Crescent Energy Company

Good morning, and thank you for joining Crescent's third quarter 2022 earnings call. Our prepared remarks today will come from our CEO, David Rocacharly, and myself. Todd Falk, Chief Accounting Officer, and Ben Connor and Clay Rind, both Executive Vice Presidents, are also here today and available during Q&A. Today's call may contain projections and other forward-looking statements within the meaning of the federal securities law. These statements are subject to risks and uncertainties, including commodity price volatility, the continued impacts of COVID-19, geopolitical conflict, including in Russia and Ukraine, our business strategies, and other factors that may cause actual results to differ from those expressed or implied in these statements and our other disclosures. We disclaim any obligation to update any forward-looking statements after today's call. In addition, today's discussion may include disclosures regarding non-GAAP financial measures. For reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measure, please reference our 10Q and earnings press release available on our website. With that, I will turn it over to David.

Great. Thank you, Brandi, and good morning. Next month will mark our first anniversary of becoming a public company. A lot has changed in the market environment over the last year, but at Crescent, We continue to execute the same strategy that we've used successfully over the last decade through market cycles and volatility. Number one, generating significant free cash flow. Number two, exercising prudent risk management. And number three, producing outsized returns on investment. And thanks to the dedication, expertise, and hard work of every one of the members of our team, we're pleased to discuss yet another strong quarter and exceptional progress on our value creation goals. Before moving to this quarter's results, I'd like to highlight some of the significant achievements from this past year, both operationally and financially, which add value to the company and keep us well positioned for continued long-term value creation for our shareholders. To begin, we continued our successful acquisition track record with the highly accretive $690 million Uinta Basin acquisition closed earlier this year. We believe these assets add meaningful value for shareholders, significantly increasing the scale of our production base with approximately $1 billion of approved developed PV10, while also enhancing our margins and adding attractive oil-weighted inventory. The transaction exemplifies the power of our acquisition platform. and we expect our deeply experienced team of investment and operational professionals will continue to deliver value through our acquisition strategy in what remains a capital-constrained sector. Next, we continue to demonstrate our commitment to balance sheet strength, free cash flow, and returns to investors. Our cash flow generation allowed us to achieve over $250 million of debt reduction post-acquisition, and our leverage at 930% is in line with our long-term target of one times debt to EBITDA. We also announced a $0.17 per share dividend again this quarter, which has expanded 40% over the course of this year from $0.12 per share in the first quarter. We continue to execute well operationally across the company, even as we face tougher market conditions and increasing scale of the business. The Uinta acquisition marked our seventh transaction since the beginning of 2021, and our team continues to successfully integrate these assets into our portfolio while maintaining strong operations. Crescent is an organization of scale with approximately 150,000 barrels of oil equivalent per day of production and $1.4 billion of annualized adjusted EBITDA and $2.3 billion of adjusted EBITDA on an unhedged basis for the third quarter. We also have approximately $6.3 billion of approved developed PV-10 at 930 stroke pricing. Additionally, we've continued to create value from our large reserve base, investing $600 to $700 million in our development capital program, primarily concentrated across our operated positions in the Eagleford and Uinta bases. where we expect to generate an excess of two times our invested capital. With our attractive drilling inventory and consistently low reinvestment rate, Crescent has been able to compound value through the drill bit while preserving the strength of our balance sheet. Importantly, we continue to prioritize our role as stewards of the environment through our ESG initiatives, joining the Oil and Gas Methane Partnership and publishing our second ESG report in September. I encourage you all to read our sustainability report, which includes tangible operational metrics and targets, most notably our goal to reduce absolute emissions by 50% relative to our 2021 EPA reported baseline. Our team has identified a number of low-cost projects that provide high-confidence emissions reductions opportunities and has increased efforts on detection and measurement of emissions, which are highlighted in the report. we will continue to update the market on our progress in this important area. Finally, we've continued to execute on our capital market strategy into what has been an increasingly volatile broader market. In the high yield market, consistent with our strategy, we issued $200 million of tack-on notes in February to term out the RBL debt we acquired through the Contango merger. And through good performance and support of our bank group, we increased our borrowing base and extended our term maturity to five years, ensuring no near-term maturities. In the equity capital markets, we completed our inaugural secondary offering in September, which was the first marketed deal in the EMP space this year, raising gross proceeds of $86 million. The transaction progressed a significant goal for our organization, increasing public float by 15%, and taking a key step in continuing to build public awareness and broaden our institutional investor base. Further, in connection with the transaction, we executed the concurrent buyback of over 2.5 million Class B private shares, reducing total shares outstanding by approximately 2% at what we believe remains an attractive valuation of our business. Additionally, we significantly advanced our public presence through increased research coverage, adding four research analysts since the closing of our merger with Contango late last year. And as a reminder, we describe our current investor base in three groups. One, our legacy private investors hold approximately 55% pro forma ownership post-transaction, down from 60%. Number two, KKR & Co., our manager, did not participate in the offering and remains an aligned and supportive long-term shareholder, retaining its 16% ownership. And number three, the public Class A shares represent 29% ownership in Crescent, up from 25%. We are pleased with our progress on these goals and will continue to execute our capital market strategy in a methodical way that is aligned with long-term value creation for all shareholders. In summary, The scale of our achievements year to date is a testament to the strength of our asset base and the quality and performance of our people, and we do not take this for granted. Each of these accomplishments aligns with the broader goals we've set for ourselves and outlined to the market since becoming a public company late last year. To put it plainly, we've done what we said we were going to do, and we're confident we are well-positioned to continue to execute on our strategy of creating long-term value for shareholders. Now, moving on to our third quarter results. As I briefly touched on, Crescent continues to perform in line with our expectations in what we anticipate will be our most active quarter of well completions for the year. We spent $190 million of capital in the third quarter, the bulk of which was attributable to our operated drilling program, having maintained two and a half rigs across the Uinta and Eagleford and brought online 13 gross operated wells for the quarter. Additionally, we participated in another seven gross and one net wells brought online across our non-operated assets in the Permian, DJ Basin, and Eagle Fruit. Given the heightened completion activity, total production increased 6% from 142 to 150,000 BOE per day, and oil production increased 8% from 64 to 69,000 barrels per day. On the financial side, the business generated $359 million in adjusted EBITDA and $144 million in levered free cash flow, delivering consistent cash flow despite the decline in commodity prices relative to the previous quarter. Going forward, we expect our capital spend to be fairly flat quarter over quarter, while well completions in the fourth quarter will decrease ahead of increased completion activity in the first half of 2023. Across the A&D market, we remain on pace to evaluate north of 150 transactions this year and would characterize the past two quarters as a more challenging period to be a buyer across the sector. In the energy market more broadly, this past quarter saw sustained commodity price volatility exacerbated by an increasingly complex geopolitical environment. all while ongoing inflationary pressures continue to create headwinds across our industry in the form of supply chain constraints and service company supply-demand imbalances. This combination of commodity price and cost uncertainty, alongside an economy-wide shift in central banking policy and the implied cost of capital, has continued to challenge the bid-ask spread in the energy asset market. even as an ever-increasing volume of assets are coming to market, a significant portion of these processes remain on the sidelines. However, A&D activity has begun picking up recently, and we're expecting meaningful improvement in the A&D market over the coming months. Fortunately for Crescent, our continued participation in the A&D market has kept our finger on the pulse, all while the nature of our asset base with our low decline rate and multi-year inventory of high returning locations has permitted us to stay patient in evaluating new transactions. That patience allows us to continue to adhere to the discipline framework and investment criteria that guide our evaluation process. Our market presence and patience have also allowed us to find good value as we opportunistically divest non-core assets. Turning back to operations, over the course of the last quarter, We ran one and a half rigs in the Uinta Basin and one rig in the Eagleford, and our development program continues to be underpinned by returns-driven decision-making, generating attractive returns on capital and short payback periods. We plan to run one rig in the Uinta for the remainder of the year, a shift we made in August. This allows us to continue to validate our spacing and completions design optimization relative to the previous operator. And while it's still early, our initial data suggests those changes are translating into a positive impact on overall performance. This process of validation and optimization comes at a good time, as it corresponds well with managing our development cadence while our midstream provider adds additional capacity to our infield gathering system to support future volume growth. As we have said in previous quarters, we continue to see an industry trend of deferred maintenance impacts. and our assets and service providers are not immune. We will continue to do our best with planning and operations to mitigate the potential for future impacts on Crescent. And while inflationary pressures continue to manifest, we expect to remain within our publicly stated capital guidance range, primarily due to increased drilling efficiencies across our Eagle Fruit position, where our continuous acreage position allows us to extend laterals most recently through a pad brought online this past quarter with average lateral length in excess of 16,000 feet, as well as through the continuous improvement as we implement our development strategy in the Uinta, both of which we feel will continue to provide a tangible offset to costs as we work with service providers on establishing a consistent, repeatable process. Additionally, we've continued to see sustained inflationary pressures across our operating cost structure, approximately 10% year to date, primarily due to increased maintenance and commodity link costs, but also due to high returning elective work over activity, as well as non-recurring expenses related to our recent acquisitions and merger with Contango. Looking ahead to next year, we expect we can see further inflation, particularly on the services side, the market remains anomalously tight but we are confident our team will continue to find ways to achieve repeatable operational efficiencies as we remain focused on operations in q4 and beyond we look forward to posting 2023 guidance over the coming months at a high level we anticipate running a maintenance maintenance level development program over the course of next year as we are mindful of margin compression into stabilizing commodity prices with the potential for sustained capital inflation. Our organizational focus on generating attractive returns on capital as opposed to growing production ensures we'll remain flexible, particularly as the A&D market continues to evolve and with it, our view on the highest returning use of capital. In short, we're happy with the progress we've made this year and remain optimistic about our value creation potential given Crescent's current positioning and the unique opportunity set laid out before us. With that, I'll turn the call over to Brandi to cover our third quarter 2022 financial results in more detail and our remainder of the year outlook. Brandi?

Thanks, David. Our third quarter results reflect yet another solid quarter for our business as we continue to prioritize shareholder returns in the balance sheet. To recap, we produced 150,000 net barrels of oil equivalent per day and 69,000 net barrels of oil per day, which reflected 6% and 8% increase quarter-over-quarter, respectively, primarily due to higher plain completion activity. Additionally, we generated $359 million of adjusted EBITDA and $144 million of lever-free cash flow, maintaining consistent cash flow generation despite the fall-off in commodity prices. Alongside earnings, we announced a quarterly dividend payment of $0.17 per share, consistent with the previous quarter, Part of our forthcoming 2023 guidance, we intend to reevaluate our base dividend within the confines of our 10% of adjusted EBITDAX framework. And subject to board approval, look forward to declaring our 2023 dividend as part of our forward outlook early next year. Diving into specifics, our oil differentials increased modestly quarter over quarter, primarily due to growing production from our Uintah Basin assets, which has been more than offset by the higher oil weighting of our production this quarter. Operating costs excluding production and other taxes for the quarter were $15.33 per BOE, a 4% increase quarter-over-quarter. As David briefly mentioned, this increase is partially driven by inflationary pressures and certain commodity-linked costs, but a meaningful piece of our overall increase was driven by increased maintenance activity and high-return elective work-over projects. Additionally, we incurred certain non-recurring operating expenses over the course of the primarily due to the expenses stemming from our first year as a public company, as well as our most recent acquisition. Excluding those non-recurring expenses, our operating costs, excluding production and other taxes, would decrease to $14.87 on a per-unit basis, outside the high end of our prior OpEx guide. Adjusted recurring cash G&A totaled $1.40 per BOE, which is in line with previous expectations. We continue to benefit from synergies associated with the Uinta Basin acquisition, which added significant scale to the broader business while contributing minimal incremental G&A. I would note this calculation excludes certain non-recurring expenses associated with the Contango merger and the formation of Crescent Energy as a new public company. And we expect incremental $3 to $5 million of one-time expenses for the remainder of 2022, including post-merger integration and other transaction-related costs. For the full year, we anticipate 25 to 30 million of non-recurring expenses to impact G&A and operating expenses due to these factors. On capital spend, we invested 190 million in the third quarter, drilling five growth-operated locations in the Uinta and five in the Eagleford. Additionally, we brought online another 13 growth-operated wells in the Uinta. Today, we brought online 50 gross operated wells and 48 net operated wells this year as part of our 2022 program and continue to see high productivity and strong returns on capital. We expect the significant majority of our programs to pay back in the range of 12 months and generate more than two times our investment at today's commodity prices. Today, we are continuing to operate one rig in both the Eagleford and Uinta basins. As we hit them last quarter, we shifted to one rig in the Uinta in August we began to implement and monitor our optimized spacing completion design and manage volumes ahead of our third party gas gatherers planned expansion as david mentioned we expect the third quarter to be our most active this year for wells turned in line and for this upcoming quarter are guiding relatively consistent capital spend to the second and third quarter but lower production due to less completion activity for full Year 2022 capital guidance, our estimates are unchanged at $600 to $700 million, with approximately 80% allocated to operated development in the ECOFR and UNTA bases. As discussed on our call last quarter, we expect to end up between the mid to high ends of our original guidance range, subject to timing adjustments associated with our operated program around the end of the year. Similar to others across the industry, we've continued to see inflationary pressures, but have been able to successfully mitigate a portion of those pressures through increased drilling and completion efficiencies across our operated assets. Given the rapid escalation in development costs coupled with the significant task of integrating a 30,000 barrel of oil equivalent per day asset, we're pleased with the efforts our team has put forth to keep us within our guidance range set at the beginning of this year. On the balance sheet, we exited the quarter with LTM leverage of one time and $625 million in liquidity. Since closing the Uinta acquisition at the end of the first quarter, we've repaid $256 million in debt, and as we continue to generate significant free cash flow for the remainder of the year, we expect to maintain leverage at or below our target level of one times EBITDA by year end. In September of this year, we completed our fall redetermination, increasing our borrowing base from $1.8 to $2 billion and extending our term maturity an additional two and a half years, ensuring we have no near-term maturities for the foreseeable future. Additionally, we successfully negotiated a 50 basis point reduction in the interest rate margin for amounts outstanding on our credit facility. Taken together, we're pleased with the outcome of our determination process, which speaks to the relative strength of the business, the outlook for substantial cash flow, our growing approved reserves, and our strong balance sheet. Additionally, last week we signed a purchase agreement to divest our non-core operated Midland Basin position for total proceeds of $80 million, subject to customary purchase price adjustments. the proceeds of which will be used to repay debt in the near term. And we anticipate the transaction to close by year-end 2022. Year-to-date, we've divested over $100 million of non-core assets, which will decrease 2022 production by 1.5 to 2,000 barrels of oil equivalent per day and EBITDA by $25 to $30 million relative to our prior full-year guidance. In the capital markets, as we hit on last quarter, we recognize that the current market positioning and awareness of Crescent is not yet at a level consistent with peers of a similar size. And more nuanced aspects of the business, such as our lower decline rate and the impact hedges have on near-term cash flows, are still not fully appreciated and reflected in our current evaluation. And while some of these features will improve over time as we continue to post positive results, complete accretive acquisitions and legacy acquisition-related Hedges continue to roll off. We still de-market visibility and education as a key piece of our strategic plan for 2022 and beyond. We are committed to an active approach to building awareness of our story, which we intend to accomplish by engaging with the market to expand our followership, improve our flow, and increase equity research coverage. This past quarter, we took a tremendous step in doing just that through our inaugural public equity offering, which was the first E&P marketed equity offering of the year. Initially marketed for 5 million shares, we received significant enthusiasm for the offering from both existing and new investors in our business, allowing us to exercise our green shoe option and sell an additional 750,000 shares. The offering was complemented by the company's concurrent purchase and retirement of just over 2.5 million Class B private shares at the same price per share received by the selling stockholders. The combined offerings were made pro rata across our legacy private investors, with the exception of the units owned directly by KKR & Co., who continues to retain its ownership in Crescent. Proforma for the transaction or private investors own 55% of the business, maintaining significant alignment with Crescent's public float, while KKR retains its direct investment in Crescent as a supportive long-term shareholder. In addition to KKR retaining its stake, members of our management team and board of directors continue to increase their direct ownership in Crescent over the course of the quarter, further promoting the alignment we believe is crucial to creating an optimal outcome for our shareholders. In light of the offering, we want to reiterate that we do not intend to pursue a public share buyback program like many of our public company peers, which we believe would run counter to the creation of long-term value that increased float and market presence would provide. However, we may continue to conduct similar buybacks for private shares in connection with future secondary offerings. That is a tool available to us that does not compromise public float, which we will continue to evaluate based on the implied returns associated with that use of capital and impact to our balance sheet. Looking forward to this upcoming quarter, we anticipate a slight decline in production given the increased completion activity in the third quarter of this year as a significant portion of our development capital will be driven by drilling activity. For the full year 2022, we anticipate to land near the midpoint of our production guidance range due to the continued inflationary pressures impacting our operating cost structure at the low end of our EBITDA free cash flow guidance when accounting for asset divestitures and decreased commodity prices. As a reminder, our prior guidance was established alongside our first quarter earnings in May and provided at $100 per barrel oil and $6 per BTU gas. We remain pleased with our results year-to-date and the progress we've made. As operational results are continuing business as usual, and Crescent has taken a significant step forward in expanding our public markets positioning through its inaugural secondary offering. With that, I'll turn the call over to David to provide the closing remarks.

Thanks, Brandi. Before moving on to Q&A, I want to reiterate some of our year-to-date highlights, which we believe provide the foundation for sustained value and success. First, we completed the Uinta Basin acquisition, adding significant scale to the business and increasing our runway of high-margin oil-weighted inventory. Second, we increased our dividend by 40%, passing through the accretive nature of the Uinta transaction while continuing to delever the business, having repaid over $250 million of debt over the past six months. Third, we continue to post strong quarterly results while successfully integrating a number of new assets into our business, creating a business of scale with approximately $2.3 billion in unhedged annualized adjusted EBITDA and approximately $6.3 billion improved developed PV10 at 930 strip pricing. Fourth, we've continued to create organic value across our $600 to $700 million capital program, developing high returning locations, and managing an inflationary environment with repeatable operational efficiencies. We've continued to prioritize our role as stewards of the environment, publishing our second ESG report, and committing to reduce absolute emissions by 50% by 2027. And finally, we've continued to prioritize capital markets activities, raising incremental bank and high-yield debt, completing the year's first marketed EMP equity issuance, which increased our public float by 15%, and adding research coverage from four analysts over the course of the year. The achievements we've had in our first years of public company continue to demonstrate Crescent's differentiated business model is working, and we'll continue to position the company for success into what remains an attractive market backdrop for our sector. Thanks again for joining us today, and with that, we will now be happy to take your questions.

Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please 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 keys. One moment, please, while we poll for questions. To ask a question, please press star 1. We have a first question from the lineup, Neil Dingman, with Truist Securities. Please go ahead.

Good morning, guys. Thanks for the details. Could you talk maybe just a bit about more of your maintenance plan? I know you don't have a specific 23, but I'm just thinking about around maybe flat production, how you might think about cost, OFS, and everything as it affects next year. Thank you.

Yeah, happy to take that, Neil. It's been, you know, what I'd say is, as David and Brady noted in their opening remarks, you know, we expect to kind of be in maintenance mode next year and kind of thinking about running kind of the two-rig program that we've been running more recently into next year. We've talked about that in the past, you know, to maintain, to slightly grow our production, that's a two- to three-rig program. So I think that's what you should continue to see from us from a activity level, but we'll be obviously coming out with guidance here in the near term. As it relates to cost inflation, look, we're seeing the same trends that everybody else in the sector is seeing, which is expected given, you know, the move in the commodity price and increased activity. And we noted that, you know, when we came out with our guidance, coupled with the Uintah Basin transaction of an increase of 10 to 15 percent. You know, we've done a good job combating that, both through, you know, enhancing laterals, links in the Eagleford, and then also changing our completion design in the Uinta, which is meaningfully below where the prior operator's cost was before you take into account the inflation. But on the outlook, our view from here is that inflation is really going to be tied to activity and continued activity in the sector. And so while we still see pressure, we certainly have seen the pace of increase in cost moderate And we think that, you know, our low-declined asset base will continue to advantage us in an inflationary environment just given, you know, the relatively lower amount of capital that's required for us to invest back in our assets to maintain our production.

So hopefully that answers your questions, but happy to expand upon that. Thank you. Neil, do you have any further questions?

I'm sorry. I was just wondering about the UNTA, if you're re-stimulator, what you're doing there to sort of revitalize that. Thank you.

Yeah, really. And it's in our investor presentation. I don't have it in front of me in terms of the exact page. But really what we've done in the UNTA is twofold. One, we've widened out the spacing, which you would expect to deliver, you know, better results. And then coupled with that, we've increased the completion intensity. both in terms of the amount of prop and fluid that we're pumping in the reservoir, and we've changed that in terms of the types of things that we're pumping into the ground, which ultimately is lowering the cost of that completion.

Thank you. Do you have any further questions, Neil? Thank you.

We take the next question from the lineup, Lloyd Byrne with Jefferies. Please go ahead.

Hey, guys, David. Nice job. You talked about the A&D market and how you've scrutinized 150 transactions and the market might be getting better as you look out. So maybe you could address that. And then also you talked about when you sold active scale. And does that mean that you'd rather scale up the Uintah and the Eagleford, or it doesn't really matter as long as the value is there?

Yeah, we can start on Ector quickly. I think as we looked at the portfolio, that was just an asset that it was going to be difficult to scale around, given where it was in the basin, and frankly wasn't going to be a place we were going to be committed to spending capital on. So we ran the process and felt like we got good value. So I don't think it's a direct statement on the broader Permian or anything like that. I think it was just that asset footprint and kind of how we felt about the capital opportunity relative to the portfolio. In terms of the broader market, you know, obviously, you know, David hit a bunch of this, but, you know, we were really active post the signing of the Contango merger, did over a billion dollars of transactions through Q1. And then, you know, in Q2 and Q3, you know, a lot of commodity volatility it was a tough time to kind of be a buyer at value i think what we're you know as we look out from here we kind of remain in active dialogue on a number of conversations see kind of the the stability in the market a bit although it continues to be volatile uh providing an outlook where we we can we think we'll be able to transact value as we look over the next six six to nine months yeah and the other thing i just say is like we're even better positioned today

really coming out of all the accomplishments that we've completed over the last couple of quarters. We've successfully integrated you into acquisitions going well. We've continued to pay down debt on the balance sheet and completed an equity offering that was really well received. So just as a business, we feel really very well positioned going into next year where we do expect to see continued activity in the A&D market. And the things that have gotten done have gotten done at very attractive values, we think.

Okay, great. And let me ask on the back of that, you talk about paying down debt and your balance sheet's in great shape. What are the priorities for your levered free cash going forward? Is it just building cash at this point, waiting for the right opportunity? How do you think about that?

Hey, Lloyd, it's Brandy. Good question. So cash flow priorities 1A and 1B continue to be the dividends. and the balance sheet. So alongside earnings last night, we announced another 17 cents per share per quarter dividend, which is in line with our last quarter's dividend. It equates to roughly a 5% yield. We expect to continue to keep this dividend framework consistent in the near term of paying out 10% of our adjusted EBITDA. Would expect next quarter's dividend to be in the same range, so roughly 17 cents a share, and then we'll look to reset it alongside guidance in 2023. So it's really balance sheet, strength, long-term target of a turn, which we're at now, that the dividend will look organically into our capital program, right, where we're spending capital. And Ben mentioned this earlier, we're spending capital in the Uinta and the Eagle for today. And then if there's excess cash, you know, we'll continue to focus on debt repayment.

That's great. Thank you, you guys. If I could squeeze one more in. On the drilling efficiency side, you guys did a pretty good job, obviously, with the longer laterals and helping offset inflation. Is there more there going forward? I know Neil touched on it a little bit in the Uinta, but just in general. How do you see efficiencies and maybe offsetting some of the inflation the industry is seeing?

Yeah, I mean, look, I think our teams have done a really good job today, and we've done a good job combating it this year. There's always room for continued improvement. So don't want to overpromise there, but, you know, we're driving every day to reduce our cycle times and to, you know, do the things we've done this year to reduce costs. So I think you'll see continued improvement. you know, efforts on that. And then really, you know, it's, I think, as we noted earlier, it's really just how active is the sector going to be and ultimately where do we land there in terms of some of the supply chain constraints that we've seen. But again, like I said, it has moderated, but we do see continued pressure. So hopefully not to the same extent that we've seen over rate of change this year, but we're seeing pressure and we're, you know, constantly pushing back, trying to be creative to continue to lower our cost structure.

Great. Thank you.

Thank you. We have next question from the line of Tarek Hamed with JP Morgan. Please go ahead.

Hi, this is Evan for Tarek. Thanks for taking our questions. So first, you mentioned that you're planning to increase completion activity in the first half of 2023. Just wanted to see or get your thoughts on what you're expecting for production cadence entering 4Q, but also through 2023 for any high-level commentary you could provide.

Hey Evan, it's Brandy. As we hit on in the prepared remarks, we do expect production to decline slightly quarter over quarter, and that's just really driven by till activity. As you know, we don't provide quarterly guidance, but would want you to, what Ben mentioned earlier, just as we're thinking about 2023, and that's going to be more of a maintenance level, so we'd expect on an average for the year, we'd be you know, plus or minus 140,000 a day.

Got it. Thank you. That's helpful. And then also, as long as you could provide a little bit more color on working capital in the third quarter, if there's any kind of carry forward into the fourth quarter.

Yeah, good question again, Randy. We would expect that to normalize into the fourth quarter. There's a little bit of noise just related to the Uinta transaction. but would expect that to normalize going forward.

Great, thanks. That's all from us.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and I'd like to turn the call back over to David Drogacharli, CEO, for closing remarks. Over to you, sir.

Great. Thank you all again for your time and your support of the business. We As you hopefully heard today, I think that the business is doing really well, and we look forward to keeping you updated as we move forward. Thank you very much.