Francis Lloyd Byrne

Francis Lloyd Byrne asked for commentary on the growth trajectory for Vapor Recovery Units (VRUs) and how it differs from HPGL, and also requested more detail on the market reception for the new e-Grizzly and SurgeFlow products.

Answer

CEO Joseph Edwards explained that VRU growth is driven by both environmental compliance and strong economics from capturing high-BTU vapors, with a significant tailwind from the positive long-term outlook for U.S. natural gas demand. He detailed that the e-Grizzly HPGL system offers economies of scale for multi-well pads, while the SurgeFlow product provides efficiency gains for plunger lift conversions. Both new products are reportedly seeing very nice uptake from large operators.

Francis Lloyd Byrne inquired about the impact of administration policy, such as the Inflation Reduction Act, on the Vapor Recovery Unit (VRU) business. He also asked for more detail on the potential for expanding the VRU business into the midstream sector.

Answer

CEO Joe Bob Edwards stated that the VRU business is driven by strong customer economics, making it viable regardless of government policy, though he noted potential regulations could be a tailwind. He confirmed that expanding into the midstream sector is a key growth strategy, targeting pipeline operators and other points in the gas delivery system, with hopes for positive developments in 2025.

Lloyd Byrne from Jefferies asked for clarification on a theoretical maintenance capital number, considering the company's high efficiency and strong performance.

Answer

Andy O'Brien, SVP of Strategy, explained that sustaining capital is a philosophical concept. He provided two reference points: normalizing the 2025 capital of $12.9 billion by removing $3 billion in growth projects suggests a sustaining number around $9 billion at current prices. Alternatively, updating the $6 billion figure from the 2022 investor day (at a $40 price deck) for acquisitions and organic growth would result in a number closer to $7.5 billion in that same $40 world. He emphasized these are hypothetical numbers for a non-growth scenario.

Lloyd Byrne inquired about natural gas price differentials, the expected impact from the Matterhorn pipeline, and any progress on securing international LNG regasification capacity.

Answer

Andy O'Brien, SVP of Strategy, confirmed that Permian pipeline constraints depressed Q3 gas realizations but noted improvement with the Matterhorn ramp-up. He stated Matterhorn should reach 2.5 Bcf/d in 2025. On the LNG front, he announced three new agreements in Europe, securing approximately 1.8 MTPA of regasification capacity to enhance market access and placement of volumes.

Francis Lloyd Byrne of Jefferies followed up on the opportunistic AOSP sale's impact on long-term goals and asked about the DJ Basin's impressive progress, questioning the decision to hold production flat through the decade.

Answer

CEO Mike Wirth reiterated that the AOSP sale was about realizing full value for a non-core asset. Regarding the DJ Basin, he praised the team's performance and synergy capture exceeding targets. He explained that after growing from zero to 400,000 boe/d, the focus is now on maximizing value and free cash flow from the asset rather than pursuing further growth there.