Q4 2024 Crescent Energy Co Earnings Call
Ladies and gentlemen, greetings and welcome to the question Energy Q4 fiscal year 2020 full results.
This time, all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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Speaker Change: It is now my pleasure to introduce your host.
Speaker Change: These Gallagher Investor Relations. Please go ahead.
Speaker Change: Good morning, and thank you for joining <unk> fourth quarter and full year 2024 conference call.
Speaker Change: Today's prepared remarks will come from our CEO, David rocket, Charlie our CFO Randy Coleman.
Speaker Change: Our executive Vice President of investments quite rent will also be available during Q&A.
Speaker Change: Today's call may contain projections and other forward looking statements within the meaning of the federal Securities laws.
Speaker Change: The statements are subject to risks and uncertainties, including commodity price volatility global geopolitical conflict, our business strategy and other factors that may cause actual results to differ from those expressed or implied in these statements and our other disclosures.
Speaker Change: We have no obligation to update any forward looking statements after todays call.
Speaker Change: Today's discussion May include disclosures regarding non-GAAP financial measures a reconciliation of historical non-GAAP financial measures.
Speaker Change: Most directly comparable GAAP measure please reference our 10-K and earnings press release available on the investors section of our website.
David Rocket: I will turn it over to David.
David Rocket: Good morning, and thank you for joining us yesterday Crescent posted financial and operating results in summary, it was a great quarter and a great year for our business.
Speaker Change: Before we get into the details I want to begin with a few key points that I hope you take away from this call.
David Rocket: <unk>.
David Rocket: 2024 was a transformational year for our business.
David Rocket: Highlighted by impressive financial and operational execution alongside significant profitable growth from accretive acquisitions, but more than doubled our core Eagle Ford position cementing cressa as a top three producer in a premier basin.
David Rocket: Our talented team continues to deliver.
David Rocket: Creating value in numerous ways with increased well productivity improved capital costs and accelerated outsized synergy capture.
David Rocket: Second we expect continued outperformance in 2025 or.
David Rocket: Our advantaged asset base provides the unique flexibility to invest in both oil and gasoline and development and our operational plan is designed to maximize free cash flow generation and returns for our investors through commodity price cycles and.
David Rocket: And finally present has never been better positioned to capitalize on the opportunity.
David Rocket: With consistent execution of our strategy, we have become a bigger and better business and I'm confident that through disciplined investing and safe and efficient operations. We can continue to deliver value for our shareholders and achieve our goal of becoming an investment grade company.
David Rocket: Following those quick highlights I will now discuss our results in a bit more detail.
David Rocket: We reported impressive financial results for the fourth quarter with our advantaged low decline production base generating significant free cash flow and continued improvements in capital efficiency.
David Rocket: With strong execution from our team we exceeded expectations across both production and capital with this outperformance alongside accelerated synergy capture we generated approximately $260 million of free cash flow for the quarter, well above wall Street expectations.
David Rocket: In the Eagle Ford, we continue to build momentum and enhanced returns with increased well productivity alongside even stronger capital execution, demonstrating the depth of our inventory and the dedication of our operating team.
David Rocket: Our team has consistently exceeded expectations and made our business better at every turn.
David Rocket: Finding gold buried in both our base business and acquired assets.
David Rocket: For example, we recently completed the first U turn wells on our legacy acreage in the fourth quarter of this year.
David Rocket: These advanced well generate significant cost savings relative to standard shorter laterals and our recent optimization efforts have generated production in line with traditional development.
David Rocket: We expect U turn wells to be only a small part of our overall development strategy in 2025 and beyond but they are a valuable tool as we optimize our acreage position and the long term development plan of our assets.
David Rocket: As we acquire assets a key part of our strategy is to improve operations through our ownership.
David Rocket: Our significant depth of experience operating in the Eagle Ford has enabled us to identify and capture synergies as we've grown.
David Rocket: Our largest acquisition of 'twenty 'twenty four silver Bell.
David Rocket: Can use to outperform our expectations with realized annual synergies in excess of $100 million at the top end of our recently increased target range.
David Rocket: While we are extremely pleased with the value created to date, there is still opportunity for more and we are increasing our target synergy range by approximately 15% on top of the increase announced on our third quarter call.
David Rocket: Our more recent acquisition of <unk> energy, which closed in January represents another opportunity for incremental value creation.
David Rocket: The integration is still early days, but we're excited about the potential optimization across our pro forma footprint.
David Rocket: In the Uinta, we continue to see solid results from our development program, which is largely focused on the proven ULIN Butte formation since we acquired the asset in 2022.
David Rocket: The Uinta is unique relative to other premier basins in the U S. In that it's true resource potential is only beginning to be understood by the broader industry.
David Rocket: We entered the basin through a transaction at a discount to production value as horizontal development was just beginning in the area.
David Rocket: Because of our advantaged entry point, we've been patient and our development of the asset as other operators have spent meaningful risk capital to delineate the substantial resource opportunity in the basin.
David Rocket: In 2024 with a meaningful performance data from offset operator activity, we allocated prudent capital to incremental formations beyond our core U Butte development.
David Rocket: And are seeing some exciting early time results.
David Rocket: A particular note is the early performance of our eastern joint venture designed to delineate the eastern extent of our acreage.
David Rocket: Previously untapped resource requiring no initial capital risk for our investors.
David Rocket: While very early time, this three well pad targeting the upper cube with wells and the Castle peak Black shale and Douglas Creek formations has averaged approximately 1500 barrels of oil per day per well over the first 30 days of production.
David Rocket: Exceeding our previous core UN Butte development.
David Rocket: While initial data from our resource delineation is still limited and has been encouraging.
David Rocket: We will be patient as we monitor the results and take a methodical approach to capture the substantial long term resource upside across our assets.
David Rocket: Our team's consistent operational execution and the impressive performance of our existing assets have fueled our differentiated growth through acquisition strategy to date.
David Rocket: In 2024 was a transformational year for our business.
David Rocket: Through five separate transactions totaling more than $3 billion invested since year end 2023, we've cemented crescent as a top operator in the Eagle Ford.
David Rocket: Significantly scaled our business and meaningfully enhanced our asset portfolio.
David Rocket: Our 2020 for performance and acquisitions have positioned us well for continued success in 2025.
David Rocket: Our operating plan for the coming year is focused on flexibility and free cash flow.
David Rocket: Maximizing returns on our capital and reflecting the advantaged commodity diversification across our inventory.
David Rocket: Following the successful integration of our acquisitions, we are now able to apply our operating approach and business plan to the acquired assets as part of our overall portfolio.
David Rocket: We planned around four to five rigs over the course of the year largely focused in the Eagle Ford across all phase windows, including our dry gas assets in Webb County to capitalize on recent natural gas pricing tailwind.
David Rocket: This plan translate to enter production of 254 to 264000 barrels of oil equivalent per day.
David Rocket: And 925 million to $1.0 billion to $5 billion of capital.
David Rocket: Or $975 million at the midpoint.
David Rocket: Overall, we expect to deliver strong performance across the business from our 2025 operating plan.
David Rocket: And as always in 2025, we are focused on investment returns and free cash flow, which looks to surpass current wall Street estimates at like for like commodity prices.
David Rocket: Supporting our return of capital further strengthening our balance sheet and maintaining crescent strong positioning for continued growth through opportunistic and accretive M&A.
David Rocket: Crescent has never been better positioned to capitalize on what is in front of US we are coming into this year, a better business with increased scale and enhanced asset portfolio and a solid balance sheet.
David Rocket: The M&A and A&D markets remain active and we are busier than ever we look at more than 100 potential transactions a year and a demonstrated both our patients and preparedness executing zero to three each year consistently.
We are focused on compounding significant capital over time at attractive rates of return and we quickly pass on opportunities that don't meet our underwriting criteria.
David Rocket: For Growth's sake has no place in our business and every acquisition, we complete has cleared a rigorous and consistent screening and evaluation process.
David Rocket: While it is our business to remain disciplined and focused on finding the next attractive acquisition opportunity.
David Rocket: As investors and operators, we manage our asset portfolio through opportunistic divestitures of noncore assets as well.
David Rocket: We seek to maximize value by identifying assets in our portfolio that may be more attractive and another's hands and contribute to the streamlining of our operational footprint and allocation of resources.
David Rocket: To that end, we divested roughly $50 million of noncore assets in 2024.
David Rocket: And we have a meaningful pipeline of noncore assets under evaluation for opportunistic divestiture as we went forward.
David Rocket: I am confident that we have the team the assets the balance sheet and the strategy to generate profitable growth and value creation for our shareholders over the long term.
With that I'll turn the call over to Brandi to provide more detail on the quarter.
Brandi: Thanks, David Crescent impressive results for the quarter close at a tremendous year for the business with approximately $535 million adjusted EBITDA and $259 million in Levered free cash flow across the three months.
Brandi: We had $221 million of capital expenditures during the quarter better than forecast as the team continues to drive improvement in E&C.
Brandi: We brought online 15 gross operated wells in the Eagle Ford and five gross operated wells in the Uinta all of which are generating strong initial results.
Brandi: We exited the year with net leverage at 1.4 times within our publicly stated range of one to one and a half times.
Brandi: With approximately $1 4 billion of liquidity pro forma for the closing of the <unk> acquisition and no near term maturity, we are well positioned for the future.
Brandi: We also announced another dividend of <unk> 12 per share together, our dividend and repurchases over the course of 'twenty 'twenty four equated to an attractive 4% annualized yield.
Brandi: On top of our return of capital framework.
David: We also made substantial progress in the equity market. This year with significantly increased float and trading liquidity highlighted by a recent edition to the S&P 600 index with that I'll turn the call back over to David for closing remarks.
David: Thanks, Brandon before we wrap up I want to reiterate our key messages coming out of the year first 2024 was a transformational year for our business, we saw significant growth and generated substantial free cash flow, we met or exceeded our latest guidance across all key metrics and had a meaningful beat on free cash flow generation.
David: Relative to Wall Street estimates.
David: We executed on multiple accretive acquisitions, creating a premier Eagle Ford footprint and enhancing the broader value proposition of our business sector.
David: Second we expect continued outperformance in 2025 with flexible capital allocation to maximize free cash flow generation and returns across our high quality asset base and.
David: And finally Crescent has never been better positioned to capitalize on the opportunity ahead of US we are a bigger and better business. We have ambitious goals and we are only getting started.
David: I am confident that we have the unique combination of investing in operational expertise required to continue our profitable growth trajectory and deliver sustainable long term value for our investors.
David: With that I'll open it up for Q&A operator.
David: Thank you.
David: Ladies and gentlemen, we will now be conducting a question and answer session.
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David: Ladies and gentlemen, you'd wait for a moment, while we poll for questions.
David: Ah.
David: First question comes from Oliver Huang with D. P. H. Please go ahead.
Speaker Change: Good morning, David Brandy and team and thanks for taking the questions.
Oliver Huang: Maybe just wanted to start out on 2025, I mean feels like it's simply economics being better in the current commodity backdrop on gas driving greater free cash flow, but just wanted to get a deeper walk through into the decision making process that kind of came about for capital allocation for the 2025 program.
Speaker Change: Yeah.
David: Hey, great. Thanks for the question David.
Speaker Change: I'll start on that one.
Speaker Change: I think the best way I can describe it is that we today have a portfolio like we've never had before.
Speaker Change: Our Eagle Ford position.
Speaker Change: As cord up across oil.
Speaker Change: And that what we call a mixed area than in the dry gas. So I think all you're seeing is what I'll call very operationally efficient.
Speaker Change: Ability to allocate capital dynamically across that position. So there is a little bit more gas drilling in the portfolio. This year.
Speaker Change: Longer gas prices, but at the end of the day, it's just us maximizing returns around our operational capability and our our asset base, it's a pretty straightforward.
Speaker Change: Okay that makes sense and maybe just for a follow up.
Speaker Change: Our backs and oil realizations, just kind of looking at Q4, it certainly looks like certain line items like G. P. N T L O.
Speaker Change: They seem to have come in meaningfully better for Q4, and it looks like kind of carried through to some extent looking to the 'twenty twenty-five guideposts, just trying to better understand the primary driver is how much of it is the moving parts of silver Bell Rich Mar maybe.
Speaker Change: Maybe some lower cost dry gas volumes being in the mix versus futures future synergy capture and just on the oil realizations I know in the past you you all had kind of talked about a potential marketing benefits from scale out of the Eagle Ford. So maybe any color in terms of how much of a factor that played into it all would be great.
Speaker Change: Hey, Oliver it's Randy I'll take the question so from an oil realization standpoint, you're right that's something that we've talked about last quarter or our Q.
Speaker Change: Some of the progress that we've made in the Eagle Ford specifically around oil marketing right. The fact that we're marketing a bigger.
Speaker Change: Our portfolio of assets just gives us more.
Speaker Change: <unk> ability ultimately from a counterparty perspective, but also how we felt at the various types of crude.
Speaker Change: And so we've definitely made some.
Speaker Change: Continued good progress there from a synergy capture.
Speaker Change: Amboy, and I would say, that's really driving the the increase in oil realizations from kind of the low ninety's.
Speaker Change: And then in the mid Ninety's, that's something that we think we've captured on a go forward basis, that's reflected in our R 25 guidance.
Speaker Change: From an opex standpoint, you're right.
Speaker Change: Q4, we reported close to 11 50 per Boe.
Speaker Change: I would say that there are a couple of things driving that outperformance. There one we've just continued to make really good.
Speaker Change:
Speaker Change: Improvement from an operating cost standpoint last quarter, we talked about from the synergy capture with respect to you know chemicals and fielding et cetera, that's flowing through.
Speaker Change: And you are our Q4 print, but we also had some kind of one off items.
Speaker Change: In the fourth quarter. So for example.
We inject P O T you into some of our Rockies assets, the plant and where we get that fee acuity was down in the quarter. So that's actually.
Speaker Change: Resulting in lower LOE.
Speaker Change: And in the fourth quarter, obviously, it didn't impact our operations, there or really production from a top line standpoint.
Speaker Change: They didn't go forward that the right way to think about Opex is that the 12 25 to 13 25 that we.
Speaker Change: Guided too.
Speaker Change: Perfect. Thanks for the time.
Speaker Change: Thank you. Our next question comes from Neal Dingmann with tourists Securities. Please go ahead.
Neal Dingmann: Hi morning, All Dave My first question just.
Neal Dingmann: I like your comment about not growing for growth's sake I'm just wondering when you look at the scale now where do you sort of satisfied and in sort of second part of that is there still when you look at your footprint a lot of white space, where not necessarily just big deals, but theres a lot of potential fill in to do.
Neil: Yeah, Hey, Neil Thanks, Great question.
Neal Dingmann: Maybe I'll give you.
Neal Dingmann: A couple of different ways to think about that first of all yes, we're definitely satisfied with.
Neal Dingmann: The prior acquisitions, we've made how the integrations have gone and how things.
Neal Dingmann: Look going forward hopefully what you're getting from US is a really strong outlook on the business going forward as well based on everything we got accomplished last year.
Neal Dingmann: But what I would say is that we.
Neal Dingmann: We learn something every time and I think you're also seeing us talk about a lot of the benefits we've gotten as we've grown the business over the last few years. So.
Neal Dingmann: Two things, we are not going to grow the business.
Neal Dingmann: With really high growth through the drill bit just not our strategy typically we acquire assets from others, who have a more operationally intensive strategy than we do and we get the benefit of upbringing I'll call it more discipline and.
Neal Dingmann: Method as things come into our portfolio, but we do see significant opportunity still in the sector and in particular in the Eagle Ford.
Neal Dingmann: To add on bolt on and continue to increase our position when we find it and when it's attractive so long story short I see tremendous opportunity ahead.
Neal Dingmann: But we're going to be really disciplined about it and it's got to reach a very high a very high hurdle.
Speaker Change: No. That's good that's a good that would meet as much and then secondly, just wondering now that you have the size and scale you know rather than just that normal what service costs. Julien are you seen where you're getting maybe better prices and such now that you have bigger scale and part of that maybe just talk about what you are seeing around for service costs. These days.
Speaker Change: I would say that we'll continue to get our.
Speaker Change: Efficiency around.
Speaker Change: Service cost pricing a lot of it I would say, which which is just kind of doing your job at.
Speaker Change: That bigger scale and Youll recall, this as well that somebody acquisitions, we've made from others.
Speaker Change: Themselves a collection of acquisitions and so when you see one off.
Speaker Change: Service decisions or even just one off operational decisions there is inefficiency there.
Speaker Change: That may not be.
Speaker Change: As is inefficient when you're when you're in a in a small confined area, but as you drop things into our larger portfolio, we're absolutely seeing ways to be more efficient as we operate assets as part of a single portfolio and add it to your point, it's everything from just optimization of the existing resources, we have available in the company.
Speaker Change: Being more efficient in and frankly clear with what we need from service providers as we as we bought more services.
David: Perfect. Thanks, David.
Speaker Change: Thank you.
Speaker Change: The next question comes from timber as one with Keybanc Capital Markets Inc. Please go ahead.
Timber: Hey, good morning folks. Thank you for taking my questions I want to start David in your prepared comments you gave a little more color on the noncore asset sale opportunities $50 million in 2024, and I think he said like a meaningful list for divestitures.
I know you all are open to trying to transact it at fair prices.
Timber: But can you talk about what that opportunity set is you know is at a $50 million again or could you go like multiples bigger for the right price and it are you being your tone seems to be changing a bit on this so just kind of curious your AR.
Timber: Any comments or color you can provide.
Clay: Hey, Tim it's clay.
Clay: Yeah, certainly I think we've continued to iterate that we see opportunity.
Clay: We're able to grow the business and excited about the growth of the business accretive way last year, but see opportunity on both the acquisition and divestiture side to create value for the business. You know we've put out there publicly that that two.
Clay: $250 million pipeline for divestitures, so I think certain way relative to the 50, there is bigger opportunity.
Clay: Our business for divestiture.
Speaker Change: To your point the focus there for us is finding the right value.
Speaker Change: In particular assets, where we see others valuing them more than we would value them in our own portfolio.
We can create value by selling those assets. So we certainly think that that opportunity exists.
Speaker Change: We'll be prudent and thoughtful as we approach it but we are excited about the ability to kind of create value on the divestiture side as well.
Speaker Change: Okay. Thanks, and is that a 2025 timeline, we should think about.
Speaker Change: Yeah, we haven't put a set date on it right everything for US is opportunistic and focused on value, but certainly think that that size and scale of opportunity exists for us in 'twenty five.
Speaker Change: Okay. Okay, that's fair.
Speaker Change: And my follow up.
Speaker Change: I wanted to pivot to Utah I know when you that the asset sort of fell in your lap you didn't really pay up for inventory you guys. Some promising results out there.
Speaker Change: One rig is only going to do so much on the delineation and development side. So it's interesting you got some third party capital to come in there could you talk about your willingness to sort of pursue more more an orthodox kind of opportunities like this to maybe pull value forward or pull learnings forward on delineation. Thank you.
Speaker Change: Yeah, Hey, Tim Thanks for the question, it's David I'll give you just a high level answer and I'll, let clay give a little more context around.
Speaker Change: The approach we took there but.
Speaker Change: Theres two things one I think youre seeing.
Speaker Change: Just the size and scale of the Eagle Ford position relative to the Uinta today. So we basically had one rig running on that asset.
Speaker Change: Our expectations are still to have in the ZIP code of one rig on that asset just the position has huge resource potential that we look at as a long term.
Speaker Change: Play and so I think the most important thing was.
Speaker Change: Last year, and what we talked about.
Speaker Change: And some of our disclosures is that we have started to allocate some more capital to what I'll call expanding the resource potential.
Speaker Change: They are and so youre just seeing early days for us. So I don't think you'll see a fundamental change in how we approach our business overall, but we are starting to take.
Speaker Change: More steps in and I'll, let clay covered a little bit of the thinking there yeah and I'd just say I think that the specific JV that you bought TV.
Speaker Change: A good example of US for me that.
Speaker Change: The opportunity of the resource base and he went to it and then just how we think about allocating capital.
Speaker Change: And using and managing risk and so there.
Speaker Change: We had a JV partner, who took the risk on the capital spend.
Speaker Change: We focus did it in an area, where we thought.
We could delineate the position in an area or the other.
Speaker Change: No we had less daunting Asia, but we also focused.
Speaker Change: Right right. So it's really a single the issue. We have is we haven't done anything broadly.
Speaker Change: That takes away flexibility and Optionality for US go forward. So certainly think theres more opportunity for us to be thoughtful about resource delineation.
Speaker Change: <unk> risk and allocation.
Speaker Change: It is a good example of just the ability to do that.
Speaker Change: I appreciate the comments thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Mike Inside a lot, which Stevens. Please go ahead.
Hi, good morning, everybody.
Speaker Change: Just start off and stay on the same topic that Tim brought up with Utah looking at your location count of 650.
Speaker Change: Obviously, you got some.
Speaker Change: Pretty exciting results, albeit early days with the delineation work you're doing on the eastern side.
Speaker Change: Any potential or any commentary you could provide.
Speaker Change: Provide on how that location count may change if these some of these areas like their zones I should say like the black shale.
Speaker Change: Pan out what's the potential upside here do those those carry a cross cutting your western acreage are just looking for some more commentary commentary on what the resource potential could be here.
Speaker Change: Yeah.
Speaker Change: Yeah, Hey, Michael it's quiet, we have it we have it.
Speaker Change: Plan to put out kind of quanta pure quantification of that but I would just say the delineation here its pure upside from our location count perspective.
Speaker Change: So certainly excited about the resource as you heard from US early days, we plan to be a SaaS dollars here focused on data aggregation and prudent capital allocation, but see upside to the location count at this point.
Speaker Change: Okay.
Speaker Change: And now wanted to see I know you pointed out and one of your slides of our goal of getting to investment grade I. Just wanted to see the path do you think you'd need to take to get to that point.
Speaker Change: Yeah, it's pretty simple.
Speaker Change: Two things we we.
Speaker Change: We believe to meet an investment grade criteria today. It is about scale from their perspective.
Speaker Change: So think about doubling the business all that being said our strong indication to investors is that.
Speaker Change: When we achieve scale, we're going to achieve scale with it with a great financial position. So I think just really maintaining our investment grade metrics around the balance sheet and the way we manage the business.
Speaker Change: So that opportunistically, if we get the chance to grow we're going to grow the right way. So again, if you just wanted to put a number to it probably got to double the production base of the business.
Speaker Change: But we're going to maintain investment grade credit metrics along the way.
Speaker Change: Sounds good thank you.
Speaker Change: Thank you our.
Speaker Change: Our next question comes from John Abbott with Wolfe Research. Please go ahead.
John Abbott: Hey, good morning, and thank you for taking our questions.
Speaker Change: Staying with the Uinta and the new zones.
Speaker Change: Not ready to give a resource estimate yeah understand but can you just sort of talk about the problem what how many wells you need to drill in the process of delineated in these other zones.
Speaker Change: And what do you think the timeframe could possibly be in terms of understanding the potential there.
Speaker Change: Yeah.
Clay Covered: Hey, John it's clay I think for us.
Speaker Change: Uh huh.
Speaker Change: Not a beta beta drug here, but for US everything comes down to returns on capital and the ability to kind of generate value for the business. So I think as we approach the U.
Speaker Change: That's that's still leads so I think you know.
Speaker Change: To your point right there is a real delineation opportunity.
Speaker Change: And there's a real kind of resource expansion opportunity in the basin, but what you've seen from US is allocated capital away. It's still focuses on our ability to generate free cash flow and generate returns on that capital.
Speaker Change: So I don't I don't think we're coming at it with a in the next couple of years, we're going to try to create a full kind of delineation of the resource we're just trying to get.
Speaker Change: Gathered data not get ahead of ourselves and it would be able to kind of generate returns on capital, but certainly a ton of excitement about the resource, but we're also going to allow others to be ahead of us as they have been in Indonesia alongside us.
Mike: John It's Mike.
Speaker Change: I was just going to add one more thing for you which is the base in itself is fairly well set the acreage has been leased in the operators.
Mike: You know are sort of.
Mike: Pursuing their own business plans. So I think we've gotten the benefit of a couple of strong.
Mike: Operators, who were delineating over the last few years that have now sold positions to two operators. So we're going to continue to do that but we.
I'll hope to learn together so I think it's not just about what we do is really the punch line.
Mike: Appreciate it and then I'm going to go back to the comp.
Mike: Okay, and then I'm going to go back to the topic of divestitures.
Mike:
Mike: So I mean, there's a pipeline there is no set timeline here I understand that.
Speaker Change: If I sort of look at your portfolio and maybe there's some assets in Oklahoma.
Speaker Change: Maybe you've got you've got a barnett position, maybe there's other assets that I'm kind of missing.
Speaker Change: But when I sort of think about when you sort of think about commodity prices.
Speaker Change: I mean, how do you think about selling oil versus gas assets in the current environment. I mean, you seem to be more constructive on gas given the pivot here do you wait and self me. It's like if you were to sell the Barnett, you're just sort of way and oil you know if if we sort of look at the ear performance of this well.
Today oil stocks, who have not necessarily always done as well. So is this the right time assets. So is it.
Speaker Change: So how do you look at the commodities and the timing of divestitures.
David Rocket: Yeah, Hey, John It's David a great Great question, I think you framed it.
John Abbott: A lot of good questions there.
David Rocket: Around that framing that we would think through.
David Rocket: The punch line as we said earlier is that we are committed to becoming.
David Rocket: A bigger company Opportunistically, a more efficient company opportunistically and that means we're gonna be buyers and sellers of assets. So.
David Rocket: The timing of that yes is important we're focused on creating great value as we buy and sell but long story short is we are signaling that we sold approximately 50 to 100 million of assets a year.
David Rocket: For the last few years and that we've got at this scale.
David Rocket: Bigger pipeline of that going forward. So I would I would think about your question we're going to.
David Rocket: Evaluate all of those comments.
David Rocket: Comments that you made them oil gas do they make our position.
David Rocket: In the portfolio better.
David Rocket: More streamlined but fundamentally we have some some assets that we think will be better in other people's hands.
David Rocket: And we think now is a reasonable time to be thinking about that in a greater scale than we have in the past.
Speaker Change: Alright. Thanks I appreciate it thank you for taking our questions.
David Rocket: Thank you.
Speaker Change: Our next question comes from Mike in Furrow with Pickering Energy. Please go ahead.
Speaker Change: Hi, good morning, Thanks for taking my questions.
Speaker Change: Just like to ask a question about capital flexibility and the decision to reallocate some capital to dry gas seems like it could be a good long term strategy given the macro environment and highlights your ability to mobilize and response to.
Speaker Change: Different commodity pricing fairly quickly.
Speaker Change: But in the slide deck, you know your 25 guidance as for $70, a barrel and $33. Henry hub. So I was wondering does that mean that the company plans to move forward with dry gas drilling at prices that are $3 or higher.
Speaker Change: Or does that also mean that you would transition back to liquids and be flexible with your spending program, if if gas prices dip below $3.
Speaker Change: At least for 2025.
Speaker Change: Hey, Mike It's Brandy as David mentioned in the prepared remarks right. We're all about.
Speaker Change: Drilling in allocating capital to the highest returning opportunities in our portfolio and maximizing.
Speaker Change: Free cash flow I think you're seeing right in our twenty-five plan just the flexibility that we have across the various phase windows and the Eagle Ford.
Speaker Change: Look at how we allocated capital last year it was heavily across our liquid then.
Our oil weighted inventory right and that was a nice 75 and $2 50, you world given gas prices are north of four right. There's a lot of really attractive our inventory that we're bringing forward and into 2025. So again I think you're going to continue to yes.
Speaker Change: Maintain capital allocation flexibility, but always towards an eye as.
Speaker Change: Allocating capital to really high returning opportunities within our portfolio.
Yeah that makes sense gas prices are certainly higher than three asked right now.
Speaker Change:
Speaker Change: I appreciate the disclosure about the 24 program and then you end up with 25% of the allocation to the non U N Butte.
Speaker Change: If you could provide any color about what the expectation is for non U b intervals in 2025.
Speaker Change: And then additionally, you you've already hit on the productivity today I was wondering if you could provide some details about the comparable economics between the different zones.
Speaker Change: If they're if they're coming in.
Speaker Change: Little better or worst depending on you know maybe drilling and completions.
Clay Covered: Hey, it's clay I think you can assume a similar kind of program makeup absolutely as we look at 25.
Speaker Change: It's certainly.
Speaker Change: From a.
Speaker Change: Resource perspective, it's early but we're seeing.
Speaker Change: Similar results.
Speaker Change: Across the intervals, which is what's what's got us excited about the prospects for the <unk>.
Speaker Change: Total resource base.
David: Yeah, and it's David just to add one thing though.
David: When you start to leading new formation the range of outcomes is gonna be wider so youre hearing really I'll call it optimistic.
Our expectations from us because we've seen great resource we've had great results, but I think.
David: Part of the our expectation in this phase is we're going to.
David: Learned a lot and just have a wider range of outcomes, but still around a good.
David: Well I'll call it good overall program.
David: Alright, Thank you I appreciate the color.
David: Thank you.
Speaker Change: Question comes from John Freeman with Raymond James. Please go ahead.
Speaker Change: Yes, thanks our.
Speaker Change: First question you know there's this plan. After 25, just you know generates a lesser amount of free cash flow and when.
Speaker Change: When I sort of look out you know last year, you are utilized 20% of the buyback program.
Speaker Change: Our leverage is around one four times target of one times.
Speaker Change: It looks like you could accomplish.
Speaker Change: The rest of the buyback in that that leverage target this year.
Speaker Change: So I'm just maybe help me think about the priority and kind of ranking of that.
Speaker Change: Free cash flow that you're generating above and beyond that that base dividend.
Speaker Change: Yeah.
Speaker Change: Hey, John its brand name, so I would say fundamentally no change as to how we think about capital allocation top priority for me and that's the base dividend as you buy but also the balance sheet.
Speaker Change: After that it's all about how do we Ah driver earn the best risk adjusted return on the capital that we invest for that we're buying back our stock because it's discounted to intrinsic value or we're investing our business are buying assets accretively.
So again I think we view the buyback as an opportunistic tool and then you flagged the 20% of it in 'twenty four bought back stock at an average price of $10.
Speaker Change: Per share it.
Speaker Change: So in the U S a.
Speaker Change: In 25 to continue to be an opportunistic tool that we have at <unk>.
Speaker Change: We would expect that the base dividend it stay in the 12 cents per share per quarter range.
Speaker Change: With incremental return of capital are likely coming from the buyback.
Speaker Change: Got it.
Speaker Change: Yeah.
Speaker Change: In the presentation you all highlighted.
Speaker Change: If you turn or kind of advanced trajectory well you did the first of the others are it looks like you've identified about 12 of these locations.
Speaker Change: And then watch Regal Ford.
There are additional additional ones and its current 25 plan that you all have.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: Hey, John It's Brandon again, and so nothing really in the 2025 planned specifically with respect to U turns, but I would say at a high level right as we're looking to develop that particular asset we're going to do so in the most optimized way as that may be Ryan just straight lateral.
Speaker Change: It may be eight straight laterals plus plus.
Speaker Change: Plus a U turn well forget it it's a nice tool to have in our D&C.
Speaker Change: Tool the tool kit.
Speaker Change: That we'll look to use opportunistically.
Speaker Change: In the future.
Speaker Change: Got it thanks Brandi.
Speaker Change: Thank you, ladies and gentlemen, as there are no further questions I would now like to hand, the conference over to David Rocker, Charlie CEO for closing comments.
David Rocker: Great. Thank you all again for joining us for.
Speaker Change: For supporting the company and for the questions.
Speaker Change: Today, we again are really just.
Speaker Change: Proud of the company and the team that comes to work every day for outstanding performance in 'twenty four and.
Speaker Change: Again, we have really high expectations.
Speaker Change: A great outlook for 2025, again, I look forward to catching up with Nielsen.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time.
Speaker Change: You for your participation.
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