Q2 2024 Veren Inc Earnings Call
Good morning, ladies and gentlemen. My name is Ina, and I will be your operator for VAREN's second quarter 2024 conference call.
Operator: This conference call is being recorded today and will be webcast along with a slide deck which can be found on Varen's website. All amounts discussed today are in Canadian dollars with the exception of West Texas Intermediate Pricing, which is quoted in US dollars.
Speaker Change: This conference call is being recorded today and will be webcast along with a slide deck which can be found on Varen's website. All amounts discussed today are in Canadian Dollars with the exception of West Texas Intermediate Pricing which is quoted in U.S. Dollars.
Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session for members of the investment community. If you would like to ask a question over the phone line during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 2. During the call, management may make projections or other forward-looking statements regarding future events or future financial performance.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session for members of the investment community.
Speaker Change: If you would like to ask a question over the phone line during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 2.
Speaker Change: During the call, management may make projections or other forward-looking statements regarding future events or future financial performance.
Craig Bryksa: Any such statements are made subject to the Forward-Looking Information and Non- GAAP measures sections of the press release issued earlier today. I will now turn the call over to Craig Bryksa, President and Chief Executive Officer at VEREN. Please go ahead, Mr. Bryksa.
Operator: Any such statements are made subject to the forward-looking information and non-gap measures sections of the press release issued earlier today. I will now turn the call over to Craig Bryksa, President and Chief Executive Officer of Veren. Please go ahead, Mr. Bryksa.
Craig Bryksa: Thank you, operator. Welcome everyone to our Q2 2024 conference call. With me today are Ken Lamont, our Chief Financial Officer, and Ryan Gritzfeldt, our Chief Operating Officer. Throughout the first half of this year, we have focused on operational execution, strengthening and optimizing our balance sheet, and consistently returning capital to our shareholders. During the quarter, we again demonstrated our operational success with well results in the Alberta Montaney and Cape Aub DuVernay ranking among the top in the Western Canadian Sedimentary Bas
Craig Bryksa: Thank you, Operator. Welcome everyone to our Q2 2024 conference call. With me today are Ken Lamont, our Chief Financial Officer, and Ryan Gritzfeldt, our Chief Operating Officer.
Speaker Change: Throughout the first half of this year, we have focused on operational execution, strengthening and optimizing our balance sheet, and consistently returning capital to our shareholders.
Speaker Change: During the quarter, we again demonstrated our operational success with well results in the Alberta Montaney and Kay Baub DuVernay ranking among the top in the Western Canadian Sedimentary Basin.
Craig Bryksa: We produce 192,500 BUE per day comprised of 65% oil and liquids and continue to successfully optimize drilling and completions across our assets. We also generated $195 million in excess cash flow for the quarter and returned 60% of that back to our shareholders through sharer purchases and base dividends. We allocated the remaining 40%, along with the proceeds from our non-core Saskatchewan asset disposition, to reduce our net debt. Since the beginning of this year, we have reduced our net debt by almost $800 million and remain on track to exit this year with $2.8 billion of net debt, or one times debt to cash.
Speaker Change: We produce 192,500 BUI per day comprised of 65% oil and liquids and continue to successfully optimize drilling and completions across our asset base.
Speaker Change: We also generated $195 million in excess cash flow for the quarter and returned 60% of that back to our shareholders through sharer purchases and base dividend.
Speaker Change: We allocated the remaining 40% along with the proceeds from our non-core Saskatchewan asset disposition to reduce our net debt.
Speaker Change: Since the beginning of this year we have reduced our net debt by almost $800 million and remain on track to exit this year with $2.8 billion of net debt or 1x debt-to-cash flow.
Craig Bryksa: Also during the quarter, we received an investment grade rating of triple B low with a stable trend issued by Morningstar DBRS. Achieving this milestone was a direct result of our strategic transformation over the past few years, where we added significant premium drilling inventory, increased our production and cash flow, and strengthened our balance. Our investment grade rating allowed us to access the public debt market and diversify our capital structure. Subsequently, we issued $1 billion of senior notes at a favorable rate. We directed all proceeds to repay our existing debt, including fully retiring our bank term loan.
Speaker Change: Also during the quarter we received an investment grade rating of BBB low with a stable trend issued by Morningstar DBRS.
Speaker Change: Achieving this milestone was a direct result of our strategic transformation over the past few years where we added significant premium drilling inventory, increased our production and cash flow, and strengthened our balance sheet.
Speaker Change: Our investment grade rating allowed us to access the public debt market and diversify our capital structure.
Speaker Change: Subsequently, we issued $1 billion of senior notes at a favorable rate. We directed all proceeds to repay our existing debt, including fully retiring our bank term loan.
Craig Bryksa: We're very pleased with our efforts to reduce our net debt and optimize our balance sheet, which will provide many long-term benefits for our company. In addition to improving our financial outlook for the quarter, we continue to demonstrate our successful operational execution, which remains the company's top strategic priority. In Montigny, we had the top four light oil producing wells in the Western Canadian Sedimentary Basin based on recent results. We brought on our first fully operational pad on stream in the quarter, utilizing our drilling and completions design on the lands we acquired in late 2023. This pad located in Car West generated an average peak 30-day rate of 1,300 B.E.
Speaker Change: We are very pleased with our efforts to reduce our net debt and optimizing our balance sheet, which will provide many long-term benefits for our company.
Speaker Change: In addition to improving our financial outlook in the quarter, we continue to demonstrate our successful operational execution, which remains the company's top strategic priority.
Speaker Change: In the Montany, we had the top four light oil producing wells in the Western Canadian Sedimentary Basin based on recent results.
Unknown Speaker: We brought on our first fully operated pad on stream in the quarter utilizing our drilling and completion's design on the lands we acquired in late 2023. This pad located in Car West generated an average peak 30-day rate of 1,300 BUI per day per well and consisted of over 65% oil and liquids. In Goal Creek, we drilled a new pace setter well in a record nine days, with the pad averaging 11.3 days drilling per well. This is an improvement of three days since entering the play just over a year ago. We are in the process of bringing 11 wells on stream in Goal Creek that were completed in the late second quarter and planned to bring on an additional 22 wells on stream in the Alberta Montney during the remainder of 2024.
Speaker Change: We brought on our first fully operated pad on stream in the quarter, utilizing our drilling and completions design on the lands we acquired in late 2023.
Craig Bryksa: per day per well and consisted of over 65% oil and liquid. In Gold Creek, we drilled a new pace setter well in a record nine days, with the pad averaging 11.3 days drilling per well. This is an improvement of three days since entering the play just over a year ago.
Speaker Change: This pad located in Car West generated an average peak 30-day rate of 1,300 B.E. per day per well and consisted of over 65% oil and liquids.
Speaker Change: In Gold Creek, we drilled a new pace setter well in a record nine days, with the pad averaging 11.3 days drilling per well.
Craig Bryksa: We are in the process of bringing 11 wells on stream in Gold Creek that were completed in the late second quarter and plan to bring on an additional 22 wells on stream in the Alberta Montaney during the remainder of 2024. In K-Bob DuVernay, three of our recent wells ranked among the top five producing wells in the area. We brought three pads on stream during the quarter in the volatile oil window of the play.
Speaker Change: This is an improvement of three days since entering the play just over a year ago.
Speaker Change: We are in the process of bringing 11 wells on stream in Gold Creek that were completed in the late second quarter and plan to bring on additional 22 wells on stream in the Alberta Montaney during the remainder of 2024.
Unknown Speaker: In the K-Bob Doverney, three of our recent wells ranked among the top five producing wells in the area. We brought three pads on stream during the quarter in the volatile oil window of the play. One pad has been on stream for over 30 days and has generated an average peak 30-day rate of 1,300 BUI per day per well consisting of 75% condensate and liquids. We planned to bring in additional 22 wells on stream in the K-Bob Doverney area throughout the remainder of 2024. We continue to refine our technical expertise in both the Alberta Montney and K-Bob Doverney and will rely on consistent regularization, optimize drilling and completions, and knowledge transfer across our assets to further improve results and drive efficiencies.
Speaker Change: In the K-Bob DuVernay, three of our recent wells ranked among the top five producing wells in the area.
Craig Bryksa: One pad has been on stream for over 30 days and has generated an average peak 30-day rate of 1,300 BUE per day per well, consisting of 75% condensate and liquid. We plan to bring an additional 22 wells on stream in the Kaibab Duvernay area throughout the remainder of 2024. We continue to refine our technical expertise in both the Alberta Montany and Cave Aub D'Uvernay and will rely on consistent rig utilization, optimized drilling and completions, and knowledge transfer across our assets to further improve results and drive efficiency.
Speaker Change: We brought three pads on stream during the quarter in the volatile oil window of the play. One pad has been on stream for over 30 days and has generated an average peak 30-day rate of 1,300 BOE per day per well, consisting of 75% condensate and liquids.
Speaker Change: We plan to bring an additional 22 wells on stream in the K-Bob DuVernay area throughout the remainder of 2024.
Speaker Change: We continue to refine our technical expertise in both the Alberta Montney and K-Bob DuVernay and will rely on consistent rig utilization, optimized drilling and completions, and knowledge transfer across our assets to further improve results and drive efficiencies.
Craig Bryksa: In Saskatchewan, we continue to advance our decline mitigation programs to further enhance our long-term sustainability and Access Cash Flow Generator. These long-cycle properties continue to play a valuable role in our overall, excess cash flow profile because they feature minimal sustaining capital requirements driven by a low decline rate. Looking ahead, we remain on track to meet both our 2024 production guidance of $191,000 to $199,000 BUI per day and our development capital expenditures guidance of $1.4 to $1.5 billion.
Unknown Speaker: In Saskatchewan, we continue to advance our decline mitigation programs to further enhance our long-term sustainability and excess casual generation. These long-cycle properties continue to play a valuable role in our overall. Excess casual profile is that they feature minimal sustaining capital requirements driven by low decline rates.
Speaker Change: In Saskatchewan, we continue to advance our decline mitigation programs to further enhance our long-term sustainability and excess cash flow generation. These long-cycle properties continue to play a valuable role in our overall
Speaker Change: Access Cash Flow Profile as that they feature minimal sustaining capital requirements driven by low decline rates.
Unknown Speaker: Looking ahead, we remain on track to meet both our 24 production guidance of 191 to 199,000 BUI per day and our development capital expenditures guidance of 1.4 to 1.5 billion dollars. We anticipate generating $825 million dollars of excess cash flow at $80 per barrel WTI pricing. The 60% of that expected to be realized in the second half of this year.
Speaker Change: Looking ahead, we remain on track to meet both our 2024 production guidance of $191,000 to $199,000 BWE per day, and our development capital expenditures guidance of $1.4 to $1.5 billion.
Craig Bryksa: We anticipate generating $825 million of excess cash flow at $80 per barrel WTI prices, with 60% of that expected to be realized in the second half of this year. I'm very pleased with our execution year to date, the progress we have made across our business, and remain excited about our trajectory. I'd like to thank all our employees for their hard work this quarter and our shareholders for their ongoing support. I'll now turn the call back to the operator to begin the Q&A. Thank you.
Speaker Change: We anticipate generating $825 million of excess cash flow at $80 per barrel WTI pricing, with 60% of that expected to be realized in the second half of this year.
Unknown Speaker: I'm very pleased with our execution year to date, the progress we have made across our business, and remain excited about our trajectory.
Speaker Change: I'm very pleased with our execution year to date, the progress we have made across our business, and remain excited about our trajectory. I'd like to thank all our employees for their hard work this quarter, and our shareholders for their ongoing support. I will now turn the call back to the operator to begin the Q&A.
Unknown Speaker: I'd like to thank all our employees for their hard work this quarter and our shareholders for their ongoing support.
Unknown Speaker: I'll now turn the call back to the operator to begin the Q&A. Thank you.
Operator: Thank you. As a reminder for members of the investment community, if you would like to ask a question, please press star and then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. We will pause for a moment to compile the Q&A roster. Your first question comes from the line of Dennis Fong from CIBC World Market. Please go ahead.
Unknown Speaker: As a reminder for members of the investment community, if you would like to ask a question, please press start and the number one on your telephone keypad. If you would like to withdraw your question, please press start to. We'll pause for a moment to compile the Q&A roster.
Speaker Change: Thank you. As a reminder for members of the investment community, if you would like to ask a question, please press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. We will pause for a moment to compile the Q&A roster.
Dennis Wong: Your first question comes from the line of Dennis Wong from CIBC World Market. Please go ahead. Good morning, and thanks for taking my questions. The first one that I have here is just around. As we look in the back half, it looks like you have about 44 wells to be brought on. Can you talk to us a little bit about the cadence of bringing on that production and how that sets you up for 20.5 production. All.
Speaker Change: Your first question comes from the line of Dennis Fong from CIBC World Market. Please go ahead.
Dennis Fong: Hi, good morning, and thanks for taking my questions. The first one that I have here is just around. As we look in the back half, it looks like you have about 44 wells to be brought on. Can you talk to us a little bit about the cadence of bringing on that production and how that sets you up for 2025 production?
Speaker Change: Hi, good morning and thanks for taking my questions. The first one that I have here is just around
Dennis Fong: As we look in the back half it looks like you have about 44 wells to be brought on. Can you talk to us a little bit about the cadence of bringing on that production and how that sets you up for 2025 production levels?
Unknown Speaker: Hey, Dennis. Thanks for the questions. It's great to talk to you.
Craig Bryksa: Hey, Dennis. Thanks for the questions. It's great to talk to you. So, it's Craig here.
Craig Bryksa: We've got a fairly consistent capital program, and I'll let Ryan provide some color on the timing of how these pads are coming. But when you think of how we've laid out our capital program here for 2024, it's actually a fairly even split between half one and half two. So we've got about 48% of our capital remaining for the remainder of the year. And we are running fairly consistently the three rig program in the Montany and then the two rig program in the Duvernay and then following along with a frac spread in each of those areas. So I'll let Ryan maybe give you some color on timing of how we're looking through pads here in the back half.
Craig Bryksa: So it's Craig here. We've got a fairly consistent capital program. And I'll let Ryan provide some color on the timing of how these pads are coming. But when you think of how we've laid out our capital program here for 2024, it's actually a fairly even split between half one and half two. So we've got about 48% of our capital remaining for the remainder of the year. And we are running fairly consistently the three rig program and the Montany, and then the two rig program in the Doverney, and then following along with a frax spread in each of those areas.
Craig Bryksa: Hey Dennis, thanks for the questions, it's great to talk to you. So it's Craig here, we've got a fairly consistent capital program and I'll let Ryan provide some color on timing of how these pads are coming, but when you think of how we've laid out our capital program here for 2024, it's actually a fairly even split.
Ryan Chad Raymond Gritzfeldt: Yeah, so we, you know, maybe, maybe I can speak to results a little bit in that question too. Obviously, you know, in the Montney, Craig spoke to that Car West results, really pleased with that 1300 BUI a day on our type, well, actually, those were a little bit shorter laterals, so probably beat our type while they're a little bit, and still hanging in at that 1300 BUI a day, so it'll be interesting to see, you know, what our wider spacing kind of how those, those results hang in.
Ryan Gritzfeld: between half one and half two so we've got about 48% of our capital remaining for the remainder of the year and we are running
Ryan Gritzfeld: Fairly consistently, the three-rig program in the Montagne and then the two-rig program in the Duvernay and then following along with a frack spread in each of those areas. So, I'll let Ryan maybe give you some color on timing of how we're looking through pads here in the back half.
Unknown Speaker: So I'll let Ryan maybe give you some color on timing of how we're looking through pads here in the back half.
Ryan Gritzfeldt: Yeah, so we, you know, maybe I can speak to a result a little bit in that question too, obviously. You know, in the Montany, Craig spoke to that car west result. Really pleased with that 1300 BUE a day on our type. Well, actually, those were a little bit shorter, lateral. So probably feed our type while they're a little bit. And still hanging in at that 1300 BUE a day. So it'll be interesting to see, you know, what are wider spacing, kind of how those results hang in.
Ryan Gritzfeld: Yeah, so we, you know, maybe, maybe I can speak to results a little bit in that question too, obviously.
Ryan Gritzfeld: In the Montney, Craig spoke to that Car West result, really pleased with that, 1,300 Buoy a day.
Ryan Gritzfeld: on our typo. Actually, those were a little bit shorter laterals, so probably beat our typo there a little bit. And still hanging in at that 1300 BOE a day. So it'll be interesting to see, you know, what our wider spacing kind of how those those results hang in.
Ryan Gritzfeldt: We're going to be moving to a pad offsetting that pad that, you know, had the top four Montany wells. So we'll be moving to that here shortly. That's a seven-well pad, and that'll be coming on early in 2025.
Ryan Chad Raymond Gritzfeldt: We're going to be moving to a pad offsetting that pad that, you know, had the top four Montney wells. So we'll be moving to that here shortly, that's a seven well pad, and that'll be coming on early in 2025. In the Duvernay, you know, we announced that another really strong result just showing how kind of repeatable and consistent the Duvernay has been 1300 BUI a day, that's, that's our FC 807 pad, we're actually drilling a pad right offsetting that, that'll be coming on early in 2025, you know, a couple more exciting pads coming on, we're bringing on that FC 601 pad here in August in the southeast part of our play that had really strong initial pullback results earlier in the quarter, and then over to the west in Simonette, that pad will be coming on later in the year in November.
Ryan Gritzfeld: We're going to be moving to a pad offsetting that pad that, you know, had the top four Montany wells.
Ryan Gritzfeld: So we'll be moving to that here shortly. That's a 7-well pad and that'll be coming on early in 2025.
Ryan Gritzfeldt: In the Doverney, you know, we announced that another really strong result just showing how kind of repeatable and consistent the Doverney has been 1300 BUE a day. That's that's our FC 807 pad. We're actually drilling a pad right off setting that that'll be coming on early in 2025. You know, a couple more exciting pads coming on. We're bringing on that FC 601 pad here in August in the southeast part of our place that had really strong initial flowback results earlier in the quarter. And then over to the west in Simon Net, that pad will be coming on later in the year in November.
Ryan Gritzfeld: In the DuVernay, you know, we announced that another really strong result just showing how kind of repeatable and consistent the DuVernay has been.
Ryan Gritzfeld: 1300 BUE a day. That's our FC807 pad. We're actually drilling a pad right offsetting that. That'll be coming on early in 2025.
Ryan Gritzfeld: A couple more exciting pads coming on. We're bringing on that FC601 pad here in August in the southeast part.
Ryan Gritzfeld: of our play that had really strong initial fullback results earlier in the quarter.
Ryan Gritzfeld: and then over to the west in Simonette.
Ryan Gritzfeldt: So, you know, great results; you know, exciting to see the result here for the rest of the year in terms of cadence. I mean, you know, we're probably going to be in and around that, you know, low 190,000 BUE a day Q3, growing to high 190,000 BUE a day in Q4. And then obviously into 2025, kind of over that 200,000 BUE a day mark. So hopefully that gives you a little bit of cover on that, Dennis.
Ryan Chad Raymond Gritzfeldt: So, you know, great results, and exciting to see the results here for the rest of the year. In terms of cadence, I mean, you know, we're probably going to be in and around that low 190,000 VUE a day in Q3, growing to high 190,000 VUE a day in Q4, and then obviously into 2025, kind of over that 200,000 VUE a day mark. So hopefully, that gives you a little bit of color on that.
Ryan Gritzfeld: That pad will be coming on later in the year, November .
Ryan Gritzfeld: So, you know, great results, you know, exciting to see the results here for the rest of the year. In terms of cadence, I mean, you know, we're probably
Ryan Gritzfeld: It's going to be in and around that low 190,000 VUE a day Q3, growing to high 190,000.
Ryan Gritzfeld: BOE a day in Q4 and then obviously into 2025, kind of over that 200,000 BOE a day mark. So hopefully that gives you a little bit of color on that, Dennis.
Dennis Wong: No, thank you. Appreciate that that context. You touched on it a little bit just around productivity and definitely what you're seeing both obviously from car eat and in the bar as a oil window in the K-bub BUE per day.
Dennis Fong: Thank you. I appreciate that context. You touched on it a little bit just around productivity and definitely what you're seeing both, obviously, from Car East and in the volatile oil window in the KBOB Kubernetes. Can you talk to us a little bit around, I think, back at the Investor Day, you discussed the idea around kind of optimizing well design, completion design, placement of wells, well spacing, and as you continue to execute the program, what are some of the things that you're looking for and that we on the sell side and the buy side should be looking for to deem kind of the successful implementation of your revised completion design as well as potentially upwardly revising or revising your type curve expectations
Dennis Fong: No, thank you. I appreciate that context.
Speaker Change: You touched on it a little bit just around productivity and definitely what you're seeing both, obviously, from Car East and in the volatile oil window in the KBOPK Brunei. Can you talk to us a little bit around, I think, back at the investor day, you discussed the idea around
Dennis Wong: Can you talk towards a little bit around, I think back at the investor day, you discussed the idea around kind of optimizing well design, completion design, placement of well as well spacing.
Speaker Change: kind of optimizing well design, completion design, placement of wells, well spacing. And as you continue to execute the program, what are some of the things that you're looking for and that we on the sell side and the buy side should be looking for to deem kind of
Dennis Wong: And as you continue to execute the program, what are some of the things that you're looking for and that we on the self-ign in the by side should be looking for to deem kind of the successful implementation of your revised completion design as well as potentially upwardly revising or revising your type of expectations going into the future. Clark.
Speaker Change: The successful implementation of your revised completion design, as well as potentially upwardly revising or revising your type curve expectations going into the future.
Craig Bryksa: Thanks for that, Dennis. Again, so it is Craig here. So, like Brian mentioned, when you think of that car, West Pad, so that's our first pad that came on with the very well-spacing and completion design, as well as our landing profile and how we've been landing the wells. We're excited about that when it looks really good. Like Ryan mentioned, so we're in that car, 1,300 hp per day per well. In that 65% oil and liquids rate, so a good strong oil well when you think of it from that standpoint, we're sorry pad. So we're excited about that.
Craig Bryksa: Thanks for that, Dennis. Again, so it is Craig here.
Craig Bryksa: So, like Brian mentioned, when you think of that Car West pad, that's our first pad that came on with the Varon well spacing and completion design, as well as our landing profile and how we've been landing the wells. We're excited about that one. It looks really good, like Ryan mentioned. So we're in that 1,300-ish BOE per day per well, at 65% oil and liquids rate.
Speaker Change: Thanks for that, Dennis. So again, so it's it is Craig here. So like Brian mentioned, when you think of that car west pad, so that's our first pad that came on.
Speaker Change: with the VARIN well spacing and completion design as well as our landing profile and how we've been landing the wells.
Speaker Change: We're excited about that one it looks really good like Ryan mentioned so we're in that called 1300 ish BOE per day per well.
Craig Bryksa: So a good, strong oil well, when you think of it from that standpoint, we're sorry, pad. So we're excited about that. And Ryan alluded to, you know, really what we're looking for in that is to see how long that profile hangs in at those levels and just the consistency and steadiness of that. And so far, it looks pretty good.
Speaker Change: In that 65% oil and liquids rate, so a good strong oil well when you think of it.
Craig Bryksa: And Ryan alluded to, you know, really what we're looking for, and that is to see how long that profile hangs in at those levels and just the consistency and steadiness of that. And so far it looks pretty good. So that's got us fairly excited.
Ryan Gritzfeld: from that standpoint, we're sorry, pad. So we're excited about that. And Ryan alluded to, you know, really, what we're looking for in that is to see how, how long that profile hangs in at those levels and, and just the consistency and steadiness of that. And so far, it looks pretty good. So that's got us fairly excited.
Craig Bryksa: And then the other thing keep in mind, Dennis, like Ryan mentioned, you know, we've got a number of pads coming on here in the back half of this year that are our design. The other thing about them is they're spread out across the place. So it's not like they're zeroed in and focused in on one area, right? We're doing a very good job, a very disciplined job of delineating the entire asset base so that we have a full understanding of this as we move forward. So, you know, you get a pad in each of the areas coming on, and it certainly gives you more of a data point, and that really has a sixth sighted.
Craig Bryksa: So that's got us fairly excited. And then the other thing, keep in mind, Dennis, like Ryan mentioned, we've got a number of pads coming out here in the back half of this year that are our design. The other thing about them is they're spread out across the place. So it's not like they're zeroed in and focused in on one area, right?
Dennis Fong: And then the other thing, keep in mind, Dennis, like Ryan mentioned, you know, we've got a number of pads coming on here in the back half of this year that are our design.
Dennis Fong: The other thing about them is they're spread out across the play. So it's not like they're zeroed in and focused in on one area, right? We're doing a very good job, a very disciplined job of delineating the entire asset base so that we have a full understanding of this.
Craig Bryksa: We're doing a very good job, a very disciplined job of delineating the entire asset base so that we have a full understanding of this as we move forward. So, you know, you get a pad in each of the areas coming on, and it certainly gives you more of a data point. And that really has us excited. So, you know, as these things come online, we will bring you more and more of that data.
Dennis Fong: As we move forward. So, you know, you get a pad in each of the areas coming on and it certainly gives you more of a data point and that really has us excited. So, you know, as these things come online, we will get you more and more of that data, but we'd like to, you know, you'd like to see data for COD.
Craig Bryksa: So, you know, add these things come online. We will get you more and more of that data, but we'd like to, you know, you'd like to see data for, call it. Three, six, nine months before you start making material revisions to, to typos, you want to see how they hang in at that spacing, that landing, and then again with that different completion design, but as far as two a 13 path looks really good.
Craig Bryksa: But we'd like to, you know, you'd like to see data for COD, three, six, nine months before you start making material revisions to the typewells. You want to see how they hang in at that spacing, that landing, and then again with that different completion design.
Dennis Fong: 3-6
Dennis Fong: nine months before you start making material revisions to typewells. You want to see how they hang in at that spacing, that landing, and then again with that different completion design. But as far as 213 pad looks really good.
Craig Bryksa: But as far as the 213 pad goes, it looks really good. And then the other thing Ryan noted is to keep in mind, you know, six to seven, which is the Gold Creek West pad, which has just been an outstanding pad for us. It's in and around that 2000 BUE per day per well, plus 85% oil on that pad. And it's just a great pad. We are moving the rig in there shortly.
Craig Bryksa: And then the other thing, right, noted is keep in mind, six to seven, which is the Gold Creek West pad, which is, you know, has just been an outstanding pad for us. It's in and around that 2000 B.E. per day per well, plus 85% oil on that pad and it's just a great pad. We are moving the rig in there shortly. I'm going to be dribbling a seven well pad offsetting that. So, I guess it's going to take us a bit of time to make some of those revisions, but we need to see how these play out over the long run, and again, we are delineating the entire asset bases we go to.
Dennis Fong: And then the other thing Ryan noted is, keep in mind, 6 of 7, which is the Gold Creek West pad, which is, you know, has just been an outstanding pad for us. It's in and around that 2,000 BUE per day per well.
Craig Bryksa: I'm going to be drilling a seven well pad offsetting that. So I guess it's going to take us a bit of time to make some of those revisions. But we need to see how these play out over the long run. And again, we are delineating the entire asset base as we go.
Dennis Fong: plus 85% oil on that pad. And it's just just a great pad. We are
Dennis Fong: Moving the rig in there shortly, I'm going to be drilling a 7-well pad offsetting that. So, I guess it's going to take us a bit of time to make some of those revisions, but we need to see how these play out.
Dennis Fong: over the long run. And again, we are delineating the entire asset base as we go through.
Unknown Speaker: No, I appreciate that, that color as well.
Dennis Fong: No, I appreciate that color as well. If you would permit me kind of one more here, flipping to the balance sheet, you've already announced some non-core asset sales. Can you talk about, and then achieve your IG rating, can you talk a little bit about your comfort in terms of the pace of the leveraging, obviously making good headway with respect to free cash flow generation, and there's obviously other checks and balances that you have, but can you just talk about, I guess, a little bit more about the pace of lowering outstanding leverage and how much comfort you feel around that?
Dennis Wong: If you would maybe kind of one more here, flipping to the balance sheet, you've already announced obviously some non-core asset sales. Can you talk to women as you can your ID rating, can you talk to a little bit towards your comfort in terms of the pace of delivering obviously making good head way with respect to free cash with generation. And there's obviously other checks and balances that you have, but can you just talk towards, I guess, a little bit more about the pace of lowering outstanding leverage and how you, how much comfort you feel around that.
Dennis Fong: No, I appreciate that color as well. If you would permit me kind of one more here, flipping to the balance sheet.
Speaker Change: You've already announced obviously some non-core asset sales, can you talk to, and then achieving your IG rating, can you all, can you talk to a little, a little bit towards
Speaker Change: Your comfort in terms of the pace of the leveraging, obviously making good headway with respect to free cash flow generation. And there's obviously other checks and balances that you have. But can you just talk towards, I guess, a little bit more about the pace of lowering outstanding leverage and how you, how much comfort you feel around that?
Craig Bryksa: Um, yeah, so, you know, if you look at where we started the year, Dennis, we were about $3.7 billion in absolute debt, and ending this quarter right now at around $3 billion in absolute debt, it ends up being about just about $800 million of debt repayment that we've made in the short six months of this year. So, you know, we feel really good about that.
Craig Bryksa: Yeah, so, you know, if you look at where we started the year, Dennis, we were both $3.7 billion of absolute debt, ending this quarter right now at in and around $3 billion of absolute debt. It ends up being about just about 800 million dollars of debt repayment that we've made in the short six months of this year. So, you know, we feel really good about that. Part of that was excess cash flow generation, and then the other part of that was the non-core dispositions that we did in Saskatchewan. To really strengthen the balance sheet on what we've milling, so from that standpoint, really good.
Speaker Change: Yeah, so, you know, if you look at where we started the year, Dennis, we were about $3.7 billion of absolute debt.
Speaker Change: Ending this quarter right now at in and around $3 billion of absolute debt. It ends up being just about $800 million of debt repayment that we've made.
Speaker Change: in the short six months of this year. So, you know, we feel really good about that.
Craig Bryksa: Part of that was excess cash flow generation. And then the other part of that was the non-core dispositions that we did in Saskatchewan to really strengthen the balance sheet on what we've been building. So from that standpoint, really good.
Speaker Change: Part of that was excess cash flow generation. And then the other part of that was the non-core dispositions that we did in Saskatchewan.
Craig Bryksa: I'd also tell you we're extremely happy with how the investment rate rating played out for us. And then what that allowed us to do is we went into the bond market where you able to issue, you know, basically a billion dollars of notes set at very favorable terms when you think of. The first crunch of that $550 million of five year notes at sub 5% and then the second crunch, $450 million of tenure notes at just over 5% and that 5.5% range, so very happy with that. All that being said, like we've talked to you both in the past, Dennis, you know, if you ask, can myself a Ryan.
Speaker Change: to really strengthen the balance sheet on what we've been building. So from that standpoint, really good. I'd also tell you we're extremely happy with how the investment grade rating played out for us.
Craig Bryksa: I'd also tell you we're extremely happy with how the investment grade rating played out for us. And then what that allowed us to do is we went into the into the bond market, and we're able to issue, you know, basically a billion dollars of notes at very favorable terms when you think of Unknown Attendee, Unknown Shareholder, Justin Foraie, Craig Bryksa, Laique Arif, Unknown Attendee, Unknown Shareholder, Justin Foraie, Craig Bryksa, Laique Arif, Unknown Attendee, of absolute debt.
Speaker Change: And then what that allowed us to do is we went into the into the bond market and we're able to issue, you know, basically a billion dollars of notes at very favourable terms when you think of.
Speaker Change: The first tranche of that $550 million of 5-year notes at sub-5%
Speaker Change: and then the second tranche.
Speaker Change: $450 million of tenure notes at just over 5% in that 5.5% range, so very happy with that.
Speaker Change: All that being said, like we've talked to you about in the past, Dennis, you know, if you ask Ken, myself, or Ryan, where we'd like to be, well, we'd certainly like to get the absolute debt level down. We'd like to be near-term, like we've talked, around $2.2 billion.
Craig Bryksa: Where we'd like to be, but we certainly like to get the absolute debt level down. We'd like to be near term, like we talked around $2.2 billion. of Absolute Debt. If everything stays status quo in the commodity price range that we're in today and around that 80-ish dollars, we'll be somewhere around $2.8 billion at the end of the year, which is about one point, basically one time's debt to cash flow. So happy with it. And then we do have a significant amount of excess cash flow generation here in the back half of this year. Like I mentioned, about 60% of our excess cash flow comes in the back half.
Craig Bryksa: If everything stays status quo at the commodity price range that we're in today, in and around that $80-ish, we'll be somewhere around $2.8 billion at the end of the year, which is about basically one times debt-to-cash flow. I'm so happy with it.
Speaker Change: of absolute debt, if everything stays status quo in the commodity price range that we're in today, in and around that $80-ish.
Speaker Change: will be somewhere around $2.8 billion at the end of the year, which is about one point.
Craig Bryksa: And we do have a significant amount of excess cash flow generation here in the back half of this year. Like I mentioned, about 60% of our excess cash flow comes in the back half. So things are working that way.
Speaker Change: Basically, one times debt-to-cash flow, so happy with it.
Speaker Change: And we do have a significant amount of excess cash flow generation here in the back half of this year, like I mentioned, about
Craig Bryksa: The other thing, keep in mind, Dennis, as far as upstream A and D, we're absolutely taking a good, long pause as far as the acquisitions, as we've talked. On the back end of those dispositions, we're very comfortable with our portfolio. So don't look for us to do any dispositions on the upstream assets. But we have also talked to you and the market a little bit about potential infrastructure. So that is one of the things that we'll continue to look at and work through, and we'll see how that plays out.
Craig Bryksa: So things are working that way.
Speaker Change: 60% of our excess cash flow comes in the back half. So things are working that way. The other thing keep in mind Dennis
Craig Bryksa: The other thing, keep in mind, Dennis, you know, as far as the upstream, A and D, you know, we were absolutely taking a good long pause as far as the acquisitions, like we've talked on the back end of those dispositions. We're very comfortable with our portfolio. So don't look for us to do any dispositions on the upstream assets. But we also have talked to you and the market a little bit of what we're talking about. We're talking about potential infrastructure. So, you know, that is one of the things that we'll continue to look at and work through, and we'll see how that plays out.
Speaker Change: You know, as far as the, the upstream.
Speaker Change: A&D, you know, we were absolutely taking a good long pause as far as the acquisitions like we've talked.
Speaker Change: On the back end of those dispositions, we're very comfortable with our portfolio. So don't look for us to do any dispositions on the upstream assets. But we also have talked to you and the market a little bit about potential infrastructure. So
Craig Bryksa: But if something like that was to happen, that would allow us to further strengthen the balance sheet a little bit more rapidly, I would say. A very long-winded answer, Dennis, of me saying we are very happy with pounding our debt down by just about $800 million in six months.
Craig Bryksa: But that, you know, if something like that was to happen, that would allow us to further strengthen the balance sheet a little bit more rapidly, I would say. A very long winded answer, Dennis, me saying, we are very happy with pounding our debt down by just about 800 million bucks in six months.
Speaker Change: You know, that is one of the things that we'll continue to look at and work through and we'll see how that plays out. But that, you know, if something like that was to happen, that would allow us to further strengthen the balance sheet a little bit more rapidly, I would say.
Speaker Change: A very long-winded answer, Dennis, of me saying we are very happy with pounding our debt down by just about $800 million in six months.
Dennis Wong: No, I just am I. I'm going to appreciate that and look forward to what you're able to do in the second half year as well. Thanks, Dennis. Thanks.
Dennis Fong: [inaudible] I can appreciate that and look forward to what you're able to do in the second half here as well. Thanks, Dennis. Thanks. I'll turn it back on.
Speaker Change: I can appreciate that and look forward to what you're able to do in the second half here as well.
Unknown Speaker: I'll turn it back. Thank you.
Operator: Thank you. And your next question comes from the line of Travis Wood from National Bank Financial. Please go ahead.
Speaker Change: Thanks, Dennis. Thanks. I'll turn it back.
Travis Wood: And your next question comes in the line of Travis Widow from National Bank Financial. Please go ahead. Yeah, thanks. I wanted to dig in a bit on Dennis's last question there on infrastructure. And if you're able to kind of goal post kind of what types of infrastructure you're thinking about in terms of transmission type of infrastructure processing. And then, if there's any kind of wide range goal posts of value kind of put around each of those buckets. If I could get incremental color from you on that.
Speaker Change: Thank you and your next question comes from the line of Travis Wood from National Bank Financial. Please go ahead.
Travis Wood: Yeah, thanks. I wanted to dig in a bit on Dennis's last question there on infrastructure. And if you're able to kind of goalpost, kind of what types of infrastructure you're thinking about in terms of transmission type of infrastructure processing, and then if there's any kind of wide range of values to kind of put around each of those buckets, if I could get incremental color from you on that.
Speaker Change: Yeah, thanks. I wanted to dig in a bit on on Dennis's last question there on infrastructure and if you're able to kind of goalpost kind of what types of infrastructure you're thinking about in terms of
Speaker Change: Transmission type of infrastructure, processing, and then if there's any kind of wide-range goalposts of value you could kind of put around each of those buckets.
Craig Bryksa: Hey, Travis. Thanks for the question. I'll I'll hit some of them. Maybe the higher higher points, and Ryan can give you some colors as he's been looking into this for us. But if you remember, when we did the last on each transaction, when we posed a deal with Hammerhead late in December, one of the things we liked about the Hammerhead asset basis, the infrastructure that they had in place that was built out. Keep in mind that when we did the original transaction, some of the infrastructure in that area from that original transaction is not owned and operated by Baron.
Craig Bryksa: Hey, Travis, thanks for the question. I'll hit some of the higher points, and Ryan can give you some color as he's been looking into this for us. But if you remember when we did the last ONI transaction, when we closed the deal with Hammerhead late in December, one of the things we liked about the Hammerhead asset base was the infrastructure that they had in place that was built out. Keep in mind that when we did the original transaction, some of the infrastructure in that area could have gone together with maybe one single owner and potentially harmonized that deal for us.
Speaker Change: If I could get incremental color from you on that.
Speaker Change: Hey Travis, thanks for the question. I'll hit some of the maybe the higher points and Ryan can give you some colors as he's been
Speaker Change: I'm looking into this for us, but if you remember when we did the last Monty transaction, when we closed the deal with Hammerhead late in December , one of the things we liked about the Hammerhead asset base is the infrastructure that they had in place that was built out.
Speaker Change: Keep in mind that when we did the original transaction, some of the infrastructure in that area
Ryan Gritzfeldt: So there is a way for us to put this together, and I would say more harmonize that from a high level where you can put that, that, that together with maybe one single owner and potentially harmonize that deal for us. So I'll let Ryan give you some color on that, but you know Travis says, as we work our way through things. You know, know that that there's a lot of balls in the air, and this sort of thing, and you've got to just very disciplinely make your way through this. So we'll see how it ends up playing out.
Speaker Change: from that original transaction is not owned and operated by VARIN. So there is a way for us to to put this together and I would say more harmonize that from a high level where you can and put that that
Speaker Change: that together with maybe one single owner and potentially harmonize that deal for us. So I'll let Ryan give you some color on that. But you know, Travis says as we work our way through things,
Craig Bryksa: So I'll let Ryan give you some color on that. But you know, Travis says, as we work our way through things, you know, know that there's a lot of balls in the air and this sort of thing. And you've got to just very disciplinedly make your way through this. So we'll see how it ends up playing out. It's absolutely got to make sense for Varun in the long run, and we'll see how this goes. But Ryan, do you want to? Yeah, I think so.
Speaker Change: you know know that that there's a lot of balls in the air and this sort of thing and you've got a just very disciplinedly make your way through this so we'll see how it ends up playing out it's absolutely got to make sense for Varun in the long run
Ryan Gritzfeldt: It's absolutely got to make sense for Baron in the long run. And we'll see how this this goes.
Ryan Gritzfeldt: But Ryan, you want to.
Ryan Gritzfeldt: Yeah, I think I think I would just say Travis, you know, obviously pursuing opportunities and what I'd say, I think, you know, what we be looking for in an infrastructure partner, obviously, you know, first and foremost, like Craig said, you know, maintain or obtain operatorship. I think that's key for us. We feel we're good operators; we want to maintain that. Obviously, you always look to leverage selling your infrastructure assets to try to reduce your fees or lower your cost structure, especially as we grow volumes, locking up capacity at key processing plants to give us greater certainty on our five-year plan executions, obviously also key.
Ryan Chad Raymond Gritzfeldt: Yeah, I think, I would just say, Travis, you know, obviously pursuing opportunities and what I'd say, I think, you know, what we'd be looking for in an infrastructure partner, obviously, you know, first and foremost, like Craig said, maintain or obtain operatorship. I think that's key for us. We feel we're good operators; we'd want to maintain that. You know, obviously, you'd always, always look to leverage, you know, selling your infrastructure assets to try to reduce your fees or lower your cost structure, especially, you know, as we grow volumes. Locking up capacity at key processing plants, to give us greater certainty on our five-year plan execution is obviously also key.
Ryan Gritzfeld: And we'll see how this goes. But Ryan, do you want to? Yeah, I think I would just say, Travis, you know, obviously pursuing...
Speaker Change: opportunities and what I'd say I think you know what we'd be looking for in an infrastructure partner obviously you know first and foremost like Craig said you know maintain or obtain operatorship I think that's key for us
Speaker Change: We feel we're good operators. We want to maintain that. You know, obviously you'd always...
Speaker Change: Always look to leverage, you know,
Speaker Change: Selling your infrastructure assets to...
Speaker Change: to try to reduce your fees or lower your cost structure, especially, you know, as we grow volumes, you know, locking up capacity at key, you know, processing plants.
Ryan Gritzfeldt: And then even potentially a future infrastructure partner for larger capital projects. So I think if we could check all those boxes, that would be pretty strategic for us. That's what we're looking to do.
Speaker Change: to give us greater certainty on our five-year plan execution is obviously also key. And then even, you know, potentially, you know, a future infrastructure partner for larger capital projects. So I think, you know, if we could check all those boxes, that would be pretty strategic for us.
Ryan Chad Raymond Gritzfeldt: And then, potentially, you know, a future infrastructure partner for larger capital projects. So I think, you know, if we could check all those boxes, that would be pretty strategic for us. You know, that's what we're looking to do.
Travis Wood: Okay, fantastic.
Travis Wood: Okay, fantastic. And just to keep the fire under a bit, are there any timelines on that? Is this like a 2024 negotiation finalization? Or, or should we be more patient on something like this? That sounds like there's a bunch of moving parts, as you say.
Travis Wood: And just to keep the fire under you a bit, any timelines on that? Is this like a 2024 negotiation finalization, or should we be more patient on something like this that sounds like there's a bunch of moving parts, as you say. Yeah, yeah, I mean Travis, we're working through that, right. We'll see how the remainder of the year plays out, but certainly as things get done and ink that, you know, we put that into the market. But right now it's these; they take a bit of time, especially when you're looking for all the boxes that Ryan just mentioned that need to be checked.
Speaker Change: That's what we're looking to do.
Speaker Change: Okay, fantastic. And just to keep the fire under you a bit, any timelines on that? Is this like a 2024 negotiation finalization, or should we be more patient on something like this? It sounds like there's a bunch of moving parts, as you say.
Craig Bryksa: Yeah, yeah, I mean, Travis, we're working through that, right? We'll see how the remainder of the year plays out. But certainly, as things get done in ink that, you know, we put that into the market, but right now, these, they take a bit of time, especially when you're looking for all the boxes that Ryan just mentioned that need to be checked. So I guess we'll see how it plays out here over the next little bit.
Speaker Change: Yeah, yeah, I mean, Travis, we're working through that, right? We'll see how the remainder of the year plays out, but...
Speaker Change: Certainly, as things get done in ink that, you know, we put that into the market, but right now it's these, they take a bit of time, especially when you're, when you're looking for all the boxes that Ryan just mentioned that need to be checked. So I guess we'll see how it plays out here over the next little bit.
Travis Wood: So, you know, I guess we'll see how it plays out here over the next little bit.
Travis Wood: Okay, and then just one more question related to that, and I'll turn it back, but I think, as you mentioned, the Hammerhead facility is kind of in and around $80,000, $90,000 a day in processing. Is that the right way to think of that?
Travis Wood: Okay, and then just one more question related to that, and I'll turn it back. But I think, as you mentioned, that the hammerhead facilities kind of in and around 80, 90,000 a day of processing, is that the right way to think of that? Yeah, the capacity that we picked up was right in around 80. Okay, awesome.
Speaker Change: Okay, and then just one more question related to that and I'll turn it back, but I think as you mentioned that the Hammerhead facility is kind of in and around $80,000, $90,000 a day of processing. Is that the right way to think of that?
Craig Bryksa: Yeah, the capacity that we picked up was right around 80. Okay. Okay.
Speaker Change: Yeah, the capacity that we picked up was right in around 80.
Travis Wood: Okay. Okay. Awesome. Thanks very much. I'll, I'll turn it back.
Unknown Speaker: Thanks very much. I'll turn it back.
Unknown Speaker: Yeah, thanks, Travis. Thank you.
Speaker Change: Okay, okay, awesome. Thanks very much. I'll turn it back.
Operator: Thank you. There are no further questions at this time. Mr. Bryksa, please proceed.
Unknown Speaker: There are no further questions at this time.
Speaker Change: Yeah, thanks, Travis.
Unknown Speaker: I'm Mr. Bricks out. Please proceed.
Speaker Change: Thank you. There are no further questions at this time. Mr. Bryksa, please proceed.
Sarfraz Somani: Okay, I'll pass it over to Sir Fraz now. I think he's going to moderate a couple of questions here from our webcast portion. Thanks big yet. There were a couple of questions online, but I think those good coverage with the questions we just had from the analysts right now. So there are no questions online right now.
Craig Bryksa: Okay, I'll pass it over to Sarfraz now. I think he's going to moderate a couple questions from our webcast portion. Thanks, Craig.
Speaker Change: Okay, I'll pass it over to Sarfraz now. I think he's going to moderate a couple questions here from our webcast portion.
Sarfraz: Yeah, thanks, Craig. Yeah, there were a couple of questions online, but I think those got covered with the questions we just had from the analysts right now. So there are no questions online right now. So I'd like to thank everyone for joining our call today.
Speaker Change: Yeah, thanks, Craig. Yeah, there were there were a couple of questions online, but I think those got covered with the questions we just had from the analysts right now. So there are no questions online online right now. So I'd like to thank everyone for joining our call today. Thanks, everybody.
Unknown Speaker: So I'd like to thank everyone for joining our call today. Thanks, everybody. Thank you.
Operator: Thank you. The Variance Investor Relations Department can be reached at 1-855-767-6923. Thank you all for participating. You may all disconnect.
Unknown Speaker: Variance investor relations department can be reached at 1 8 5 5 7 6 7 6 9 2 3. Thank you all for participating. You may all disconnect. Thank you.
Speaker Change: Thank you. Variance Investor Relations Department can be reached at 1-855-767-6923. Thank you all for participating. You may all disconnect.