Mike Henderson: Yes, Scott, it’s Mike here. I’ll take that one. So still feels a little bit early to make any definitive call on 2024 Service cost. I mean, that said, I think we’re likely to trending towards that kind of low single digit year-on-year deflation in ‘24. But again, I think ultimately, it’s going to be dependent on what commodity prices do, and probably more importantly, what kind of industry activity levels look like. I think for us, looking at ‘24 largest contribution to any deflation is likely going to be around steel and hydraulic horsepower. Maybe the counter to that categories that have significant labor, any labor costs feel pretty sticky. So don’t see much movement there. And when you think about B&C services, that’s a big part of that is labor.
So maybe an area where we don’t see as much deflation, certainly absent any kind of material move in the commodities. Maybe just providing a little bit more detail in the various areas for us steel costs, they are trending down, as I’ve said from kind of first half eyes in 2023. We’re kind of thinking about 20% there. And that’s pretty consistent. Lower raw materials, milk capacity has opened up and just a bit of decreased demand as well. Similar story in the frack space. Hydraulic horsepower softened, spot rates have come down. We’re kind of looking at off at 25% from those highs. Now, what I would note is we were never contracted at those levels, so that’s more just about an industry perspective. Similarly, high spec rig market availability has definitely improved.
Again, pricing’s kind of trended down your at 20% of peaks there. And again, we weren’t contracted at those levels. And as I mentioned, anything that has got a labor components or things like directional drilling, cement, coil, wire line, hauling, all of those kinds of costs are probably going to be a little bit stickier and it’s worth recognizing that is not an insignificant component of your total well costs. And then maybe the last area is diesel. And that is a bit of a wild card. Supply demand fundamentals still feel pretty tight there.
Operator: The next question comes from Umang Choudhary of Goldman Sachs.
Umang Choudhary: On EG, appreciate all of your response to Arun’s questions. I guess one more, any update you can provide us on the progress on capturing the third party as saying volumes?
Lee Tillman: Yes, I mean, I would just say that right now that’s an active dialogue as we look to bring those third party. And maybe just as a little bit of a reminder, we already have a commercial model in place that will guide that discussion. And obviously the saying gas cap was also part and parcel of the heads of agreement that we signed earlier this year. But again, just to maybe lay out the opportunity here, this is a reservoir where the operator has been producing the oil rim. They’re now looking to really turn that around and blow down the gas cap. There’s already the existing Alen pipeline that connects in to our gas plant and LNG plant, so much of the infrastructure to get to our facility is already in place. And again, we have the commercial model, which is a tolling plus percentage of proceeds or profit-sharing model, that we already have in place for the Alem molecule.
So I would say that’s just a continuing effort right now and a negotiation that’s ongoing, and I would just say stay tuned. But at the end of the day, this is really the only monetization route, ultimately for that gas.
Umang Choudhary: And then on Slide 12, you’ve highlighted strong productivity and efficiency gains across your U.S. asset base. When you look across your assets, which ADAS are moving up from a return perspective and are probably going to likely demand more capital deployment over time? And then, the housekeeping question which I have for you is that implied 4Q guidance, oil guidance, it’s calls for a bigger step down versus what we were expecting if you plan to keep, if you plan to hit the midpoint of your FY guidance. So any color you can provide there?
Lee Tillman: Yes. Let me start with what I think was kind of a little bit of a question around capital allocation and how we’re thinking about that, certainly, as you look ahead to 2024. I think, again, we’re very early in the cycle, so it’s a bit difficult to give specifics, and more to come on this. But certainly, the Eagle Ford and the Bakken are going to continue, to compete for the lion’s share of capital. We do expect that because of the strong results that we’ve seen in the Permian, so that will start competing for a bit more capital as we finalize the 2024 plan as well, and of course, we’ve also talked about potentially the need to loop in some long lead items for the Alba Infill program in 2024. So when you think about capital allocation next year, not any seismic shifts there.
You’re looking at, again, a couple $1 billion inclusive of a little bit of EG spend, but again, Bakken, Eagle Ford, the black oil plays, coupled with a little more incremental, allocation, to the Permian, is likely the case to be. On the 4Q, kind of, I’ll call it the 4Q squeeze against where we sit right now. First of all, we don’t get that fussed about quarter-to-quarter variations. That’s just an output of our business plan. Our focus is really on delivering our annual guidance commitment. That’s where we’re really looking to drive the results. So if you just reflect, for instance, on this year, we started in the first quarter at about 186,000, second quarter we’re about at 189,000 barrels of oil per day. Third quarter, we’re at 198,000. We’ll probably be in the upper kind of 180s in fourth quarter.
All that being driven by our business plan and that commitment to meet that 190 annual average. And we do expect, just like we saw this year, that there will be some quarter-to-quarter variation, going into 2024. It’s likely that we’ll once again have a bit of a first half weighted program, and that’ll translate into a bit of a shape to our production volumes. But at the end of the day, we believe, for a nominal $2 billion program, we’re going to nail those 190,000 barrels of oil per day because of the underlying productivity durability that we’re seeing in our portfolio.
