Roger Read : I guess I’d like to follow up on Port Arthur LNG. Obviously, the Phase 1 was covered. There’s always a possibility of greater expansion in LNG. Just what would be the things we would watch coming up in terms of the second phase?
William Bullock : Yes. Sure, Roger. This is Bill. As we talked about at the Analyst Investor Meeting, we’re currently really satisfied with 30% for Phase 1 and our 5 million ton equity offtake and we’re prioritizing market development over any additional offtake in equity right now. We really think we’ve got sufficient capital allocation to Port Arthur, and we’re looking for ways to optimize our current investment. So our plate’s pretty full, and we don’t need — see need to allocate significant additional capital in the near term. And so there need to be some pretty unique reasons to make it attractive.
Operator: The next question comes from Doug Leggate with Bank of America.
Kalei Akamine: This is actually Kalei on for Doug. My question is a follow-up on Surmont. So our understanding is that Suncor could receive certain tax benefits as part of their deal. And I’m wondering if those tax benefits would be available to you if you exercise your right of first refusal? And I’m asking the question because I think yours would look more like an asset deal, while there’s is more of a corporate deal.
Ryan Lance : Well, as we said, Kalei, that we’re currently reviewing the proposal that we got and the terms and the conditions. So it’s a bit early to comment on tax pools.
Operator: The next question comes from Sam Margolin with Wolfe Research.
Sam Margolin : The capital efficiency looks like it’s going in the right direction with the production guidance and the capital plan in line. At the Analyst Day, you made some comments where you thought it was at least possible that you could start to see inflation ease if not reverse. And the question is just as you think about this production results, is that an outcome of maybe an opportunity to press activity a little bit as costs are easing? Or is this — is it more of a well results-driven outcome?
Dominic Macklon : It’s Dominic here. Just to talk to inflation a little bit first. I think overall, our capital inflation for the company, we still expect to be in the mid-single digits year-over-year. So we certainly see that all leveling off. As you mentioned before, we’ve probably seen deflationary trends in steel tubulars, oil price-related commodities such as fuel and chemicals, beyond that on the rig and other services. They’ve certainly leveled off. We may be trending towards some reductions. We have seen rig counts peak and begin to decline. That’s led by the gas basins. So our teams are very focused on costs, and they’re working with our many service providers on that, but we still expect around the mid-single digits at this stage on inflation.
Having said that, we certainly see capital efficiency coming through. I think that’s really on an execution front. So we’ve had a strong start, particularly in the Lower 48. Our full year production guidance, as we’ve said, is up at the midpoint. We do expect low to mid-single digits growth for the year, and that’s pretty consistent with the long-term 4% to 5% CAGR we presented at our Investor Meeting. We’re holding our capital range the same with $11 billion at the midpoint. So we’re definitely seeing some execution efficiency. We’re pleased about that. Nick, you may want to talk a little bit more about the Lower 48 on that so.
Nicholas Olds : All right. Thanks, Dom. Yes, Sam, just to take you back to the analyst call when we talked about drilling and completions efficiency. If you recall, we had from 2019 to 2022, we had a 50% improvement in drilling, 60% improvement in completion at stages per day. We continue to see that in Q1, very promising results, and that’s the use of technology like simul-frac, e-frac. We’re testing out some remote frac as well where we keep a frac spread on pad 1 and then we frac pad 2, pad 3, pad 4. So very promising results there. as well on the drilling front, we continue to use data analytics and rig automation, but all that’s coming together, so really promising. That did lead to some accelerated places on production of wells in Q1 driving some of the over-performance.
Operator: The next question comes from John Royall with JPMorgan.
John Royall : So my question is just on Willow. Are there any updates there to how the lawsuits are progressing? And are you any closer to a resolution there and getting to FID then when we last saw you a few weeks ago with the ?
Andy O’Brien : Hi, John, this is Andy. Yes, there’s really not too much new to comment on over the last few weeks. So the only incremental news we’ve had has all been positive. The 9th Circle Court of Appeals denied motions attempting to stop our construction work. So we’ve been progressing with the winter season, and we’ve had gravel extraction and road construction underway. It’s pretty much going as we expected it would in the last two, three weeks. Not much more to add than we talked about at the Analyst and Investor Day.
Operator: The next question comes from Ryan Todd with Piper Sandler.
Ryan Todd : Ryan, and — maybe one for you, following up on the Analyst Day. But what impact iof any does — you increased your view of the mid-cycle oil price from 50% to 60%. What impact, if any, does that have on the way in which you think about the business? I mean you’re still focused on low cost of supply assets well below this price. Does the view that oil prices would be structurally higher over time have any impact on the way you think about managing the business over the long term, your balance sheet, allocation of capital or anything else?
Ryan Lance : No. Thanks, Ryan. In terms of how we’re running the company day to day and the allocation of capital that we put in each year, it really doesn’t — we’re only investing in things that have a cost of supply less than $40 WTI in the portfolio. So what a mid-cycle price change, our Chief Economist Office, our commercial team, we go through a process every year where we take a current view of the macro and have a long-range view of what we think is happening. And as we’ve gone through a lot of turmoil in the business, the Russian invasion of Ukraine, just the lack of investment going into the business these days. we stepped back and did our own bottoms up, which we do every year, but important this year, we did our own bottoms-up work to try to understand where we think the mid-cycle price is moving to and was is to staying at kind of that $50 level.
Our assessment of the price required to generate that incremental barrel to meet that incremental demand, our assessment put it at around $60 today. And so that — so the implications of that are really just how much cash flow we think we’re going to be generating as we interrogate the portfolio, as we invest in the growth and development of the company, and we put capital into the company the way it manifests itself is just how much floor we can deliver at that kind of mid-cycle price, which is obviously a little bit more than what we would deliver at the lower price. So it goes to sort of how we think about cash in the balance sheet, how we think about the debt that we’re carrying, how we think about distributions and how much capacity there is to distribute a bunch of our cash, which our commitment is about 30%.
And when we get above mid-cycle price in our case like we are today, obviously, we’re generating a lot more cash, and we’re returning a lot more cash to the shareholder, now something in excess of 50% today. But that’s driven by the reinvestment rate that we have in the company our commitment to only invest in the lowest cost supply things we have in the portfolio.
Operator: The next question comes from Devin McDermott with Morgan Stanley.
Devin McDermott : So I wanted to go back to the Lower 48. It was helpful detail before on some of the efficiencies that you’re seeing there. I think one of the other drivers of the strength in production that you called out in the prepared remarks was well performance beating your expectations. Can you talk a little bit more explicitly about what you’re seeing there and if there’s any development changes that you’ve made driving that uplift?
Nicholas Olds : Yes. Devin, this is Nick. You’re right. Strong well performance was definitely a contributing factor for Q1. If I take you back to the Q4 call, I had mentioned that our well performance was meeting or exceeding-type curve expectations, and we continue to see that trend in Q1. So that’s very encouraging. No overall development changes. We’re just seeing very promising results across all assets. It is just not the Permian as well. And as I mentioned earlier, the completion and drilling efficiency has allowed us to accelerate some wells earlier into Q1, and so we’re seeing that production come into play. And then on the Eagle Ford stabilization plant that we’ve updated, the team just did a remarkable job in sheltering the amount of downtime in Q1. So we had less DT. But overall, a very strong quarter.
Operator: The next question comes from Josh Silverstein with UBS.
