That’s why I said, I think we’re already probably in that 10% savings range and end of the Q4, beginning Q1, looking at average 15% or better over the year. But as the year goes on, continue to tweak that and tweak, tweak that and tweak our science to find a little bit more. But yes, if you were to draw it out, it looks like an [asset], but you — at the same time, if you are open-minded and fit for purpose, you’ll always find something.
Operator: Our next question comes from Gabe Daoud with Cowen and Company.
Gabe Daoud: I was hoping, Joe, you could just go back to the comment around lower reinvestment rates. And I know you mentioned the goal of that is to better manage free cash initiatives. But just curious, how does that translate to top line growth? I think previously, you guys had mentioned maybe a 0% to 4% growth rate on production on an annual basis. So just curious then how does lower reinvestment rate equate to that number? I’m assuming maybe it’s lower over time, but just curious to hear your thoughts.
Joe Gatto: Yes, Gabe, Happy to take that. What I mentioned earlier going into ‘24, the priority is really going to be on capital efficiency and realizing all the things we’ve been talking here about in terms of DC&F costs, high-grading our asset base, improving cycle times. I think that will get us off to a good start, getting into ‘24. We’ll obviously provide some more formal guidance as we move forward. But in the near term, we are prioritizing capital efficiency and cash flow versus any meaningful headline production growth. Now hopefully, we realize all these efficiencies, get going, hoping to do better. I think that’s the time we look at adding some additional activity with reinvesting back in the asset base over time, but give us some time here to put all these things in motion.
Gabe Daoud: Okay. Understood. And then I guess as a follow-up, you highlighted a lot of the, obviously, cost savings on the capital front. But just curious, you did another good job here on LOE. How does LOE trends into ‘24? And do you think there’s more you could squeeze out of there?
Russell Parker: I think our biggest opportunity on LOE long term is fixing our failure rate. Our failure — ESPs account for about 5 days of our artificial lift — that’s where our highest value rate is. And that’s probably the high — the largest part of our expense structure, I’d say on the LOE front that has the opportunity — some opportunity for improvement. That won’t happen quickly. You don’t change failure rate overnight or even in a quarter. That comes from a program change not only a fit-for-purpose artificial lift, but how you’re optimizing the ESPs, what size they are, a whole host of what your surface facilities do in terms of maintaining electric power even when you’re suffering power outages. So there’s a whole host of things that you have to do there in order to improve that failure rate.
But that portion of our spend is neighborhood $50 million a year. And it’s all driven by the rate at which wells fail. So it will be a big focus of ours in ‘24 to try to waddle that down and see if over the next couple of years, we can’t cut that in half or reduce it by 75%, ideally in time. But that’s probably the biggest single opportunity. Otherwise, what we’re looking at structurally are some places in which we can improve our — not only basically improve our chemical spend with some larger infrastructure projects that’s going to take some time to implement. And of course, that’s because we deal with sour gas, just like a lot of other people do in the Delaware Basin. I got a little bit of the Midland Basin, but not as prolific there.
But I’d say those 2 areas are going to be our primary focuses on LOE. But don’t take — those will probably take longer to come to fruition.
Operator: There are no further questions at this time. I will now turn the call back to Joe Gatto for any closing remarks.
Joe Gatto: Thank you, everyone, for joining and the interest in Callon. We covered a lot of ground here today with a lot of exciting things going on. We’ll have a lot more to fill in over the coming months and look forward to keeping you all up to date on that. And as always, with any questions, please be able to reach out. Thanks again.
Operator: This concludes today’s conference call. Thank you for joining us. You may now disconnect.
