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spk01: Welcome to the fourth quarter 2023 ConocoPhillips earnings conference call. My name is Liz and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session. During the question and answer session, if you have a question, please press star 1-1 on your touchtone phone. I will now turn the call over to Phil Gresh, Vice President Investor Relations. Sir, you may begin.
spk13: Thank you, Liz, and welcome everyone to our fourth quarter 2023 earnings conference call. On the call today are several members of the ConocoPhillips leadership team, including Ryan Lance, Chairman and CEO, Tim Leach, Advisor to the CEO, Bill Bullock, Executive Vice President and Chief Financial Officer, Dominic Macklin, Executive Vice President of Strategy, Sustainability and Technology, Nick Olds, Executive Vice President of Lower 48, Andy O'Brien, Senior Vice President of Global Operations, Kirk Johnson, Senior Vice President, Lower 48 Assets and Operations, and Will Gereau, Senior Vice President, Corporate Planning and Development. Ryan and Bill will kick it off with opening remarks, after which the team will be available for your questions. A few quick reminders. First, along with today's release, we published supplemental financial materials and a slide presentation which you can find on the Investor Relations website. Second, during this call, we will make forward-looking statements based on current expectations. Actual results may differ due to factors noted in today's release and in our periodic SEC filings. We will make reference to some non-GAAP financial measures, reconciliations to the nearest corresponding GAAP measure can be found in today's release and on our website. And third, when we move to Q&A after the prepared remarks, we'll be taking one question per caller. With that, I will turn it over to Ryan.
spk21: Thanks, Phil, and thank you to everyone for joining our fourth quarter 2023 earnings conference call. It was another strong quarter for ConocoPhillips as the team continued to execute on its commitment to deliver returns to our shareholders. Now stepping back and looking at 2023, ConocoPhillips demonstrated solid execution across all aspects of our triple mandate. We reported record production and achieved several milestones across our global asset base. And we delivered a preliminary reserve replacement ratio of 123%, highlighting our ability to We're also progressing several key strategic initiatives. We advanced our global LNG strategy through expansion in Qatar, FID at Port Arthur, and several offtake and regasification agreements. We FID'd the Willow Project in Alaska and have been ramping up construction this winter season. And we opportunistically acquired the remaining 50% of Sermon at an attractive price that fit our financial framework. We were able to accomplish all of this while delivering our returns focused value proposition to our shareholders. We generated a training 12-month return on capital employed of 17% or 19% on a cash adjusted basis. We also delivered on our plan to return 11 billion of capital to our shareholders, which was well in excess of our greater than 30% annual through the cycle commitment. Last spring, we further strengthened our GHG emissions intensity targets to a 50 to 60% reduction from a 2016 baseline. And we were recently awarded the gold standard pathway designation by the oil and gas initiative and the heart methane partnership 2.0. Now looking ahead to 2024, this morning we announced a plan to distribute 9 billion to shareholders this year. We also announced a VROC of 20 cents per share for the first quarter. The remainder of our cash flow will be reinvested into the business as we continue to execute on our plan to grow earnings and cash flows as we outlined at our analyst and investor meeting last year. In conclusion, once again, I'm proud of the accomplishments of the entire organization. Our portfolio is well positioned to generate competitive returns and cash flow for decades to come. Now let me turn the call over to Bill to cover our fourth quarter performance and our 2024 guidance in more detail.
spk07: Thanks, Ryan. In the fourth quarter, we generated $2.40 per share in adjusted earnings. We produced ,902,000 barrels of oil equivalent per day, representing 4% underlying growth year over year. This was consistent with our full year 2023 underlying growth rate of 4% also. Fourth quarter lower 48 production averaged ,086,000 barrels of oil equivalent per day, which represented 9% underlying growth year over year. We produced 750,000 from the Permian, 211,000 from the Eagliford, and 110,000 from the Balkan. Full year 2023 underlying growth for the lower 48 was roughly 8%. Moving to cash flows, fourth quarter CFO was $5.5 billion, and this included 8 PLNG distributions of $281 million. Fourth quarter capital expenditures were $2.9 billion, which included $573 million for long recycle projects. Full year capital expenditures were $11.2 billion, which included $2 billion for long recycle projects. Now regarding returns of capital, we delivered $11 billion to shareholders in 2023. For the fourth quarter, we returned $2.5 billion. This was via $1.1 billion in share buybacks and $1.4 billion in ordinary dividends and VROC payments. We ended the year with cash and short-term investments of $6.9 billion, as well as $1 billion in long-term investments. Regarding the guidance, we forecast 2024 production to be in a range of 1.91 to 1.95 million barrels of oil equivalent per day. This translates to 2 to 4% underlying growth pro forma for acquisitions and dispositions. We expect this growth to be well balanced between both lower 48 and international. Our full year forecast includes turnaround impacts of 25 to 30,000 barrels per day, which is about 10,000 higher than in 2023. Now, turnarounds are expected to be concentrated in the third quarter, when CERMON completes a one-month turnaround, and that turnaround occurs once every five years. For the first quarter, production guidance is in a range of 1.88 to 1.92 million barrels of oil equivalent per day, or roughly 1 to 3% underlying growth. While the first quarter will have minimal turnarounds, similar to the fourth quarter, it does include a 20,000 barrel per day headwind from January weather impacts. For APL&G, we expect distributions of $400 million in the first quarter and $1.3 billion for the full year. Now, shifting to cost guidance, we see full year adjusted operating costs in a range of $8.9 to $9.1 billion, representing essentially flat unit costs on a -over-year basis. Full year cash expiration expenses are expected to be $300 to $400 million, and DD&A expense is expected to be in a range of $9.4 to $9.6 billion. Full year adjusted corporate segment net loss guidance is $1 to $1.1 billion, and for taxes, we expect our effective corporate tax rate to be in the 36% to 37% range of strip prices, and that's excluding any one-time items. And that's with an effective cash tax rate in the 33% to 34% range. For capital spending, our full year guidance range is between $11 to $11.5 billion, which includes $200 to $300 million of capitalized interest. Now on slide eight of the presentation, we provided bridge from 2023 to 2024 with some of the key -over-year variables, most of which we've discussed on prior earnings calls. These include our expectation of $200 to $300 million in deflation benefits, primarily in the lower 48, $200 to $300 million of lower spending in Norway following the startup of our four subsea tieback projects, and $500 to $600 million in lower LNG spending, mostly at Port Arthur. These decreases are offset by a $900 to $1 billion increase at Willow, and a $100 to $200 million increase in Canada to count for the acquisition of the remaining 50% of Sermon and the addition of a second rig in the Montney. For Willow, we expect spending to be more heavily weighted to the first quarter, and this is consistent with the normal timing of winter construction season. And for Port Arthur, we expect that our $400 million of equity contributions in 2024 will also be weighted towards the first half of the year. As a result, first quarter capex could be a bit above $3 billion. So to wrap up, we end the year with another solid operational quarter. We continue to deliver on our strategic initiatives across our deep, durable, and diverse portfolio, and we remain highly competitive on our shareholder distributions. That concludes our prepared remarks. I'll turn it back over to the operator to start the Q&A.
spk01: Thank you. We will now begin the question and answer session. In the interest of time, we ask that you limit yourself to one question. If you have a question, please press star 1-1 on your touchtone phone. If you wish to be removed from the queue, please press star 1-1 again. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star 1-1 on your touchtone phone. Our first question comes from Neil Mehta with Goldman Sachs.
spk12: Thank you. Thank you, and good morning, team. Ryan, I want to ask you about the lower 48. Last year, you correctly predicted that many of us who thought production was going to be up 400,000 to 500,000 barrels a day were wrong, and the number ended up being closer to your number of 800,000 to 900,000 barrels a day. As you think about exit to exit this year, how are you thinking about the US oil production? Tie that into your own lower 48 development plans. How are you thinking about prosecuting that acreage over the course of the year?
spk21: Thanks, Neil. We see a bit of de-acceleration in the growth rate coming from the US, driven by a number of factors around efficiency and the rig rate. We would peg the growth, but we're still growing in the lower 48. We'd peg that growth between 300,000 to 500,000 barrels of oil equivalent. That's total liquids. We still see some growth coming from the US shale, the lower 48, primarily driven out of the Permian, but more modest relative to last year's growth, relative to our expected lower 48. We're in that same range load of single digit growth rates coming out of that on pretty much similar activity level to what we entered into 2023. At this time, we don't intend to be wrapping our program in the lower 48 and are coming into the year at a similar level to what we exited 2023 at.
spk12: Thanks, Rob.
spk01: Thank you. Our next question will come from a line of Doug Leggett with Bank of America. Your line is now open.
spk09: Thank you. Good morning, everyone. I guess either, thanks, Ryan or Bill. I'm not sure who wants to take this one. We're always interested to know how you see your portfolio break even evolving as it relates to not so much current capital but sustaining capital. What we're really trying to get to is that dividend break even, that post-dividend break even level. If I may, maybe as a part B to that, I'm curious whether cash on the balance sheet benefits or is a priority currently as it relates to how you think about cash returns in that dividend context given that you're entering a period of elevated spending here for a couple of years.
spk21: Thanks, Doug. I'll let Dominic roll in. He can give you some specifics around the break even, but at our mid-cycle price kind of deck, I think it's pretty consistent with what we laid out at AIM. I can let Dominic give you a few more details to answer that question more specifically.
spk02: Yeah. Good morning, Doug. Maybe starting with our free cash flow break even, I take you back to our analyst meeting for our 10-year plan and at mid-cycle prices, we highlighted our free cash flow break even. Average is about $35 WTI. That is higher through the first half of the plan, as you mentioned, as we have the sort of pre-productive capital in the first half of the plan, and then lower during the second half of that 10-year plan as those projects increasingly come on stream. So that's our free cash flow break even. And for our dividend, you would add an additional sort of $8 to $9 on that right now.
spk09: That's helpful. Maybe on the cash on the balance sheet?
spk07: Yeah, sure. We're really happy with where we're at on the balance sheet right now, Doug. We exit the year with $6.9 billion of cash and $1 billion worth of long-term investments, like I mentioned. Our net debt to CFO ratio is in a really good spot. We're at .5 turns, and that's post-Sermon. So we're quite happy where the balance sheet is at right now. And having a strong balance sheet, it's a strategic asset for the company. We continue to view it as such. And that's fundamentally one of the reasons why we feel really good about $9 billion of distributions this year.
spk21: Yeah, in light of arguably a softer commodity price
spk06: relative
spk21: to where we started in
spk06: 2023.
spk01: Thank
spk05: you.
spk01: Our next question will come from the line of Roger Reed with Wells Fargo. Your line is now open.
spk23: Yeah, thank you. Good morning. I guess I'd like to get your thoughts, Ryan, on the M&A side. Obviously, you did the Sermon thing last year. There's still transactions going on. And just how you think about your cost of supply approach to anything on the acquisition front that's out there, be it lower 48 or elsewhere.
spk21: Yeah, Roger, I appreciate you. There's obviously a lot of M&A activity going on. It's not surprising in our business. And we've said that all along that we think there's going to be more even yet to come as we think about the consolidation that's needed in the business. Our approach hasn't changed. Our approach is we think about cost of supply. We think about the framework that we've laid out to the market over the last four or five years. That's how we've executed some of our M&A activities. So again, it's got to fit that financial framework, how we think about mid-cycle price. It's got to make our 10-year plan better. The plan that we outlined to the market last year we think is pretty strong. And it's underpinned by a low cost of supply, diverse asset base. So we've got to see a way to make that plan better through any inorganic M&A. And then finally, we've got to see a way to make the asset better. And that's really dictated how we've approached M&A over the last number of years. And I think as we think about it going forward, that approach is consistent.
spk06: Thank you.
spk01: Thank you. Our next question will come from the line of Nitin Kumar with Mizuho. Your line is now open.
spk17: Good morning, guys, and thanks for taking my question. Ryan or Bill, I don't know who wants to take this one, but you reduced the cash return target from 11 billion to 9 billion. Last year, it was very evenly distributed between your dividends, both the fixed and the variable and the buyback. How should we think about the mix across those three channels in 2024?
spk07: Yeah, so first, we think the most important thing continues to be the total quantum of distribution. That's what we focus on. We think that that's what matters most. We're really happy to start the year with an initial plan to return nine billion dollars to shareholders. Now, when it comes to the mix, we look at a number of different factors and commodity prices, our own stock price and other considerations. And so for 2024, you've seen that we've shifted our mix to be a bit more weighted towards buybacks, about 60 percent of our total plan distributions. That would put our buybacks essentially flat with what we spent in 2023 at about 5.3, 5.4 billion dollars. And that's we're continuing to like the value of our shares. So against that, the total cash component represents about 40 percent of our expected distributions. And that's with 20 cents per share on VROC. And we think that represents a really solid mix of both cash and buybacks. As we've always said, VROC provides a really flexible tool to achieve our distribution targets as prices adjust through the cycles to continue to serve us well in balancing our mix.
spk17: Great. Thanks for the call,
spk01: Leroy. Thank you. Our next question will come from the line of Lloyd Byrne with Jeffreys. Your line is now open.
spk08: Good afternoon, everyone. And thanks for all the details so far. Ryan, I was hoping just to get your thoughts on the administration's LNG pause and then in particular, Conoco's positioning and maybe whether it has any impact on your plans or your capital going forward.
spk21: Yeah, thanks, Lloyd. I can chime in maybe ask Bill to add a few more details as well. But, you know, it's unfortunate. It's clearly more politically driven than fundamental. But I think we feel pretty good. It just makes us feel a little bit better about what we're doing on the LNG side because of what we do have permitted. I think it's pretty short sighted in the short term. Hopefully, it'll be fixed in the long term. I can build and provide maybe a few more specifics around how we're thinking about, you know, poor author phase one, phase two as we as we think about the implications of what was announced.
spk07: Yeah,
spk21: sure, Ryan.
spk07: You know, we're really pleased that Port Arthur phase one, it's fully permitted. It's got not only its free trade agreement permit, but it's non free trade agreement permit. It's got environmental permits in place. So we're quite pleased to be investing in Port Arthur phase one. We think that actually what you're seeing right now makes that more valuable. And so it's a good fit in our portfolio. And we're continuing to look at developing a diversified portfolio of Optake. We remain interested in a number of LNG opportunities because we think the market's going to be strong for decades to come. We're focusing on low cost supply, low greenhouse gas intensity resources that meet that transition pathway. And you saw us last year announced two point two million tons from MPL at Saguaro. And in the fourth quarter, we signed point two million tons off of Sempera's ECA project on the west coast of Mexico for five years. So we're continuing to look for opportunities that really fit that framework. But regarding your question on permitting right now, Port Arthur is in a great spot.
spk08: OK, great. So it doesn't change any plans going forward.
spk07: It's not it's not impacting us right now.
spk08: Thank you.
spk01: Thank you. Our next question will come from the line of John Royal with JPMorgan.
spk20: Thanks for taking my question. So my question is on Willow. You have the sanction out of the way now and even post sanction. We've seen some news flow around lawsuits, which I assume you have some confidence in as an organization that won't cause any delays. But maybe you can confirm that. And then beyond that, maybe we can just speak to you can just speak to the construction plan for the year and what you're hoping to accomplish in terms of the progression of the build in twenty four specifically.
spk03: Hey, John, this is Andy. I can take that question. So, yes, you know, it is it's pretty nice to also be at a point now where we can start talking about the project and not just give you a legal update, but we will give you a question. I'll start with a bit of a legal update, because as you mentioned, we had a fair bit of positive activity in the fourth quarter on that front. So just to sort of summarize where we are right now is that we're very pleased that both the Alaska District Court and the Ninth Circuit allowed construction to be done. We allowed construction work to proceed on the north slope. And then separately, the Alaska District Court upheld the legality of the rod issued by the BLM. So as you mentioned, this is currently being appealed to the Ninth Circuit. But as we said before, we believe the BLM and the cooperating agencies conducted a really thorough process to satisfy all the legal requirements for them to grant their approvals. So these positive rulings gave us the certainty to make the FID decision. Now, then in terms of the second part of your question on the execution itself, since taking the FID, we're really pleased with how quickly we've ramped up the activity. We're now into our second winter construction season on the north slope, and we're mobilizing 1200 workers right now who are going to be building gravel roads, gravel paths for the facilities and beginning laying pipelines. We're also making some pretty significant progress with our modular facility fabrications. So we do expect 2024 capital to be in the upper end of the previously communicated annual ranges of one to one and a half billion dollars per year. But our estimate for the capital to first production remains unchanged at seven to seven and a half billion dollars. Now, just to give you a bit more color in terms of the progress, we're now at a point where we have three quarters of the project scope under firm contract and expect to have 90 percent of that under contract by the end of twenty four. And all those contracts we've issued so far, 70 percent are the lump sum or unit rate contracts. And then these kind of contracts, we've agreed a price now as we have limited exposure to future inflation. So it's still very early, but with all major projects, it's really important we get off to a fast start and we're really pleased. That's exactly what we're doing with Willow. Just to wrap it up, it's great to see at this point now our teams in full execution mode focus on actually building Willow.
spk05: Thank you. Thank
spk01: you. Our next question will come from the line of Neil Dingman with Truist Securities. Your line is now open.
spk14: Morning. Thanks for taking my question. My question is more about kind of how you're thinking about production growth. You certainly have laid out pretty what I call a stable to platish plan for the year for first quarter for the year. I guess kind of two questions right now. One, if you continue to be more efficient as you have been, would you take those savings and plow back to the ground and boost production a bit more or that or will those savings go back to the shareholders in some fashion? And then, you know, secondly, a couple of your large peers continue to be growing even a bit more than you in the permeate. I'm just wondering how you view sort of from a macro position your responsibility of when it comes to production growth.
spk02: Yeah, Neil, it's Dominic here. I think, you know, I mean, first of all, I think it's probably three questions there. Actually, I'll take the activity one. You know, we were holding our lower 48 activity flat this year versus last year. We like that. We're still seeing some some modest growth there and we get, you know, we're really focused on efficiency there. And so, you know, if we if we if we did get more efficient and we felt there was some, you know, some capital headroom there, I think I suspect that we would pretty much hold things flat because we're just so focused on efficiency. We don't want to swing our programs around in terms of the total growth rate. And remember, growth is an outcome of our plan. We're not chasing growth. It's really an outcome of a return that's focused on returns. And so, you know, we're pretty happy with that sort of modest level growth. It's pretty consistent with what we said at AEM. You know, in terms of the overall profiles, to give you a bit of color, and I mean, Bill mentioned a lot of this in his prepared remarks, but we do expect sort of underlying production in the range of two to four percent growth this year versus last year. And the good thing about it is that we're seeing growth this year, not just coming from the lower 48, but also from across our international portfolio. So it's nice to see the diversity of that portfolio coming through. And then, of course, on top of that organic growth, we have the additional some on 50 percent interest on top of that. You know, in terms of the shape for the year, fairly rateable year over year growth by quarter, except for Q1, we have the weather impacts. Bill mentioned that about 20,000 barrels a day of weather we'll see in Q1. And then in Q3, we have our turnaround impacts. So we have about 25 to 30,000 barrels a day of turnaround impacts this year. Most of that will be in the third quarter. And that includes a sort of month long turnaround we have at some on which occurs every five years. So but anyway, you know, we were all very pleased with just where the growth is coming from. We're pleased with the level of growth. And I think we're pretty committed to keep the keep the program steady, stable and focus on efficiency.
spk21: Yeah, I just reiterate, we just don't want to we just don't want to whipsaw that the teams, you know, either up or down. We just like the constant pace of the execution and find that gets the efficiencies at a maximum, gets our returns, really maximizes our returns.
spk06: It's great to hear that, guys. Makes much more sense. Thank you so much.
spk01: Thank you. Our next question will come from the line of Josh Silverstein with UBS. Your line is now open.
spk10: Thanks, everybody. So I just wanted to touch on the motiny. This is one of the key growth areas that you had highlighted back in April last year. You mentioned the processing facility started up in the back half of the year as well. I know it's 60 percent liquids, but how has the lower natural gas price environment changed the way you're thinking about development there? And along those same lines, I know there's only a small uptick in in Canadian spend for the year. I figure that that might be related to Sir, more than this. So any help there would be great.
spk03: Thanks. Yeah, hi, this is Andy. Maybe just taking the first part of your question, sort of the natural gas, you know, it really doesn't impact our natural gas. It doesn't really impact our long term development plans. And then also putting that in context is sort of we know we have our position in Sir, but where we actually are a user of natural gas. So, you know, that that doesn't really change our motiny development plans. You know, I think in terms of the progress we're making on motiny, you know, we are you know, we we are going to be ramping this year. We've just started the second rig. And just to give you some context of the numbers here, where in our full year, 23 productions, about twenty four thousand miles a day, we average thirty three thousand miles in the fourth quarter. And that, you know, that's we're expecting that to grow now throughout the year. And then in terms of the capex, you know, the modest growth, you know, capex you're seeing in Canada, it is a combination of additional equity we have in someone, but also adding the second rig of the motiny.
spk06: Thanks, guys.
spk01: Thank you. Our next question will come from the line of Bob Brackett with Bernstein. Your line is now open.
spk16: Good morning. I was looking at the triple digit organic reserve replacement ratio and wondering some of the moving parts and kind of curious what impacted the sanctioning of Willow play on that.
spk02: Hey, Bob, Dominic, yes, yeah, I mean, we're very pleased to see a strong organic and total reserve replacement again this year. And we're seeing we're seeing strong contributions from across the portfolio. So on the organic side, you know, first of all, low forty eight doing well, you know, with the advancement of our resource development plans, its organic replacement ratio is well in excess of 100 percent. We've got contributions from Motley and then the Willow piece. Yeah, that's a that's a really strategic piece for us. So we you know, you know, the way that works with bookings on major projects, you have an initial booking and then you book as the project develops. That's normal. So our initial booking was one hundred and sixty, about one hundred and sixty million barrels on Willow. So that's what we book on sanction. And then as we develop up the the development worlds and the project, we'll see that approach towards our base case resource estimate of 600 million barrels for Willow. So, yeah, very strong there. And of course, you know, on the total reserves replacement, we add in the A&D and we get the benefit of about 200 million barrels of of resource that came with reserves that came with the somewhat 50 percent acquisition. So, again, another year of strong total reserve replacement for us, which which is good.
spk06: Very clear. Thanks.
spk01: Thank you. Our next question will come from the line of Sam Margolin with Wolf Research. Your line is now open.
spk19: Hi, thanks for taking the question and thanks for all the detail today. Maybe a follow up on lower 48 capital. There's some deflation that you've called out. It seems like most of it right now is driven by consumables and commodities. But, Ryan, you mentioned activity levels overall have have cooled significantly over the course of the second half of twenty three. And so I was wondering, you know, if you where where you think we are in maybe the life cycle of this lower 48 deflationary trend and maybe if that presents some opportunities to term out capacity and add even more visibility to to the spending plan, because as you as you mentioned, you know, you're not really going to move activity around in different scenarios. Thank you.
spk21: Yeah, Sam, I can let Nick follow up on some of the details, but certainly we look at any opportunity to turn out things when we when we when we see that opportunity. And I think the service side of the business, I think, like Scott, I go Phillips because our plans don't change and we have consistent execution and, you know, consistent rate counts and frac spreads and all the other support activity that goes with the business and the deflation. It's kind of a tale of a couple of different areas and certain commodities to spend. But I can let Nick chime in specific to the lower 48 there.
spk11: Yes, Sam, in there, like like Ryan was mentioning, again, you look at our activity level, it's flat to twenty twenty three. So stable rig, stable frac crews and the teams are really just focusing on driving, operating efficiency, capital efficiency and then capturing that deflation, as you mentioned, as we showed in the prepared slides there that we posted. And it's going to range across a number of spend categories. So we've got OCTG, we've got some propent as well as rig horsepower. We'll look at all the contracts across our vendors and see if we want to turn them up. Typically, we're looking at well to well, pad to pad as far as rigs, a little longer term contracts on our on our frac spreads, especially the E-frax. But the key thing for us is really just focusing on operating efficiency and capital efficiency with the level loaded city state program that we have in twenty twenty four.
spk19: Thanks so much.
spk01: Thank you. Our next question will come from the line of Ryan Todd with Piper Sandler. Your line is now open.
spk15: Thanks. Maybe if I could ask on on a couple of the lower forty eight assets, the EO for production has been declining over the last few quarters in twenty twenty three. What's what's the right way for us to think about direction of production there? Is the goal to hold it flat or modestly decline or grow going forward? And maybe the same question for the Bakken.
spk11: Yeah, Ryan, just talk first on Eagleford. When you look at Q3 to Q4, we had that nine percent production drop. You know, that met our tight curve expectations. There's no productivity issues or operational concerns there. It was a conscious decision as we looked at the second half of twenty twenty three. And as we've talked about, the completion efficiencies are actually outpacing our drilling efficiency. So it's a good problem to have. So we've worked down through kind of our working level of ducks and decided on the second half of twenty twenty three to take a what I call an operational frat gap. So we built some ducks in that period of time and then reinstated late twenty twenty three the frat crew. So it's really intentional, really good performance from the Eagleford going forward. Bakken very similar. You know, we've had some production records. You know, you think about a legacy asset like the Bakken and we were hitting one hundred and ten thousand barrels equivalent per day. We've got a long level of inventory. We'll have a steady program up there as well.
spk06: Thank you.
spk01: Thank you. Our next question will come from the line of Alastair Sign with City. Your line is now open.
spk18: Hi, I just wanted to return to the questions and people circle around a little bit on the Permian. You know, you've mentioned supply chain costs and sort of wrap it up with efficiency because, you know, I guess last April you presented these cost of supply numbers that include some forward assumptions about cost and efficiency. I just wanted to get a sense of where you think you stand relative to those assumptions. I use the Permian moving up, down or sideways on your cost of supply. Thank you.
spk11: Yeah, I'll first talk about just the overall efficiency assumptions that we have and what we're seeing out in the field to remind you on both DNC and we continue to see step changes in both the drilling side as well as the completion side, probably differential on the completion efficiencies, as I just mentioned, related to Eagleford. And we're leveraging all of the different kind of suite of opportunities to improve those frac efficiencies and drilling efficiency. I'll just mention a few. And the key thing here is that we're continuing to see improvement kind of quarter to quarter, year to year, and that manifests itself into essentially a 10 to 15% improvement in our pumping hours per day, year to year. A couple items that we have out there, you know, we continue to deploy simul-frac across the board, but also super-zipper down in Eagleford. We've had really good success of this particular application where we can hook up, for example, on a four-well pad, we'll hook up all of the wells. And if we have any operational downtime, we can quickly move from well to well and have high pumping hours and therefore more stages per day. So that's been really successful. On the, we also remote frac, I've mentioned that before, seeing good success in that we don't have to moab and demobe a frac spread so we can move on to pad two, pad three without demobe again. And then finally, I'll just pivot to the drilling side. You know, we've deployed that real-time drilling intelligence group out in the Permian, we've got the entire rig fleet that we're monitoring 24-7 where we can optimize the plan, we can troubleshoot and we can steer the wells and we're seeing really promising results, 10% improvement in rate of penetration there. So combined through all of that, we are seeing improvement in those efficiencies and again, 10 to 15% improvement in pump hours per day, as I mentioned on the completion side.
spk01: Thank
spk05: you. Our
spk01: next question will come from the line of Paul Chang with Scotiabank. Your line is now open.
spk22: Thank you. Good morning, guys. I think this maybe is for Phil or maybe it's for Ryan. Ryan, you have said that the industry will need more consolidation and you have proven in the past that you are not shy in doing your share. For the right deal, when you're looking at your bond sheet today, how much you're willing to put on the debt or how much you're willing to stretch your bond sheet from that standpoint if it is a right deal? Is there a number or a ratio or anything that you can share so that at least we get some better understanding? And from a bond sheet standpoint, the nine billion of the distribution for this year, is there a fixed amount or that it will fluctuate based on the commodity prices, either better or worse than your current assumption? Thank you.
spk21: Yeah, kind of stuck in a couple there, Paul. But let me start with the last one first. The nine billion, as we said in our release, is a starting point. We recognize the commodity prices are pretty volatile, pulled up and down. And we've seen WTI approaching 60 and we've seen it approaching 80. So I think you view the nine billion as a starting point. And folks should feel pretty comfortable that we're well above our mid-cycle price. We're well above our 30 percent commitment to return capital to the shareholders. And again, look at our history. So you should feel comfortable that we'll adjust. It's a starting point for us and we'll see how the commodity prices go through the remainder of the year. On the second part, look, we consider the balance sheet to be a pretty significant asset inside the company. We will maintain an A credit rating. The balance sheet's strong for the company. We've got, you know, a 2.5 net debt turn to cash. So we like where the balance sheet is at. And it gives us the cushion in these volatile commodity price to be able to return the money that we're spending and sending both to grow the company organically and the distribution level that we're starting with at the nine billion dollars. You know, we'll again, on the M&A side, Paul, it's really what kind of opportunities present themselves that have to fit our financial framework. And if they fit our framework and there's something that we can make better, makes our 10-year plan better, we've been willing to execute those. And but we'll look at the way we execute those on a kind of case by case basis. You know, Sir, we funded with some debt, but it made sense for that that particular asset to do that. We've done other we've used to use cash and other means to fund the acquisition. So it's pretty hard to say, depending on any opportunities to present themselves, what we might do.
spk22: Ryan, is there a maximum debt you're willing to add based on a single transaction?
spk06: Don't have a
spk21: it depends on the circumstance, Paul. I don't we're not going to stress the balance sheet. So we're not we've worked hard to get the balance sheet where it's at today. We're not I'm not interested in going back to where we were seven, eight years ago on the balance sheet.
spk22: OK, thank you.
spk01: Thank you. Our next question will come from the line of Leo Mariani with Ross MKM. Your line is now open.
spk04: Hi, guys, you talked about having some pretty decent international growth this year, well and above the lower 48, which obviously a nice contributor as well. Sounded like some of that's coming from the Motney in Canada. Can you maybe just detail some of the other international growth that you're seeing? I imagine there could be some chunk of your project that might be coming online during the year. So any call around that helpful?
spk03: Yes, sure. This is Andy. I can take that question. We actually discussed this one in a bit of detail on our last quarterly call. And you're right, we do have some good momentum on the Alaska and international projects. But just to give you a feel about where they're coming from across the portfolio. So in Norway, we achieved first production ahead of schedule in three of the four subsea tiebacks and the fourth one is expected to come online as planned in the second quarter. In China, our partner brought the first Bohai phase four B platform online in October and the second one came on in December. Also in December, we achieved first off on pad 267 in someone's and we expect to gradually ramp that up over the coming months. And as I previously discussed in Motney, the start of a CPF to really allowed us to start ramping production there in the third quarter. And we expect to see growth in 2024 in the Motney from the CPF to and also the second rig. So we're really happy with sort of the spread we have across Alaska and international with where the growth is coming from. And I think as we said in one of the earlier questions that, you know, A&I is going to be providing a significant part of the total company growth this year.
spk05: Thank you.
spk01: Thank you. We have no further questions at this time. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.
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