Operator: The next question comes from Josh Silverstein of UBS.
Josh Silverstein: Just on EG, now that you guys are linked to TTF pricing. It’s been pretty volatile over the last two years. Is there anything that you guys can do to lock in some of that $300 plus $1 million uplift whether through some hedges or any other tools in the Glencore contract?
Lee Tillman: Yes. I’ll maybe say a few things and let maybe Pat jump in as well. Our philosophy has been that we obviously want to protect the upside and the linkage to TPF are investors. We have an investment grade balance sheet. We have the lowest enterprise breakeven in the peer group. We have a very balanced portfolio from a product mix standpoint. And so when you couple all that together, we feel that we can Hold some of that upside and not hedge that away for our investors. Taking as a little bit different, maybe not quite as liquid as some of the other markers as well. But we believe, because of the way we position this asset within a broader portfolio, That with the TTF linkage, that’s going to give us the market based upside, that’s going to give us the biggest valve. Pat, do you want to add anything?
Pat Wagner: You really did it all. I mean our contract is linked to TTF, but we’ll close that. And we have a commodity risk committee that meets weekly and looks our opportunity to hedge that volume and we said there’s not a lot of liquidity there. We’ll continue to look at it.
Josh Silverstein: And then thanks for the commentary on the thoughts around spending as well and the 190 for next year. Can you talk about how much runway you guys see to kind of hold that level of oil and total production of around a similar couple of billion-dollar CapEx level?
Lee Tillman: Well, certainly, in the past, we’ve talked about, a maintenance program, they can take us out 5, even 10 years, and when you look at our inventory life and the quality of that inventory, when we talk about a decade plus of inventory, it really is thinking about projecting that maintenance program out in time. There’ll be some well mixed effects, as you move through the portfolio, but I believe our productivity and the durability of that productivity is pretty resilient. And the example I would use is, when you look at places like the Bakken where we’ve made the shift into the Hector area, that type of productivity and capital efficiency, that’s the forward inventory there. Similarly, all the good work in Permian that’s been done on extended laterals 2 miles or beyond, that’s the type of capital efficiency that we see, going forward and with the addition of something like Ensign, which had capital efficiency at or above our legacy acreage, we see that also being very additive as we look forward in time and look at projecting that maintenance program out across our, like I said, over a decade in inventory.
Operator: The next question comes from Doug Leggate from Bank of America.
Doug Leggate: Lee, I wonder if I could just address the balance sheet topic that you obviously touched on what your targets are there, but I want to kind of put it to you a little differently and say your capital structure today is still about 25% net debt. And if you think about market recognition of value, you’ve got a backward if the oil curve and a buyback program that is arguably buying back stock at the front of a very backwardated oil price. Why would it not make more sense to try and tackle the net debt formula to transfer value from debt to equity rather than pursue the per share growth metrics that obviously come with the buyback program?
Lee Tillman: Yes. Well, Doug, maybe I’ll start it off then I’ll get Dane to jump in here. First of all, this for us — this is not an either or proposition. I mean, we are consistently delivering our minimum a 40% CFO back to our shareholders while also continuing to work against that gross debt kind of midterm gross debt target. And I’ll let Dane talk about that a little bit more. But on your — on the stock repurchase question, keep in mind that, we’re trying to look through the cycle. I mean, this is a different business model today. I mean, we’re not trying to time the market or be opportunistic. We’re putting TD programs in place, we’re getting dollar averaging, we’re consistently doing free cashflow yield on our shares is still well into the double digits, which means that program is devastatingly efficient.
And so, because we can do both, that’s what we in essence are doing. So we don’t have to make that choice today. And we still believe, when you look at some of the numbers that Dane shared on just how much dilution we have taken out of the share repurchase program, we’ve done that at a very attractive price point on our shares as well. So as long as we continue to have that free cash flow yield efficiency in our shares, it’s still very competitive for us to focus on that per share metric and drive that. Dane, you want to say anything a little bit more about kind of how we’re approaching the gross debt?
Dane Whitehead: Yes, maybe how we think about prioritization, it is — it’s a both answer right now. We could — we feel like we’ve got the capacity to do both. I think about the investment rate balance sheet. We’re on positive watch with one or more of the ratings agencies in our current state. We’ve got a ton of flexibility with regard to debt maturities over $2 billion of liquidity. We just have all the tools in the toolkit we need to manage a glide path from $5.5 billion of gross debt down to 4 billion over time. And I think over the next 12 to 18 months, we’re well positioned to do that while we need that minimum 40% return to shareholders. So really, if I was perceiving something a little more stressed than that or that was showing up in our stock valuation, for example, maybe it would be a little more urgent to pay down the debt.
But I don’t feel like we’re in that situation at all. Current pricing environment. We’re generating a bunch of free cash flow, and if we get a tailwind, it will just further accelerate things. And remember also, Doug, our return of cash framework also does recalibrate as you move through price bands as well. So if we start seeing some of that backwardation, and obviously, we can — we will adjust by virtue of the framework that we have put out to the market.
Doug Leggate: That’s very clear, thanks guys. On how you think about this. I guess my follow up is, if you don’t mind on EG, I think, we all recognize the capacity, the potential of the legacy plant. And clearly, you’re the only game in town, so I think, it’s inevitable that you find opportunities, I guess to help frame the current situation though. I wonder if you could just share with us, with what you have today, how long do you keep the plant full, in other words to try and kind of risk what the future opportunity needs to be. If nothing else happened, what do you have today in terms of plant longevity?
Lee Tillman: Yes. No. I understand the question, Doug. Let me maybe describe it in financial terms, Doug. So, we’ve shown very clearly the potential uplift that’s going to occur in 2024. That is a very durable uplift at a minimum for the duration of this 5-year contract, that we have with Glencore. So, I can say with great confidence that that financial uplift that we’re capturing in 2024 is very durable over the next 5 years. With just a few of these incremental items that we’re talking about, the out of the infill program as well as the same, which, as you say, we’re the only game in town. Just those relatively modest projects are going to extend the EG LNG operating life well into the Next decade. And that’s wonderful, and that gives us a much broader runway on cash flows and EBITDA, but it also provides some time for us to continue to work on things like the cross border opportunities, some of the discovered undeveloped assets that could really be game changers for us, and they just take time to mature.
And so when we think back, a lens was kind of the first step. Now we’ve moved on to the next step, which is the recalibration of the commercial terms. From there, we’re now looking at diversion options from, Methanol, because it makes value sense to do so. And finally, the Alba Infill work is under evaluation right now between ourselves and our partners, and the commercial terms are being discussed with the same. So, just with those few incremental wins, and I hope you see that we’ve demonstrated a track record of actually capturing those wins, will extend EG LNG, like I said, well out into the next decade.
