Unidentified Analyst: Thanks, Lee. I appreciate those comments. My quick follow up just goes to E.G. I’m just trying to get a sense of the readability for the perspective of the commodity sensitivity. Not to be stupid about it, but let’s say prices blew out to $30 per MMBtu in a very extreme scenario. I’m wondering if the earnings that you’ve shown here would exhibit the same linearity compared to the $10 to $15 scenarios that you’ve laid out.
Lee Tillman: Well, first of all, it goes to $30. We’re going to be very happy. But there is a bit of linearity there though. And one of the reasons that — and I think I mentioned this my open comments, we’ve provided some sensitivities at an enterprise level for all of the key products. So you can see how E.G. factors into the overall enterprise delivery, but certainly the data that we’ve included in the deck, you should be able to test those sensitivities because it is a commercial framework, it’s a linked to global LNG pricing. So the extent that we’re delivering, same level of volumes under the same cost structure, then that should be a pretty linear relationship with commodity pricing.
Unidentified Analyst: I appreciate that. Thank you.
Lee Tillman: I want to make that $30 as a prediction too, by the way.
Operator: Our next question comes from Paul Cheng with Scotiabank.
Paul Cheng: Thank you. Good morning, guys.
Lee Tillman: Morning.
Paul Cheng: Maybe this is, for both Lee and Dane. You guys are changing a bit on the accounting in E.G. shifting the transfer price. Just curious that — with that other than say the shift on earning between the equity affinity and fully owned operation, but see in any way that changed the way how your decision making for that operation level. That’s the first question. The second question that I want to — maybe go back to the consolidation, in your operating region, because of that, we are going to see some bigger payer, do you foresee that going to change the landscape in terms of the service supply, in terms of all that, because of the consolidation, people become more rational. So you actually think that the pricing on the survey will become better for the rest of the payer. So just curious then, I mean, what you view on the competitive landscape that may have changed, if any, due to that consolidation in the operating regions that you are in.
Lee Tillman: Okay. Great. Well, again, lots to unpack there, Paul. Let me, maybe start off on the E.G. question. I’ll get Dane to jump in here and help me out. But you’re spot on in that under the new contractual structure that we will be shifting some element of profitability from the equity companies over to the consolidated reporting. And in fact we provided a very kind of detailed breakdown of that in our guidance in the deck just to hopefully eliminate any confusion or lack of clarity around this point. I mean, we know E.G. still is complex, but in some ways this will bring more transparency by migrating more of that profitability into the consolidated entity. It will also limit kind of this timing dislocation that we also have between when we generate the income or the earnings and when we receive, say, the dividend from an equity company.
Because in the consolidated entities, obviously that step does not occur. The only other thing you said, well, would this change anything around our decision making because of this new structure? And what I would tell you is, the beauty we have in E.G. is that we are aligned from an equity percentage standpoint across the value chain. So there’s really no impact to our decision making or how we think about investments across that value chain because we have alignment in every aspect of it from the upstream, all the way through the LNG plan. I don’t know, Dane, if I missed anything there.
Dane Whitehead: No, I agree completely, Lee. I would just add the guidance that we provided on page 15 of the slide deck, it’s really sort of at an — holistic E.G. business unit level $550 million to $600 million EBITDA in 2024, assuming $10 TTF and we gave price sensitivity. So you can dial that how you want. But I will say that’s the best way to look at the business is the aggregate EBITDA generation. That’s how we think about it. So it doesn’t really — to echo Lee’s point, I don’t think it drives our decision making which entity, whether it’s consolidated or an equity affiliate where that earning is coming from. We like it all. The other thing is that guidance is quite a bit stronger than what we previously provided for ’24 and now we’ve actually gone out five years and given you a five-year average.
So this business is very strong and it’s improving with the infill opportunities and bringing the same gas into the system. I mean, there’s a lot of running room here and a lot that’s not fully baked into the future model yet. So we’re pretty bullish on E.G.
Lee Tillman: I think the last question you had was just around kind of the, I’ll call it, the competitive landscape certainly in some of the basins where we operate today. Consolidation is absolutely a factor in all basins. It’s probably in some ways it becomes a bit more challenging and mature basins as the best operators tend to be aggregating the best assets and many of them have already done so and have a material position. The other challenge I think you have in those assets is it’s the balancing act between PDP production versus forward inventory. And I would use the example, for instance, of Ensign where we really struck that balance. It brought cash flow and EBITDA with it, but it also brought 600 plus locations that was not only inventory life accretive to the Eagle Ford, but with inventory life accretive to the overall company.
And those opportunities came in and competed immediately and continue to compete within our capital allocation today. And so there are some unique challenges as you look at the more mature basins, but ultimately the high quality assets will be run by the highest quality operators. And we certainly put ourselves in that category.
Paul Cheng: Thank you.
Operator: Our next question comes from Scott Gruber with Citigroup.
Scott Gruber: Yes. Thanks for squeezing me in and just have one question here. Lee, I think your M&A framework is certainly a very prudent approach. But obviously there does seem to be an industry rush here to secure good rock and scale up. So the question we get from investors is, do you worry about the opportunity set for acquisitions shrinking and the quality of the opportunity set fading? And does that warrant a tweak to your M&A strategy? I guess ultimately the question is, are you comfortable with the longer term outlook for adding quality resource, whether that’s organic or inorganic within the construct of your M&A approach or — and in the context of this hyper consolidation phase?
Lee Tillman: Yeah. Well, definitely there — we’re in that phase today, but we see no upside to our shareholder to compromise our criteria today. Again, all of these transactions are very bespoke. They reflect the attributes of the counterparties. Most of those counterparties are searching for something. They’re searching for scale, they’re searching for resilience, they’re searching for balance sheet help. I mean, they’re searching for sustainability in inventory, so they’re trying to fill a void. And what that drives is, is this I’ll — I won’t necessarily refer to it as desperation, but it drives a different kind of behavior for us. We’re sitting with 10-plus years of inventory. So we can be patient, we can be thoughtful, we can exercise the same level of discipline that we do in our organic business and be very successful.
And we’ve demonstrated that. We’ve got a track record. I talked about those four levers we have available for inventory replenishment. Large scale M&A is just one of those levers that we can apply. And also keep in mind that even when transactions occur, the assets are still there and so they’re not going anywhere. And so there is still that aspect of ultimately the best assets will find their hands into being operated by the best operators.
Scott Gruber: I appreciate the color. Thanks, Lee.
Lee Tillman: Thank you, Scott.
Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over Lee Tillman for any closing remarks.
End of Q&A:
Lee Tillman: Thank you for your interest in Marathon Oil. And I’d like to close by again thanking all of our dedicated employees and contractors for their commitment to safely and responsibly delivering the energy the world needs now more than ever, cannot be proud of what they achieve each and every day. Thank you. And that concludes our call.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
