, you know, how we think about our service partners. We really value strong safety cultures, you know, vendors that are going to be focused on driving performance.

Speaker Change: And so we're always going to be a little bit careful about just taking on the next lowest cost provider. We just don't think long term that makes an awful lot of sense. But I think as we look ahead, I think to the back half of this year in 2025,

Speaker Change: You know, I would say we are anticipating a little bit more weakness as we exit this year in some, you know, specific services. And then I would expect that, you know, pricing starts to moderate as we get into 2025.

Josh Beats: And then I would expect that, you know, pricing starts to moderate as we get into 2025.

Neil Mehta: Thank you.

Nick Delosso: And then the follow-up would just be your perspective on the LNG story. You know, we've clearly got a big ramp ahead, call it 10, 14 Bs, depending on how you look at it. We've seen some volatility around Freeport and push out of things like Golden Pass. So just love your perspective on the multi-year outlook for the U.S. LNG ramp and how does Chesapeake fit into it. Yeah, we're still really excited about the multi-year...

Nick Delosso: And then the follow-up would just be your perspective on the LNG story. You know, it's clear we've got a big ramp ahead and call it 1014b, depending on how you look at it. We've seen some volatility around Freeport and push out of things like Golden Pass. So just love your perspective on the multi-year outlook for, for the US LNG ramp. And how does, how does Chesapeake fit into it? Yeah, we're still really excited about the multi-year ramp in front of us on LNG. The world remains short energy, and US LNG is going to be a big part of solving that shortage.

Speaker Change: Thank you and then the follow-up would just be your perspective on the LNG story you know it's

Speaker Change: Clearly, we've got a big ramp ahead, call it 10, 14 Bs, depending on how you look at it. We've seen some volatility around Freeport and push out of things like Golden Pass. So, just love your perspective on the multi-year outlook for the US LNG ramp and

Nick Delosso: Yeah, we're still really excited about the multi-year ramp in front of us on LNG. The world remains short of energy, and US LNG is going to be a big part of that, solving that shortage. We're well positioned to deliver gas into that market and see the value of our gas increase as a result of how we deliver gas into that market at the same time recognizing that we'll be a very important source of supply for growing domestic demand for natural gas. There's a lot of gas resources in the United States. We own a lot of it today, and the Proforma Company will own more of it than anyone.

Speaker Change: How does Chesapeake fit into it?

Speaker Change: Yeah, we're still really excited about the multi-year ramp in front of us on LNG. The world remains short energy, and US LNG is going to be a big part of that.

Nick Delosso: And we're well positioned to deliver gas into that market and see the value of our gas increase as a result of how we deliver into that market, at the same time recognizing that will be a very important source of supply for growing domestic demand for natural gas. So a lot of gas resource in the United States, we own a lot of it today. The pro form of company will own more of it than anyone. And so we're very excited about what all of this represents. We think the opportunities are significant. You've seen a lot of headlines just recently with Woodside investing in Tolerian or buying Tolerian and giving some new momentum to that project, the Driftwood project there just south of our asset in the Hainesville.

Speaker Change: solving that shortage.

Speaker Change: And we're well positioned to deliver gas into that market and see the value of our gas increase as a result of how we deliver into that market, at the same time recognizing that we'll be a very important source of supply for growing domestic demand for natural gas. There's a lot of gas resource in the United States.

Speaker Change: We own a lot of it today. The pro forma company will own more of it than anyone.

Operator: And so we're very excited about what all of this represents. We think the opportunities are great. You've seen a lot of headlines just recently with Woodside investing in Tellurian or buying Tellurian and giving some new momentum to that project, the Driftwood project there, just south of our asset in Hainesville. L&G is moving and moving, we think, pretty constructively. There have been a little bit of delays in some of the projects that are coming on here in the near term, but those projects are moving by months, not by years or decades. And so, you know, we're fine with all of that. This is a very long-term dynamic that's playing out in front of us that we're extremely well positioned for.

Speaker Change: And so we're very excited about what all of this represents.

Speaker Change: We think the opportunities are significant.

Speaker Change: You've seen a lot of headlines just recently with Woodside investing in Tellurian or buying Tellurian and giving some new momentum to that project, the Driftwood project there just south of our asset in Haynesville.

Nick Delosso: LNG is moving and moving; we think pretty constructively. There have been a little bit of delays in some of the projects that are coming on here in the near term, but those projects are moving by months, not by years or decades. And so we're fine with all of that.

Speaker Change: LNG is moving, and moving, we think, pretty constructively. There have been a little bit of delays in some of the projects that are coming on here in the near term, but those projects are moving by months, not by years or decades, and so, you know, we're fine with all of that. This is a very long-term...

Nick Delosso: This is a very long term. and dynamic that's playing out in front of us that we're extremely well positioned for.

Speaker Change: dynamic that's playing out in front of us that we're extremely well positioned for.

Unknown Attendee: Okay, thank you, sir.

Speaker Change: Thank you, sir.

Zach Parham: Our next question will come from Zach Parham with JP Morgan. You may now go ahead.

Operator: Our next question will come from Zach Parham with J.P. Morgan.

Speaker Change: Our next question will come from Zach Parham with J.P. Morgan.

Zach Parham: Good morning. During two key, you had some price-related cutailments, and you've recently indicated that those cutailments have largely been brought back online. Nate, you mentioned them in a pair of remarks that you have prepared to curtail again if prices will leak in the fall.

Nick Delosso: Good morning. During 2Q, you had some price-related curtailments, and you've recently indicated that those curtailments have largely been brought back online. Nick, you mentioned in your prepared remarks that you were prepared to curtail again if prices were weak in the fall. Can you detail what you would need to see from maybe a local pricing perspective to start curtailing some volumes in both the Marcellus and the Haynesville?

Speaker Change: You may now go ahead.

Benjamin Zachary Parham: Good morning.

Speaker Change: During 2Q, you had some price-related curtailments, and you've recently indicated that those curtailments have largely been brought back online.

Speaker Change: Nick, you mentioned in the prepared remarks that you were prepared to curtail again if prices were weak in the fall. Can you detail what you would need to see from maybe a local pricing perspective to start curtailing some volumes in both the Marcellus and the Haynesville?

Nick Delosso: Can you just detail what you would need to see from maybe a local pricing perspective to start curtailing some volumes in both the Marcellus and the Hainesville? Yeah, Zach, hey, good question. We'll stay away from giving you an exact price on that. You can certainly look back and see the prices in the spring and see that they got pretty low. And so, you know, if there's a repeat of some very low prices like that, then we would curtail more volumes.

Nick Delosso: Yeah, Zach, hey, good question. We'll stay away from giving you an exact price on that. You can certainly look back and see the prices in the spring and see that they got pretty low. You know, if there's a repeat of some very low prices like that, then we would curtail more volumes. One thing that's important to note in our projections is that we don't consider curtailment for price reasons in our projections to any significant magnitude.

Nick Delosso: Yeah, Zach, hey, good question. We'll stay away from giving you an exact price on that. You know, you can certainly look back and see the prices in the spring and see that they got pretty low. And so, you know, if there's a repeat of some very low prices like that, then we would curtail more volumes. One thing that's important to note in our projections is that...

Josh Beats: One thing that's important to note in our projections is that we don't consider curtailment for price reasons in our projections. Of any significant magnitude, we sort of have a historical pattern of shoulder season reductions and volumes that's pretty modest. That would be in there, but nothing beyond our historical pattern. So, if there are significant price curtailments that would reduce our production in the second half of the year, which we're totally prepared and willing and ready to do if the market ends up showing up to us, showing us that it's necessary.

Nick Delosso: We don't consider curtailment for price reasons in our projections.

Nick Delosso: We sort of have a historical pattern of shoulder season reductions and volumes that's pretty modest. That would be in there, but nothing beyond our historical pattern. So if there are significant price curtailments, that would reduce our production in the second half of the year, which we're totally prepared and willing and ready to do if the market ends up showing it to us, showing us that it's necessary. Yeah, exactly.

Nick Delosso: of any significant magnitude. We sort of have a historical pattern of shoulder season reductions in volumes that's pretty modest.

Nick Delosso: That would be in there, but nothing beyond our historical pattern. So if there are significant price curtailments that would reduce our production in the second half of the year, which we're totally prepared and willing and ready to do if the market ends up showing up to us, showing us that it's necessary.

Joshua J. Viets: Yeah, Zach, this is Josh. I'll just maybe add on to that a little bit. You know, obviously, the market is incredibly dynamic, and so our teams do a phenomenal job of monitoring market conditions. And between our marketing and operations teams, we really look at these almost day-to-day as, you know, decision points on whether or not gas is needed in the market. I think the other thing I would just point out, you know, of course, we're very focused on executing our deferred-till strategy.

Josh Beats: Yeah, Zach, this is Josh. I'll just maybe add on to that a little bit. Obviously, the market is incredibly dynamic. And so, our teams do a phenomenal job of monitoring market conditions between our marketing and operations teams. We really look at these almost day-to-day as decision points on whether or not gas is needed into the market.

Nick Delosso: Yeah, Zach, this is Josh. I'll just maybe add on to that a little bit. You know, obviously, the market is incredibly dynamic. And so our teams do a phenomenal job of monitoring market conditions. And between our marketing and operations teams,

Joshua J. Viets: You know, we really look at these almost day-to-day as, you know, decision points on whether or not, you know, gas is needed into the market. I think the other thing I'd just point out, you know, of course, we're, you know, very focused on executing our deferred-till strategy.

Josh Beats: I think the other thing I've just pointed out, of course, we're very focused on executing our deferred till strategy. And as we look at our volume decline from Q2 of this year through the fourth quarter, we're anticipating a 17% decline. That equates to a little over a half a BCF a day of the band capacity coming offline from our operated production. And so, we're absolutely committed to helping restore productive capacity when these market conditions improve.

Joshua J. Viets: And as we look at our volume decline from Q2 of this year through the fourth quarter, you know, we're anticipating a 17 percent decline. That equates to a little over a half a BCF a day of capacity, demand capacity coming offline from our operated production. And so we're absolutely committed to, you know, helping, you know, restore productive capacity when, you know, these market conditions improve.

Joshua J. Viets: And as we look at our volume decline from Q2 of this year, you know, through the fourth quarter, you know, we're anticipating a 17 percent decline. That equates to a little over a half a BCF a day of demand capacity coming offline from our operated production. And so we're, you know, absolutely committed to, you know, helping, you know, restore productive capacity when, you know, these market conditions improve.

Zach Parham: Thanks.

Joshua J. Viets: Thanks, I appreciate that color. My follow-up question, just on your operational plans, you're running a bit ahead of schedule on your deferred turning lines and ducks that you're going to build this year. And you took down CapEx by $50 million this quarter. If you continue to run ahead of schedule, is there room for CapEx to move incrementally lower? Or would you just enter 2025 with a few more deferrals than you'd originally planned? Yeah, Zach, at this point in time, I think we're

Josh Beats: I appreciate that color. My follow-up, just on your operational plans, you're running a bit ahead of schedule on your deferred turn and go ahead and say, and Doc, if you're going to build this year, then you took down CAPEX by 50 million in this quarter. If you continue to run ahead of schedule, is there room for CAPEX to move incrementally lower, or would you just enter 2025 with a few more deferrals than you originally planned?

Speaker Change: Thanks, I appreciate that color. My follow-up, just on your operational plans, you're running a bit ahead of schedule on your deferred turning lines.

Speaker Change: and Ducks that you're going to build this year and you took down CapEx by $50 million this quarter. If you continue to run ahead of schedule, is there room for CapEx to move incrementally lower or would you just enter 2025 with a few more referrals than you'd originally planned?

Josh Beats: Yes, at this point in time, I think we're committed to the activity levels that we've, you know, exited the second quarter at. And so right now, we're running around four rigs in the Hainesville and three rigs in the Marcellus. You know, I think for us at this point, it's really about just monitoring the setup for 2025 before we would decide to adjust activity levels any further. And so, at this point in time, you know, we're kind of happy to carry, you know, these six to seven incremental wells as docs into 2025.

Joshua J. Viets: Yeah, Zach, at this point in time, I think we're committed to the activity levels that we exited the second quarter at. And so right now, we're running around four rigs in Hainesville and three rigs in Marcellus. You know, I think for us at this point, it's really about just monitoring the setup for 2025 before we would decide to adjust activity levels any further. And so at this point in time, you know, we're kind of happy to carry the six to seven, you know, incremental wells as ducts into 2025.

Speaker Change: Yes, Zach, at this point in time I think we're committed to the activity levels that we've, you know, exited the second quarter at and so right now we're running around four rigs in the Hainesville and three rigs in the Marcellus.

Speaker Change: You know, I think for us at this point, it's really about just monitoring the setup for 2025 before we would decide to adjust activity levels any further. And so at this point in time, you know, we're kind of happy to carry, you know, these six to seven, you know, incremental wells as ducts into 2025.

Unknown Attendee: Thanks, Josh.

Joshua J. Viets: Thanks, Josh.

Charles Meade: Our next question will go from Charles Meade with Johnson Rice.

Operator: Our next question will come from Charles Meade, with Johnson Rice. You may now go ahead.

Charles Arthur Meade: Our next question will come from Charles Meade with Johnson Rice.

Charles Meade: You may now go ahead. Good morning, Nick, to you and the team there.

Operator: Good morning, Nick, to you and the team there. Hey, Charles.

Speaker Change: You may now go ahead.

Nick Delosso: Okay, Charles. I want to pick up on that question of the PDP decline. It's an interesting natural experiment, at least from where we sit and that we get to observe this, this, you know, something close to a PDP decline from you guys quarter to quarter. But I'm curious, what, if anything, have you guys learned from looking at it on the inside and, you know, maybe about the performance of your asset base and managing it, and it, perhaps optimizing your midstream as you're going through this decline. Yeah, Charles, great question. I think the PDP decline this year is a really interesting thing to look at and try to understand.

Charles Arthur Meade: Good morning Nick, to you and the team there.

Nick Delosso: I want to pick up on that question of the PDP decline. It's an interesting natural experiment, at least from where we sit, in that we get to observe something close to a PDP decline from you guys quarter over quarter. But I'm curious. What, if anything, have you guys learned from looking inside and maybe about the performance of your asset base, managing it, and perhaps optimizing your midstream as you're going through this decline?

Charles Arthur Meade: Hey, Charles.

Charles Arthur Meade: I want to pick up on that question of the PDP decline. It's an interesting natural experiment, at least from where we sit, in that we get to observe something close to a PDP decline from you guys quarter over quarter. But I'm curious,

Speaker Change: And what, if anything, have you guys learned from looking at it on the inside, and maybe about the performance of your asset base, managing it, and perhaps optimizing your midstream as you're going through this decline?

Nick Delosso: Yeah, Charles, great question. I think the PDP decline this year is a really interesting thing to look at and try to understand. As we have looked at our own assets, we have seen our PDP decline outperform slightly relative to what our modeling would suggest, but I think the market has a hard time seeing exactly how that PDP decline is working, given that we had curtailments in the spring, which made that decline look more.., significant or steeper, then we've brought those curtailments back on this summer, which has flattened everything back out, and then you see that underlying decline pick up again as you go from Q3 to Q4.

Speaker Change: Yeah, Charles, great question. I think the PDP decline this year is a really interesting thing to look at and try to understand. As we have looked at our own assets,

Nick Delosso: As we have looked in our own assets, we have seen our PDP decline outperformed slightly relative to what our modeling would suggest. But I think the market has a hard time seeing exactly how that PDP decline is working, given that we had curtailments in the spring, which made that decline look more significant or steeper. Then we've brought those curtailments back on this summer, which is flat and everything back out. And then you see that underlying decline pick up again as you go from Q3 to Q4. You can see that on that slide in our presentation.

Speaker Change: We have seen our PDP decline outperform slightly relative to what our modeling would suggest, but I think the market has a hard time seeing exactly how that PDP decline is working given that we had curtailments in the spring which made that decline look more

Speaker Change: Then we've brought those curtailments back on this summer, which has flattened everything back out. And then you see that underlying decline pick up again as you go from Q3 to Q4. You can see that on that slide in our presentation.

Nick Delosso: You can see that on that slide in our presentation. So I think it's hard for the market to see the underlying decline as clearly as we may be able to see it with our own internal data. There is no doubt that when you reduce activity in the field, your base performs a little bit better. You have less downtime from offset activity. You have gathering systems that flow and function a little bit better with hydraulics. You do a better job of maneuvering logistics around the field to keep water tanks empty, and everything just stays; the uptime is just better.

Nick Delosso: So I think the, I think it's hard for the market to see the underlying decline as clearly as we may be able to see it with our own internal data. There is no doubt that when you reduce activity in the field, your base performs a little bit better. You have less downtime from offset activity. You have gathering systems that flow and function a little bit better with hydraulics. You do a better job of maneuvering logistics around the field to keep water tanks empty, and everything to stay the up time is just better. So we definitely see that through the year.

Speaker Change: So, I think it's hard for the market to see the underlying decline as clearly as we may be able to see it with our own internal data.

Speaker Change: There is no doubt that when you reduce activity in the field, your base performs a little bit better. You have less downtime from offset activity. You have...

Speaker Change: gathering systems that flow and function a little bit better with hydraulics.

Speaker Change: you do a better job of maneuvering logistics around the field to keep

Speaker Change: Water tank's empty and everything just stays, the uptime is just better.

Nick Delosso: So we definitely see that through the year. That's relatively modest. It's encouraging, we like it, it's efficient, but it's relatively modest. And what we are interested in is the fact that that underlying decline is still moving lower. And when we look at the forecasts that are out there from a bunch of different macro analysts, we're not sure that that's fully incorporated.

Nick Delosso: That's relatively modest. It's encouraging. We like it. It's efficient, but it's relatively modest. And what we are interested in is the fact that that underlying decline is still moving lower. And when we look at the forecasts that are out there from a bunch of different macro analysts, we're not sure that that's fully incorporated at this point.

Speaker Change: So, we definitely see that through the year. That's relatively modest. It's encouraging. We like it. It's efficient. But it's relatively modest. And what we are interested in is the fact that that underlying decline is still...

Speaker Change: still moving lower and when we look at the forecasts that are out there from a bunch of different macro analysts

Nick Delosso: God, that is a great color, Nick. Thank you for that.

Charles Meade: God, that is great color. Thank you for that.

Speaker Change: We're not sure that that's fully incorporated at this point.

Josh Beats: And then I want to try a question on 2025. And I recognize that none of us know how 25 is going to look, but I'm really interested in maybe putting some bounds on what it might look like. As I look at your volumes on a standalone basis, you're looking at about two and a half beef a day in 4Q, and you say you're going to have a BCF a day of capacity. Does that mean that you're going to be at the upper end? You could be as high as on a, again, on a standalone basis, three and a half beef a day in 25, or is that a possibility?

Speaker Change: God, that is great color, Nick. Thank you for that. And then I want to try a question on 2025. And, you know, I recognize that, that.

Speaker Change: None of us know how 25 is going to look, but I'm really interested in maybe putting some bounds on what it might look like.

Joshua J. Viets: And then I want to try a question on 2025. And, you know, I recognize that none of us know how 2025 is going to look, but I'm really interested in maybe putting some boundaries on what it might look like. And as I look at your volumes on a stand-alone basis, you're looking at about, you know, two and a half beats a day in 4Q, and you say you're going to have... a BCF a day of capacity.

Speaker Change: As I look at your volumes on a stand-alone basis, you're looking at about 2.5 BCF a day and 4 Q, and you say you're going to have a BCF a day of capacity.

Joshua J. Viets: Does that mean that you're going to be, you know, that at the upper end, you could be as high as, again, on a standalone basis, three and a half bees a day in 25? Or is that not possible?

Speaker Change: Does that mean that you're going to be, you know, that at the upper end, you could be as high as, again, on a standalone basis, three and a half bees a day in 25? Or is that...

Josh Beats: Yeah, I would say a lot of that just depends on the timing at which we activate the tails. It's ultimately going to drive that. And I think our goal, as we start to activate these tails, is to get back to our sustaining level of production, which what we've communicated in the past is around 3.2 BCF a day as a standalone company. And so, you know, that'll, we would have the ability to potentially accelerate that BCF a day and activate the tails a little bit quicker. You know, we want to be thoughtful about how we reintroduce those markets, and it's ultimately that pace that is going to dictate the ultimate production level that we achieve.

Joshua J. Viets: Yeah, I would say a lot of that just depends on the timing at which we activate the tills. The tills are ultimately going to drive that. I mean, I think our goal as we start to activate these tills is to get back to our sustaining level of production, which, you know, what we've communicated in the past is around 3.2 BCF a day as a standalone company. And so, you know, though we would potentially accelerate that BCF a day and activate the tills a little bit quicker, we want to be, you know, thoughtful about how we reintroduce those markets. And it's ultimately that pace that is going to dictate the ultimate, you know, the ultimate production level that we achieve.

Speaker Change: Is that a possibility?

Speaker Change: Yeah, I would say a lot of that just depends on the timing at which we activate, you know, the tills is ultimately going to drive that. And I think our goal as we start to activate these tills is to get back to our sustaining level of production, which, you know, what we've communicated in the past is around 3.2 BCF a day as a standalone company. And so, you know, though we would have the ability to potentially accelerate that BCF a day and activate the tills a little bit quicker, you know, we want to be, you know, thoughtful about how we reintroduce those markets. And it's ultimately that pace that is going to dictate the ultimate, you know, the ultimate production level that we achieve.

Joshua J. Viets: That is helpful. Thank you, Joshua.

Unknown Attendee: Thank you, Josh.

Speaker Change: That is helpful. Thank you, Josh.

Betty Jiang: Our next question will come from Betty Jiang with Barclays.

Operator: Our next question will come from Betty Xiong with Barclays. You may now go ahead.

Speaker Change: Our next question will come from Betty Xiong with Barclays. You may now go ahead.

Betty Jiang: You may now go ahead.

Josh Beats: Um, good morning. Um, thank you for taking your own question. I wanted to ask about actually things about, uh, that macro question, because given the production decline that we have seen here today and then we have seen some, um, recent improvements of some of the curtail volume.

Operator: Good morning. Thank you for taking my question. I wanted to ask about, actually, Hainesville, a bit of a macro question. Given the production decline that we have seen here today, and then we have seen some recent improvements, some of the curtail volumes coming back, we'd love to get your thoughts on how you think about volumes in Hainesville, whether we see plateau production, or could we see more decline from here? And then, also, how that's impacting them based on pricing. Clearly, you are seeing better pricing here today. Could that continue to improve? Yeah, hey, Betty, I'll...

Betty Xiong: Good morning.

Betty Xiong: Thank you for taking my question. I wanted to ask about, actually I think it's a bit of a macro question.

Speaker Change: Given the production decline that we have seen here today, and then we have seen some

Josh Beats: Just coming back, we'll love to get your thoughts on how you think about volumes in the hands, though. Will we see plateau production? No, can we see more decline for here? And then, um, also whether that's how that's impacting based on pricing. Clearly, you are seeing better pricing here today? Um, is that good? That continued to improve? Yeah.

Speaker Change: and recent improvements as some of the curtailed volumes are coming back. We would love to get your thoughts on how you think about volumes in the Hainesville. Will we see plateau production or could we see more decline from here? And then also, whether that's how that's impacting based on pricing. Clearly you are seeing better pricing here today. Could that continue to improve?

Joshua J. Viets: Josh, may I add something here? Pricing is a little bit better today than we saw in the spring. Those curtailed volumes have come back on, and so you've seen that flatten out Haynesville production overall for our asset. If you look at the slide in our presentation that we posted last night, you can see that we do expect declines to then come back as you go from Q3 to Q4. So if you think about what's happening here, we began reducing activity during the first quarter, but then we also curtailed volumes at that same time. So the initial slope of the decline that we saw was quite steep.

Nick Delosso: Yeah. Hey, Betty, I'll start.

Josh Beats: Hey, Betty. I'll start, Josh, man. That's something here. Um, pricing is a little bit better today than we saw in the spring. Those curtail volumes have come back on. And so you've seen that flatten out, uh, the Haynesville production overall, um, uh, for our asset. Uh, if you look at the slide in our presentation that we posted last night, you can see that we do expect declines to then come back, uh, as you go from Q3 to Q4. So if you think about what's happening here, uh, we, um, we began reducing activity during the first quarter, but then we also curtailed volumes at that same time.

Joshua J. Viets: Yeah, hey Betty, I'll start. Josh may add something here. Pricing is a little bit better today than we saw in the spring. Those curtailed volumes have come back on and so you've seen that flatten out the Haynesville production overall.

Speaker Change: for our asset. If you look at the slide in our presentation that we posted last night, you can see that we do expect declines to then come back as you go from Q3 to Q4. So if you think about what's happening here, we began reducing activity.

Speaker Change: during the first quarter, but then we also curtailed volumes at that same time. So the initial slope of the decline that we saw was quite steep. Now that we've brought that curtailment back on, it has plateaued or flattened out for a period of time until the effect of that curtailment

Josh Beats: So the initial slope of the decline that we saw was quite steep. Now that we brought that curtailment back on, it has plateaued or flattened out for a period of time until the effect of that curtailment. Is all on and the underlying decline picks back up and takes over and brings volumes lower again, but again, you can see Q3 to Q4. So, we do see that that decline continues at the current underlying market conditions. When we consider where total supply is, we look at where total demand is; we look at where storage is. Uh, we don't anticipate at this point turning in line any material number of wells in the second half of the year in the Haynesville.

Nick Delosso: Now that we've brought that curtailment back on, it has plateaued or flattened out for a period of time until the effect of that curtailment is all on and the underlying decline picks back up and takes over and brings volumes lower again, which you can see in Q3 to Q4. So we do see that that decline continues at the current underlying market conditions when we consider where total supply is, we look at where total demand is, and we look at where storage is. We don't anticipate, at this point, turning in line any material number of wells in the second half of the year in the Haynesville.

Speaker Change: is all on, and the underlying decline picks back up and takes over and brings volumes lower again, which again you can see Q3 to Q4.

Speaker Change: So, we do see that that decline continues at the current underlying market conditions when we consider where total supply is, we look at where total demand is, we look at where storage is. We don't anticipate, at this point, turning in line.

Speaker Change: material number of wells in the second half of the year in the Haynesville.

Josh Beats: So we do expect that decline to continue. If prices were to weaken materially, we would curtail volumes again. We, we've, we've mentioned that now on the call already. So just to reiterate, our projections do not assume any material amount of curtailment through the fall, but we're totally prepared to do that. And that would change the shape of that decline again if we were to do it. But what I think is important to note is if you look at the Q1 of this year to Q4 of this year, there is an underlying decline. The slope of that gets adjusted with the effect of curtailment.

Nick Delosso: So we do expect that decline to continue. However, if prices were to weaken materially, we would curtail volumes again. We've mentioned that already on the call. So just to reiterate, our projections do not assume any material amount of curtailment through the fall, but we're totally prepared to do that, and that would change the shape of that decline again if we were to do it. But what I think is important to note is...

Speaker Change: So we do expect that decline to continue.

Speaker Change: If prices were to weaken materially, we would curtail volumes again. We've mentioned that now on the call already. So just to reiterate, our projections do not assume any material amount of curtailment through the fall, but we're totally prepared to do that, and that would change the shape.

Speaker Change: of that decline again if we were to do it. But what I think is important to note is...

Nick Delosso: If you look at Q1 of this year to Q4 of this year, there is an underlying decline. The slope of that gets adjusted with the effect of curtailment, and you can see that in Q2 and Q3, but that underlying decline is pretty real going from the beginning of the year to the end of the year.

Speaker Change: If you look at Q1 of this year to Q4 of this year, there is an underlying decline. The slope of that gets adjusted with the effect of curtailment. You can see that in Q2 and Q3. But that underlying decline is pretty real going from the beginning of the year to the end of the year.

Josh Beats: And you can see that in Q2 and Q3, but that underlying decline is pretty real going from the beginning of the year to the end of the year.

Joshua J. Viets: A follow-up just on the operational efficiencies that you're seeing in Hainesville. Clearly, CAPEX in Hainesville has been coming a bit lower than expected. Outside of the saltwater disposal savings mentioned in the slides, is there anything else perhaps on the drilling and completion side where that's continuing to trend lower that's helping your CAPEX that could be sustainable going forward? Yeah, Betty, we continue to look at, you know,

Betty Jiang: Okay, and I have a follow-up just on the operational efficiency that you're seeing in the Haynesville. So clearly catbacks in the Haynesville has been coming a bit lower than expected outside of saltwater disposal savings mentioned in this slide.

Speaker Change: Okay and a follow-up just on the operational efficiencies that you're seeing in the Haynesville

Speaker Change: Thank you.

Josh Beats: Is there anything else perhaps on the drilling and completion side where it, where that's a convenient, low or that's helping your catbacks that could be sustainable going forward? Betty, we continue to look at new technologies and improving operational practices to drive those costs lower. In the last six months or so, we've implemented insulated drill pipe in the Hainesville to help us manage temperatures a little bit better using chillers to help reduce temperatures of drilling mud, optimizing the whole sizing, which we've seen some benefits here, and so we continue to, you know, find new opportunities to improve our operations, and we're really starting to see those results show up. So we really think that provides some tailwinds. In addition to that, as we're, you know, exiting 24 into 25, you know, looking at opportunities to change the way at which we source sand in the Hainesville, which we think will also provide an additional tailwind as we head into next year.

Speaker Change: where that's continuing to trend lower, that's helping your CapEx that could be sustainable going forward.

Joshua J. Viets: Yeah, Betty, we continue to look at new technologies and improve operational practices to drive those costs down. In the last six months or so, we've implemented insulated drill pipe in Hainesville to help us manage temperatures a little bit better, using chillers to help reduce temperatures of drilling mud, optimizing the hole sizing, which we've seen some benefits from here late. And so we continue to, you know, find new opportunities to improve our operations, and we're really starting to see those results show up.

Speaker Change: Yeah, Betty, we continue to look at, you know, new technologies and improving operational practices to drive those, you know, costs lower.

Speaker Change: In the last six months or so, we've implemented insulated drill pipe in the Haynesville to help us manage temperatures a little bit better, using chillers to help reduce temperatures of drilling mud, optimizing the hole sizing, which we've seen some benefits here of late.

Speaker Change: And so we continue to, you know, find new opportunities to improve our operations and we're really starting to see those results show up.

Joshua J. Viets: So we really think that provides some tailwinds. In addition to that, as we're, you know, exiting 24 into 25, we are looking at opportunities to change the way in which we source sand in Hainesville, which we think will also provide an additional tailwind as we head into next year.

Speaker Change: So, we really think that provides some tailwinds. In addition to that, as we're, you know, exiting 24 into 25, you know, looking at opportunities to change the way at which we source sand, and the Haynesville, which we think will also provide an additional, you know, tailwind as we head into next year.

Betty Jiang: Got it.

Unknown Attendee: Thanks.

Speaker Change: Got it. Thanks.

Josh Schoverstein: Our next question will come from Josh Schoverstein with UBS.

Operator: Our next question will come from Josh Silverstein with UBS. You may now go ahead.

Speaker Change: Our next question will come from Josh Silverstein with UBS. You may now go ahead.

Josh Schoverstein: You may not go ahead. Thanks, morning guys. Um Nick, within the flexibility you have to bring back the BCFDA capacity. What's the additional flexibility you have between the Marcellus and Hainesville? I'm just wondering if Appalachia basis remains you know weak in next year can you bring back the Hainesville Vimes first and then sit on the Appalachia Vimes if you can provide a little bit more detail there that would be great. Yeah Josh, you know I would just say that you know we absolutely remain flexible on, you know, which area we would choose to bring back first. You know, look at these decisions really independent of one another.

Operator: Thanks. Good morning, guys.

Joshua Ian Silverstein: Thanks. Good morning, guys. Nick, within the flexibility you have to bring back the the BCFDF capacity,

Nick Delosso: Nick, within the flexibility you have to bring back the BCFDF capacity, what's the additional flexibility you have between the Marcellus and Haynesville? I'm just wondering if Appalachia Bases remains weak next year, can you bring back the Haynesville volumes first and then sit on the Appalachian volumes? If you could provide a little bit more detail there, that'd be great.

Joshua Ian Silverstein: What's the additional flexibility you have between the Marcellus and Hainesville? I'm just wondering if Appalachia Bases remains, you know, weak in next year, can you bring back the Hainesville volumes first and then sit on the Appalachia volumes? If you can provide a little bit more detail there, that'd be great.

Joshua J. Viets: Yeah, Josh, I would just say that we absolutely remain flexible on, you know, which areas we would choose to bring back first. You know, we look at these decisions really independently of one another, you know, so it's really just about monitoring local market conditions and then, you know, our operations and engineering teams working together to plan out as efficiently as we can to activate these turbines when the market says that the gas is needed. So, yeah, we're going to be flexible, and we could very well be bringing on one basin ahead of another.

Speaker Change: Yeah, Josh, you know, I would just say that, you know, we absolutely remain flexible on, you know, which area we would choose to bring back first, you know, we look at these decisions really independent of one another, you know, so it's really just about monitoring local market conditions and then, you know, our operations and engineering teams working together, you know, to, you know, plan out as efficiently as we can to activate these tools when the market says that the gas is needed. So yeah, we're going to be flexible and we could very well be bringing on one basin ahead of another.

Nick Delosso: You know, so it's really just about monitoring local market conditions and then, you know, our operations and engineering teams working together, you know, to you know, plan out as efficiently as we can to activate these tails when the market says that the gas is needed. So, yeah, we're going to be flexible and you, we can very well you bring on one basin ahead of another.

Operator: Great, and then just wanted to see if we can get an update on the Momentum project, the investment, you know, kind of updated timeline, and then anticipated benefits when it is complete as well. Good morning, this is Mohit.

Mohit Singh: Great, and then just wanted to see if we could get an update on the momentum project, the investment, you know, kind of updated timeline and then anticipated benefits when complete as well. Thanks.

Speaker Change: Great, and then just wanted to see if we can get an update on the momentum project, the investment, you know, kind of updated timeline, and then anticipated benefits when complete as well. Thanks.

Mohit Singh: So we are very pleased that the litigation that was between Energy Transfer and Momentum has been settled. We are extremely happy with that outcome. And the project is now back on track, and we expect it to go in service towards the end of 2025. So we're expecting the in-service date in Q4 2025. From a project delivery point of view, the contractors are being reengaged, and all the materials that they had stored in the yards, they have kind of gone back and checked the integrity of them, which all looks good.

Mohit Singh: Yeah, hey Josh, good morning. This is Moeth, so we are very pleased that the litigation that was between Energy Transfer and Momentum has been settled. So, we’re extremely happy with that outcome, and the project is now back on track. We expect that to go in service towards the end of 2025, so we're expecting an in-service date in Q4 2025. The from a project delivery point of view, the contractors are being re-engaged, and the all the materials that they're stored in the yards, they've kind of gone back and check the integrity of it, which all looks good. So the, you know, the plan here, as we've guided for the rest of this year in terms of capital calls, we're saying $5,200 million of remaining capital calls that will be made on the project. So everything is back on track from that point of view. The second part of your question around what this means for us, so the original thesis why we got into this project was to connect our production to the emerging demand source, and the million a day of production that we can bring from Hainesville down to Gillis gives us increased flexibility and optionality because if you look at the overall flow map, we currently have capacity on tiger and gulf run, which allows us to go due east to Perriwell, and now we will have this optionality to take it down to Gillis, which in the future, when this project is in service, gives us, you know, the flexibility to redirect flows as we see a probe. Thank you.

Operator: Hey Josh, good morning. This is Mohit.

Speaker Change: Yeah, hey Josh, good morning. This is Mohit. So we are very pleased that the litigation that was between Energy Transfer and Momentum has been settled.

Speaker Change: So, extremely happy with that outcome, and the project is now back on track, and we expect that to go in service towards end of 2025, so we're expecting in-service date in Q4.

Speaker Change: 2025.

Speaker Change: From a project delivery point of view, the contractors are being re-engaged and all the materials that they had stored in the yards, they have gone back and checked the integrity of it, which all looks good.

Mohit Singh: So the plan here, as we've guided for the rest of this year in terms of capital calls, we're saying $5,200 million of remaining capital calls that will be made on the project. So everything is back on track from that point of view. The second part of your question concerns what this means for us, so the original thesis why we got into this project was to connect our production to the emerging demand source in the Gulf Coast.

Speaker Change: So, you know, the plan here, as we've guided for the rest of this year in terms of capital calls, we're saying $50 to $100 million of remaining capital calls that will be made on the project.

Speaker Change: So everything is back on track from that point of view. The second part of your question around what this means for us...

Speaker Change: got into this project was to connect our production to the emerging demand source in the Gulf Coast. So that thesis remains intact and now that we'll have 700 million a day of production.

Mohit Singh: So that thesis remains intact, and now that we'll have $700 million a day of production that we can bring from Hainesville down to Gillis, it gives us increased flexibility and optionality. Because if you look at the overall flow map, we currently have capacity on Tiger and Gulf Run, which allows us to go due east to Perryville, and now we will have this optionality to take it down to Gillis, which in the future, when this project is Great, thanks Mohit. Our next question will come from Phillips.

Speaker Change: that we can bring from Hainesville down to Gillis gives us increased flexibility and optionality, because if you look at the overall flow map, we currently have capacity on Tiger and Gulf Run, which allows us to go due east.

Speaker Change: to Perryville, and now we will have this optionality to take it down to Gillis, which in the future when this project is in service, gives us, you know, the flexibility to redirect flows as we see appropriate.

Unknown Attendee: Great.

Unknown Attendee: Thanks, Robert.

Speaker Change: Great. Thanks, Mohit.

Phillips Johnston: Our next question will come from Phillips, Johnston with Capital One.

Operator: Our next question will come from Phillips Johnston with Capital One. You may now go ahead. Hey guys, thanks. Just a quick one for me. Looks like

Speaker Change: Our next question will come from Phillips Johnston with Capital One. You may now go ahead.

Phillips Johnston: You may not go ahead. Hey guys, thanks. Just a quick one for me. It looks like you've turned on close to 25 wells in the upper Marcellus of the last four quarters or so. I just wanted to get a sense as to how those wells are performing relative to the lower Marcellus. Thanks.

Phillips Johnston: Hey guys, thanks. Just a quick one for me. Looks like you've turned on close to 25 wells in the upper Marcellus over the last four quarters or so. Just wanted to get a sense as to how those wells are performing relative to the lower Marcellus. Thanks.

Nick Delosso: Yeah, Phillip. You know, I think we've documented in the past, and it pretty well shows itself in the public data sources that the upper Marcellus is not going to be as productive as the lower Marcellus core that, you know, we've been so focused on developing, you know, really for the last decade or so. And so we expect that trend to really continue. But our teams continue to find opportunities to, you know, improve the overall economics of the upper Marcellus. And that's what we remain focused on is generating, you know, better returns. And so we do that through extending our lateral links, which you see that in the deck today. Just, you know, year over year, we're going to end up being about 11% higher on lateral link relative to last year.

Joshua J. Viets: Yeah, Philip, I think we've documented in the past, and it pretty well shows itself in the public data sources that the upper Marcellus is not going to be as productive as the lower Marcellus core that we've been so focused on developing for the last decade or so. And so we expect that trend to really continue.

Speaker Change: Yeah, Philip, you know, I think we've documented in the past, and it pretty well shows itself in the public data sources, that the upper Marcellus is not going to be as productive as the lower Marcellus core that, you know, we've been so focused on developing.

Speaker Change: you know, really for the last decade or so. And so we expect that trend to really continue. But, you know, our teams continue to find opportunities to, you know, improve the overall economics of the upper Marcellus. And that's what we remain focused on is generating, you know, better returns. And so we do that.

Joshua J. Viets: But, you know, our teams continue to find opportunities to, you know, improve the overall economics of the upper Marcellus. And that's what we remain focused on generating, you know, better returns through extending our lateral links, which you see in the deck today. Just year over year, we're going to end up being about 11% higher on lateral link relative to last year. And that's really coming as a result of, you know, more wells being drilled in the upper and specifically using these hybrid well bore designs, which we've talked about in the past to be able to extend laterals and create better returns than we could with just a standalone upper Marcellus well.

Speaker Change: through extending our lateral links, which you see that in the deck today. Just, you know, year over year, we're going to end up being about 11% higher on lateral link relative to last year, and that's really coming as a result of, you know, more wells being drilled in the upper, and specifically using these hybrid well bore designs, which we've talked about in the past.

Nick Delosso: And that's really coming as a result of, you know, more wells being drilled in the upper and specifically using these hybrid well-bored designs, which we've talked about in the past to be able to extend laterals and create better returns than we could with just a standalone Upper Marcellus well. Sounds good.

Speaker Change: to be able to extend laterals and create better returns than we could with just a standalone upper Marcel as well.

Unknown Attendee: Thank you.

Speaker Change: Sounds good, thank you.

Paul Diamond: Our next and final question will come from Paul Diamond with City.

Operator: Our next and final question will come from Paul Diamond with Citi. You may now go ahead.

Speaker Change: Our next and final question will come from Paul Diamond with Citi.

Paul Diamond: You may not go ahead. Thank you, Mordell. Thanks for taking my call.

Operator: Hi, good morning, all. Thanks for taking my call. Just a quick one on slide five, talk about the 25% decrease in SWD cost per barrel. I just want to get an understanding of, I guess, how many years should we think of that trend if that, you know, $20 million investment per annum continues?

Mohit Singh: Just a quick one on slide five, talking about a 25% decrease in SWD cost per barrel. It's going to get an understanding of, I guess, how many years should we think of that trend is that, you know, 29 investment per annum continues? Yeah, so we continue to, you know, look for opportunities to invest in our water disposal system. You know, today we have around 30,000 barrels a day of disposal capacity for the four sites that we operate, and that also includes about 60 miles of gathering systems. So, you know, over the last couple of years, we've been investing in and around $15 million a year.

Speaker Change: You may now go ahead.

Paul Michael Diamond: Hi, good morning. I'll thank you for taking my call. Just a quick one on slide 5 to talk about 25% decrease in SDPD cost per barrel. I just want to get an understanding of I guess how many years should we think of that trend if that $20 million investment per annum continues?

Joshua J. Viets: Yeah, so we continue to, you know, look for opportunities to invest in our water disposal system. Today we have around 30,000 barrels a day of disposal capacity for the four sites that we operate, and that also includes about 60 miles of gathering system. So, you know, over the last couple years, we've been investing in and around $15 million a year. We would expect that we'll continue to look for opportunities to do that.

Speaker Change: Yeah, so we continue to, you know, look for opportunities to invest in our water disposal system. You know, today we have around 30,000 barrels a day of disposal capacity for the four sites that we operate, and that also includes about 60 miles of gathering system. So, you know, over the last couple years we've been investing in and around $15 million a year. We would expect we'll continue to look for opportunities to do that. And that's, you know, one of the reasons we're, you know, we're so excited about the Southwestern transaction is because it allows us to better utilize that system.

Mohit Singh: We would expect we'll continue to look for opportunities to do that. And that's, you know, one of the reasons we're, you know, we're so excited about the Southwestern Transaction, because it allows us to better utilize that system. Today, we run the system at about a 65 to 70% utilization rate and, you know, oftentimes these gathering lines run right by some of the southwestern sites. So, we're going to continue to look for opportunities to exploit that system and help to preserve these types of disposal rates that we've showed you all today.

Joshua J. Viets: And that's, you know, one of the reasons we're, you know, we're so excited about the Southwestern transaction is because it allows us to better utilize that system. Today, we run the system at about a 65 to 70% utilization rate. And, you know, oftentimes these gathering lines run right by some of the Southwestern sites. So we're going to continue to look for opportunities to exploit that system and help to preserve these types of disposal rates that we've shown you all today.

Operator: Got it. And just one quick follow-up.

Speaker Change: Today, we run the system at about a 65 to 70 percent utilization rate, and oftentimes these gathering lines run right by some of the southwestern sites. So we're going to continue to look for opportunities to exploit that system.

Speaker Change: and help to preserve these types of disposal rates that we've showed you all today.

Mohit Singh: Got, and just one quick follow-up. We talk about a 20% decrease in well costs in Marcellus, but then targeting 800 for the four-year 24. You talk about kind of how you see the second half of the year planning out. Should we think about that as kind of run rate around 800 or more, you know, going up and down, or how should we think about the trajectory in cadence? Yeah, Paul. I mean, so from the slide, you would have noted, you know, just under 17,000 feet of average lateral length in the second quarter, and that will be the peak for the quarter, and that's why you see that corresponding number there of the cost per foot around the $740 to $750 a foot.

Joshua J. Viets: You talk about a 20% decrease in well costs in Marcellus, but then targeting 800 for the full year. 24. You talk about kind of how you see the second half of the year playing out. Should we think about that as kind of a run rate around 800 or more, you know, going up and down? Or how should we think about the trajectory and cadence?

Speaker Change: Got it. Just one quick follow-up. You talk about a 20% decrease in well costs in Marcellus, but then targeting 800 for the full year 24.

Speaker Change: We talked about kind of how you see the second half of the year playing out, should we think about that as kind of run rate around 800 or more, you know, going up and down, or how should we think about the trajectory and cadence?

Joshua J. Viets: Yeah, Paul, I mean, from the slide you have noted, you know, just under 17,000 feet of average lateral length in the second quarter, and that will be the peak for the quarter, and that's why you see that corresponding number there of the cost per foot around $740 to $750 a foot. So we do anticipate an average cost of around $800, and really, what that $800 per foot is tied to is an average lateral length of around 14,500 feet. And so, again, it will fluctuate quarter to quarter just based upon how the teams are, you know, attempting to optimize the drill schedule throughout the course of the year.

Speaker Change: Yeah, Paul, I mean, so from the slide you would have noted, you know, just under 17,000 feet of average lateral length in the second quarter, and that will be the peak for the quarter, and that's why you see that corresponding number there of the cost per foot around $740 to $750 a foot.

Mohit Singh: So, we do anticipate averaging around 800, and really what that $800 per foot is tied to is an average lateral length around 14,500 feet. And so, again, it will fluctuate quarter to quarter, just, you know, based upon how the teams are, you know, attempting to optimize the drill schedule throughout the course of the year.

Speaker Change: So, we do anticipate averaging around 800, and really what that $800 per foot is tied to is an average lateral length around 14,500 feet. And so, again, it will fluctuate quarter to quarter just, you know, based upon how the teams are, you know, attempting to optimize the drill schedule throughout the course of the year.

Unknown Attendee: Good, appreciate the clarity. Thanks for your time.

Operator: I understand. I appreciate the clarity. Thanks for your time.

Speaker Change: Understood. Appreciate the clarity. Thanks for your time.

Nick Delosso: This concludes our question and answer session.

Nick Delosso: This concludes our question and answer session. I would like to turn the conference back over to Nick DeLasso for any closing remarks.

Nick Delosso: I'd like to turn the comments back over to Nick Delalso for any closing remarks. Thanks very much. Appreciate everybody's time today. We're really looking forward to the second half of the year. There's a lot of catalysts in front of us, obviously the closing of our merger, which we anticipate in the second half of the year, as well as we look forward to the point of time at which the natural gas market begins to improve. We're going to be really well positioned for that, and we look forward to updating you all on our progress as we move throughout the year. We will be available through our investor relations group if you have any follow-up questions to today.

Speaker Change: This concludes our question and answer session. I'd like to turn the conference back over to Nick DeLasso for any closing remarks.

Nick Delosso: Thanks very much. I appreciate everybody's time today. We're really looking forward to the second half of the year. There are a lot of catalysts in front of us, obviously the closing of our merger, which we anticipate in the second half of the year, as well as we look forward to the point in time at which the natural gas market begins to improve. We're going to be really well-positioned for that, and we look forward to updating you all on our progress as we move throughout the year. And we will be available through our investor relations group if you have any follow-up questions after today. Thanks very much.

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

Nick DeLasso: Thanks very much. Appreciate everybody's time today. We're really looking forward to the second half of the year. There's a lot of catalysts in front of us, obviously the closing of our merger, which we anticipate in the second half of the year, as well as we look forward to the point in time at which the natural gas market begins to improve.

Nick DeLasso: We're going to be really well positioned for that, and we look forward to updating you all on our progress as we move throughout the year. And we will be available through our investor relations group if you have any follow-up questions to today. Thanks very much.

Unknown Attendee: Thanks very much.

Unknown Attendee: The conference is now concluded. Thank you for attending today's presentation.

Unknown Attendee: You may not.

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

Q2 2024 Chesapeake Energy Corp Earnings Call

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