Q2 2019 Earnings Call

Good morning, ladies and gentlemen, and thank you for standing by welcome to the southwestern Energys second quarter 2019 earnings call.

Management will open the call for a question and answer session. Following our prepared remarks.

The interest of time, we do ask you please limit yourselves to two questions and re queue for additional questions.

I would now like to turn the call, let's go over to page patches southwestern Energys, Vice President Investor Relations.

You may begin.

Thank you Jamie good morning, and welcome to southwestern Energy second quarter 2019 earnings call. Joining me today are Bill way, President and Chief Executive Officer, Clay Carroll, Chief Operating Officer, Julian Clarke, Chief Financial Officer, and Jason Curt head of marketing and transportation along with yesterday's press release. We also issued our 10-Q, which is available in the Investor Relations section of our website at Www Dot W.N. Dot com.

Before we get started I'd like to point out that many of the comments. During this call are forward looking statements that involve risks and uncertainties affecting outcomes. Many of these are beyond our control and are discussed in more detail in the risk factors and the forward looking statements sections of our annual and quarterly filings with the Securities Exchange Commission. Although we believe the expectations expressed are based on reasonable assumptions. They are not guarantees of future performance and actual results may differ materially. We may also refer to some non-GAAP financial measures, which helped facilitate comparisons across periods and with peers for any non-GAAP measures. We use a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release available on our website.

I'll now turn the call over to Bill way.

Thank you Barry and good morning, everyone. We really appreciate you all joining us for the call today.

Foundational to who we are at southwestern energy, we once again delivered strong operational performance for the quarter reporting solid results across the business and honoring the specific commitments that we have made to investors.

We remain committed to responsible returns focused capital allocation.

Our clear and deliberate path to free cash flow and preserving our strong balance sheet.

Well the backdrop of equity and commodity markets is clearly challenged we have and will continue to prudently manage risks lower costs and capture strategic organic and inorganic opportunities along the way to build long term value.

We know the efforts across the industry to exercise capital discipline in a volatile commodity business and to take steps to improve balance sheets.

This is nothing new here its win and we have been doing this for years.

As clearly evidenced by our strategic actions we have taken this discipline is part of the bedrock of our management approach its win.

Our fully funded capital program Undrawn 2 billion dollar revolver strong leverage ratio and no material maturities. Prior to 2025 altogether mean that we already have a strong balance sheet, which underpins our resilience in this current market.

We remain sharply focused on both cash flow neutrality, and our leverage ratio, we are well down our announced path to replace the EBITDA, we monetized in our federal sale last year through prudent development of our liquids rich Appalachian assets.

Lowering drilling and completion costs and reducing cycle times without sacrificing well performance are all key to this plan.

If theres one thing swing is known for its operational outperformance.

By combining our leading fully integrated field development capabilities, and our large scale high quality acreage position.

The company is setting new records and building on its strong legacy of outperformance.

Our subsurface technical expertise in Appalachian spans the basin in high yield condensate rich and Super Rich NGL acreage, along with high yield high rate gas wells.

When combined with our demonstrated learning agility and innovation, we are continuing to applying new learnings at an accelerated pace gaining the benefits of improved performance and realizing lower costs and we do all of this while assuring the safety of all those who work with us and protecting the environment, where we work and live.

Playing Julian will describe our most recent technical operational and cost reduction achievements in more detail in a moment, but I want to highlight a few for you.

First we are on track for our well cost reduction target of $875 per lateral foot on average for all wells to sales in 2019.

Second as a result of numerous efforts across the company production of 186 Bcf equivalent was on the high end of guidance for the quarter.

Year over year performance predominantly came from our Super rich acreage in southwest Appalachia, where condensate production increased 30%.

For the full year as previously guided we expect modest production growth of 9% for the company.

My thanks.

Two are incredibly dedicated.

And resourceful teams, we sure are proud of you and the efforts that you make everyday to make these achievements possible.

Third with cost management being at Paramount importance to our company, we have reduced our total cost structure by over $100 million compared to the first half of 2018.

We are careful and prudent with every dollar whether it is capital or expense.

Fourth with the capital and operational efficiency improvements achieved year to date.

We are able to lowered the high end of capital investment for 2019 by $30 million, while affirming our original production guidance.

Total capital for this year will not exceed $1.15 billion.

To emphasize this point, we've already begun our planned reduction of activity in the second half of this year and expect to go from operating an average of six rigs and four frac crews in the first half to two rigs and one frac crew by the end of the third quarter.

All within plants.

Looking ahead, the company's strategic intent remains the same.

We intend to grow differentiated and sustainable shareholder value.

The returns focused investment and consistent operational outperformance in leading high quality concentrated large scale and low cost assets with an emphasis on high margin liquids.

While we're just getting underway with our detailed 2020 planning process you can expect us to remained as disciplined in our approach as we have been in the past.

Our priorities in our financial discipline are clear.

As you've heard me say before we establish and adjust our capital budget based off of available cash flow.

At strip pricing generated by the company, including the benefits of our hedging program.

And we allocate capital based on project economics calculated using strip pricing unhedged.

As previously announced 2019 and 2020 capital programs are fully funded by cash flow generated by the company and supplemented with cash earmarked from last year's favorable monetization.

We believe that even at strip prices, we can achieve our goal of returning to free cash flow neutral position by the end of 2020.

However, if cash flow declined due to lower prices.

And it impacts our cash flow, we will reduce investment accordingly in line with our rigorous capital discipline management.

And finally regarding our current operations protecting the environment is a core value of the company.

The sustainability of our efforts as highlighted in the fact that from the beginning of our operations in Appalachia, we have invested in water delivery infrastructure.

To date, we estimate that we have removed more than 1.3 million truckloads of water from the roads.

Thereby reducing industrial traffic in the communities, where we work and live all while lowering our cost to operate another proof point of our core value based culture, supporting leidy safe, leading safety performance and environmental stewardship.

I'd now like to turn the call over to clay to further discuss our quarter's operational achievements.

Thanks, Bill and good morning.

Let me start by recognizing our operating asset teams for their outperformance in the quarter and for continuing the operational momentum that we have been building for some time now.

From technical enhancements to operational excellence from supply chain to marketing, we delivered industry, leading execution and achieve greater efficiencies.

All of these teams working together drove costs lower enhanced margins and improved production performance on both new and existing wells.

Total production for the quarter was above the midpoint of guidance at 186 Bcf.

Including 21% liquids.

Liquids production increased 15% compared to the second quarter last year to 70700 barrels per day, consisting of 60400 barrels a day of Ngls and 10300 barrels a day of condensate.

Our condensate production increased 30% compared to prior year quarter and is our highest value commodity accounting for 12% of total reserves this quarter.

During the quarter, we captured greater value through ethane rejection, resulting in slightly lower ethane volumes.

Consistent with our front end loaded capital program, we invested $368 million in the second quarter and have already begun our planned activity reduction for the second half of the year.

In the second quarter, we averaged six drilling rigs and four frac crews and are currently utilizing four drilling rigs and three frac crews.

As Bill mentioned, we plan to operate two drilling rigs and one frac crew by the end of the third quarter.

Capital will decline in the second half and will not exceed $1.15 billion total for the year.

We continue to enhance our technical and operational capabilities across drilling completions and facilities.

Oltrogge long laterals each in excess of over 15000 feet, bringing the year to date total to 10.

In addition, we accomplished a mile and a day goal on 10 wells in the quarter and 21 wells year to date.

These achievements demonstrate the quality of our super spec rigs and drill an organization, which delivers exceptional results enabled by a continuous improvement mindset.

On the completion side, we delivered a company record 11.4 stages pumped per day on a four well pad.

Year to date swim has increased completion stages per day by 30% to an average of greater than seven stages per day on all completed wells.

These examples contributed to delivering to Q results that have us on track to achieve our annual goal of reducing well costs for wells to sales by 25% with an average cost per lateral foot of $875 for the quarter, we averaged $866 a foot with an average lateral length of 10128 feet.

At 30% increase in lateral length compared to the prior year quarter.

The well costs, we report our comprehensive and include title regulatory permitting pad site facilities.

Drilling optimized completions and initial flowback costs for all wells to sales in the period.

To be clear, we are focused on maximizing returns from our capital program and maximizing efficiency, but we will not jeopardize well performance simply to meet a certain cost target.

In southwest Appalachia, we are focused on maximizing our condensate and liquids production rates in our super rich acreage through longer laterals completion optimization flowback techniques and facility design improvements.

We brought 23 wells online 12 of which were online for 30 days or more and had an average 30 day rate of 11 million cubic feet equivalent per day, including 69% liquids, a 60% increase compared to second quarter 2018.

A recent well had initial production rates of 31 million cubic feet equivalent per day, including 1700 barrels per day of condensate and total liquids of more than 70%.

In northeast Appalachia, we brought 13 dry gas wells online with an average initial production rate of 25 million cubic feet per day.

At 25% increase over the prior year quarter.

In addition, we are further optimizing the base production associated with this asset and have lowered wellhead and line pressures through gathering system enhancements and wellhead compressor additions.

We progressed, our resource to reserves effort in the quarter and southwest Appalachian We completed our fourth upper Devonian well, which is our first test in the Super Rich acreage.

The well is expected to be online in the third quarter.

Additionally, we continue to add and evaluate trade data related to the new pp Utica and have advanced our view of being able to significantly reduce well costs associated with the go forward development of that horizon.

In northeast Appalachia, we completed our three most recent upper Marcellus tests and have early production results, averaging 13 million cubic feet per day with an average lateral length of about 8600 feet.

We are encouraged by these early results and we will continue to evaluate the production data to confirm long term economic viability.

And now I will turn the call over to Julian for the financial highlights Julie.

Thank you clay and good morning, everyone.

The company continues to deliver solid operational and financial results on its transition back to generating free cash flow following last year's de leveraging initiatives with the Fayetteville asset monetization.

Adjusted EBITDA for the quarter was $186 million and 505 million for the first six months of 2019 compared to 713 million in 2018.

Principally driven by the loss of 8 billion EBITDA.

Year to date, MP margins, including interest or a $1.28 per mcf.

Or 11 cents higher than the first six months of 2018.

Higher Appalachian production volumes, and our lower cost structure more than offset lower commodity prices.

Our weighted average realized price, including derivatives was $2.61 per Mcf.

Excluding transportation bullet $2.17 per Mcf.

Including.

Page.

We continue to realize the benefits of our leading low cost firm transportation portfolio, which is well positioned to capture the improving basis differentials in the basin and provide the company with market access to premium northeast hubs and Gulf coast pricing locations.

We are updating our guidance for natural gas differentials, which include all transportation costs to 60 to 70 cents per Mcf.

10 cents improvement from the guidance issued.

This is Mike.

Excellent realized gas prices for example in northeast Appalachia, our realized gas price during the second quarter of 2019 was one cents higher than the second quarter of 2018, Despite a 16 cents decline in Nymex.

In the current environment, we see these tightening differentials continuing as we move through the rest of this year and into 2020.

Whilst our differentials include some new unutilized contractual pipeline capacity on Amex ERP. The approximate 10 cents contribution is short term and manageable as we grow in a capacity.

From a cost structure perspective, we are enhancing margins and lowering the company's fully burdened breakeven prices.

Gross gionee was reduced $49 million in the first six months of 2019 compared to 2018.

We continue to look for additional opportunities to reduce gionee even further.

For example, we recently closed a real estate transaction, but sold our Houston headquarters and entered into a new lease for roughly half the space, which will save eight and a half million dollars per year or $85 million of DNA over the 10 year lease term.

Furthermore, we lowered our ela, we guidance for the year, reflecting the results of the ongoing cost and efficiency drive by our operating and logistics teams. The two biggest drivers a lower compression fees and reduce.

Salt water disposal costs.

The new range of 90 to 94 cents per Mcf fee capture savings of approximately 20 million from the previous guidance assuming midpoints.

Our guidance for NGL realizations are being lowered to 18% to 22% of Wi Fi, which is reflective of the current ethane price environment and the divergence of C plus prices to oil prices.

Prices for NGL, and particularly ethane will lower in the quarter. We believe that the ethane forward curve will continue to be volatile and the supply demand balance can adjust quickly, which we believe will happen. This year as new ethane cracker capacity goes in service and when it does we expect some price improvement.

As we did in the second quarter to maximize value, we will elect to reject ethane as prices dictate despite the impact on reported production volume.

There continues to be growing global demand for propane and butane, however, Mont belvieu propane and butane prices have experienced the decoupling from oil and the international pricing due to limited Gulf coast export capacity.

While we have revised NGL realizations guidance to reflect this situation, we expect Mont belvieu pricing to realign with global prices in late Q3, or early Q4 and into 2020 as multiple LPG export expansion projects are completed providing incremental export capacity.

Moving to the balance sheet, we continue to maintain our strong position with an Undrawn 2 billion dollar revolver and 150 million of cash on the balance sheet.

This strong liquidity position, coupled with no material debt maturities until 2025 positions us well to maneuver through a volatile commodity price environment.

Our leverage ratio for the trailing 12 months is two times, even when excluding the EBITDA from Fayetteville.

Protecting our balance sheet and liquidity remains a core focus of the company and is a critical component of our decision making process.

During the second quarter, we sold non core assets for $25 million with no production inventory or reserves in.

Reducing debt has not only strengthened our balance sheet, but has also allowed us to reduce our interest costs by approximately $40 million for the first six months of 2019 compared to 2018.

Further adding to the captured savings throughout the organization that I mentioned earlier.

To summarize cost management remains a key focus for us as demonstrated by having reduced our total cost structure by over $100 million compared to the first six months of 2018.

Our efforts are ongoing and continuing.

That concludes our prepared remarks.

Jamie could you. Please open the line for questions.

Ladies and gentlemen at this time, we'll begin the question and answer session to ask a question you may Prostar and then one using a touchtone telephone if you are using a speakerphone. We ask you. Please pick up your handset before pressing the keys.

To withdraw your question you May press star into.

Once again that is star and then one to ask a question.

Our first question today comes from Holly Stewart from Scotia, Howard Weil. Please go ahead with your question.

Good morning, gentlemen page.

Morning.

Bill recognizing it.

It's early and I appreciate the comments on on planning a trip on an unhedged basis, but is there.

Just any color you can provide on the activities that as you kind of move toward Tony Tony with those two rigs running.

Yes, we are in the planning stages and because our capital program is built off of.

The cash flow is generated at commodity prices in the year that certainly impacts.

That answer but.

What I can tell you for 2020 is that as we.

To close out 2019, and the capital program that I described we will begin the process of ramping back to a nominal amount of rigs and frac fleets commensurate with our estimates of the budget.

And we'll make adjustments to that as we finalize that budget. After in January February time period that budget will be will be.

Benefitted by the lowering cost structure productivity gains and all of the things that have happened this year.

And in years past.

It will be coupled with.

The cash flow is generated from strip pricing at the time as I said any hedging benefit that we have that that is locked in.

And then we'll we'll take that capital.

Our available cash flow will determine how much of it and in what priority we want to invest it based off the economics and then take the the prioritized list.

Projects, and and and setting up to be funded so.

The other piece of color I can give you is that we will likely continue our our practice.

Slightly front end loading the first half of the year to assure delivery and captured greater value just as we've done over the last several years and so the shape of the of the activity will be similar to where we are today.

For this year.

Okay. That's helpful.

Maybe just sort of along the same lines I think it was the Fourq you call that you talked about some other strategic contract renegotiations that we're still ongoing seems weve heard a few.

Producers at least talk about the potential of some some midstream contract renegotiations I think your southwest wasn't done until.

At some point in 2017, but is there anything that you can highlight from just the strategic.

Yes level that you're still sort of working toward.

It does.

Those costs lower.

We look across the entire enterprise and where it makes sense.

To go back and take another look at an agreement. These are long term relationships that we have that.

That are critically important to us, but where we have the opportunity to add additional.

Acreage or adjust the the contracts to to the.

The particular commodity market that were in whether we look at some of the new well inventory that is being generated in our our resource to reserves efforts and being able to commit those to the agreements.

We are able to exchange those commitments for some.

Some.

Opportunities for us to get a better deal on the contract on our side and so we've got a number of those.

Discussions that are underway as we typically do.

We bring those results out when when they're done.

But.

There is a continuous effort, whether it's a contract for a.

For gathering or our transportation Theres always an optimization that were going on.

And whether it's a strategic sourcing procurement any of those there is a constant effort to find greater value for for us and again as we bring those forward.

And get them concluded we'll bring them out on that on the table for you guys.

Okay I appreciate the color.

Thank you.

Our next question comes from drew Venker from Morgan Stanley . Please go with your question.

Sure.

Our next question actually is from Noel parks from Coker and Palmer. Please go ahead with your question.

Hi, good morning.

Good morning.

Yes, I was wondering with your.

Your company owned rigs could you just refresh my memory on sort of the age of those rigs as wondering.

As you look at planning activity levels going forward.

Is there any time, a downtime for maintenance or refurbishment scheduled ahead.

Sure and oldest play.

The rigs are vintage.

13, 2013 age we've continued to apply upgrades to those rigs to where they are super spec state of the art.

Horizontal long lateral shale rigs and when we.

Start bringing down rigs like we've started got is the opportunity for us to both do maintenance and upgrades that we think are beneficial as as we move forward with the program and to keep getting the.

The execution that we're getting out of that program.

Okay, and just just for perspective in any accounting of that spending does that to show up as regular.

Drilling and completion Capex then.

Ah yes, it did.

If it gets applied to the wells because it you'll see it in line on the guidance is another easy.

It shows up there on the on the table.

Okay, Great and you know, even though the the spot has been so tough for gas lately.

With a few exceptions, we look out to the the longer dated strip it really has.

For the past year those between 20 gotten a little weak kind of been in that to 50 to 75 range and yeah do you have a offensive where.

You know if the if the.

A longer dated strip weekend wear.

It might be enough to.

Oh really spur some.

Oh, the plants or curtail activity more.

Well I think I think how we how we invests in a given year.

There's a couple of different things that happened one whatever the strip is at the time.

We put in our company's model and it generates cash flow.

Among them the myriad of things that we can do with that cash flow you know debt reduction this year, we did share with our luxury and share repurchases.

Capital investment we prioritize those.

And then we prioritize the economics of the program and so if.

Yes.

And then in 2019 and 2020.

Some of the funds that we monetize at a favorable are included in that which we've disclosed previously and so we take that budget and and we said it and then we continuously monitor so to your point, if if gas prices fall or commodity prices fall in the <unk> in the year, we put it through our model and if if if if and when it affects cash flow. This year. For example, we're pretty heavily hedged, but its X cash flow them, we pulled back on the capital investment.

Just a practice that we have been doing for some time, if we if we see a short term spike.

You know gas goes to pick a number for the winter months, we don't just turn on another rate, we take that cash flow into the company and again evaluate.

The use of then it could be paydowns that it could be you know for the uses and that's all done in a in a rigorous economic evaluation.

The wells themselves are they in the broadening the investments themselves must meet certain certain returns metrics as well so we looking out multiple years.

And that's how we prioritize them is to force rank or economics. So yes. There is adjustment yes. It does move we want to be we want to keep that looked live by using strip pricing and we want to keep that live by looking at how the cash flows generated this funding the projects.

Great. Thanks, a lot.

Our next question comes from Brian singer from Goldman Sachs. Please go ahead with your question.

Thank you. Good morning wanted to just follow up on some of the comments you were just making can you just talk philosophically Rick with regards to your willingness to let production decline in pursuit of free cash flow and then how much capital and rig activity at the cost reductions that you've highlighted keeps production flat on an annual basis.

Yeah, I mean philosophically what we're trying to do is look at two things generating free cash flow.

And achieving a two times debt leverage, which we talk about continuously.

And the.

Biggest leverage of that is to looking for looking at ways, whether it's cost reductions productivity improvements investing in high value.

Appalachian wells to to drive the EBITDA side of that debt to EBITDA.

Equation, because there's more leverage in that in terms of.

As a result, and so is this isn't to production driven driven exercise it really is how do we.

Because we drive EBITDA from a number of places you know we have.

Very very lucrative investments in water, we have very lucrative investments in.

And some of the other projects and so it's about driving EBITDA and production will be.

What were the production movie.

That results from that.

When I when we look at maintenance capital.

For the for the company its right around 550 million.

Dollars the foresee any that's drilling completions capital.

And and so.

Again, we we look at that we've talked about becoming free cash flow neutral at the stroke of a pen you know we can just stop.

But.

We are looking at both getting to free cash flow neutral and.

Maintaining our our debt leverage both of which we believe are important for.

Going forward.

Plans that we have.

Great. Thanks, and then my follow up is with regards to opportunities to add a inorganically or organically no inventory can you talk about your thoughts on consolidation.

And southwestern his role or potential role there and then you made a comment in a may have just been converting prove locations into or unbooked locations into proved locations that you made a comment on adding new well inventory and wanted to see if there was anything going on on the exploratory front or just adding a adding inventory.

To your overall locations within a within the within Appalachian well I'll start I'll start with our inventory, we've got a deep and robust inventory and we also have a significant amount of resource.

Thats attached to both those years of reserves and that inventory and it's incumbent upon us and we call it organic growth because we are.

We already own it it's incumbent upon us to continue to test intervals, such as the upper Devonian, the upper Marcellus and others using today's.

Technology that we apply consistently these ultra long laterals.

A number of things like that and where we can convert resource into reserves that type of organic growth is a terrific thing to do and as part of.

What we do it all the time, and so where where you see us go back into areas that we've been in before and been in a while and come back and and in effect retest or getting some some promising results on that in a number of areas.

We are also recognize the fact that you know.

In in the upper Devonian, it's a new area spends a great deal of acreage in West Virginia.

We're in a test program trying to understand that as well.

And so once we as we.

Further test that.

Be able to bring those reserves into the picture.

As well so.

We have what we call a science budget, we test acreage, we de risked acreage we test new capabilities all in the name of.

Continuing down that path in the area of consolidation, there's a lot of discussion about that and as I've said before where it makes economic sense. We believe the consolidation should occur and then there's likely certain situations that make that makes sense and if at all different levels and what I mean by all different levels at all different sizes of of enterprises.

We're in this for the shareholder and so we look at these opportunities we examine them.

We have them that that that.

Where we see there is an opportunity to provide greater scale offer meaningful synergies.

As possess the potential generate short or long term value, we think that makes sense and we should pursue them. It's part of of our obligation to the shareholder to look at all different.

Different options, so we talk about them coming opportunistically.

In other words, a banker comes in Britain and has a chat.

Or we are out studying the basins and and we know the basins and we know our top tier.

Acreage and so you know we continue to analyze that our top tier balance sheet. Our track record of implementing large scale strategic moves like we did when we bought west Virginia and like we did when we sold Fayetteville, all while managing the business and continuing to outperform in everything we do.

Puts us in a great position to participate in those and we will continue as I've also said.

Before when we announced Fayetteville, we did that very publicly before we sold it to generate as much interest and activity as we could.

And on the sell side that makes sense on the opportunity side, just like we did when we were looking at west Virginia or any of these other things that we're talking about here and it makes us a lot of sense to me like when you're buying a house in a popular neighborhood broadcast every step and so we'll take a look at these and should there should something makes sense again, it's dry it's economics and value driven it's not size driven it's not any that any of the other things and if you. If you go down this path you've got to generate full cycle returns and you've got to generate to and deliver on the promises whether they're synergies or other promises.

To the shareholder or it doesn't make sense to do but we see a.

We believe there's an opportunity to spend some time in this space and Thats what were doing.

Great. Thank you for that.

Our next question comes from Marshall Carver from Heikkinen Energy Advisors. Please go ahead with your question.

So on the dropping to two rigs in the fourth quarter were more in the second half of this year is that a reduction.

And the planned tils or the planned wells to be drilled this year all those targets. The exact same as they were now. This this what we're doing is exactly what we planned it is it's in the program exactly.

The the front end loading in the phase down the number of wells. Both delivered sales everything is is as we said it would be including.

We talked about how much all that will cost at the end of the day and we put that number out.

We won't go over the the number that we laid out.

If.

If something changes and we need to make an adjustment to that we will but we have.

We we honor the commitments, we made around capital like everything else.

Okay. Thank you and as a follow up.

You've talked in the past about not wanting to drill a well unless it.

Meets a minimum return metric what would your minimum return metric b.

Yeah, what we've typically talked about morsel is.

Oh, PPI metric and and we've targeted greater than a 1.3 PV.

So $1.30 for every dollar invested at a 10% discount rate.

Okay. Thank you Thats a threshold amount.

Our next question comes from Sean Sneeden from Guggenheim. Please go ahead with your question.

Good morning, and thank you for taking the questions.

Morning.

Bill.

Good for you.

Can you talk a little bit about <unk>.

What gives you mute your confidence around.

Free cash flow by the end of 20, and I guess specifically.

Can you give us a sense of.

Just anecdotally how much of that is driven by cost reductions versus you know.

Your view or expectations of gas in and really NGL markets you are in.

Roofing and normalizing more towards.

Global LPG market.

Yes, I'll tell you straight up the first thing that gives me great confidence in being able to do that is is the hundreds and hundreds of people that work for our company across this country, who continue to deliver exactly what we keep telling you about with all of you out which is.

Operational efficiency gains lower cost structure productivity gains on wells, well performance and the like.

The fact that we have a deep and robust inventory of high value very predictable investment opportunities and execution capability that continues to deliver outperformance.

Our our very close and and rigorous planning and implementation of capital allocation at strip pricing our risk management program. There's just a number of pieces and it's pretty it's the things that we talk about integrated together and then rigorously managed with a lot of discipline and being willing to make adjustments as necessary to two.

Compensate for swings and changes in market dynamics, and so you know as we as we look at our program our prioritization of projects.

And again lateral length increases efficiency increases that gives me a great deal of confidence gas prices commodity prices are any companys largest swing.

No impacts is the largest and.

We understand that and as you as you become more and more efficient, which is where we are our breakeven numbers and our our minimum required return members.

Our in some cases below $2 and so in in Super Rich condensate laden wells and so the opportunity set that we get to play with and all of this.

Execution is what gives me confidence and gives the leadership team the confidence to continue down this path.

Got it that's helpful. So it's really kind of all the above your type of strategy of continued cost reductions beyond what you've laid out in <unk>.

Continued productivity gains and that kind of a fair way to summarize that.

It is often times, we have folks come talk to us and they bring a single metric.

And single metric rarely.

Is this is the the.

You know the ticket to get something done I think a tow a completely integrated very collaborative well.

Executed plan that brings in all of those risks and opportunities.

Is the way to go.

And our people deliver it every day.

That that makes sense.

Maybe just as a follow up.

You guys highlighted U.S. LPG markets somewhat decoupled from global prices and.

Sounds like you think that.

It's up.

Normalizing.

You towards the end of the year.

But I guess.

Just kind of curious you'd just kind of giving how U.S. markets progress year to date has that.

Shaped your views differently.

If at all around you potentially marketing your own kind of C plus volume.

Well I think that.

You know certainly.

The market's waiting for the promises to be delivered in the industry. So if you're going to put three or four crackers on.

Our five when they are on the market will level.

His adjusting and it isn't it.

Appears to be a bit more real time.

We think that the fundamentals for Ngls, even as difficult as it is right now the evidence of demand the AVOD through all these crackers the evidence.

Demand in re linking.

Ngls to the export market by additional capacity the investments are being made the contracts are being let the opportunity is there we will market. Our NGL. If we can add value over as we add can add greater value.

To that process than someone else can.

And that's our objective and so we we.

We built that capability in house and.

We will continue to to head in that direction.

Our marketing team has deep experience in the nuances and the capture of opportunities and managing risks in the gas side and their capability to.

To understand very quickly and build on that in the liquid side is suppressed.

Great I appreciate the comments guys. Thanks.

Thank you.

[noise].

And ladies and gentlemen at this time in showing no additional questions I'd like to turn the conference call back over to management for any closing remarks.

Thank you and thank you all for joining I appreciate all the questions and the continued dialogue.

As we continue to deliver quarter after quarter success.

As we've I think talked about today, we're confident about our future. We're confident we're confident about our ability to move forward on a clear path.

That has multiple levers and multiple opportunities and risks to to work together on that work together to continue to deliver on every commitment that we've made we believe in.

In strength resilience and the capabilities of our people.

And we celebrate the fact that we have them because they deliver over and over consistently quarter on quarter.

On the very commitments that we make and so we absolutely appreciate them, we'll continue to execute with the same relentless.

Determination as we always have.

With returns at the center of every decision that we make and in everything we do and as I've said before we're moving from strength to strength.

Earning the confidence of all stakeholders.

So we just want to say thank you very much for joining our call and for your interest in the company and we look forward to sharing more results going forward. So we have a great weekend. Thanks.

Ladies and gentlemen that does conclude today's conference call. We do thank you for joining you may now disconnect your lines.