Sam Margolin: Hi. Thanks for taking the question and thanks for all the detail today. Maybe a follow up on Lower 48 capital. There’s some deflation that you’ve called out. It seems like most of it right now is driven by consumables and commodities. But, Ryan, you mentioned activity levels overall have cooled significantly over the course of the second half of 2023. And so I was wondering, if you — where you think we are in maybe the lifecycle of this Lower 48 deflationary trend and maybe if that presents some opportunities to term out capacity and add even more visibility to the spending plan, because as you mentioned, you’re not really going to move activity around in different scenarios? Thank you.
Ryan Lance: Yeah. Sam, I can let Nick follow up on some of the details. But, certainly, we look at any opportunity to term out things when we see that opportunity. And I think the service side of the business, I think, likes ConocoPhillips, because our plans don’t change and we have consistent execution and consistent rate counts and frac spreads and all the other support activity that goes with the business. And the deflation, it’s kind of a tale of a couple different areas and certain commodities to spend. But I can let Nick chime in specific to the Lower 48 there.
Nick Olds: Yeah. Sam, like Ryan was mentioning, again, you look at our activity level, it’s flat to 2023, so stable rigs, stable frac crews and the teams are really just focusing on driving operating efficiency, capital efficiency. And then capturing that deflation, as you mentioned, as we showed in the prepared slides there that we posted and it’s going to range across a number of spend categories. So we’ve got OCTG, we’ve got some propent, as well as rig horsepower. We’ll look at all of the contracts across our vendors and see if we want to turn them up. Typically, we’re looking at well-to-well, pad-to-pad as far as rigs, little longer term contracts on our frac spreads, especially the e-fracs. But the key thing for us is really just focusing on operating efficiency and capital efficiency with the level loaded steady-state program that we have in 2024.
Sam Margolin: Thanks so much.
Operator: Thank you. Our next question will come from the line of Ryan Todd with Piper Sandler. Your line is now open.
Ryan Todd: Thanks. Maybe if I could ask on a couple of the Lower 48 assets, the yield for production has been declining over the last few quarters in 2023. What’s the right way for us to think about direction of production there? Is the goal to hold it flat or modestly decline or grow going forward? And maybe the same question for the Bakken?
Ryan Lance: Yeah. Ryan, just talk first on Eagle Ford.
Ryan Todd: Okay.
Ryan Lance: When you look at Q3 to Q4, we had that 9% production drop. That met our type curve expectations. There’s no productivity issues or operational concerns there. It was a conscious decision. As we looked at the second half of 2023 and as we’ve talked about the completion efficiencies are actually outpacing our drilling efficiency. So it’s a good problem to have. So we’ve worked down through kind of our working level of ducks and decided on the second half of 2023 to take what I call an operational frack gap. So we built some ducks in that period of time and then reinstated late 2023 the frack group. So it’s really intentional, really good performance from the Eagle Ford going forward. Bakken, very similar. We’ve hit some production records. You think about a legacy asset like the Bakken, we were hitting 110,000 barrels equivalent per day. We’ve got a long level of inventory. We’ll have a steady program up there as well.
Ryan Todd: Great. Thank you.
Operator: Thank you. Our next question will come from the line of Alastair Syme with Citi. Your line is now open.
Alastair Syme: Hi. I just wanted to return to the questions. I think people have circled around a little bit on the Permian. You’ve mentioned supply chain costs and sort of wrap it up with efficiency, because I guess last April you presented these cost of supply numbers that include some forward assumptions about cost and efficiency. I just wanted to get a sense of where you think you stand relative to those assumptions, i.e., the Permian moving up, down or sideways on your cost of supply? Thank you.
Ryan Lance: Yeah. I’ll first talk about just the overall efficiency assumptions that we have and what we’re seeing out in the field. To remind you on both D and C, we continue to see step changes in both the drilling side, as well as the completion side. Probably differential on the completion efficiencies, as I just mentioned, related to Eagle Ford. And we’re leveraging all of the different kind of suite of opportunities to improve those frac efficiencies and drilling efficiency. I’ll just mention a few. And the key thing here is that we’re continuing to see improvement kind of quarter-to-quarter, year-to-year. And that manifests itself into essentially a 10% to 15% improvement in our pumping hours per day, year-to-year.
A couple items that we have out there, we continue to deploy simul frac across the Board, but also super zipper down in Eagle Ford. We’ve had really good success of this particular application or we can hook up, for example, on a four-well pad, we’ll hook up all of the wells and if we have any operational downtime, we can quickly move from well-to-well and have high pumping hours, and therefore, more stages per day. So that’s been really successful. On the — we also remote frac. I’ve mentioned that before. We’ve seen good success in that where we don’t have to mow and de-mow the frac spread so we can move on to Pad 2, Pad 3 without de-mowing it. And then, finally, I’ll just pivot to the drilling side. We’ve deployed that real-time drilling intelligence group out in the Permian.
We’ve got the entire rig fleet that we’re monitoring 24×7 where we can optimize the plan, we can troubleshoot, and we can steer the wells and we’re seeing really promising results, 10% improvement in rate of penetration there. So combined through all of that, we are seeing improvement in those efficiencies. And again, 10% to 15% improvement in pump hours per day, as I mentioned on the collision side.
Operator: Thank you. Our next question will come from the line of Paul Cheng with Scotiabank. Your line is now open.
Paul Cheng: Thank you. Good morning, guys.
Ryan Lance: Good morning, Paul.
Paul Cheng: I think this maybe is for Phil or maybe it’s for Ryan. Ryan, you have said that the industry will need more consolidation and you have proven in the past that you are not shy in doing your share. For the right deal, when you’re looking at your balance sheet today, how much are you willing to put on the debt or how much are you willing to stretch your balance sheet from that standpoint if it is the right deal? Is there a number or a ratio or anything that you can share so that at least we get some better understanding? And from a balance sheet standpoint, the $9 billion of the distribution for this year, is there a fixed amount or that it will fluctuate based on the commodity prices, either better or worse, than your current assumption? Thank you.
Ryan Lance: Yeah. You kind of stuck in a couple there, Paul. But let me start with the last one first. The $9 billion, as we said in our release, is a starting point. We recognize the commodity prices are pretty volatile, both up and down. I mean, we’ve seen WTI approaching 60 and we’ve seen it approaching 80. So I think you view the $9 billion as a starting point. And folks should feel pretty comfortable that we’re well above our mid-cycle price. We’re well above our 30% commitment to return capital to the shareholders, and again, look at our history. So you should feel comfortable that we’ll adjust. It’s a starting point for us. And we’ll see how the commodity prices go through the remainder of the year. On the second part, look, we consider the balance sheet to be a pretty significant asset inside the company.
We are — we will maintain an A credit rating. The balance sheet is strong for the company. We’ve got a 2.5 net debt turn to cash. So we like where the balance sheet is at and it gives us the cushion in these volatile commodity prices to be able to return the money that we’re spending and sending both to grow the company organically and the distribution level that we’re starting with at the $9 billion. We’ll — again, on the M&A side, Paul, it’s really what kind of opportunities present themselves that have to fit our financial framework, and if they fit our framework and there’s something that we can make better, makes our 10-year plan better, we’ve been willing to execute those. But we’ll look at the way we execute those on a case-by-case basis.
Surmont we funded with some debt, but it made sense for that particular asset to do that. We’ve used cash and other means to fund the acquisition. So it’s pretty hard to say, depending on any opportunities that present themselves, what we might do.
Paul Cheng: Ryan, you said maximum debt you’re willing to add based on a single transaction?
Ryan Lance: It depends on the circumstance, Paul. I don’t — we’re not going to stress the balance sheet. So we are not — we’ve worked hard to get the balance sheet where it’s at today. We are not — I’m not interested in going back to where we were seven years, eight years ago on the balance sheet.
Paul Cheng: Okay. Thank you.
Operator: Thank you. Our next question will come from the line of Leo Mariani with ROTH MKM. Your line is now open.
Leo Mariani: Hi, guys. You talked about having some pretty decent International growth this year, well above the Lower 48, which is obviously a nice contributor as well. It sounded like some of that’s coming from the Montney in Canada. Can you maybe just detail some of the other International growth that you’re seeing? I imagine there could be some chunkier projects that might be coming online during the year. Is there any call around that would be helpful?
