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spk10: Greetings and welcome to the Antero Resources first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brendan Krueger, Vice President of Finance and Treasurer of Antero Resources, and Chief Financial Officer of Antero Midstream. Thank you. You may begin.
spk05: Good morning. Thank you for joining us for Antero's first quarter 2024 investor conference call. We'll spend a few minutes going through the financial and operating highlights, and then we'll open it up for Q&A. I would also like to direct you to the homepage of our website at www.anteroresources.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Today's call may contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. Joining me on the call today are Paul Rady, Chairman, CEO, and President, Michael Kennedy, CFO, Dave Canalongo, Senior Vice President of Liquids Marketing and Transportation, and Justin Fowler, Senior Vice President of Natural Gas Marketing. I will now turn the call over to Paul.
spk09: Thank you, Brendan. Good morning, everyone. I'll start my comments on slide number three, titled Drilling and Completion Efficiencies. As I started my comments off last quarter, the year 2023 was a transformational year for Antero for operational efficiency gains. This year, 2024, continues that trend. Starting with the chart on the top left-hand side of the slide, days per 10,000 lateral feet drilled averaged 5.4 days during the first quarter, down from 5.5 days in 2023. On the completion side, we averaged a quarterly record of 11.3 stages per day during the first quarter, an increase from the pace in 2023 of just under 11 stages per day. These operational improvements result in shorter cycle times, as shown on the bottom of the page. Our year-to-date cycle time per pad is currently trending ahead of last year's 2023 average. There are many inputs that lead to these operational improvements as every single line item gets examined by our team. However, the most impactful change in 2024 has been improved efficiency in zipper swaps that allows us to move from well to well on a pad without having any true downtime. We estimate that this new completion technology will save more than an hour of pumping time each day and will result in further increases in completion times. Our operations also benefit from Antero Midstream's water infrastructure. providing industry-leading water deliverability rates for our completions. Avoiding the use of water trucks significantly reduces pad site congestion that we would otherwise get from water and sand trucks accessing the pad, something that many of our peers have to contend with. Now, let's look at how these improvements led to our peer-leading capital efficiency. The chart on slide number four compares capital efficiency of the natural gas peer group. Put simply, this is the amount of capital required to achieve a maintenance level of production. Antero has the lowest capital per MCF equivalent of its peer group at just 55 cents per MCFE. This is 40% below the peer average of 90 cents per MCFE. Our best-in-class operating efficiency, combined with significant liquids exposure, led to positive free cash flow during the first quarter and is expected to generate free cash flow for the full year. Now, to touch on the current liquids and natural gas liquids, or MGL, fundamentals, I will turn it over to our Senior Vice President of Liquids Marketing and Transportation, Dave Canalongo, for his comments.
spk03: Thanks, Paul. The start of 2024 demonstrated improved fundamentals for liquids. Ongoing geopolitical tension, particularly in the Middle East, has increased the risk premium on crude pricing in 2024 year-to-date. Internationally, the canal-related challenges seen last year have diminished, but global geopolitical tensions remain high. On the domestic front, record propane demand occurred simultaneously with significant January freeze-offs. drawing down storage and resulting in upward pressure on propane prices. Propane as a percentage of WTI has averaged 44% since the start of this year, compared with 36% in the fourth quarter of 2023. Exports have remained a driving force in the propane market and are showing strong year-over-year growth driven by growing global demand. This year, China PDH build-out continues to progress with three new facilities placed in service in the first quarter and another three expected to start up there in the second quarter, totaling nearly 170,000 barrels per day of capacity additions in the first half of 2024. At the same time, propane exports have averaged 1.8 million barrels per day in 2024 year-to-date, an increase of 14% over the average in 2023, Notably, propane exports reported an all-time record high this week at over 2.3 million barrels per day. This export growth is depicted on slide 5. The chart illustrates that the U.S. remains the most important source of waterborne export LPG to meet fast-growing global demand. As a reminder, Antero exports over 50% of our C3 Plus production, skewed heavily towards propane. directly out of the Marcus Hook Terminal in Pennsylvania. This year, we have elected to sell a greater portion of our waterborne barrels against international indices, as well as in the spot market, instead of entering into longer Montbellevue-linked term deals. In the event that Montbellevue propane prices disconnect from Europe and Asian pricing due to dock constraints or rising domestic storage levels, Intero is well positioned to avoid additional Montbellevue exposure. The strength in international pricing has allowed us to increase our guidance for full year 2024 C3 Plus differentials to a premium to Montbelvi pricing. As Paul just touched on, our first quarter results benefited from our significant exposure to liquids prices. Slide number six illustrates the approximately 125,000 barrels per day of C3 Plus NGLs plus condensate that we produce. You can see the breakout of those products in the barrel on the left. The barrel on the right-hand side of the slide separates the approximately 40,000 barrels per day of liquids that are closely linked to WTI oil prices. This includes isobutane, natural gasoline, and condensate. Butane markets have also been a strong tailwind to Enteros C3 Plus realizations, mainly due to implications of the Tier 3 gasoline speculations. Many U.S. refiners are unable to desulphurize gasoline down to 10 parts per million without also downgrading the octane of their motor gasoline. As a result, there is a strong demand for octane enhancement products made with butanes as feedstock. Isobutane has been particularly strong as it is used in the production of alkaline, which is a key octane enhancement product. Just this morning, you've seen isobutane trade at over a 40 cent per gallon premium to normal butane. In conclusion, in Taro's NGL strategy, product diversification and pricing is distinct when compared to other producers. Supportive fundamentals witnessed this past quarter illustrate the promising signs that are ahead. With that, I'll turn it over to our Senior Vice President of Natural Gas Marketing, Justin Fowler, to discuss the natural gas market.
spk02: Thanks, Dave. I'd like to open it up by turning to slide number seven titled, Not All Transport to the U.S. Gold Coast is Equal. As a reminder, we sell substantially all of our natural gas out of basin, including approximately 75% to the LNG corridor. Our firm transportation portfolio provides us with direct exposure to growing LNG demand along the Gulf Coast, and importantly, in the Tier 1 pricing points in the vicinity of the major LNG facilities. With several new LNG facilities starting up over the next year, we expect to see a widening spread between sales points near Henry Hub and sales points outside of this premium market. The blue call-out box highlights a recent quote from a research commodity team that emphasizes this view. They believe sales points within 100 miles of Henry Hub could see prices comfortably above $5 per MMBTU, while sales points outside of that range for MMBTU. Looking closely at this map, the yellow stars highlight Antero sales points and are located well within this 100-mile range to Henry Hub. These sales points were strategically selected beginning over 10 years ago in order to access the feeder lines at the doorstep of the LNG fairway. The chart on the top left-hand side of this slide highlights that Antero sells 75% of our gas at Henry Hub link prices. while our peers on average sell less than 15% of their natural gas into this premium market. Looking ahead over the next two years as LNG export capacity increases by nearly 6 BCF per day, in addition to an expected rise in NYMEX pricing, we expect Antero sales points to be priced at even higher premiums than NYMEX as these LNG facilities compete for supply. of this is the pricing along the TGP 500L pool in the summer of 2025 and 2026. We watched those summer premiums increase to $0.40 above Henry Hub on financial basis alone in anticipation of Venture Global's Plaquemines facility startup in the next few months. Just last year, those same implied summer premiums were only $0.03 above NYMEX. Venture Global received FERC approval this week to begin immediately introducing gas into the feeder Gator Express pipeline that brings supply from the TGP 500L pool to the Plaquemine LNG facility. This initial feed gas requirement will potentially lead to higher demand and pricing in the TGP 500 region, as well as NYMEX Henry Hub prices this summer. According to Market Intelligence, the Tennessee Gas Pipeline Phase 1 Evangeline Pass project that feeds the Plaquemine LNG facility is expected to be online by July 1, 2024, with capacity of $900 million per day. As a reminder, Ontario owns $570 million per day of the fern delivery to the 500L pool, or 63% of the supply that will feed the phase one project capacity. Next, I would like to touch on the outlook for power burn demand. The chart in slide number eight depicts a third party estimate for the increasing natural gas power demand as a result of AI data centers, crypto mining, and electric vehicles. It projects nearly eight BCF of incremental natural gas demand through 2030 in its base case scenario, or 14% growth per year. Next, turning to the chart on slide number nine, we illustrate the significant expected natural gas demand growth coming from LNG exports, Mexico exports, along with this increasing electric power generation need. Combined, these are expected to result in an increase in demand of 30 BCF by 2030. an increase of over 100% from these same demand sources today. It is in the early innings of increasing electrification demand. We believe there has been a structural shift toward reliable, clean, and affordable natural gas that will continue to increase power burn demand annually going forward. This demand growth combined with rising LNG in Mexico exports creates a significantly higher base demand level than we have ever experienced in the past. We expect these fundamentals will provide support to natural gas prices and lead to periods of higher prices in the coming years. With that, I will turn it over to Mike Kennedy, Antero's CFO.
spk06: Thanks, Justin. I'd like to start with slide number 10 and our continued focus on reducing absolute debt. We plan to allocate future free cash flow to paying down the remainder of the credit facility balance and the higher coupon near-term notes we have outstanding. We'll then be in a position to return to our 50-50 strategy of 50% of free cash flow going to debt reduction and 50% going towards our share repurchase program. Turning to slide number 11, this slide compares 2024 free cash flow breakeven levels. We highlighted our peer-leading breakeven price shown on this slide during our last conference call. Our $2.27 break-even level compares to the average NYMEX natural gas price of $2.24 in the first quarter. Despite the low price, Antero generated an unhedged $10 million of free cash flow during the first quarter. Our quarterly results benefited from low maintenance capital requirements and high exposure to liquids. And as shown on this slide, results in the lowest unhedged free cash flow break-even price among our natural gas peers. I will conclude my comments today with slide number 12, titled Entero Resources, the Unconstrained E&P Company. We believe the differentiated strategy that we built here at Entero is set up for success in today's macro backdrop. We have significant scale with production volumes of 3.4 BCFE a day, and over 20 years of premium inventory. We have integrated upstream and midstream, which provides development reliability and long-term visibility into our program. This is critical in the development of the asset, as evidenced by recent transactions in the basin. We have the firm transportation portfolio that allows us to sell 75% of our production to the LNG fairway in the Gulf Coast. Many of our peers lack firm transportation capacity, forcing them to sell gas at discounted prices well back at the Henry Hub. The startup of the Plaquemines LNG terminal this summer is expected to lead to higher prices at our TGP 500 sales point, potentially leading to higher premiums to NYMEX Henry Hub. Lastly, we have the lowest reinvestment rate of our natural gas peer group. This peer-leading capital efficiency drives higher free cash flow conversion. Our low investment rate and high leverage to liquids was highlighted during the first quarter when we generated positive free cash flow despite being unhedged at a $2.24 NYMEX Henry Hub natural gas price. With that, I will now turn the call over to the operator for questions.
spk10: Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask your question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Arun with JP Morgan. Please proceed with your question.
spk01: Yeah, good morning. Maybe one for Justin. Justin, given the strong demand growth potential for gas to the end of the decade, I was wondering maybe if you could comment a little bit more on what you see as kind of advantage molecules from a margin perspective in this kind of environment. You know, obviously, historically, Appalachia has garnered a discount just given the lack of takeaway capacity in some of the gas-on-gas competition. But would rising demand in that area for data centers, et cetera, could that start to narrow some of the discounts that we've seen for Appalachia Gas?
spk02: Good morning, Arun. It's Justin. Yeah, so when we look at just... you know, the FT, you know, TBCF down to the LNG corridor, we see those premiums continuing to gain value versus Henry Hub in the outer years. So we think that, you know, our delivery points, A&R Southeast, Head Station, CGT Onshore, TGP 500L will continue to be very strong in terms of Appalachia versus AI data centers, et cetera, and the basis, you know, compressing and gaining value back toward Henry, you know, Ontario will have that ability to sell local production volumes as well if those prices increase, you know, seasonally or in different months of the year because we do, again, have a, you know, a transport position of 75% to the Gulf, so we can measure that on variable costs, et cetera, and and make that decision over time.
spk01: Great. Thanks, Justin. Just a follow-up on the liquids marketing front. Dave, you mentioned that maybe you're exporting a little bit more than 50% or so of your C3 plus molecules. What kind of flex do you have in the system? And if you saw a greater arbitrage, could you flex a higher mix in terms of of export volumes, and maybe just give an update on what you're seeing in terms of shipping rates.
spk03: Yeah, Arun, we've done that now. This is Dave. We've done that flex in particular in the shoulder-to-shoulder season through the summer, so it'll be reported in our second and third quarter results where it shows the amount of volume that we export versus domestic, and those percentages go higher. in the summer where we are at times, well over 80% of our propane in particular is going to the dock. So we flexed that already. I think there are some ways to take that higher if the market called for it, but we don't have a lot left in the domestic pool during those times of the year to begin with. And then on the freight rates, I mean, things have improved dramatically since where we were Late last year, you had all the concerns about the Panama Canal and how much that was going to de-optimize the global LPG shipping fleet. What actually happened, what we're seeing is more LPG ships getting through the Panama Canal since that announcement was made. First, the canal has been able to move more ships in general through the canal than they initially had forecasted when they announced those restrictions. We've seen now freight rates collapse dramatically from where we were in the fourth quarter, and that's ultimately allowing prices at the dock to be closer linked to the international price. We had a large build-out of VLGC vessels last year, over 40 VLGCs. We were kind of waiting for that to have its effect, and you're now seeing that today in the forward freight pricing.
spk01: Great. Thanks a lot.
spk10: Our next question comes from the line of Sebastian with Benchmark. Please proceed with your question.
spk11: Thank you. Probably for Dave first. Dave, what do you think propane, you know, dock capacity is? And, yeah, I mean, that 2.33 was a shocking number. Are we, you know, pretty close? And I guess those propane hedges you kind of, you know, added there, you know, show some caution through December? Maybe some updated commentary there.
spk03: Yeah, I think we are there on the dock capacity, Subhas. You know, the number of the 2.3, I mean, it is a bit of a head scratcher. That can happen just kind of based on timings of when ships officially loaded. You know, if they kind of fall a minute into the next week, that can certainly allow a number like that to happen. But, you know, we ultimately believe that's well above the kind of average rate that you could run across the U.S. docks. So it's somewhere in that, you know, 1.85 to 1.9 million barrels a day of propane, because you still have butane that needs to move across those docks as well. So, you know, we'll see what they're able to hit this summer. And sometimes when it's hotter, it de-optimizes their refrigeration a bit. So, you know, I think we'll expect to see those docks, you know, highly utilized this summer. But I think we're about at the levels of what we expect. until the, you know, call it the second half of next year when there's some expansion projects on the way from the Gulf Coast midstream players. And then on the hedges, yeah, great question. You know, we've talked about our concerns around propane pricing and kind of a decoupling amount value. If you saw inventory levels rise, you know, as a result of these docks being fully utilized. And so we just thought it was prudent to, you know, when we do export the vast majority of our propane, we still had some domestic exposure and we just wanted to be conservative with that and take that risk off the table. If we saw things play out similar to what we saw last year where propane was down in the 65 cent per gallon range, I thought it was a wise move at this time.
spk06: Yeah, but put some context around that. It's 10,000 barrels a day, which is only 15% of our total propane production because the vast majority gets international pricing. That's right.
spk11: Right. Thank you for that. And Paul, I think on the Zip-A-Frax, just curious... you know, the adoption this year versus prior years and what does it look like for the balance of the year, you know, maybe percent of well count, percent of till, something like that, and sort of why, you know, it's come about now, whereas maybe in other, you know, basins it's been more common for a while. Is it topology or, you know, things of that nature?
spk09: Yeah, so, of course, Subhash, there's The zipper fracks have been around for quite a while. But earlier, maybe in a more primitive stage, there's been a lot of decoupling iron and re-hooking it up for different wells. And so we've just found a way to be much more efficient on that. And with the flip of some switches and turning on and off some valves, we can flip the zipper frack to different wells as we're pumping. So it's become much more efficient, whereas in the past it would be at least an hour of downtime when we're changing zipper fracks.
spk11: And in terms of sort of application here in the early months of 24, how new is it versus, say, last year?
spk09: I think it's a development in the last six months to a year where we've perfected it.
spk11: continue on. Thanks, Paul. Thanks, guys.
spk10: Our next question comes from the line of Bert Jones with Truist. Please proceed with your question.
spk12: Hey, good morning, guys. I just wanted to ask around the data center demand question a little bit differently. You've continued to kind of avoid the temptation to go overseas with an LNG contract. Is there maybe a thought process that if we see a data center driven boost Maybe there's no reason to leave the U.S., and does that lead you to maybe trying to lock in a long-term contract in the U.S.?
spk06: Yeah, no, it wasn't around the data centers. It was just around we're the only company that can really get the molecule to the docs or to the LNG actual facilities. So we didn't have any need to enter into long-term contracts around that. We've already done our commitments on the pipeline in itself, and so we just wanted to stay – floating and retain that optionality for us on what that pricing would look like when they'd have to compete for our gas. But with the data centers, that actually adds more, obviously, demand for that gas, so that competition just continues to grow.
spk12: Okay. And no interest in maybe, you know, boosting, you know, legacy northeast volumes for a long-term contract or anything direct? You'd rather just say, you know, indirect for both kind of uplifts?
spk06: Yeah. Yeah, that's our philosophy, stay on the Gulf Coast. I mean, an interesting thing that was highlighted in our prepared remarks, you know, TGP, that 500 line we talked about this time last year, would have set a $0.03 premium for next year. Now it's at $0.40. That's just going to continue to go higher. So as it gets closer and closer, you're going to see the premiums continue to go higher in the Gulf Coast, and that's where we sell our gas.
spk12: Great. And then changing gears on the Marcellus rates, you know, on a per foot basis, it was surprisingly strong, you know, quarter over quarter. They were shorter laterals. Is there maybe some logic going on that, you know, the shorter laterals are more economic and maybe, you know, 18,000 foot laterals are a little bit too long? Or is that just a, you know, it's one data point and you're not shifting gears?
spk06: Yeah, I'd say it's one data point. Generally, the longer laterals are more economic. You just spread the cost around longer lateral foot. But we're so good at drilling and completing these that the longer laterals still provide the economics that it would suggest.
spk12: All right. So maybe on the tail end, there'll be a stronger, you know, later dated production from the longer laterals?
spk09: Yeah. I mean... I would say, you know, a shorter lateral will clean up more quickly, will dewater more quickly, and so it'll get to peak rate in a shorter period of time. But over the longer run, as Mike just said, the economics are so much better when we're going out to 16,000, 18,000, and even 20,000 feet. Those are really big wells. And so you wait a little longer until you get to peak rate, but it's worth it.
spk12: Thanks for the answer, guys.
spk10: Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.
spk00: Good morning, team. I had a couple questions on capital allocation. The first one on slide 10, you've done a great job of getting your debt down to this level, and you talk about the next area to deploy free cash flow is to pay down your credit facility balance. So I'd be curious on your perspective of, How shareholder returns, specifically buybacks, fit into this equation? And given the strengthening of the balance sheet, when do you think you're at that inflection point to buy back stock?
spk06: Yeah, I said in the remarks, the first call on that free cash flow is to pay down the credit facility and that near-term maturity in 26. So that's about $500 million. And then after that, we'll return to our 50-50 strategy of paying down debt plus buying back shares. It'll just depend on commodity prices when we actually achieve those, but based on today's commodity prices, it'd be in the first half of next year.
spk00: And then we've seen a lot of consolidation across the E&P space, across the energy space broadly. You have a really deep inventory, so I'd just love your perspective on how do you see Antero fitting within the M&A landscape and Is the right strategy an organic strategy?
spk06: We do believe the right strategy is the organic strategy. You saw we were able to add, I believe, 19 locations in the first quarter. We had $26 million of land. That's highly economic compared to how much locations go for in the M&A landscape. And we continue to consolidate our areas of operation right where we're drilling these terrific wells. and just continue to build out our position in the liquids portion of the Marcellus. So we believe that's the best way to add value and to continue to increase our 20-year inventory position.
spk00: Perfect. Thanks, Tim.
spk10: Our next question comes from the line of Jacob Roberts with TPH. Please proceed with your question.
spk07: Morning. Morning, Jacob. Dave, I wanted to circle back to the liquids market, and I apologize if you did hit on less than your answers. I may have missed it, but I was hoping you could comment just on storage levels at the moment, specifically them being above the five-year, it appears, as well as the production coming out of Pad 3 and just where you see those playing out through the summer.
spk03: Yeah, good morning, Jacob. This is Dave. If you go back to the first quarter, we actually had that polar vortex in January. We went from the top of the five-year range to the five-year average and then kind of continued along that trend until the last five or six weeks. We've had, I would say, some pretty unusual EIA data. It didn't really change at all for a month, month and a half. And then we had a pretty significant change last week and then a below expectation build this week. So we are you know, back kind of in that between the five-year range and the top of the range below last year, but above that five-year average. And we'll see what the inflection point looks like. You know, how does that slope rise over the summer? I think, you know, there's a lot of different forecasts out there on propane production this year. You know, hard to say exactly who's right on that. We do pay attention to the rig count in all the basins and watch that. And so that's Again, part of what drove our earlier comments and just taking that small amount of domestic Montbellevue propane exposure we have doing some hedging there this year. But sorry, did I answer all of your questions there, Jacob?
spk07: Yeah, that's perfect. I appreciate it. And just a second question. Can you remind us on the current expected timeline of the MARTICA payments when those thresholds will be hit and what that ultimately looks like once they are, once that threshold is met?
spk06: Yeah, as you rightly recall, they no longer participate in our wells. That ended March 31, 2023, but there is kind of that runoff of the PDP base. That does revert back to us when they hit certain rates of return, and right now we're forecasting that to be starting in 26.
spk07: Appreciate the time. Thank you, guys.
spk06: Thank you.
spk10: Our next question comes from the line of Kevin McCurdy with Pickering Energy Partners. Please proceed with your question.
spk08: Hey, good morning. And we appreciate all the detail you gave on the NGL marketing and the prepared remarks. But my question is, as it relates to your realized prices, it looks like your C3 plus prices were much better than the weekly average benchmark pricing. And just curious if there were some one-time updates items that benefited you in the first quarter versus the benchmark, or do you expect that premium to continue?
spk06: Yeah, no, there weren't any one-time items. We've really switched this year to more international exposure, better contracts, not linked to Mount Bellevue, so we're still kind of working through those relationships. Obviously, the international pricing has been better than domestic pricing, and as that continues, we see higher and higher NGL realizations. You saw that in our increased guidance increased it by a dollar. So as we continue to kind of watch the actuals versus kind of our forecast, we'll get a little more dialed in on that. But it's really just due to us switching to internationally linked liquids contracts versus domestically linked in prior years.
spk08: Great. And as a follow-up, we've heard from other gas companies that are changing their activity plans given kind of the weak spot prices. What would make you consider pushing out wells till later in the year? Or are you overall happy with the equivalent price you receive?
spk06: Yeah, it's really dominated by liquids pricing. You know, I mentioned on prior calls, we do have one pad. I mean, we're only running two rigs and one completion through. We do have one pad in the capital program that's a spot pad for the third quarter of this year. And that's one that's still to be determined. You know, if it was based on current month prices today, that was one that could potentially be deferred. And then that would put you at the low end of the capital guidance range. The other pathway is just one completion line. So running that with our two rigs is very efficient, and it's very much 1275 to 1300 BTU gas, so very high in the liquids content. So that's what drives the economics I think in the first quarter of our revenue, 55% was liquids and only 45% was gas. So you can see how much the liquids prices really influences the economics of these wells.
spk08: Thank you. Appreciate the answers.
spk10: Our next question comes from the line of Betty Jiang with Barclays. Please proceed with your question.
spk02: Hi, Betty.
spk10: Betty, your line is going in and out.
spk04: Oh, all right. Sorry.
spk10: There we go.
spk04: All right. Can you provide a bit more detail on the startup of the Plaquemines LNG? Do we need to see the first cargo loading or say mechanical startup before seeing any material fee gas demand? You mentioned that the TGP line, the 500 line, has capacity of 900 m. Just any view on how quickly we could see those fee gas demand reach those levels?
spk02: Hi, Betty. It's Justin. Yeah, so when we look at the data that we have so far on Plaquemine, you're correct, the Tennessee project, the Evangeline Pass project, should start up July 1. capacity of 900, you know, the marketing analysts will be tracking the vessels that will be parked waiting to load, so that will be a data point to watch, you know, the vessels that are showing up to the facility as we approach July, and then we'll see that gas through the nominations into that new Evangelion Pass project. You know, in theory, once we get to July, the physical gas is flowing, we'll start getting a better gauge of how quickly the liquefaction trains are ramping to at least quote mechanical completion.
spk04: Got it. Now that's helpful. And just following up on pricing, clearly your guys' view is that the current future strip prices is not reflecting the dynamic around that hub. Why do you think that's the case and what will be the catalyst to drive that relative hub pricing higher?
spk02: So you're referring to the Henry Hub pricing?
spk04: The TGP 500 line pricing relative to Henry Hub.
spk02: Yeah, Betty, we are seeing the price reaction at 500L in the forward markets, and that's just looking at financial basis alone. So looking at financial basis alone, In the summers on Cal 25 and Cal 26 are already showing plus 40 cents. That is, again, just financial. So those points will command a physical premium, which will start to develop as we get closer to delivery. But there will be a physical premium component as well. So if it were, you know, a dime to 20 cents, let's say you're now at 60 or 70 over Henry Hub as that physical gap. to delivery.
spk04: Got it. And is there a physical premium today for that gas?
spk02: Today, you know, it varies, Betty. We've seen different premiums. You know, last summer we were seeing very high premiums in the summer months on the physical side, and that's because there still is power generation requirements in the southeast when the temperatures get hot. in the past, but it can trade flat to plus.
spk04: Got it. That's helpful. Thank you. If I could throw in a question just on the certified gas side, it's good to see that you guys increased the certified gas coverage under Project Canary. Do you expect all of your production to get certified at some point? Also, kudos to you guys on the emission intensity on the production that's really low relative to your peers, is there much more room you can do to reduce emissions organically from here?
spk06: Yes. On your first question on Project NARA, we do see that going across all of our field. We're up to 2 BCF a day, so that's about two-thirds, maybe around 50% of the field on a gross basis. Over time, we do see continuing to build that out across our entire field. On the emissions, we're getting close to being as low as we can. We've eliminated probably about 85% of all our pneumatic devices and have done all the valve control work that is necessary to limit the emissions from there. So we're getting as close as we can. We ultimately think We'll get down into that in 2025 in a 225,000, 250,000 metric tons level that we need to offset, and that's why you saw us commence with our project to offset those emissions through our cook stoves in Ghana initiative.
spk04: Great. Yeah, no, I like the project. Thank you very much.
spk06: Thank you. Thank you, Betty.
spk10: Our next question comes from the line of Subhash Chandra with benchmark. Please proceed with your question. Yeah, thanks.
spk11: Back to Plaquemines and TGP 500. So, you know, obviously the forwards are showing a scarcity of gas beginning with full ramp in the LNG facility. How do you see that being addressed and over what timeframe? Is there, you know, absolutely no chance of, you know, having incremental capacity there? over the next couple of several years that that premium shows in the strips?
spk02: There could be other volumes drawn to that area. Just depending on the basis spreads and the premiums, that corridor has a lot of pipes that traverse west to east, filling that southeast power generation load. So I think to Mike's point earlier, it just depends on the competition of needs seasonally and monthly. If global spreads and global pricing are spiking, then you would assume that the competition will increase. There is a finite amount of gas that can get into those areas. So in Taro, when we started picking up that capacity, years ago or at least putting the contracts together prior to in-service date, we knew at the time that to get physical gas on the 500 leg, it is a challenge to get volume over there just with the market pull in the southeast. So then you add the new liquefaction facility of potentially 3.4, 3.8 BCF a day, it just leads to that competition that we expect. you know, volatility and then price premiums.
spk10: Okay, got it. Okay, thank you. If there are no further questions in the queue, I'd like to hand it back to management for closing remarks.
spk05: Yes, thank you for joining us on today's call. Please reach out with any further questions. Thanks.
spk10: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.
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