And if I take you back a little bit in time to the Analyst Investor Day, when you think about the split between the 2 basins, we’ve got 2/3 of our inventories in the Delaware, 1/3 in the Midland Basin to generate the full Lower 48 of 5%. But bottom line, Doug, is that they’re both competing well. We will review every ballot to make sure we’re investing the right capital and drive that capital efficiency.
Operator: Our next question comes from the line of Lloyd Byrne with Jefferies.
Francis Byrne: Ryan, you mentioned it in your prepared remarks, but I’m hoping you could comment further on international gas integration strategy. And I recognize it’s early, but by our numbers, there seems like a lot of option value there. So maybe just thought process behind it and maybe any targets you might have to help us think about the future there.
Ryan Lance: Yes, I can let Bill give you some details there, Lloyd. But yes, we’re excited about the opportunity to add the regas capacity in the Netherlands at the Gate LNG, complements well our German edition, and we’re looking elsewhere as we try to build out and move the Port Arthur volumes and the volumes we have in other places around the globe into that market, which we think is going to be a strong market for many decades to come, which is why we’re moving into this. I can — Bill can be a bit more specific to your question on the details there.
William Bullock: Yes. I’m happy to put a bit more color on that. So we’re very focused on developing market. And as we’ve talked about, we want to do this in a stair-step fashion with how we originate supply. You’ve seen us announce Port Arthur LNG and LNG. We’re making really strong progress at 2.8 million tonnes per annum of regas capacity at German LNG, 2 of that is dedicated to supporting our LNG out of Qatar that leaves 0.8 at Germany. We just added 1.5 million tonnes of regas capacity at Gate. So that’s 2.3, that’s roughly half of Port Arthur. And I think importantly, we’re continuing to see a lot of interest and strong demand for LNG. As we’ve talked, we’re looking to develop a diversified portfolio that’s both sales into Europe and also sales into Asia, perhaps some FOB sales at the facility and having a mix of variety of term links in that.
And so I’m just — I’m really pleased with the progress we’re making within 6 months of kind of FID on Port Arthur, we’ve got roughly half of it placed. And I think the way to think about that, just going back to the vignette, I showed at AIM is, you look at the capacity that we have into Germany and the TTF, the way to think about that as you’re modeling returns as you start with the Henry Hub price, you add liquefaction tools shipping and regas, you compare that to what you think European gas price will be. That’s going to give you your base CFO for volumes into Europe before adding any diversion optionality on to that. You can do a similar type analysis going to Asia. So yes, we share your view here that these are very interesting additions to our portfolio, and we’re really pleased with the progress we’re making.
Operator: Our next question comes from the line of Devin McDermott with Morgan Stanley.
Devin McDermott: So I want to echo the earlier comment on the dividend raise and ask a question on the shareholder return. So it’s good to see the 14% increase. I was wondering if this large change in the dividend is more tied to incremental cash flow on Surmont, or there’s been a broader change in how you’re thinking about the target payout, or dividend breakeven as you look out at the business over the next few years? And just as part of that. Maybe you can give us an update on your broader thinking on shareholder return strategy and the breakdown of dividend VROC and buybacks in the context of dividends increase.
Ryan Lance: Yes. No, I don’t think anything has changed in our framework, which we outlined, I think, pretty extensively in our last analyst meeting. So based on our mid-cycle price call, you can expect us to deliver at least 30% of our cash flow back to our shareholders. And then we’ve said, when the prices are in excess of our mid-cycle price call, which is where the prices are today and where they’ve been over the last few years, you should expect us to be delivering more of our cash back. And that’s, in fact, what we’ve done over the last 5 to 6 years, delivered mid-40%, 45% or so of our cash, has gone back to our shareholders. And it’s done that in a form of both the cash and buying our shares back. So our construct around that really hasn’t changed.
We like to provide an affordable, reliable ordinary dividend that grows competitive with the top quartile, the S&P 500 over time. We’d like to buy some of our shares back through the cycle in a mid-cycle construct, and then we introduced the third leg VROC to add additional return back to our shareholders when prices are above our mid-cycle price call. So that’s the construct we have and as we — and we’re sticking to that. We think it’s served the company pretty well and it provides — like this year, we expect cash flow of close to $22 billion, and we’re giving half of that back to our shareholders. So it’s probably not a bad starting point for next year.
Operator: Our next question comes from the line of Nitin Kumar with Mizuho.
Nitin Kumar: I guess just sticking with the theme of M&A and I appreciate, Ryan, you touched on it in your comments. But one of your peers out there has talked about improving recoveries in the Permian to the tune of 20% or higher than everybody else. You operate across the entire Permian Basin. I’m curious, are you deploying or seeing others deploy technologies that you think can improve recovery rates that significantly?
Ryan Lance: Yes. I’ll let Nick respond to that specifically. And I guess I’d make this one broad comment is, I think as we talk about this topic, I think in the companies and a lot of people are guilty of this inflation a bit, between recovery and recovery rate or recovery factor. So I think you have to be really careful when we talk about this, in light of these unconventionals, we’re doing everything we can to improve the recovery that we get from the wells, the acreage, the blocks, the layers that we have within our portfolio. And — but be careful not to conflate that to recovery factor or a recovery rate. And I can have Nick speak a bit more specifically about the things we’re doing to make sure we get maximum recovery out of our assets.
Nicholas Olds: Thanks, Ryan. Yes, in our asset teams, as Ryan mentioned, are very focused on optimizing the recovery of our wells and our development projects across all of Lower 48 assets. I think it’s important, too, is we seek to maximize recovery but also driving improvement in capital, and that’s part of our returns-focused strategy and the cost supply framework that we judge every decision against. We look at kind of improving recovery across kind of 3 primary buckets, so I’ll take you through that, what we’re looking at what we’re deploying within our assets. So first, we look at development decisions, we used our first bucket. Secondly, is how do we optimize the reservoir, and that’s our second bucket. And then the third one is really, when we look at enhanced oil recovery, but that’s more longer term.
Now, then one of the things that we obviously have within the Permian, and we mentioned this at the Analyst Investor Day, is that we have 2 decades of inventory within the Permian at current rig activities level. So we have a lot of focus on development decisions and the reservoir optimization to improve recovery. A couple of things. Well, lateral length is critical. We speak to about the inventory length, more you can go from a 1 lateral to a 2 to a 3-mile lateral. You increase the recovery per well. And as we’ve mentioned before, you go from a 1 to 3, we improve our cost of supply, which drives capital efficiency by 30% to 40%. So we’re doing that. As a reminder, we’ve got 80% of our Permian well inventory is 1.5 miles or greater, and 60% is 2 miles or greater, and we’re continuing to execute 3-mile laterals year-to-year growth on those as well.
On the well completion side, again, this still sits in that development decision bucket. We’re doing some interesting work in the Bakken, as an example, using multi-varied analysis where we optimize completion design to maximize both recovery and capital efficiency and seeing recent completion results that are very favorable in that space. And then the kind of the last item I’ll address on the development decision is around spacing and stacking. One thing that we do out in the Midland Basin that you’ve heard here recently is co-development. Co-development allows us to minimize the parent-child impacts, while improving recovery as well as capital efficiency. And we’ve demonstrated over the last 4 years, both in the Midland Basin, as well as the Delaware Basin around improved performance there.
