Tom Jorden: Yeah. The answer, Kevin, is no, we’re not assuming a similar level of allocation. That said, it’s a fluid, but the model that underpins that is a reallocated number.
Kevin MacCurdy: Okay. And under that three-year scenario, what happens if we have a bullish gas market in 2025 and 2026? Do you reallocate capital from the Permian and the Anadarko back to the Marcellus or do you increase your overall CapEx? I know you spoke about a contingency plan in 2024, but just thinking about how you would think about that over the long-term?
Tom Jorden: Well, you’ve left a very nice wide opening for me with that question, because I say, it’s always our best look at current conditions. So if we had significant recovery in the gas macro, which we hope and expect, our cash flow goes way up, and within that investment fairway of, I said, 40% to 70%, we probably would have the flexibility to look at increasing our capital. But none of that is enshrined in our current outlook, because we don’t, I’d say, there is not — there’s no hope in any of the outlooks around here, but we’ll react when conditions change.
Kevin MacCurdy: Great. Thanks for the detail.
Operator: Our next question will come from the line of Ati Modak with Goldman Sachs. Please go ahead.
Ati Modak: Hi. Good morning, team. Just curious how you view the macro setup for the gas markets here. What’s the risk of surprise in associated gas from the Permian and how do we work our way through that? Are you seeing sufficient signs of supply rationalization to suggest that we’re in a better environment for 2025?
Shane Young: Yeah. Hey. It’s Shane here. I’ll start off on that. Look, it’s very challenging today. And as we look at the storage numbers and the weather picture as it’s played out, winter to-date and the way the outlook is for the next several weeks, look, we could sort of end the winter at a pretty high spot on a historical basis. Production, on the other side, has been incredibly resilient, probably more so than many of us have expected. It’s great to see — to hear some discipline in the marketplace, but it’s unclear that it’s enough and it’s unclear that it’s sort of broad-based enough at this point. So we’re cautious on gas and you see that in our 2024 planning and budgeting. You see that in the way we manage our balance sheets. But if it does turn and when it does turn, we’ll certainly be prepared to react.
Ati Modak: Great. And then you talked about this a little bit, but maybe I can approach this in a different way. Your three-year outlook on growth is on relatively stable annual CapEx. Curious what factors you’ve baked into that growth outlook in terms of the incremental efficiency gains. What should we expect to hear from you on that front over this time period?
Tom Jorden: We don’t bake in any incremental efficiency gains. So we take all our most recent gains in our program. We kind of stress test those by going through them extensively to make sure they’re real and part of our program and then we build them into our forecasting. And so while our expectation is our teams will continue to drive efficiencies, none of that’s built into these projections.
Operator: Our final question will come from the line of Charles Meade with Johnson Rice. Please go ahead.
Charles Meade: Good morning, Tom, to you and your whole team there.
Tom Jorden: Good morning.
Charles Meade: I have two questions on the Marcellus and you’ve addressed some of this, but I just want to make one more run at it. If we look at the decrement of $435 million in CapEx in 2024 versus 2023, and you look at that versus you went from two rigs to one rig and one frac crew to maybe a half frac crew, it seems like the decrement in activity is smaller than the decrement in CapEx. And so what are the other pieces that complete that picture?
Tom Jorden: Well, one of the things that we see is we will finish the year with four pads waiting to be completed. So, a lot of what we’re doing in 2024 is setting up 2025. So, it’s not always showing up in the first year CapEx. With projects that have cycle times like ours and like everybody else’s, you really have to have a multiyear outlook on any plan. So a lot of that is a benefit of what we did last year that’s currently being completed and what happens next year is a function of what we do this year. So the annual snapshot on capital versus production is interesting, but fairly incomplete.
Charles Meade: Right. That makes sense. And then maybe one other question. You have on your slide, I believe it’s slide six, you show that 10% decline in Marcellus production for 2024, but then actually a slight incline for 2025. What’s the underlying price assumption for natural gas in that scenario where you grow again at 2025?
Tom Jorden: Well, we have lots of price assumptions. I would say we have strip. We run a 55-275. We run a 75-250. I mean, we have — we run 75-375 [ph]. I’m looking at our models now. I mean, we have a smorgasbord of price files that really set our kind of define the fairway of our economic analysis. But I would say this is probably based on the strip as a foundational forecast and then we run permutations from there.
Operator: I’ll now turn the call back over to Tom Jorden for any closing remarks.
Tom Jorden: Well, thank you very much for joining us. We look forward to continuing to deliver. As I hope you’ve learned from Coterra, we really appreciate your interest and love talking about results and intend to deliver them. So thank you so much.
Operator: Everyone, this does conclude our conference call for today. Thank you all for joining. You may now disconnect.
