Willie Chiang: Al?
Al Swanson: The first question was on capital. Neal?
Neal Dingmann: For ’24.
Al Swanson: For ’24? I would – $300 million to $400 million is what we’re going to stick with for the next number of years. And your second one, could you re-ask your second question? Neal, are you still there?
Neal Dingmann: I’m sorry, I just got cut off for one second.
Willie Chiang: Did you hear my comment on ’24 CapEx? ’24 CapEx will be $300 million to $400 million, consistent with our targets across the years. And then could you ask your second question on capital allocation?
Neal Dingmann: Yes, just on – I know you’ve got the 3.5 target. So I’m just wondering, would you – if you keep – what we have for free cash flow, you can get below that? Would you keep taking it below? Or how do you think about sort of payout versus taking that debt load?
Al Swanson: Yes. At this point in the year, our guidance is that we expect to be a little below the 3.5 times at year-end. Clearly, a function of that will be what is our working capital requirements in the back half of this year that can move it a little bit. Our stated range still remains 3.75% to 4.25%. And as we’ve articulated over the last few quarters, we intend to operate below that for the near term. And so really, there’s no really other moving part. If we get a little extra cash flow will reduce debt in the back half. But the rest of the capital allocation is lined out. Clearly, if we’re successful with another Bolt-on Acquisition, that can change the dynamic a little bit. But we do still expect to be at that 3.5 times or below.
Willie Chiang: Neal, does that answer your question?
Neal Dingmann: Yes. Thank you.
Willie Chiang: Okay. Thank you.
Operator: Please standby for the next question. The next question comes from Neel Mitra with Bank of America. Your line is open.
Neel Mitra: Hi, Thanks for taking my question. Willie, I think you alluded to some of the issues in the second quarter with just Permian growth and seeing that in your slides with gathering, intra-basin and intra-basin. And I was wondering if you could just speak to some of the issues that were faced in the second quarter. I think some of your peers alluded to this, but just wanted to understand what underpinned some of the production issues that are now resolved?
Willie Chiang: Yes. In my earlier comments, Neel, it really was a lot of hot weather issues that affected gas processing. And what we’ve seen is the producers have remained very disciplined around not wanting to flare and you also had a lower price environment that probably didn’t give people an incentive to try to push any harder. So, there’s capital discipline and the producers had. And it was really back half of June and July. And since then, it’s kind of improved. I don’t know if there’s more that you were looking for, I don’t know. Jeremy, do you have anything to add?
Jeremy Goebel: Yes. I would say a lot of that led to producers not completing wells into that environment. So they’re going to produce what they had, they throttle wells that they had, maybe not complete all the wells that they were intending to, that push completions into the August and forward time period.
Neel Mitra: Okay. Perfect. And then for my second question, I wanted to understand how you’re looking at recontracting Cactus II, maybe with, when it extends ahead of possibly a competitor coming out with an open season or if that affects how you look at recontracting I know that the forward curve has improved. So just your general thoughts on the long-haul type recontracting? Thank you.
Jeremy Goebel: Sure, Neel, what I would say is we continue to have constructive dialogue with our customers. The back end of the view of prospective rates hasn’t been nearly as volatile at the front end. So those discussions continue. There’s options to extend on the Cactus II pipeline at attractive rates for our customers. So that one is pretty clear. I’d say for Cactus I and others, our integrated business model and asset base provides us unique advantages and aligns us with our customers for long periods of time. So, we fully expect to do that as a function of when and timing and we’ll update you guys when we have more information.
Neel Mitra: Thank you very much.
Operator: Please standby for the next question. The next question comes from Sunil Sibal with Seaport Global. Your line is open.
Sunil Sibal: Yes, hi. Good morning, everybody. So, I just wanted to understand a little bit better about Bolt-on Acquisition. So it seems like those volumes are already reported as part of your gathering volumes and just that you will get better economics on those? And if you could talk about kind of return on this kind of Bolt-on Acquisition?
Willie Chiang: Jeremy?
Jeremy Goebel: Sure. You’re correct. Because we operated the asset and had over 50% interest that was consolidated and the gross gathering volumes wouldn’t change. That specific asset doesn’t impact long-haul or intra-basin. I think we said it before, it just further aligns us with – they want to drill well and be in it. They feel very comfortable with the relationship with us as operators. So it makes sense for us to acquire that position. And Diamondback can recycle that into however it wants to use this capital.
Sunil Sibal: Okay. And then second is a little bit broader question on capital allocation. So it seems like the bond maturity you have coming up in the second half, you should be able to take care of that. And it seems like you still want to target higher than where you will end up in 2023, in terms of the leverage metrics. So I’m just kind of curious, is this geared towards more of – kind of creating capacity for perhaps taking out perhaps over a longer period of time? Or what are the kind of longer-term thought process in terms of that leverage goal of 3.75% to 4.25%?
