Ken Lamont: Yes. So on the debt side, Travis, I think the way we’re approaching it is a bit of a leverage at a lower oil price is kind of where we set what I’ll call our targets, or more optimal debt level. And so if you think about, we’ve been signaling here on the back of the deal, we open the year at $3.7 billion of debt. We talked about reducing that by about $1.5 billion to get to $2.2 billion. That’s kind of a debt to cash flow of around 1x at between $60 and $65 U.S. WTI. And so that’s really an initial level where you think, if we can deleverage down to that, that gives us kind of our first level of comfort, and where we can kind of reflect on potential return increasing in the return of capital proposition of the shareholders.
In the longer run, we’d like to run our business at a one-time debt to cash flow at a $50 U.S. WTI. And so that’s to Craig’s earlier comment on this call, about $1.7 billion of absolute debt. And so that’s really what we would like to manage the business at. Now, obviously, there’ll be period of times where we’ll have — we’ll be well below that. There could be period times going forward. We’ll be slightly above that. I think that’s kind of where we’re shooting to manage the business on average. And so that’s really how we’re thinking about debt levels and where we’d like to get to. With respect to the bonds, absolutely, there are early repayment provisions within those bonds where interest rates sit today. There wouldn’t really be any penalties at all to repay them early.
However, outside of just having some covenants associated with those bonds, which were well inside of obviously, they’re carrying an interest rate of 4%. So I’m not really motivated right now to repay those things early. And so I think we’ll probably look to leave those outstanding for a bit more period of time here. And then, obviously, to Craig’s point, we’re focusing on kind of getting to that $2.2 billion of debt retaining some excess cash, and just driving that balance sheet down this year a little bit further.
Travis Wood: Okay. Perfect. And then so is that $1.7 billion? Is that the threshold on absolute debt where we could start to think about 100% of excess cash be returned? Is that the optimal level for that scenario to unplay?
Craig Bryksa: So Travis, like we’ve mentioned, as we get to $2.2 billion, look for us to grow the allocation that we’re returning. So right now, we return 60% of our excess cash flow goes back to the shareholders in the form of base level dividends. And then the top up is all happening right now through share repurchases. And we certainly believe that that makes sense with how we trade on our intrinsic value. So look for us to continue that. As we get to $2.2 billion, look for us to grow that percentage upwards and call it somewhere in that 70%, 75%-ish ranges as we get there. And we’ll see how that plays out as we work through that with both the management team and the Board. As we get to $1.7 billion, I wouldn’t expect that to grow any further, Travis.
I mean, for us, there’s always going to be a component of that excess cash flow that we maintain in the business. So to continue to strengthen either a, the balance sheet or if you want to allocate a little bit more to some organic growth or that sort of thing, but we certainly believe in always maintaining a certain level of excess cash flow for us to stay in the business and quite happy to drive the balance sheet down well below that $1.7 billion of absolute debt that is our target. So don’t look for us at any point in time to go to that 100. And I would also say too, Travis, when you look at us relative to our peers, with our asset base and our netback both operating netback and then cash flow net back, I think Crescent Point punch is well above its weight as far as excess cash flow per share generation.
So our 75% certainly be competitive with what some of those other peers would be doing at a little bit higher level.
Operator: Thank you. There are no further questions on the phone line. Please proceed.
Craig Bryksa: Thanks, operator. I’ll pass it over to Sarfraz Somani, our Manager, Investor Relations to moderate a couple questions here from the webcast.
Sarfraz Somani: Yes. Thanks, Craig. So there’s just a couple of questions on tax, and I’m just going to group them here into one. The question would be, when do we expect to pay cash taxes. And does this timing get impacted by the recent known courses cash and disposition?
Craig Bryksa: Yes. So the non-core cash and disposition didn’t have a real material impact, really on our production excess cash generation and/or tax profile. Right now, as we sit on strip, we will not be taxable until the year 2026. In 2026, I would expect to be on strip taxable at kind of a 9% of the — of our cash flow would be the effective tax rate, and that kind of holds steady going forward at strip over the following year. So no cash taxes in 2024 or in 2025.
Sarfraz Somani: Okay. And so there are no more questions right now on the line. So just want to thank everybody for joining us — joining our call today.
Craig Bryksa: Thanks, everyone.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.
