So that is from a margin point of view. And when you think about base decline, so today our production, approximately 60% of our production is unconventional and with CrownRock it’s going to get to around 65%. So what we are trying to do is balance between the short-cycle, high-end decline and conventional, and then the mid-cycle, shallower decline, conventional investments. And Permian EOR, like Richard said, has one of the lowest base decline in our portfolio. So, if you look at a typical Permian EOR project, we get to the peak production by the third year and the peak production is almost 3 times the first year production and then after that, it is a shallow decline. So, what this does is, it helps manage our overall corporate decline, which helps with the sustaining capital and which ultimately helps with the break-even.
And the third part of it is capital flexibility. So, if you look at our CapEx, even for this year, around 75% of upstream CapEx is U.S. Onshore, where we have flexibility to change activity depending on the macro conditions. So, like if you look back in 2020, in U.S. Onshore, we had around 30% of the rigs that we planned to operate this year. So, we were able to wrap up quickly and efficiently and we can do this if the macro demands that. So these are the three attributes that we look at when we look at oil and gas capital allocation. So to summarize, what I would say is we have a diverse portfolio of both conventional and unconventional assets that helps manage our base decline, while also maximizing our returns and also providing the flexibility to respond to different macro conditions.
Roger Read: That was very thorough. Thank you.
Operator: The next question is from Neal Dingmann with Truist Securities. Please go ahead.
Neal Dingmann: Thanks for your time, Vicki and team. My first question, Vicki, is on the DJ. I’m just wondering, could you remind me where you all sit, I think, in good shape? I’m just wondering where you all sit on total permit pertaining to your DJ D&C [ph] plan, and then while early, are you all concerned about the, I saw some latest potential proposed Colorado Bills?
Vicki Hollub: Yeah. I’ll pass that to Richard.
Richard Jackson: Yeah. I think just from a permit standpoint. It’s been very productive over the last couple of years. So we stand today about a little over a rig year or 1.5 times kind of our current activity. But in the last six months, we’ve gotten 155 through. In the next 12 months, we expect another 169. So there’s some big ones that we’ve been working through kind of from a larger package standpoint that have gone really well. That team there, and I hope this helps kind of second part of your question, we continue to drop things that are important to the communities and the state around emissions. Our safety programs are very good. We’ve worked on consolidating facilities and doing things around transportation to make it easier and so a lot of those things have been really the positive things we’ve been able to add into these permit or development plans around the permits that we’ve received very positive comments on.
So we’re continuing on. Again, we’re sort of hitting more stable, sustainable activity up there and we feel like we’re as good a position as we have been in a long time in terms of permit outflow.
Neal Dingmann: Very helpful, Richard. And then just a follow-up on charitable return and M&A. I’m just wondering, I assume now that the preferred redemptions would now not incur until late 2025. So is it fair to assume that when you were looking at the CrownRock acquisition that you factored in that any CrownRock incremental production or free cash flow would more than offset any mitigated payments now for another year or so?
Vicki Hollub: Yes. That’s what we figured on that. But the CrownRock does that acquisition. Once we get our debt back down to $15 billion, that’s going to be a key part of helping us then to start the resumption of a more robust share of purchase program of both the common and ultimately the preferred.
Neal Dingmann: Great point. Thanks, Vicki.
Vicki Hollub: Thank you.
Operator: The next question is from Josh Silverstein with UBS. Please go ahead.
Josh Silverstein: Yeah. Thanks. Good morning. I was going to ask on kind of similar topic there. Now that the asset sales are pushed out and you don’t have the term loan coming in just yet, is the shareholder return profile just the base dividends this year and that kind of supports you getting to that $15 billion debt number a bit faster?
Vicki Hollub: No. Actually, we would — we’re going to accumulate cash flow as we continue to work toward closing the CrownRock deal, because a part of cash flow will be used to help pay down both the term loan and our debt maturities that are coming. So cash flow would not be used for share repurchases until we get to the point where we’ve achieved those goals.
Josh Silverstein: Got it. And then I saw that the Battleground project was pushed out to 2026. If you could just go through any sort of the drivers of the extra time that was needed and what the status of the other plant enhancement projects look like and maybe what the spread of that $350 million EBITDA uplift was, like, kind of between Battleground and the other projects? Thanks.
Vicki Hollub: I think, there is — the projects there were pushed out a bit just like many other things because of supply chain issues and also dealing a little bit with inflation. But those projects, we started those and those are in progress and going well at this point. So I’d like to say that, though, the importance of when those cash flows come on from the plant enhancement projects, we’re already starting to see cash flow from those projects. The actual cash flow that we’ll see from the Battleground expansion won’t be until the second half of 2026. But the exciting thing about all of this is that, when you add the OxyChem projects, which will deliver the $300 billion to $400 billion, the full uplift by the second half of 2026, that’s both the plant enhancement projects and the expansion.
So we’ve got that and you combine that with what Sunil had talked about earlier where we have a $400 million reduction in our mid-cycle contract prices in 2025. We’ll see the full uplift of that in 2026 as well. And so when you combine those along with the $1 point — $1 billion that we expect, assuming a WTI price of $70, that puts us in 2026 with $1.7 billion incremental cash at least and potentially more than that. So to be able to get to a point where, in just a little over two years, where we have through these projects and cost reduction, we are $1.7 billion better in terms of cash flow, that’s pretty significant for us and something that we’re really looking forward to and excited about.
Josh Silverstein: Great. Thanks, Vicki.
Operator: The next question is from Michael Scialla with Stephens. Please go ahead.
Michael Scialla: Yeah. Hello. I appreciate all the detail you gave on the decision to direct more capital this year to mid-cycle investments. I wanted to ask specifically about the Gulf of Mexico, which is part of that. Back in December, you were planning on just the two drillships. So I wanted to see what change you’re thinking there to add a third drillship and especially given that services there seem to be tighter than they are onshore. Was it just part of this whole mid-cycle investment thesis or is there something else? Can you talk about specifically what you’re seeing there that that third drillship will be targeting?
Ken Dillon: In terms of drillships, we’re only planning on two drillships this year. In terms of GoM overall and how it plays into the portfolio, last time I mentioned our GoM 2.0 project. Based on that, we’re carrying out detailed reservoir characterization work and can see significant upside potential in the GoM assets. I mentioned water floods, stimulation, horizontals, artificial lift and subsea pumping, which is already operational for us. If I talk a little bit about water injection, when you already operate fields with original oil in place numbers of billions of barrels, adding water injection is a really economical way of increasing recovery factors on high margin, low development cost barrels. Typical improvements in recovery and appropriate reservoirs can be between 10% and 16%, while also significantly reducing declines, so it plays into the things that Richard was talking about in EOR.
The scale of these developments and the very low development costs lead to good returns. Analogs have been highly successful in GoM. As you know, we’re world leaders in these technologies. We do them in every country that we operate in, and domestic is the foundation of who we are. I’d also like to highlight the OBN seismic activity that we’ve done since 2020. That’s really helped define these targets, the scale of them and it’s assisting in the well planning and well locations that we’re working on at the moment. I think we see GoM as a portfolio now, with great optionality to grow using the existing infrastructure that we have in place, but also the technology skills that we have across the entire company. I hope that answers your question.
Michael Scialla: Yeah. It does. Appreciate that, Ken. I know on your CrownRock acquisition call, you mentioned, I think Richard mentioned EOR pilot. You’ve been working on the Midland Basin for a couple of years. I just wonder if there’s any plans to expand EOR in the Midland in the near-term and did that have any bearing on your decision with the CrownRock acquisition?
Vicki Hollub: The CrownRock acquisition stood on its own in terms of quality and how it fit within our portfolio in the Midland Basin and it made that asset stronger. But the four pilots that we conducted in the Midland Basin were on the South Curtis Ranch, which is not too far from some of those assets. So we do believe that the Midland Basin is going to be one of the areas that we would target in a big way with an enhanced oil recovery development that’s using anthropogenic or atmospheric. But we’re also doing the same thing in the Delaware Basin now. We have a pilot going on there that will help us to potentially look at that as another place to develop ultimately. So we have both options.
Michael Scialla: Very good. Thank you.
Vicki Hollub: Thank you.
Operator: In the — excuse me, in the interest of time, this concludes our question-and-answer session. I would like to turn the conference back over to Vicki Hollub for any closing remarks.
Vicki Hollub: I’d just like to say thank you all for participating in our call today. Have a good day.
Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
