ConocoPhillips

Welcome to the first quarter 2024 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.

Thank you, Liz, and welcome everyone to our first quarter 2024 earnings conference call. On the call today, we have several members of the ConcoPhillips leadership team, including Ryan Lance, Chairman and CEO, Tim Leach, Advisor to the CEO, Bill Bullock, Executive Vice President and Chief Financial Officer, Andy O'Brien, Senior Vice President of Strategy, Commercial, Sustainability, and Technology, Nick Old, Executive Vice President of Lower 48, and Kirk Johnson, Senior Vice President of Global Operations. 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, of course, when we move to Q&A, we will be taking one question per call. So with that, I will turn it over to Ryan.

Thanks, Phil. And thank you to everyone for joining our first quarter 2024 earnings conference call. It was another solid quarter of focused execution across the portfolio on our strategic plan. Starting with our international projects, we continued to ramp up production at Sermont Pad 267 in Canada, Bohai Bay 4B in China, and three subsea tiebacks in Norway. And we expect to start up the fourth subsea tieback in Norway in the next month. In Canada, at Montney, production reached a new record level following the startup of the second central processing facility, leading to over 20% growth versus the fourth quarter. Shifting to our other projects, we are wrapping up a successful first major winter construction season at Willow this week, and module fabrication is going according to plan. As we build out our LNG portfolio, our Qatar and Port Arthur projects are also progressing well. Moving to the lower 48, our primary focus remains on capital efficient growth as we continue to improve efficiency in drilling and completions. For 2024, we still expect to deliver low single-digit production growth at flat activity levels with lower capital spending versus 2023. Shifting to return of capital, we remain on track to distribute at least $9 billion to shareholders this year. And we announced a VROC of $0.20 per share for the second quarter, consistent with our guidance of a 60-40 split between buybacks and cash distributions for the year. To wrap up, it was a solid start to the year. We are on track with the full-year guidance that we laid out back in February, which anticipates a well-balanced growth across our global portfolio. And as we discussed at our analyst and investor meeting last year, we continue to invest in our deep, durable, and diverse asset base, which will drive significant cash flows and shareholder distributions over the course of our 10-year plan. Now let me turn the call over to Bill to cover our first quarter performance and 2024 guidance in more detail.

Thanks, Ryan. In the first quarter, we generated $2.03 per share in adjusted earnings. We produced 1,902,000 barrels of oil equivalent per day, representing 2% underlying growth year over year. Lower 48 production averaged 1,046,000 barrels of oil equivalent per day, with 736,000 in the Permian, 197,000 in the Eagleford, and 96,000 in the Balkans. Now, this included a 25,000 barrel per day headwind from weather, which impacted lower 48 production by about 2%, and was slightly higher than the 20,000 barrel per day guidance provided on the fourth quarter call. As a result, lower 48 underlying growth was roughly 1% year over year. Now, for the rest of the company, Alaska International Production averaged 856,000 barrels of oil equipment per day, representing roughly 4% underlying growth year over year, excluding the sermon acquisition effects. And this really highlights the benefit of our diversified global portfolio. Moving to cash flows, first quarter CFO was $5.1 billion, which included APLNG distributions of $521 million. Capital expenditures were $2.9 billion, debt retirement payments were $500 million, and this was partially offset by proceeds of $200 million from disposition of non-core assets. And we returned $2.2 billion to shareholders in the quarter, including $1.3 billion in buybacks and $900 million in ordinary dividends and VROC payments. We ended the quarter with cash and short-term investments of $6.3 billion and $1.1 billion in longer-term liquid investments. According to guidance, we've maintained our full-year production outlook of 1.91 to 1.95 million barrels of oil equivalent per day, which translates to 2% to 4% underlying growth. And for the second quarter, we expect production to be in a range of 1.91 to 1.95 million barrels of oil equivalent also. which represents a similar 2% to 4% year-over-year underlying growth. Our full-year turnaround forecast is 30,000 barrels per day. This includes 25,000 barrels per day of turnarounds in the second quarter, primarily in Alaska, Norway, and Qatar, and 90,000 barrels per day for the third quarter. As we mentioned on the last earnings call, the heavy third quarter maintenance is driven by our once-every-five-year turnaround at Surmont. For CapEx, our full year guidance remains $11 to $11.5 billion, with a greater weight to the first half of the year. Now, this is due to the $400 million of equity contributions at Port Arthur LNG that are almost entirely in the first half of the year, as we discussed on the last call. For AP LNG, we expect $300 million of distributions in the second quarter, with no change to full year guidance of $1.3 billion. And finally, for the second quarter, we're forecasting a $600 million working capital outflow related to tax payments and timing in the U.S. and Norway. All other four-year guidance items are unchanged. So we continue to deliver on our strategic initiatives. We remain focused on executing our plan for 2024, and we're committed to staying highly competitive on our shareholder distributions. That concludes our prepared remarks. I'll now turn it back over to the operator to start the Q&A.

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 the line of Devin McDermott from Morgan Stanley. Your line is now open.

Oh, hey, good morning. Thanks for taking my question. I wanted to ask about Alaska. You noted that you just completed the first or are completing the first winter construction season for the Willow project. I was wondering if you could give us a little bit more detail on what was completed this past winter, how it went versus plan, and as we look ahead, what are some of the next key milestones you should be focused on for the project?

Hi, Devin. This is Kirk. Good morning. So we had a really strong start to project execution here on Willow this year. We were actively closing out here this week, actually, our first major winter construction season on the North Slope, where we were able to successfully mobilize over 1,200 workers and were able to successfully build out seven miles of gravel road. 30 miles of gravel paths, 30 acres of gravel paths for future facilities, and we've successfully constructed all of the pipelines that we planned for this winter season. Certainly, in addition, module fabrication has continued to progress really well here this winter and this spring, and we're expecting to be ready to transport the first of those modules to the North Slope here on schedule here mid-year, which is the Willow Operations Center. We still expect to be in the range of $1.5 billion here for 2024. And the progress that we're making here this year gives us confidence to keep our estimate on total capital to first production as being remaining unchanged. So we're still in that $7 to $7.5 billion range. And again, that's underpinned not just by the progress that we're making here on construction uh here this year both on the north slope and off-site module fabrication but we continue to make some really strong progress on our on our contractual scope we've we've uh landed three quarters of our total project scope uh here to date and we have an expectation that we could be upwards of 90 percent of our total scope contractors here by year end and uh and so as we look forward here for the remainder of the year obviously we're going to continue off-site module fabrication for production facilities, and then we'll continue to ramp up both procurement and certainly prepare for the fall-on winter construction season. So again, great progress here on the Willow project this year and putting us in a really strong position. We do these projects a lot in Alaska, and it's great to see the teams making the progress they are here yet again this year.

One moment for our next question. Our next question comes from the line of Neil Mehta with Goldman Sachs. Your line is now open.

Good morning, team. I wanted to spend some time talking about return of capital. It is notable in the release you talk about at least $9 billion. So just your framework for thinking about what the right level of return of capital. It is early in the year. Oil prices have been volatile. Gas prices have been weak. but certainly you have terrific balance sheet and have the capacity to raise that number. So love your perspective on that.

Yeah, thanks, Neil. No, I think we wanted to message, you know, look, we believe we're in good shape with the $9 billion that we described early in the year. I think you look, it's a reasonable percentage of our cash flow through the first quarter of this year, similar to what we've done in years past. We recognize that the The price that we're experiencing today is well above our mid-cycle, so our investors should expect well above 30% of our cash flow going back to them. We're monitoring kind of the volatility, as you mentioned, Neil. And again, it's not just sort of in WTI or Brent markers. It's in all the markers, NGL, LNG, and in natural gas as well, so it's a function we just want to see some durability to some of the prices, see where they end the year, and you can expect to get a fair percentage of our cash flow returned back to our shareholders like we've done over the last number of years.

One moment for our next question. Our next question comes from the line of Lloyd Byrne with Jefferies. Your line is now open.

Hey, guys. Ryan, good morning. Can you just comment strategically on the Permian gas and just kind of how you see that playing out? You guys have been really proactive in integrating some of that gas and looking forward, but any target levels you have and maybe just how you're thinking about some of those differentials?

Yeah, thanks, Lloyd. Bill's got some information there that he can share. I think you're right. We've been thinking about this for the last number of years, trying to build out an LNG strategy and to complement what we're doing on the commercial side, the gas that we move around the lower 48 to expose ourselves to some of the arms that are open even today. So I can let Bill add a little bit more color to that. Yeah, sure.

Good morning, Lloyd. So, as we talked about in the past, we ship to multiple markets. We've got transport capacity to the Gulf. We've got transport capacity to the West Coast. We're very supportive of offtake capacity from the Permian Basin. In fact, we do have some firm capacity on the upcoming Matterhorn Pipeline, but a sizable portion of our volume also is exposed to prices and in-basin pricing. We don't disclose... what percentage moves to each location for commercial reasons. But a really good way to think about the company's realizations is as a percentage of capture of first-to-month Henry Hub pricing. That's what we show. First quarter, we were about 70% realizations. That was a little bit higher than fourth quarter, so in a good position. And, you know, obviously the Permian Basin has got some transitory issues right now with gas pricing. You're seeing pricing go negative towards the end of the first quarter and as we go into the second quarter. So I think everyone's expecting to see a lot of volatility this year. We certainly expect realization in the second quarter to be particularly low, but these are transitory. As we come out the back of the year with takeaway capacity, we'd expect that to return to to more normal levels and and as you know you know we we've got a very uh sophisticated gas marketing organization now we're moving several multiples of our equity production so our flow assurance is very good for the company and we've got access to competitive market pricing. And that flow insurance really is important because we don't routinely flare, and we want to be able to continue to produce because we've got strong return profiles in the permanent primarily driven by oil.

One moment for our next question.

Our next question comes from the line of Scott Hanold with RBC Capital Markets. Your line is now open.

Yeah, thanks. I'd like to take a look at the lower 48 activity. Obviously, you know, 1Q is down a little bit just because of the weather. But can you give us some color on, you know, how you see that progressing, you know, through the year? You know, should we see a nice bounce back in 2Q and then, you know, that steady kind of slow single digit kind of rise through the course of the rest of this year?

Yeah, well, good morning. Yeah, this is Nick Scott. Maybe I'll take you through kind of the Permian update and lower 48, what we see. As you noted there, we had the headwinds of weather downtime, as Bill referenced in his prepared remarks. You know, as you look at that, we would have you exclude weather. We'd have about 3% year-over-year of growth there. In addition, remember, we took the operational frack gap at Eagleford in the second half of 2023, so we had some impact in Q1. there because of wells coming online, kind of the second half of the Q1 time period. Overall, for Permian, we're very focused on just driving efficient operations out there. We've got flat activity with rigs and frack crews. We may bump up quarter to quarter. I'd also mention that on the first half of our development plan out in the Permian, it's really focused on the Delaware area. And then we'll pivot to, on the second half, more oil-weighted towards the Midland Basin where we've got some of our larger pad projects and some three-mile laterals coming online. Again, Scott, the teams are just, again, laser-focused on capital efficiency, both on drilling completions. We see good results from the combination of, for example, simulFRAC and remote FRAC, so we continue to see those efficiency improvements on the operating side for FRACs. And then on the drilling side, I think we've mentioned several times, We've got a real-time drilling intelligence group out there monitoring the rigs 24-7. So that's really seeing promise as well. So on the efficiency front, we're seeing that roll through. If you look back as far as taking into account the weather that Bill had mentioned on 25,000 barrels of equipment per day and also accounting for the impact of the Eagleford frack gap, You can look at 1Q kind of being the low point for the year around production. We'll see progressively higher production, kind of Q2, Q3, Q4. And again, we've got some larger pad projects coming on in the second half of the year in the Midland Basin. So increasingly favorable trajectory on production. All in, as we talked about before, the plan that we laid out was low single digits of growth in that 2% to 4% range.

One moment for our next question. Our next question comes from the line of Betty Jung with Barclays. Your line is now open.

Thank you for taking my question. Nikki, you set that up for me really well because I wanted to follow up on the Permian and then the efficiency gains that you guys are seeing. We are hearing from other operators significant efficiencies from EFRAX and longer laterals. Would just love to get more color on what you guys are seeing and how that's tracking versus the corporate plan. And importantly, how that's getting translated into the capital efficiency that you're seeing in the basin volatility plan.

Thanks. Yep. Well, good. Well, let's start on some of the longer laterals. I talked a little about previously on the operating efficiency on the frac spreads and drilling. Again, our teams are very focused on long lateral development as we go forward. As a reminder for the group on the phone, if you look at our Permian inventory, 80% of the laterals are 1.5 miles or greater, and we've got 60% 2 miles or greater. If you look specifically at 2024, again, 80% of the wells are 1.5 miles or greater, and about 20% are 3-mile laterals. And we've got, as I mentioned before, we've got some of those laterals Longer laterals coming online the second half of this year. We see up to that 30% to 40% improvement on cost of supply when you move from a one-mile lateral to a three-mile lateral, so we're seeing those efficiency improvements out there. Maybe just staying on the drilling side, specifically in the Midland Basin. We've had some recent success there where we've had internal record wells. We look from spud to rig release, so very favorable performance over the last three months. We continue to see that on the drilling side. And the bottom line is that it does translate as we focus in on, you know, more feet per day, more stages per day, more pumping hours per day. We've seen that 10 to 15% improvement of pumping hours from 2022 to 2033. That all translates to improved capital efficiency and therefore lowering your cost supply. So it's very encouraging across all fronts.

A moment for our next question. Our next question comes from the line of Roger Reed with Wells Fargo. Your line is now open.

Yeah, thanks. Good morning. Maybe, Ryan, just get your updated thoughts on the global LNG market. You've obviously got, you know, a pretty good footprint. You're expanding it here. Just how you're thinking about it over the next, let's say, two to three years as some of these newer projects come online.

Yeah, thanks, Roger. I'll take a shot and maybe let Andy chime in a little bit as well. But as I said earlier, I think we certainly stepped back a few years ago and wanted to continue to grow our LNG exposure in that position. We know the markets. We have our own technology. We know the business quite well, and we do have a strategic intent to continue to try to grow that and it's really participating all assets all facets of it's the product production side here in north america in qatar in in australia uh being in the in the liquefaction side here in the in north america and elsewhere uh being having ships and being in the regas potential as well so trying to grow that integrated business as well even at sort of the lower henry hub prices you see today the arb is still open to make money and make a decent rate of return as you move some of that LNG to Europe and to Asia. And it's a long-term business that we're interested in. So I can let Andy chime in on a few more specifics as well.

Yeah, thanks, Ryan, and thanks, Roger, for the question. I think this is a bit of our business that I don't think is completely understood. So it might be helpful if I just put sort of some of the details around it. As Ryan said, if you go back all the way to 2022, we increased our ownership on the resource side with a taking more equity in APLNG. And then we've also participated in the two Qatari expansion projects. I think where you were specifically going with your question was on really more from the commercial perspective. So on the Gulf Coast, we've secured five MTPA of offtake from Port Arthur, and we also have a 30% equity interest there. We've also secured offtake on the west coast of Mexico with 2.2 MTPA from Saguaro LNG, and that one is pending FID, and 0.2 MTPA of offtake for five years starting in 2025 from ECHO Phase 1. So all in, our offtake in North America is about 7.4 MTPA pending the FID at Saguaro. And switching to the regas side of things, we now have 4.5 MTPA secured in Europe. This includes 2.8 MTPA capacity at the German LNG. Now up to two of that will support our LNG SPAs with Qatar. And we also have 1.7 MTPA of regas capacity at the gate terminal in the Netherlands. So now over the near term, our focus is on continuing to ladder in the regas opportunities. And over the longer term, maybe think about 10 to 15 MTPA as a good range of offtake capacities to think about. This will allow us to achieve the full benefits of scale across our organization. I do want to be clear, this is an offtake ambition. We don't feel we have to take on additional liquid action capital. So for competitive reasons, we don't get into the specifics of where we're actually developing offtake and regas right now, but needless to say, you know, that's something that's front of mind for us. So I know that was a lot of detail, but hopefully that helps everyone sort of just frame up sort of the moving parts we have going on on the LNG business.

One moment for our next question. Our next question comes from the line of Nitin Kumar with Mizuho. Your line is now open.

Hi, good afternoon, and thanks for taking my question. Ryan, there's been some news reports saying that, you know, linking you to a potential bid on the Citgo refining assets. There was also some articles in Reuters saying that you were considering the sale of part of your equity interest in LNG. I'm not going to ask you to comment on specific transactions, but as you look at the portfolio today and the evolving macroeconomic outlook, Are there opportunities for portfolio optimization? And maybe you can comment on a few of them.

Yeah, thanks. And say first, kind of on the CITCO, we're watching that process. Look, we're a creditor in that process, so we're owed quite a bit of money by the Venezuelans. So we're watching that process pretty closely. Look, we're not trying to become an integrated refining or major with refining in our portfolio. This is a way to protect what's what's owed the company and the credit that we have against the Venezuelan government. So we're watching that and following that process pretty closely, but that's to get the money that they owe us for the judgments that we have against the Venezuelan government for the expropriation of our assets. Look, we're always optimizing the portfolio. I think in the last call, Andy mentioned the the acquisition of some APL&G interest a couple of years ago. We secured the full interest at Surmont here in the last year or so. We're always looking at opportunities that make the company better, and those are two great opportunities that came along at the right time and we're in the right place to add to the portfolio. We think about the disposition side. We've sold assets over the last couple of years when they don't compete in the portfolio at our cost-to-supply thresholds. then the team knows that they need to improve or it moves out of the portfolio. And we do that constantly. We don't have any major large disposition programs that we're thinking about inside the company. We just do that as a normal course of business just to improve the company. With regard to Port Arthur, look, we've had some inbounds on the equity interest that we have, and we're taking a look at that, trying to understand what's right for the company going forward. As Andy mentioned in the last question, look, we're not We don't necessarily need to be an equity owner in these things. We wanted to at Port Arthur to launch the project in phase one, so we did that. But we're not married to it if the right opportunity comes along, so we continue to look at those opportunities at all. We're in the market every day, and we're trading in the market, and we're looking at the market and doing things that we think make the company better.

A moment for our next question. Our next question comes from the line of Paul Chang with Scotiabank. Your line is now open.

Hey, guys. Good morning. AI is a buzzword in many other sectors, but we haven't heard the producer talking much about that. But one of the largest oil services companies in their conference call just talked about how they believe their revenue will be up because there's a lot of interest on their product using the AI that will improve the EUR and well productivities. You guys are always on the cutting edge and trying to improve those aspects in the show. Can you tell us that is it being overly optimistic or that within the next two or three years or three or four years you actually think the AI is going to help you dramatically improve your EUR or well-put activities or that this is really much longer term, maybe at some point it will happen.

Yeah. Thanks, Paul. Look, I think AI is going to revolutionize a lot of things in our industry, other industries around the world as well. I think Nick, in his response to a previous question, talked about some of the things we're doing on the digital space with the dig, the automation, and some of what we're trying to improve our company, improve our operating efficiency. I can't comment on what somebody else said on their conference call. I think it's going to have an impact on the business. I think it goes to things like learning curve and its pace. Like if we can help optimize and improve our learning curve and get digitized and understand the application of all this deep machine learning to our company, that I think it is going to have an impact. And I think about it as acceleration of a learning curve. So it's the pace. It's the pace at which we can optimize and get better and get more efficient as a company. And it cuts across the whole company. It's not just sort of the technical and the operating side of the company, but it's the back office and other places. The challenge is going to be getting this deep machine learning and this – This applies to an enterprise like ConocoPhillips. Enterprises all around the world. How do you get out of the retail space and into the large enterprise space where you have a lot of data, a lot of visual data, a lot of machine learning data that you have to combine together and to see some of that efficiency. So, yeah, it's going to improve us. It's going to make us better. We've got to get everybody in the company embracing kind of what we're doing in this AI space.

One moment for our next question. Our next question comes from the line of Ryan Todd with Piper Sandler. Your line is now open.

Thanks. Maybe just to follow up on some of your LNG conversations from earlier, you clearly talked about there's still work ongoing on the commercial and marketing side and building up some of those kind of things. Is there still... appetite to add on the supply side? Qatar announced another LNG expansion in Northfield West. Is that the type of thing you'd be interested in more of that in the portfolio or more supply side LNG within the portfolio? And then are you seeing signs? We've heard some complaints from others about signs of cost inflation on global LNG projects. What are you seeing as you look at the development of your LNG projects? liquefaction trends across the portfolio right now in terms of cost inflation?

Yeah. Thanks, Ryan. I think Andy outlined sort of our ambition to hit, you know, 10 to 15 million in tons, and you add up the volumes that Andy talked about, and it doesn't reach that kind of a level. So do we have an ambition to grow some more in this space? Absolutely we do. We want to make sure we're in the right spots with the right kinds of opportunity. And certainly North America is a great spot, both on the Gulf Coast and on the West Coast, if there's some good opportunities. It's about having the best liquefaction fees. It's about the better projects that we see out there. I think when it comes to Qatar, we've demonstrated we've landed a couple of interests in a couple of trains there, NFE and NFS. And if they put more out there and the terms are acceptable and competitive, we're certainly interested in expanding that relationship with Qatar down the road. We'll have to see when they make their decision on what they want to do with any future expansions out of the Northfield. But our relationships are strong and our participation is strong. I think in some of those areas we're seeing – The execution of Port Arthur is going pretty well. We don't have any concerns about inflation or what's happening there, and certainly watch the market in terms of the liquefaction spend that we have or what future may come, but we're pretty comfortable with it. We're getting into these projects because they're competitive in the portfolio, and they're filling a strategic long-term vision that we have for the company.

One moment for our next question. Our next question comes from a line of Neil Dingman with Truist Securities. Your line is now open.

Morning, guys. Thanks for the time. My question is on around your lower 48 marketing associated realized prices. Specifically, you all suggest on slide six that your permanent differentials remain maybe a little bit pressured. I'm just wondering, are there any changes you can make on the marketing side to continue to stabilize and improve this? I know you've materially done this of course since you bought the contra assets versus you know what they sort of just accepted that wellhead so i'm just wondering are there further improvements or things that you potentially could do on the marketing side to even uh see even more improvement on the realizations yeah neil this is bill uh you know as we talked about uh

We have offtake capacity both to the West Coast and the Gulf Coast. We're interested in additional takeaway capacity on Matterhorn, like I talked about. We are constantly looking for ways of optimizing that portfolio. Our commercial organization is in the market daily. We're doing orders of magnitude on that production, so we really have a good sense of where volumes are moving and what rates are going. You know, so I think that, you know, the improvement on margins and as you're looking at that, that's really going to come down to getting additional takeaway capacity coming out of Permian. And, you know, we've As we've gone into the second quarter, you've had some maintenance going on there with El Paso and a couple other pipelines and a couple of outages that's putting pressure on Waha pricing. I think everybody's been seeing that. That'll likely clear through the system here as we go through this quarter. But the real relief doesn't come until you get additional takeaway capacity here towards third quarter with Matterhorn coming along. At that point in time, I would expect that you're going to see more normal differentials, and you're going to see a return for our portfolio at more than about 80% of capture of Henry Hub across the portfolio. So I think it's a transitory type thing that you're seeing until you get additional pipeline capacity built. And so I think the important thing here again is that flow assurance matters at a point in time where you're constrained in a basin and we've got excellent flow assurance given our commercial capabilities.

One moment for our next question. Our next question comes from Bob Brackett with Bernstein. Your line is now open.

Good morning. In the prepared remarks, you mentioned the new pad at Sermon 267. And I recall under the old operating structure, the partner wasn't that eager about new capital, the new technology. Clearly, now you control the pace. Can you talk about that pad? How different is it technologically than some of the older pads? And what are you seeing in early results?

Hi, Bob. This is Kirk. First, I'll probably just start out by saying our operational performance this past year has been really strong, and that's important having come through the acquisition of the remaining 50% interest in that asset. And, of course, we brought on that new pad. Certainly, as you've heard from us before, first team on 267, it started earlier this year. And then we achieved first oil in December. And we've been seeing a really steady, strong ramp on pad 267, having started that in December here through first quarter. Production for first quarter is up 3 MBOE, and we really have just seen 267 start to grow. And we expect that to continue to offset decline, especially when we normalize that for the third quarter turnaround that we have coming up. Bob, you've also heard from us in the past. We've spoken to the fact that we intend to add about a new pad about every 12 to 18 months, about every year. And we just continue to find new efficiencies and new opportunities as we bring that pad online. It's really performing against our expectations. The team spent a lot of time, as we've done a lot of infield work, mitigating base field decline. We've experimented with a number of technologies around our liners. And we have prospects of drilling longer laterals here in the future as well. So expect to hear more from us on this front, but certainly PAT267 is coming in strong and really just pleased with how this is shaping up and our ability to continue to grow the asset here in the future having control of it.

One moment for our next question. Our next question comes from the line of Alistair Syme with Citi. Your line is now open.

Yeah, thanks very much. Good morning, everyone. Can I come back just again to the question of lower gas prices? Because I'm not really sure I understand whether you're making any near-term changes to your capital program. I'm thinking both the Permian and the Eaglefoot here, given that low prices will surely be impacting on near-term cash flow. Thank you.

Yeah, yeah, Alistair. No, we're not making any capital allocation decisions. It's all driven by the liquid side of the business. I think as Bill articulated, you know, we need more takeaway capacity out of the Permian to get the Waha prices back up and – We're advantaged a bit because we have El Paso volumes we can take to the West Coast. They've been in a bit of a turnaround as well and some maintenance activities going on that pipeline. So there's a dynamic happening in the basin that is impacting Waha prices. So, again, as Bill said, evacuating your gas is pretty important so you don't go flare because we're not going to routinely flare our gas. We've made that commitment. So having the takeaway is really, really important in these periods of time. And then having the flexibility with your commercial team. We know where we can get a premium price, and we're after that every single day.

One moment for our next question. Our next question comes from the line of Kevin McCurdy with Pickering Energy Partners.

Your line is now open. Hey, good morning. Thank you for taking my question. I wanted to ask on the first quarter capital and trajectory, if I remember correctly, you had soft-guided to over $3 billion of capital for the first quarter, but you came in lower at $2.9 billion. Can you bridge that gap for us? And is this lower CapEx the result of just timing, or is there anything structural that could carry forward? Thank you.

Yeah, hi, this is Andy. Yeah, I can take that question. It's a pretty simple answer. As you said, we came in at 2.9 for the quarter, which was slightly less than our guidance. That slight underspend was a result of some willow capital shifting from the first quarter into April. So if you excuse that timing, our capital spend came in in accordance with our expectations. Now, as you look ahead to the second quarter, capital is expected to be slightly higher than the first quarter, driven by PALNG and the willow timing. And then as you look forward into the second half of the year, capital is expected to be lower than in the second half and the first half, primarily due to the $400 million of Port Arthur LNG equity capital spend that rolls off as we go into project financing.

One moment for our next question.

Our next question comes from the line of Leo Mariani with Rothk MKM. Your line is now open.

I was hoping you could speak a little bit more to the expected trajectory of your Eagle Ford volumes. I know you had kind of the frack holiday a bit, which kind of impacted volumes in the last couple quarters. I know they've been kind of trickling down here. I guess, is that over? Do you have more of a normal activity cadence? And should we start seeing growth in those volumes as you roll into the second quarter and the second half of the year?

Yeah, Leo, for the group, again, we did take that frack gap, as you just mentioned, in the second half of 2023. That impacted 4Q. Also, it impacted the first quarter of this year because the wells coming online after we reinstated that frack crew came online kind of the second half of this last quarter. So we're not really going to see that until you hit 2Q. Again, we took that frack gap because of just the strong operating efficiency that we're seeing in the fracks versus the drilling side as we apply the different technologies out there. So that's a good thing. Looking ahead just to 2Q and beyond, we expect to see higher production from the previous two cores as we bring those wells online and have reinstated that frac cap. This is all in line with our full year guidance and is consistent with the production growth that we laid out.

Again, that's low single digits in that 2 to 4 percent range.

We have no further questions at this time. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.