Toby Rice: Yes. Arun, we’re excited about the potential for this asset base and the leadership team we picked up to create value in this area. But I’d say as we’re looking for more investment opportunities that will generate pretty attractive low-risk returns that we’re looking for, we’re going to continue to just keep pushing the ball along and capturing those synergies that we identified. That Clarington Connector is something that’s top of mind for us, looking to accelerate any water debottlenecking. One thing that’s really important to just highlight is a lot of the completion efficiency gains have come from debottlenecking water. So that will be – continue to be a big focus there on that front. And hopefully these investments in water infrastructure will give us an opportunity to continually come back and talk about the cost savings, both on an LOE front and the completion side of things.
From a third-party business opportunity, this team is definitely capable and with our systems that we have, we’re able to provide those opportunities to others where it makes sense. But one of the things with a really large contiguous acreage position is third-party opportunities are limited, but if they do pop up, we’ve got our eyes out for them and we’ll be taking advantage of those.
Arun Jayaram: Great. And just maybe a follow-up on the 2024 outlook where you’ve highlighted $1.7 billion of free cash flow potential. It sounds like CapEx will be in the low $2 billion range. Can you give us a sense on your thoughts on differentials for next year?
Jeremy Knop: Yes. I’d say on a – kind of what’s embedded in that is on an all-in company basis like a $0.55 to $0.60 kind of all-in differential. I mean, we’re seeing quite a bit of movement right now, but that’s probably the appropriate range if you’re trying to tie numbers out.
Arun Jayaram: Great. Thanks a lot.
Operator: Thank you. Your next question comes from the line of Nitin Kumar with Mizuho. Please go ahead.
Nitin Kumar: Hi. Good morning guys, and thanks for taking my questions. I kind of want to start on this new firm sales contract. I think, Jeremy, you mentioned that there’s an impact of about $100 million to $200 million near-term. Could you help us bridge the gap of what is driving that? I understand that the longer-term benefit comes from better pricing. What’s the restructuring of the AMA costing you?
Jeremy Knop: Yes. So that AMA originally, if you remember, was $525 million a day. And so the cost of MVP during this, call it, two to three year period until these expansion projects are built out, effectively, what that’s saying is that’s probably $125 million to $150 million a year of near-term free cash flow that we opted to give up, so call it $300 million maybe in total. And if you use some high-level math and say the total annual free cash flow we gain when these projects come online is about $300 million, it’s like a 10% free cash flow yield is about $3 billion. So we kind of see it as, again, $3 billion over $300 million is about 10:1. So again, we think about it more from an investment perspective, it’s a near-term investment for a pretty material long-term value uplift.
Nitin Kumar: Got it. That makes sense. And then just maybe a quick question around service costs. You mentioned the low $2 billion type of CapEx number for next year. If you could maybe help us peel the onion a little bit around assumptions around deflation. You talked about pretty material capital savings from operating efficiencies on Tug Hill, $150 per foot. How much of that is baked in or what are your thoughts on the service cost environment right now?
Toby Rice: So at a very high level, we’re expecting, I’d say, single-digit service cost deflation. Biggest driver there is on the steel where we’ll see a 20% reduction in steel costs. I’d say the bigger opportunity for us to lower our cost is going to come from continued operational excellence in the field. One of the examples that’s sort of underpinning our budget in this upcoming year is assuming a 400 hour per month frac pace. And as we’ve seen with the teams, 500 hours is possible. So we’re working to shore up what we can do to make the 500 number more of the average, not just the high watermark. And those will translate to probably more significant cost savings than what we’re seeing on the service side.
Nitin Kumar: Okay. Thanks guys.
Operator: Thank you. Your next question comes from the line of David Deckelbaum with TD Cowen. Please go ahead.
David Deckelbaum: Hey guys. Thanks for the questions. I wanted to ask just that you provided the 2024 outlook. I assume that at this point, it sounds like that’s the original budget of the $1.7 billion base for EQT and then $300 million-plus or so for Tug Hill. So it doesn’t seem like you’re incorporating any of the benefits that you’re seeing so far of improvements, especially on the Tug Hill side?
Jeremy Knop: Well, I would say, again, the important caveat to that is from a true maintenance perspective from our business, if you don’t count infrastructure spend, some of the opportunistic land spend and maybe a couple of other small items we have in there, I think that actual maintenance CapEx number would come in very much at the low end. So we’re guiding more towards total CapEx, including some of that growth opportunistic capital. That makes sense. So that, I think, should bridge the numbers that you’re talking to.
David Deckelbaum: Well, maybe like if you could expand on that a bit because I think that’s helpful. As we think about improvements into the business from an efficiency standpoint into 2025, could you sort of quantify some of like the maybe front-loaded opportunistic investments around infrastructure and lands that would be in 2024? Does that extend through 2025, 2026? Is this a multi-year integration and investment process? Or is this more of an upfront 2024 situation?
Jeremy Knop: Look, I think it’s just opportunistic. It’s based on when we see opportunities come about. And obviously, they have to meet our pretty stringent criteria to justify investment. But again, if we’re looking at the opportunity to pick up some additional land in one to two years ahead of the drill bit and make 5:1, 10:1 on that investment, we’re going to do that every time. If we see the opportunity to invest in long-term infrastructure and get a 20%, 25% cash flow yield on that with virtually no risk, we’re going to do that. And so look, I think next year, it could be in the $100 million to $200 million range of that additional growth capital. And I think what’s true maintenance, if you want to think about that, is probably much closer to that $2 billion number.
David Deckelbaum: Appreciate it. If I could sneak in the housekeeping one. Is there a meaningful shift in your deferred tax assumptions for next year, cash tax as a percentage of overall burden?
Jeremy Knop: No. We don’t see any material taxes paid in 2024. And then I think as you get into 2025, at least where strip is today, we’re maybe looking at closer to like a 15% tax rate. And then by the time you get to 2026, we’re a full cash taxpayer, kind of a low 20% cash tax rate.
David Deckelbaum: Appreciate a little help. Thank you guys.
