Ovintiv Inc. (DE)

Q3 2021 Earnings Conference Call


spk_0: ladies and gentlemen and thank you for sending by welcome to avenge his twenty twenty one third quarter results conference call as a reminder to they call is being recorded at this time all participants are analyst and only mode following the presentation will conduct a question and answer session members of the investment community will have the opportunity to ask questions and can join the queue at any time by pressing start one for members of the media attending and listen only mode today you may quote statements made by any of the event of representatives however members of the media who wish to quote others who are speaking on today's couple we advise you to contact those individuals directly to obtain their consent please be advised that this conference call may not be recorded or rebroadcast without the express consent of of into i'd knowledge during a conference call over to jason voorhees from investor relations please go ahead mr for haste
spk_1: thank you operator welcome everyone to her third quarter twenty twenty one conference call colvin what trust and a slider available on her website or out of into to dot com please take note of the advisory regarding forward looking statements the universe lives and in or disclosure documents filed on or and edgar following prepared remarks we we will be available to take your specific questions we want your time to one person and one followed this allows us to get through more requests today don't alter mccall over to bring mccracken
spk_2: morning thanks everyone for joining us falling or brief prepared remarks or team will be available to answer your questions were pleased to announce or third quarter results are unique culture of innovation and discipline is driving value creation across or business we're delivering on every aspect of or value proposition for inaction on cash returns to shareholders were rapidly reducing debt or efficiency gains are fully offsetting inflation we're generating superior returns on the kabul we're investing and that's resulting in significant free cash flow and were using your expertise and innovation to drive efficiency gains and lower emissions we're committed to delivering this value creation directly to her shoulders as demonstrated by a the debt reduction share buybacks and recently increased based evident we reduce debt debt by over four hundred million dollars in the quarter to roughly four point eight billion and we remain on track to see debt below four point five billion by your and or leverage currently six at one point five times which is less than half of what it was at the start of the year based on are significant free cash flow of four hundred and eighty million dollars during the quarter we're already in action on our new shareholder returns framework this was the as return almost a hundred and fifty million dollars to our shareholders in the fourth quarter through the combination of share buybacks an herb a student we continue to maintain capital discipline and are full year twenty twenty one capital program remains unchanged at one point five billion thanks to our teams ongoing efficiency gains we have seen no erosion to our couple efficiency from inflation and a few moments greg will share our team is continuing to relentlessly pursue operational efficiencies and technical innovations on cause and dry though performance from the new wells were doing as well as from our base production performance remain strong across her assets and we continue to see the benefits of our motivation portfolio and multi product commodity exposure in early september we announced or new application framework with a focus on value creation for shareholders or business is cable capable of generating substantial free cash flow and over the next ten years we project about fifteen billion dollars a free cash flow of fifty five dollars wt i and about twenty one billion at sixty five dollar wtf with this robusto look we felt it was important to provide the market with a clear transparent and durable road map for how we plan to allocate that capital we've had the opportunity to meet with many of our shareholders since announcing the framework and the feedback we received has been pa
spk_3: positive on our plan
spk_2: first of all we remain committed to running a business with lower that not only does it drive cars said the system it also improves or resiliency during periods of market volatility with that in mind we set a new that target of three billion dollars which admit cycle prices would equate to leverage ratio of about one times net debt to bidder the three billion dollars does not represent a starting point in our cap allocation framer gives us the ability to continue to further reduce debt and take our leverage them our while debt reduction remains a top priority we've made tremendous progress and we're now in a position where it doesn't need to be are only priority starting last month and until we reach three billion dollars of note that we've committed to return twenty five percent of the previous quarter's free cash flow after based evidence to our shareholders through either share buybacks or variable dividends when we consider the total dollars involved at the twenty five percent level this level of cash returns is very competitive with her peers the remaining seventy five percent will be allocated to the balance sheet with a modest amount allocated small low cost property bolt ons once we hit our net debt target which at today's prices could be as soon as year and twenty twenty two we plan to increase the shareholder return allocation to at least fifty percent our plan is underpinned by a reimbursement reissue of no more than seventy five percent of cash flow and and twenty twenty one will reimburse less than fifty we've outlined the principles will use to make a value based decision each quarter on which cash return option to use either buybacks of able to evidence based on the market conditions at the time we currently do share buybacks is the best way to generate access returns for our shoulders and were actively repurchasing shares in the open market will continue to evaluate the value proposition of each option on an ongoing basis oh now turn the call over to korea
spk_4: thanks brendan the details of our cap allocation framework for the fourth quarter can be seen on the slide for we purposely built the framework to be clear transparent and durable will return almost a hundred and fifty million dollars to shareholders is quarter alone one hundred and eleven million of this will come to share buybacks and other thirty seven million to our base dividend which we increased by fifty percent earlier this year at almost a hundred and fifty million or planned fourth quarter direct returns to shareholders will be approximately six times the level of cash returns be delivered in each of the first two quarters of the year by the base dividend payments we've been active in the market and last month we we purchase seven hundred ninety one thousand shares at an average price of thirty seven dollars and ninety one sense for about thirty million dollars we expect to complete the remaining eighty one million dollars of share buybacks of the remainder the quarter as we look ahead to next year and see the significant free cash flow potential of our business the magnitude of cash returns to shareholders is compelling on slide five we've provided outline of our potential twenty twenty two shareholder returns cross the commodity price landscape at the eighty dollar damage yeah and four dollar nymex prices with the cash returns about thirteen percent of or equity value on top of that we would be reducing dad all the way down to the new three billion dollar that target and potentially be ah and at this time we're using buybacks return additional capital to our shareholders beyond the base dividend or share prices increased recently we still see are intrinsic equity value relative value and other key metrics like free cash will yield strongly signaling value creation through buybacks will continue to evaluate this return of cash method to make the bed best value based decision for shareholders is corporate level cap location framework is underpinned by the great work drag and his team are doing on the operation said a business strong production rates and costs controller keeping capital efficiency intact isn't turn is driving strong free cash flow generation and our ability to return more cash to shareholders
spk_5: i'll turn over to greg for operational highlights thanks for to three marks another quarter of exceptional performance where operational teams we continue to demonstrate our ability to fully offset inflationary pressures and deliver lower drilling a completion cost across all assets through the first three quarters twenty twenty one well costs or eleven percent lower than twenty twenty as you recall we said well fast guidance for a core assets earlier in the year and have successfully met or beat those targets across the portfolio in addition we now have clear line of sight to achieving these while cause through the for year reaffirming are one point five billion dollar capital budget these remarkable achievements are a testament to our unique culture of innovation is culture is produced a twenty twenty one capital program efficiency that is top tier among your peers i encourage you to compare will cost against others in any of the basins we operate in we've been an industry leader and piloting and adopting new technology and processes to increase efficiencies and reduce costs across our assets we are now in our third year of using seibel frac animated a standard part of our operations we were first mover and the use of local wet sand and the anadarko and twenty nineteen and recently spread this application to the permian basin we've been quick to progress new ideas and make them standard practice across the business or teams are continuously testing new technologies to find the next level of innovation our ability to consistently generate industry leading will cost is directly underpinned by continued operational sort this has never been more apparent than in the third quarter starting with the permian we achieved a new record performance on third of thirteen while development and middle and county these wells had an average lateral links of thirteen thousand five hundred feet drilled it over two thousand feet per day he completed over thirty three hundred feet per day using some of frank technology in fact and ninety five percent of our third quarter permian completions you realize i will frank we've also taken significant strides to quickly ramp up utilization or howard county sand mine early fifty percent of the proper pumped in the permian during the quarter was locally sourced wet sand this is a significant increase from twenty twenty and nearly twice the amount pump last quarter using was and generates an estimated one hundred thousand dollars in savings for well in the anadarko through optimized equipment design increasing number well prepared and efficiently reoccupy older locations we've made significant progress and lowering facilities cost susan the anadarko were now approximately three hundred thousand dollars per well which is twenty seven percent lower than the twenty twenty average in the money the tangible strides we have made an operational efficiency are really paying off of it of not only draw the company record lateral length of over fifteen thousand three hundred feet but in the third quarter alone drop three of the top five longest lateral in the basin today
spk_1: also ninety percent of our completions in the quarter implemented a new optimized casing design that is generating savings of roughly one hundred and twenty thousand dollars per well
spk_5: lastly were quickly hitting our stride the bargain and are delivering impressive operational results
spk_4: with optimized wellborn completions designs we completed an average of twenty seven hundred feet per day in the base in this year
spk_5: fifty percent faster than the twenty twenty average all of these examples really highlight the key drivers were using today and continue to look to in the future to fully offset inflation and deliver lower cost in addition to lower cost or program capital efficiency this year has been supported by well productivity out performance across the portfolio in stack the team continues to optimize completion designs which have led to significantly improved oil productivity and the money we've delivered industry leading well results across a range of products one does this includes the eight well pipe stone sixteen of twenty seven pad it is produced an average of nine hundred ninety three be a week per day per well over the first hundred and eighty days of production with sixty three percent of this production being high value condensate our tube development approach in the permian is delivering consistent year over your performance while continuing to codable at multiple horizons test new zones and optimized the value or acreage lastly in the bargain we're seeing continued strong deliverability from orchestral pad and and are encouraged by the early time performance where recent reoccupy development
spk_2: of into this truly delivering industry leading results across every discipline and throughout our entire portfolio these results continue to improve in our culture of a culture of innovation will allow us to further optimize our program and deliver additional operational efficiency as we head into twenty twenty two without altering the call back to random thanks great as you look ahead to twenty twenty two of ain't is leading couple efficiency remains differentiator among your peers we fully offset said inflationary pressures this year and respect to hold our cattle efficiency flat and next year or cost reductions of the result of innovation and execution these changes in our designs and processes make the savings permanent culture is unique and feeds constant innovation and this is not easily replicated we also into the air with minimal documentary and twenty twenty two the same way sir capital efficiency is truly sustainable is driven by the tremendous effort to cross the organization to deliver better wells for lower costs for optimizing multiple program levers as we refine or twenty twenty two plans these letters to name a few include longer lateral development maximizing are used to some of rock and locally sourced wet sand as well as delivering quicker cycle times through more efficient drilling and completion operations from base production optimization to supply chain management to drilling incompletions efficiency we're always looking at ways to deliver our production targets for the least amount of capital and other although we're still working on or twenty twenty two plans we have a clear line of sight to remain maintaining a flat production profile for the same amount of capital investment were highly confident we can deliver crude and cons a production of one hundred and eighty thousand two hundred ninety thousand barrels per day with one point five billion dollars capital we think capital efficiency will continue to be a differentiating factor and twenty twenty two and were positioned to be a leader among your peers our capital efficiency is under penned by a multi base and portfolio that provide stability and optionality to our business with a with equivalent returns on invested capital across the assets our portfolio provides operational in commodity diversification cross and learnings and a decade plus of inventory at a current development place each of these three core assets is set each of our core three assets is said to generate over a billion dollars of upstream operating free cash flow in twenty twenty one at current prices this strong performance across the board demonstrates the return on invested capital overseen each play
spk_6: the ability to shift capital quickly in response to regional pricing dynamics whether outages infrastructure access or other challenges is a competitive advantage for our business we can do this without sacrificing returns to ensure we deliver on or promised corporate outcomes this truly balance multi base and portfolio is unique in
spk_2: daisy m p landscape we've also made significant strides in emissions reductions over the last year and we're very proud to highlight our performance in this area we recently declared full alignment with the world bank zero routine flaring initiative and we announced that we've to achieve our target for thirty three percent reduction in methane emissions four years ahead of schedule tracking our missions allows us to set targets and identify solutions to reduce emissions intensity we've monitored greenhouse gas emissions for more than fifteen years and have significantly decreased our emissions intensity during that time over the last year we have enabled more proactive emissions management by establishing a digital image missions monitoring dashboard across our operations we currently have line of sight to greater than twenty percent reduction in our scope one into d h d intensity by your and twenty one measured against or twenty nineteen baseline in twenty twenty two we plan to further formalize or commitment to emissions reductions by setting a total ghg emissions intensity target which will be time compensation for on boys innovating in pursuit of efficiency is what we do best and that includes continuously improving our emissions performance before we turned the call over to cuny i'd like to leave you with the key reasons we're confident we'll deliver superior returns on the road ahead we believe or one of the very best producing oil and gas from shell and wilbur particularly great at is getting better at that all the time where intensely focused on making sure this capability translates into value for our shareholders and we're committed to delivering the company returning significant castro shareholders we just begun to execute on her new shareholder return framework which we believe will deliver competitive cash return to our shareholders well continuing to rapidly really you step we're committed to maintaining capital discipline and preserving our capital efficiency in to twenty two or program is highly repeatable next year despite inflationary pressures are confident we'll keep our cap efficiency flat and deliver production profile consistent with the second half of this year for one and half billion dollars next year
spk_0: or multi base and multi product optionality continues to be an asset and the competitiveness of our assets and the agility of our operations offer multiple pathways to deliver the best corporate outcomes and drive superior returns and finally we're committed to managing our business to deliver the products the world needs in a manner that is both prefer profitable answers animal this concludes are prepared remarks operator our prepared to take questions
spk_7: thank you ladies and gentlemen we will now begin the question and answer session said you have a question please pass star followed by one on your touched on some you'll hear three to unprompted knowledge a request and your questions will be hauled in the order they received
spk_8: a speakerphone pleased with the handset before pressing any keep your first question comes from it said like eight with bank of america please go ahead
spk_7: good morning says john added i've heard that the morning affected part of another called moment ah yes there are questions
spk_2: first question is on slide five and your presentation
spk_7: that looks like danish capital breakeven has dropped on as fly can you from at one obama has possibly chair i'd just have been a little bit of trouble hearing about think your question is around the sustaining capital is that right
spk_2: that's correct i apologize i am a cell phone yes he does get at first that's for quite as i thought correct yet so yeah they think this is really key take away from the comments we made here i think will be one of the a few companies that have provided some color on where we see twenty two shaping up in one of the things we're seeing as a real advantage for us is this ability to hold capital efficiency flat you have a year which is giving us that profile with you're you're talking about so you know this is something we've been working out for for quite a quite a while in terms of building the skillset we gotta very sophisticated supply chain organization
spk_5: we've got an operating organization that is constantly driving efficiency gains that that allows to to offset inflationary pressures or or or improve the returns that regenerating on the couple investing so you know key operating initiatives like sign of rock wet sand new casing designs and the record completion of agencies we're generating or are keeping that guide impact as we look out in the twenty two and and generating a sustainable through the cycle savings to maybe i'll just and by greg to make a few comments on on the details of how we're making that happen effects run and feel as of his run the noticed we we are mentioned we are have continued see some up or pressure on commodities as as we talked about previous calls you know steal a diesel continue to our to rise but we're also a really proud of the teams efforts to mitigate inflation on other commodities are such as santa
spk_4: or was an initiative has allowed us to actually hold those costs flat or reduce overtime as well as how we're managing water which is eyes reduced or those costs as well as we think about the server side you know where act we negotiate contracts for twenty twenty two a while we are being asked for increases in some categories
spk_9: we're receiving bids in line with twenty twenty one cost and some other categories
spk_5: ill notably on a recent frac rfp ah we've had done some folks come on the some really strong pricing allows the holocaust flat there but as we work with oliver vendors were with and wait for ways for both sides to become more efficient and keep our costs down and that's how we are we really were believe we're going to be able to maintain a couple efficiency going forward
spk_7: is brenda noted we gotta really sophisticated supply chain and as allowing us to adhd did not only maintain the savings we've we've achieved in the past but the holders into the future so strongly just in summary and we've been able offs and inflation and twenty twenty one with this approach and we're confident we can manage inflation again and twenty twenty two with are not only offsetting the inflation but improving the efficiency of our programs overall we appreciate that color and and first or second question it i catch the abolition of fast tax
spk_4: as you enter a big that flow from a period of time that involving and how did you hear flaky than prolonged break either
spk_0: a john it's core code here so as we model of the business obviously the of the higher prices make make a big difference in terms of your cash tax rise and that we're starting off with a four point eight billion in and allows in the us and nother billion three in canada so you were close to six billion
spk_10: of and allowed to start with and we don't see yourself paying material cash tax know stuff for five years old
spk_11: next question comes from human carries with goldman sachs please go ahead
spk_10: i'd the mining and thank you for taking my question good morning
spk_2: or first question was on the outlook gonna give us any sign of and thought that on factor location across your as a what for you actually given your given the be some come i descent you see ventured i look at more capital the ledge and it off of and yeah no appreciate the question you know the egg the great environment that we find ourselves in here today as received very strong prices across all three models with that we have a big presence in so that's driving returns a any to the assets and so today where we would tell you is that something will look out as with baking in the details of the twenty twenty two plan but it doesn't look like it's going to create a material shift in in how we been allocating capital so i would not expect
spk_10: to a big shift in the product mix for us and twenty twenty two great thank you and then many more high level has had on the macro and also any such as the evaluating the can law the computer philippa some good as thinking more like longbottom not likely to the point where it's going beyond months at that level of down that have three billion dollars of what are the
spk_2: incremental that of kashmir which you see ah and i would get quoted as a part of the continuation than yeah i think on the macro you obviously there's a constructive set up there but that's not really how we are forming our business plan and in our running the company know we we look at everything through a mid cycle lens and look at our ability to generate returns on him best the capital through that mid cycle lands we think on that on the go forward you know that the the business that we're building is a free cash generating machine in prices are gonna go up and prices are going to go down but we've got the ability to generate that free cash flow through the cycle and and superior returns on the capital there we're deploying i think on your your debt comment you know the way we've described the three billion dollars is it's not a stopping point and really want me to think about it is it's a tipping point on our cash return so with the cap allocation framework that we've outlined that's the spot where were those cash returns will increase to shareholders to at least fifty percent from the twenty five percent of out today so
spk_0: you know that's really how we're thinking about that i think i'm earpiece around growth you know i think that's you know an option down the road for value creation but once again i'd i'd bring it back to a focus on generating superior returns through the cycle and so here we're very clear that well where it sheathing our strategic priorities on dat reader
spk_7: auction and increasing cash returns to shareholders we're going to hold the business at scale and i would add further to that we don't really see a call for growth from our company today and the market we still got a lot of opec plus spare capacity in the system and we gotta world economy that still get
spk_12: back to pre pandemics demand level so
spk_13: next question come from neil dingman the truest securities go ahead
spk_14: i'm on album and many just had a fun but within the last question just you know you guys have i have is a great him before they said it on craig's gone over as well my thought on just you the had a greater evil for sale that help them for speed up meeting your your death tolls them starts as various other potential non course
spk_2: sales to go along with that he read her pick organic free cash or to get there yeah neil yeah good to hear you yet pc the question
spk_7: this is something we're gonna always be looking at from a value proposition for the shareholders and today the portfolio we have is very much right sized for the scale the business so you know with the eagle for divestiture we weren't investing capital into that acid and so he was declining and so the the cash was were declining costs were challenging to hold and margins where challenging to hold so for us that made sense to to bring about a forward and be able to accelerate debt reduction without i think today you know we we think the poor fellow we have is is well suited to our strategy he just said is delivering compare
spk_5: additive returns on the capital of we're investing their and as playing a key role in maintaining scale maximizing the free cash generation that that you're seeing great read details or maybe just one for predrag a good the be talked about the benefit of lovely source in some of the wet sand i'm just wondering did you talk about any potential for more fully in you know the processor you know how you view it today you guys in a great job in started taking caused our others have seen in place and seems like to me i'm just wondering if you talk to that is waist have even more fully integrated process to to abby more cost savings are that he is talk about along those lines oh sure neil thanks thanks to the question i'm so as we think about all of these innovative technologies and processes that we've been using or the last several years you know they always get better over time it is i think about sam frac when we started it and twenty nine team we were using either on a small portion of our program we quickly realized that it couldn't have application across multiple basins and within months we were spreading that across the entire portfolio and continue to get better with with that technology every time we go out on location and and else imo frac is really part of of everything we do about eighty five priest ten of our wells is your woman complete it was i'm afraid i'm we talk about wet sand are the the exciting thing about that is a it it's got multiple benefits outta here we're taking a process that traditionally was you took sand or from a mine at distance see you dried it you put on a rail car you shifted into the base and and then you trucked it the last mile the location only to get it wet again to put it back down whole and so for us it just made a lot of sense to take out all those steps it only takes up costs but it actually has a really nice psg to impact we're reducing the emissions from drying the sand reducing emissions from all the transportation that comes along the way and reducing the cost of overtime we gotten but process the our minds and in oklahoma that we've used or i will slightly further distance away from location or is in howard county i was actually out there are just a few weeks ago with the team an hour you can almost see the location we were fracking from the san mind so we're talking about just a few miles away you're taking the sand and moving and over it's a we're we're really getting better at that process i think be the improvements you're going to see overtime is just around logistics getting more and more efficient when you're talking about either some of wrecker wet sand both our with the amount of volume are able to pop in a day that really requires a lot of synchronization between multiple teams within the company and externally and our team just as an amazing job of maintaining that those logistics and and keeping ahead of of the the fracture herbs and so i think you'll see us continue to get better and more more efficient fracking more more feet per day and there's
spk_2: also other technologies that were trailing other ideas the teams coming up with new ideas every day that i think we're going to start integrating into our are programs and in moving that around the company to psych we've we've been doing with sam or fracking wet sand the team is really good a collaborating and sharing ideas between multiple basins so whatever ideas we come up with they quickly get spread across the organization so
spk_0: we're not finished yet we're just really getting started on shown how efficiently can they kneel maybe i'd add one thing to greg's comments their which is important how come you know you see a still setting pacesetter costs and you to the assets deterred fifteen to twenty percent lower than your average cost across the board and so that's telling us we still that a lot of running room on efficiency gains with things we know we can do already today and so that's quite encouraging
spk_15: for us and him and bodes well for the road had
spk_16: ladies and gentlemen as a reminder if you do you have any questions please press star one
spk_17: next question comes from know park with to for brothers please go ahead
spk_18: morning points to mine
spk_10: go go ahead no
spk_18: or are you there no
spk_2: i guess hiking any yeah we can you now okay sorry about that on your you one earlier we're talking about your your supply chain organization and damn fall of just now discussion about the just as i am just curious what you on what they're about where we might queen in serve overall supply chain challenger i'm in new sort of colvin recovery cycle
spk_5: and as whenever they thought maybe the worst unaccounted are of the time and more are still my life and yeah maybe guy greg to to provide a cop a bit of color their on trajectory that you know this is the environment where that team is really valuable so their their ability to understand how markets are working and be out in anticipation and in work through some low supply chain bottlenecks that clearly are impacting on global it on me as a whole has been a real advantage for us over not only this year but but i think going forward so and greg if you wanna get some comments and for sure run and i'm about i think the first thing i would say it is that yeah our supply chain team has been at this for awhile this is something we've been doing for for a decade now while we were one of the first operators to unbundle services
spk_19: i think we have a better understanding of what it takes to not only are perform the operations on location but all of the logistics that are required to get all that equipment and material to location so we've been doing this for a number of years and the team just continues to get better and better and i think that's why you seen assad not only apply some of
spk_5: these new technologies such as sample frank i'm at a faster pace and our peers but it is really fully infiltrated are are programs just because of our ability to handle the logistics and the supply chain is i think about what the pressures are going forward i mean are we are as we said we're seeing your issues around steel and diesel but those can be mitigated by simply using last labour is a challenge
spk_20: your truck drivers are are in demand in our basins but again if you get out ahead of that work or if you have a level eight loaded program like we do you allow that allows you to provide consistent work for these people and develop longer term relationships or when when so are we are seeing the pressures there are there are challenges out there but our team been doing this
spk_18: for a long time
spk_7: and were up for those challenges so we feel really good about dog you're delivering on the one point five billion this year and again next year with her level loaded programs that will deliver that new one hundred eighty five thousand barrels a day
spk_18: his finishing this year and going into next so we feel road will get about where we stand great thanks damn dumb and a question about infrastructure you know we're kind of us in this environment novel
spk_2: been lucky enough to perhaps look ahead and think about what was longterm sixty five or seventy our oil actually look like or or high gas prices as well and as you look across the bay so i'm just wondering if you have any thoughts government or the concert a rank them where if if we do this in this activity begin to ramp up sir better see professor has so far
spk_0: do where do you like he had the most little room and and vs which areas do you think might be a bit more challenging more quickly
spk_21: yeah and anger know this is you know something that we've always had a part of our sort of basin evaluation criteria to be in places that are very well planned and so we don't see an infrastructure you know challenge in any of the basins they were operating in today or or for the the near to medium term and so that something that here we were pretty deliberate about when we chose to to get the to the spot
spk_2: your next question comes from android brin with you bs please go ahead hey guys find how are you going first i'd like to just touch on the ball times and never miss you come and takes his untimely but you talk a little than an advertising deals you want here there and then the returns are targeting in today's market yeah blood pressure yeah thanks for the question you know the types opportunity that were looking out here are are are low cost small scale a creative opportunities and in the bases there already and so these are things like you know leasing acreage nearby or it or edit existing positions adding cow opponents to a number of the acreage swaps the that we've done over the years picking up baker's to lengthen are lateral is increasing the working interest in ah well there were already drilling into those are the types of of opportunities that we're looking at we're seeing them across the portfolio in a new you mentioned how will look at evaluating them were looking for a full cycle returns at mid cycle prices stone to not at today's prices were looking for a strong for cycle returns and mid cycle where we can create value with are operating capability on our infrastructure footprint you know it i don't like can't i don't expect these things are going to be readable overtime but that that's the approach that retaking and it's built into our framework and and will be very disciplined to that approach as we go and maybe the other thing i'd say here is this compliments the organic
spk_22: renewal element that's already built in to our cap a program you know remember we have over five hundred locations this year that were assessing and appraising for
spk_0: becoming premium locations so if we get more results and confidence in the minutes till rate in to the one and a half billion dollars of capital
spk_23: that we're spending this year so we think on the whole this is just good business to both organically as well as through times be evaluating through the cycle and when we see a creative opportunities will act but it but it's not a target
spk_24: you know what we'll do it when we see the opportunity were not driven to it
spk_25: agreed ugly
spk_23: your next question comes from a run around with jp morgan
spk_2: a brendan how are you
spk_4: our up first question our to ask you ah it was just on the a potential inclusion and the snp four hundred index said i know that
spk_26: here the manager on a stress management team to breed a month to read domesticating the u us as just to get more index the so i wanted us even give an update on that prosecutors i think the snp was the last and to see that you're hoping to join at some point
spk_27: yeah room yeah great guy thanks for the question me appreciate it cookery or maybe just comment on where we stand there it's really really in earnings peace
spk_23: yeah so for those that aren't familiar there's sort of to earnings tessie have to meet sudanese have a positive earnings in the in inner current quarter as well be positive for their drilling twelve months and so if you look at whereas today your the last year after year to date were positive i think it's thirty two and then i was us the last quarter with the with the hedge book so looking to queue for out even with any positive earnings will me both of those tests and then obviously the actual inclusion is at the snp discretion which is of the little bit harder to predict so we think as soon as the end of the fourth quarter we can meet all
spk_2: all the tests are required great great thanks to the corey and just a follow up a brenda we've been getting just a couple of questions on on your thoughts around the money obviously since the bcs supreme court ruling tell a mid year
spk_0: on the on on a first nations of assorted if you get to the give investors a sense of how you're thinking about the money obviously you have a diversified portfolio and and just how does that potentially alter how you're thinking about allocating capital to the money
spk_1: yeah know maybe maybe first ought to say the money's performing incredibly well you saw it's highlight the that free cash flow parity across the three ah said so he knows very much shot delivering a strong returns on the capital are investing their and and performing well i think you know on the the the
spk_0: robinson the blueberry first nation we're watching closely but we're encouraged by the progress that's underway

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only. Earnings Call, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.