Antero Resources - Q2 2023
July 27, 2023
Transcript
Operator (participant)
Greetings, welcome to the Antero Resources second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you Brendan Krueger, VP of Finance. Thank you, Brendan. You may begin.
Brendan Krueger (VP of Finance)
Thank you. Good morning. Thank you for joining us for Antero's second quarter 2023 investor conference call. We'll spend a few minutes going through the financial and operating highlights, and then we'll open it up for Q&A. I would also like to direct you to the homepage of our website at www.anteroresources.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Today's call may contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. Joining me on the call today are Paul Rady, Chairman, CEO, and President, Michael Kennedy, CFO, Dave Cannelongo, Senior Vice President of Liquids Marketing and Transportation, and Justin Fowler, Senior Vice President of Natural Gas Marketing. I will now turn the call over to Paul.
Paul Rady (Chairman, CEO, and President)
Thank you, Brendan. I'll start my comments on slide number three, titled Drilling and Completion Efficiencies. After a record-breaking first quarter operationally, the strong momentum continued in the second quarter. Completion stages averaged more than 11 per day in the second quarter, a 40% improvement compared to the 2022 average and over a 90% increase from 2019 levels. Drill outs, which are the process of drilling out the plugs in each stage of the horizontal portion of the well, exhibited the same success during the quarter. Drill outs averaged over 4,000 ft per day during the second quarter, up 9% from the 2022 average and over 50% increase from the 2019 levels. Faster drill outs and completion times have resulted in significantly shorter cycle times, as shown on the bottom of the page.
Since 2019, our cycle times have decreased by 65% and averaged just 151 days in the second quarter. In June, we had the fastest cycle times in our company history at 129 days. These cycle times reflect the total number of days it takes on average from first spud on a pad to turning the entire pad to sales. As a reminder, we average six wells per visit per pad. Shorter cycle times mean higher capital efficiency. Highlighting this point, we completed roughly 60% of our 2023 budgeted completion stages during the first six months of 2023. Let's turn to slide four, titled, "Antero Wells Continue to Outperform Peers." In addition to the drilling and completion records, we continue to see increases in well productivity.
The chart on this slide highlights well productivity trends versus our peers since 2020. As illustrated on the page, Antero's average cumulative equivalent production per well is 20% higher than the peer average over this time. This differentiates Antero from its peers. With many companies having already drilled their best acreage, our long core inventory life continues to deliver stronger results each year. Let's turn to slide number five. Faster cycle times and improving well performance led to the increase in our 2023 production guidance. This gain in capital efficiencies is highlighted by our 5% total production growth in the second quarter compared to the year-ago period. Our production growth was driven by 16% liquids growth, while natural gas was essentially flat year-over-year. These capital efficiency gains also reduce our maintenance capital budget.
As illustrated in the chart on the right-hand side of the page, we currently expect 10% lower DNC capital in 2024, driven by operational efficiency gains alone. To be clear, the lower capital outlook for 2024 assumes we maintain our increased 2023 production level. The potential for a rollover in service costs suggests that there could be further reductions in next year's capital budget, but it's too early to assume that those service costs will come to fruition today. Now, to touch on the current liquids and NGL fundamentals, I'll turn it over to our Senior Vice President of Liquids Marketing and Transportation, Dave Cannelongo, for his comments.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Thanks, Paul. While C3+ prices as a % of WTI are currently low, it is important to remember that the second quarter is historically weak for NGL prices. Moving into the second half of 2023 and further into 2024, we see tailwinds emerging from normal seasonal demand drivers. Upside in the Chinese petrochemical market and supply moderation due to rig reductions in liquids-rich basins. Starting with propane, although absolute propane inventory levels have remained elevated throughout the first half of 2023, days of supply has generally been trending within the five year range during the same period. This indicates that the current higher stock levels are, to a large degree, necessary to support the substantial growth that the U.S. market has experienced, primarily in exports, but also domestic petrochemical demand.
Turning to propane exports, which are highlighted on slide number six, we have seen consistent strength throughout 2023, with total U.S. propane exports averaging 1.6 million barrels per day year to date. This is 300,000 barrels per day, or approximately 25% higher than the same period last year. Propane exports also reached a new record high in the second quarter of 1.9 million barrels per day in late June, according to weekly EIA data. In the domestic market, propane demand should improve in the coming months from a new propane dehydrogenation, or PDH facility, that is starting up in the Gulf Coast, followed by seasonal crop drying and heating demand as we move through the remainder of 2023 into 2024.
Turning to the Chinese market, although there have been various headwinds to economic recovery post-COVID, we have seen some recent data points showing improvement in the petrochemical sector there. Chinese integrated polypropylene margins from PDH units have shown dramatic improvements year-to-date, increasing from outright negative levels in February to almost $300 per metric ton in May. Unsurprisingly, utilization rates at Chinese PDH units have been closely correlated with this margin improvement. Operating rates have improved from lows seen during the first quarter, as shown on slide number seven, reaching a year-to-date high of 69% in June 2023, which was the highest rate observed in over a year on the back of higher overall PDH capacity from new facility commissionings during that time frame.
We believe the rapid uptick observed in PDH utilization in recent months, in response to margin improvement, highlights the value of having spare petrochemical capacity already in place when demand recovery occurs. This is something that we have talked about in previous quarters as well, and is a bullish factor over the long term as the property sector improves in China and worldwide. Turning to supply, there has been a lot of attention on rig reductions in gas-focused basins, but we also wanted to highlight the rig reductions we have seen this year in liquids-focused regions. Slide number eight, titled "Rig Counts Dropping in Key Liquids Basins," shows the rig count changes since the beginning of 2023 for the total U.S. and for several key liquids-rich basins.
We are showing both the outright rig decrease and the reduction on a percentage basis to illustrate the magnitude of the impact in each region. There have been substantial year-to-date rate declines in the Eagle Ford, which is down 26%, the Scoop Stack, which is down 30%, and the Bakken, which is dropped 20%. While the U.S. C3+ supply is still growing overall, which we believe is ultimately needed to supply the global market, the rate of growth has been tempered by this drilling slowdown. This trend presents upside for C3+ pricing as we look ahead in 2024 and beyond, as the effect of the rig count reductions play out. With that, I will turn it over to Justin Fowler, Senior Vice President of Natural Gas Marketing.
Justin Fowler (SVP of Natural Gas Marketing)
Thanks, Dave. I will start with comments on the natural gas macro. Turning to slide number nine, titled "Peer Leading Exposure to Premium Markets." As a reminder, we sell substantially all of our natural gas out of basin, including approximately 75% to the LNG corridor. Our firm transportation portfolio provides us with direct exposure to the growing LNG demand along the Gulf Coast. This slide illustrates average basis differentials for 2024-2027. Premiums to NYMEX Henry Hub that we realized through our firm transportation have improved since the beginning of the year. In particular, you can see TGP 500 pricing relative to Henry Hub has increased by $0.15 year to date. This increase reflects the anticipation startup of the Plaquemines LNG facility in 2024, which TGP feeds directly into.
Antero has significant exposure to this premium market, with the nearly 600 MMcf a day of capacity on that pipeline. Meanwhile, local basis, where the majority of our peers have significant exposure, remains at a steep discount to NYMEX Henry Hub through 2027, despite the recent approval of the MVP pipeline. Let's discuss the industry response to lower natural gas prices. Slide number 10 depicts the historical relationship between NYMEX natural gas prices and the rig count in the Haynesville. We discussed this slide on our fourth quarter 2022 conference call back in February. At that time, the Haynesville rig count was 73 rigs. Based on the historical response by producers in that basin, when NYMEX prices fell below $3, we communicated an expectation that rigs would fall by at least 25 to 30 rigs.
As it stands today, the Haynesville rig count has declined by 38%, or 25 rigs from peak levels. This point is driven home further when looking at the reduction in completion crews in the Haynesville, which is shown on slide 11. Since the beginning of the year, the completion crew count has declined by 36%, from 28 to 18 crews. While the decrease in drilling rigs will have a downward impact on 2024 supply, this reduction in completion crews will have a more immediate impact on supply this year. The sharp decline in drilling rigs and completion crews, combined with the basin's steep decline profile, is expected to help balance the US natural gas market and provide support to gas prices. In addition to a moderated supply outlook, demand trends continue to shift toward natural gas. Let's turn to slide number 12, titled Power Burn Demand Growth.
This chart shows that natural gas power burn demand has increased every year for 10 consecutive years. 2023 looks likely to set new record highs. Despite the warmer than usual winter that led to softer demand to start the year off, 2023 power burn is averaging 3.3 BCF a day, or 14% higher than the 5-year average. This July is forecasted to average over 46 BCF per day, which would set a new monthly record. In fact, just yesterday, we hit a new daily power burn record of over 51 BCF. With that, I will turn it over to Mike Kennedy, Antero CFO.
Michael Kennedy (CFO)
Thanks, Justin. I'll be brief in my comments today, but I want to reemphasize the points that Paul made earlier on Antero's peer-leading capital efficiency. Slide number 13 highlights the results of our peer group under each company's maintenance capital program. By definition, higher capital efficiency must drive either higher production volumes for the same capital or lower capital with the same production volume. Conversely, when our peer group attempted to target a maintenance capital program, their volumes actually declined by 4% year-over-year. This is shown in the chart at the top of the slide. The chart at the bottom of the slide compares the peer group's capital required per Mcfe of production.
As a rule of thumb, internally, we view each $100 million change of capital to result in approximately $100 million a day change in production, both up and down. Over the last year, we grew nearly $175 million a day, which implies that our capital efficiency gains have reduced true maintenance capital by roughly $175 million, all else equal. Adjusted for this volume growth, Antero would have the lowest CapEx per Mcfe of its peer group at just $0.66 per Mcfe. Against the peer group averages, Antero's capital program is significantly more efficient, 40% below our natural gas peers.
Looking ahead, we expect to maintain 2024 production at our raised production guidance levels on a capital program that we expect to be at least 10% lower than 2023, with all of the lower capital amount due to our capital efficiency. This raised production guidance also continues to assume a more conservative ethane outlook as we risk the timing of the Shell ethane cracker startup. Lower capital, combined with a higher natural gas strip, leads to substantial free cash flow in 2024 and beyond. At the same time, we remain committed to our return of capital policy, which targets returning 50% of our free cash flow to shareholders. With that, I will now turn the call over to the operator for questions.
Operator (participant)
Thank you, sir. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, please pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from the line of Arun Jayaram with JPMorgan. Please proceed with your question.
Arun Jayaram (Research Analyst)
Yeah, my first question is for Dave. Dave, you highlighted just the bullish export trends, on propane, and I was wondering if you could give us some thoughts on what do you think has been driving the higher inventory levels, and just thoughts on how you see inventories potentially normalizing on the propane side as we move into winter?
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Well, I think the main thing was really the mild winter we had. I think we talked about that maybe on a prior call, that that, coupled with some petrochemical maintenance during the wintertime, added roughly 20-21 million barrels to the absolute inventory level. If you strip that out, you know, we're down in, you know, close to the middle of the five-year range, obviously, even a lower level on a days of supply basis. That's been the main driver that I would say, you know, playing a role there. The other piece on the exports, I think, you know, we just continue to see strong buying demand.
The arbs are open, using a lot of the ships that are coming online. There's still roughly 26 vessels yet to come online this year, through the remainder. That'll continue to drive freight costs down, even though we have this much higher export stack. Some tailwinds there for us as well.
Arun Jayaram (Research Analyst)
Great. My follow-up, maybe for Mike, is I wanted to get your thoughts on hedging strategy. It seems like, Mike, we're in an environment where the market's quite constructive on 2025 gas prices, just given the LNG incremental export demand. Maybe investors are appreciating if some of the gas producers can add some insurance in 2024, just to get, you know, call it a floor on, you know, your cash flows for 2024. I want to get thoughts on hedging strategy and, you know, could we see Antero looking to add some hedges, just given the improvement in strip pricing over the last few weeks?
Paul Rady (Chairman, CEO, and President)
Yeah. Thanks, Arun. Paul here. Well, you know, as you're saying, we too are positive on the natural gas market. There's positive momentum, as you know, in the futures prices. Cal 2024 is above $3.50, 2025 and 2026 are approaching $4, so pretty healthy. The other factors we see that give us a little bit of tailwind is that, as we've covered here, rig counts, completion crew counts are declining, and obviously, that lowers supply. We, as an industry, are following LNG, the build-outs, the increased demand, people signing up for more and more LNG facilities. That's happening right now, where more and more facilities will go FID. We touched on just yesterday's record power burn, but systematically, we're seeing higher power burns, setting new records, such as yesterday's 51 BCF.
As you're aware, Antero's in good shape, have a strong balance sheet. Our leverage is less than one times. We're being patient and watching the market and its tailwinds. You know, we've hedged, of course, years ago and had success at it, but we watched pretty carefully, but bide our time. That's where we are.
Arun Jayaram (Research Analyst)
Thanks, Paul.
Operator (participant)
The next question comes from the line of Bertrand Donnes with Truist. Please proceed with your question.
Bertrand Donnes (Senior Analyst)
Hey, morning, guys. On the capital program, on the 2024 comment, in the prepared remarks, you noted that you could see additional drops if maybe service costs come down from here. Could you maybe just touch on what the 10% drop includes? Does it use kind of a full year 2023 average, and then, you know, applies it to 2024? Is it maybe what you're expecting for the end of the year and then dragging that forward? Then, you know, just want to give you a chance, one of your peers is starting to talk about 2025. Is there anything that would prevent you from maybe holding that, you know, that 10% drop into 2025, or what it looks like out there?
Michael Kennedy (CFO)
Yeah, just holding today's costs into 2024 flat, no service costs or reductions are incorporated in that. Because of our capital efficiency and the well productivity, and, you know, we grew 5% year-over-year, to actually maintain that, you need about 100,000 less lateral feet. When you do the math on that, that's the 10% reduction just at today's costs. 2024 is down that 10% without any service cost help. 2025 is actually lower than 2024, because as we continue to be at maintenance capital, our natural declines continue to decline as well, as you add more and more base and get a less steep production and less wedge.
2025 is below 2024 right now, so, extremely capital efficient program continues to improve, and you can see that in our production growth at the same capital, and you'll see it in 2024 and 2025 with lower capital amounts.
Bertrand Donnes (Senior Analyst)
That's great. just second one is, maybe talk about your potential LNG strategy. you know, does a tolling agreement make sense for Antero, or are you seeing anything, you know, any other structures that maybe would work best for your approach to maybe capture some of the international pricing?
Michael Kennedy (CFO)
You know, we have 75% of our production that goes to the LNG corridor, so we have so much exposure to that pricing down there and are such a large market player that in order to attract our gas, just even on a spot basis, really, it's gonna be a lot of competition and really gonna result in a pretty significant premium, we think, to pricing. That's our exposure. You know, entering into these. We, of course, evaluate all agreements, but you're talking really small volumes and really big commitments. You know, I think that 1 million tons is about a $2 billion commitment over the timeframe, and that's for, you know, like, 100 million a day. We don't have to make those commitments.
We already have all the transport and all the production that gets down to the Gulf. We'll get exposure just through the spot pricing and then having to compete to buy our gas.
Bertrand Donnes (Senior Analyst)
Sounds good. Thanks, guys.
Operator (participant)
Our next question comes from the line of David Deckelbaum with TD Cowen. Please proceed with your question.
David Deckelbaum (Research Analyst)
Thanks for the time, guys, and the answers today. Mike, I think this first one's for you. I just wanted to dig in a little bit on just the CapEx progression into 2024. I think we all understand you're not including cost deflation, but can you characterize a bit, maybe, you know, obviously, you were employing a maintenance program, but you grew 5% this year. Some of those benefits, I guess, help in 2024. Can you kind of put some bookends around how many wells you have to do in 2024 versus 2023, and how you think about sort of the well productivity gains for Antero itself in 2023 versus 2022?
Michael Kennedy (CFO)
Yeah. David, I mentioned it's lateral feet, really, because our wells continue to lengthen in laterals. we'll have a bit longer in 2024 than we did in 2023. Pretty much every year, they go a tad longer. That's why I mentioned or referenced 100,000 ft. we'll have to do 100,000 ft less than we did this year to maintain that 3.4, around the 3.4 BCFE level. When you just do our well costs on that 100,000 ft, that's how you get the $90 million less of capital required to maintain. It's maintaining the same productivity, although our wells continue to be more productive.
Right now, we're just elevating the shape of the curve in the front end and have not increased the EURs, but that could come later as the well productivity performance continues to be ahead of our expectations.
David Deckelbaum (Research Analyst)
Is that front ends being influenced by choke management changes or completion designs, or is that-?
Michael Kennedy (CFO)
No.
David Deckelbaum (Research Analyst)
Just geology?
Michael Kennedy (CFO)
No. I think we're being conservative in not applying that throughout the curve and the life of the well and just trying to take a wait-and-see approach and see that that continues throughout time.
David Deckelbaum (Research Analyst)
Appreciate that. And just a, a follow-up on... You talked about free cash flow generation, especially in 2024, as the curve inflects higher. I think the last update we all had from you around cash taxes, we had you kind of paying some cash taxes this year and that number going higher. Can you give us an update on what you think your cash tax burden is gonna be over the next several years with this recent downdraft in commodity pricing?
Michael Kennedy (CFO)
We don't foresee any cash taxes through 2025, and not any material, really, in 2026, so not for the next three to four years. With prices in 2023, that's kept us out of really any exposure to AMT qualification as well. We don't see any cash taxes for at least the next three years.
David Deckelbaum (Research Analyst)
Thanks, Mike.
Operator (participant)
The next question comes from the line of Umang Choudhary with Goldman Sachs. Please proceed with your question.
Umang Choudhary (Research Analyst)
Hi, good morning, thank you for taking my question. My first question was a couple of follow-ups on the capital spending commentary which you made. Can you give us any color around your expectations for cost inflation heading into next year, and on lower land spending? Then you made a point that spending would be lower in 2025 as the decline rates for the shallow. Any color you can provide there would be great as well. Thank you.
Michael Kennedy (CFO)
Yeah. On the completions, I think, you know, we have, of course, our service contracts around drilling and completions really have been locked in 2023. That's why you, you don't see it there. I think we've seen recent deals, you know, 5%-10% lower than where our current contracts are. I think that's a good starting point for 2024 on the potential savings there. Then looking at past 2024, it's another 5%-10% lower capital than that 10% we talked about for 2024 versus 2023. It just continues to shout, and continues to go lower, as our decline shallow.
Umang Choudhary (Research Analyst)
Great. Quickly on the LPG side of the equation, it sounds like you think with the lower supply from the U.S., with current rig reduction and improvement in demand from China, we should expect an inflection in pricing. Any color you can provide in terms of when do you think the pricing could inflect? It's kind of a challenging macro to make predictions here, but any... Do you feel like it's a kind of a winter event as demand starts to pick up also from heating, which can drive that inflection in pricing?
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Umang, I would say yes. It's, you know, as we head into the fourth quarter, a couple of things that'll be happening. One, as Justin mentioned, his comments on the gas side, as you see rig counts drop, it takes some time to see the effect of that on the supply side. Maybe we're starting to see that here recently, just with some of the weaker EIA reports over the last several weeks, where the propane builds have underwhelmed versus expectations to the bullish side for us.
You know, other things, if you look at how propane is pricing right now relative to naphtha, it's doing its normal seasonal summertime, you know, spread that encourages propane to continue to be economic and a steam cracker, as we head into the wintertime, as we saw this last winter and every winter before that, that decouples and propane price at higher percentages of naphtha throughout the wintertime. We also. If you look at just how naphtha is pricing globally, and granted, it's been different since the start of the war in the Ukraine. Even right now, on the forward curve, naphtha is, is discounted relative to where it was this past winter. Obviously, the war was still occurring then.
We think there's some upside to naphtha and upside to propane this winter that's not reflected in the forward curve. Then, as I mentioned earlier in my remarks, or maybe to Arun's question, the freight rates are anticipated to come down this winter as well. Multiple factors that should cause propane to have quite a bit of upside relative to what the forward curve is showing today in the, you know, the low to mid-70s.
Umang Choudhary (Research Analyst)
Very helpful. Thank you.
Operator (participant)
The next question comes from the line of Subash Chandra with The Benchmark Company. Please proceed with your question.
Subash Chandra (Senior Equity Research Analyst)
Hey, Mike, just to confirm your response to the cost question. The 10%, as you've, you know, stated multiple times, purely capital efficiency, and another 5%-10% is expected, could occur in 2024 from materials and service cost deflation?
Michael Kennedy (CFO)
There's that potential. I wouldn't say, you know, in Paul's remarks, like he talked about, it may be too early to forecast that. That's why we're not including that. It seems that's where the market's trending with the lower rig count and lower completion crews working in the basins.
Subash Chandra (Senior Equity Research Analyst)
Okay, got it. Second question, this is, you know, equally complicated macro question, but, you know, you mentioned the polypropylene margins. There's a naphtha relationship, there's supply-demand, but, how far do you think the conditions, the macro conditions are from maybe getting back to the prices we saw in the first quarter? Do you think, you know, weather is winter weather is absolutely necessary to get there? Do you think some of these other, you know, non-weather variables can get us there?
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Yeah, I mean, I think certainly you can get there just on the supply reductions in the liquids-rich basins that we talked about. You can get there if China starts to ramp up their property sector activity. There's, as we talked, you know, mentioned in, there's so much excess PDH capacity that's available to ramp up, that could certainly get you there without, you know, having a normal winter. You know, we'll continue to watch those things. Obviously, you don't expect to have a, you know, mild winter year after year after year, so there's certainly the potential there as well, for some help from the, from Mother Nature.
You don't have to rely on that, ultimately, as we move through into 2024, if, if the demand starts to pick up as we anticipate it will.
Subash Chandra (Senior Equity Research Analyst)
Got it. Okay, just the final one for me. When you look at sort of the growth in liquids processing capacity, you know, Marcellus, other liquids-rich basins, what's your thoughts there? You know, do you think it's running maybe running ahead or running behind what you think, you know, required production or expected production will be?
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Sorry. You're asking about processing capacity in the Appalachian Basin, what we're seeing there, just with some of the additional plants or plant that's been talked about?
Subash Chandra (Senior Equity Research Analyst)
Correct. Yeah. Has that surprised you, you know, to the upside or has it been, you know, expected?
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Not really. I mean, when we look at what's actually being produced in the basin, you know, I think there's been a little bit of growth this year, and Antero's been the primary driver of that. You know, well, on processing capacity, not all. Just because you have maybe spare capacity in one location, doesn't mean that a certain producer who's, maybe drilling, more rich acreage is able to utilize it. You sometimes have to build a plant somewhere else at the while another plant in another part of the basin sits, maybe more idle.
We haven't seen substantial growth in the region outside of our own growth, and don't know that we would expect to really see, you know, much beyond the one plant that's talked about or coming online. Don't think we're going to see additional processing plants getting built in the region, just given the activity.
Subash Chandra (Senior Equity Research Analyst)
Got it. Thank you.
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
Thanks, Subash.
Operator (participant)
The next question comes from the line of Nitin Kumar with Mizuho Securities. Please proceed with your question.
Nitin Kumar (Managing Director and Senior Energy Equity Research Analyst)
Thanks for taking my questions. Not to keep beating a dead horse on the service cost side, you mentioned the 5%-10%. I appreciate it's too early, in terms of the different components, what are you seeing in terms of price weakness or price trends right now? Are you seeing movement on the big ticket items like dayrates or frac crew prices?
Dave Cannelongo (SVP of Liquids Marketing and Transportation)
That's really where the 5%-10% is coming from, and that's compared to our current levels. That's where we see recent deals being done, you know, a bit lower than we're at right now, that we're locked in through 2023. That's how we come up with 5%-10%.
Nitin Kumar (Managing Director and Senior Energy Equity Research Analyst)
Can you remind us, what is your current contracting for services? Are you, are you running through 2023 or even into 2024?
Michael Kennedy (CFO)
Completions is through 2023. Rigs are intermittent expiries throughout 2024, but first quarter, kind of third quarter, and then the end of 2024.
Nitin Kumar (Managing Director and Senior Energy Equity Research Analyst)
Got it. If I can sneak one more in. I don't know if you answered that question, but you had, I think, $150 million of land spend this year. Could we expect a similar kind of level in 2024 and 2025? Are you seeing enough opportunity for that kind of inventory replenishment, or should we expect that to drop next year? Any thoughts on that spending?
Michael Kennedy (CFO)
It probably will drop next year and beyond, but if we have the same level of success that we've had this year and the opportunities, we will act on them because we are adding the most efficient possible inventory locations as they're just right next to our current development plan and consolidating our acreage position. You know, it is finite, the amount of those opportunities, so we will project, you know, probably much lower and more in the typical, $75 million-$100 million range.
Nitin Kumar (Managing Director and Senior Energy Equity Research Analyst)
Great. Thanks for answering my questions.
Operator (participant)
The next question comes from the line of Gregg Brody with Bank of America. Please proceed with your question.
Gregg Brody (Director and High Yield Research Analyst)
Hey, good morning, guys. I know this may be a difficult question to answer today, but just curious what your thoughts are, how Mountain Valley Pipeline, the progress there, with potentially coming online end of this year, how you think about that impacting your production, or and the ability to grow over time? I appreciate you're in maintenance mode today and looking for a better macro, but just would love to hear your thoughts on that.
Michael Kennedy (CFO)
Yeah, Gregg, it was interesting. We did a study of the Friday of the kind of basis prices on the Friday before that surprise MVP announcement versus Monday. It actually just took the cost down kind of in the Northeast, because that MVP volumes really cannot get down to the Southeast or to the more demand centers without some further expansions of pipelines. It really didn't affect the NYMEX pricing or pricing outside of Northeast basis. As you know, we have all the transport we need to get outside the basin. I don't think it really has an impact on our ability to grow. I mean, I guess it would unlock a little bit of local growth if we chose to pursue that, but we're really attracted by NYMEX prices and not the local pricing.
As Justin highlighted on his slide, local basis is still $1 off through 2027, that's not attractive to us. We still continue to fill our transport, focus on our liquids acreage, focus on being as capital efficient as we are and being at maintenance capital.
Gregg Brody (Director and High Yield Research Analyst)
Thanks for the perspective, guys. I appreciate it.
Michael Kennedy (CFO)
Okay.
Operator (participant)
The next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Please proceed with your question.
Kevin MacCurdy (Research Analyst)
Hey, good morning, guys. A couple questions on the free cash flow comments in the press release. Just to clarify, are you now expecting the full year 2023 to be free cash flow positive? Is that a result of the better production, or is that comment just kind of looking at the back half of the year?
Michael Kennedy (CFO)
Full year, we are a bit positive on today's strip.
Kevin MacCurdy (Research Analyst)
Great. Then as a follow-up, can you maybe comment on the strategy on buyback timing? You know, I was surprised to see you guys bought back some shares this quarter, and there certainly looks to be an opportunity with your stock now. I guess the question is: How comfortable are you buying back shares ahead of forecasted free cash flow?
Michael Kennedy (CFO)
We're not comfortable in that. We the buyback that occurred in the second quarter, we just chose, instead of issuing those shares from a tax perspective on the equity vesting, we chose this time to buy it back with our cash instead. Typically, if we don't have free cash flow generation in a quarter, we're not going to be buying back any shares.
Kevin MacCurdy (Research Analyst)
Gotcha. Thank you for the clarity.
Michael Kennedy (CFO)
Mm-hmm.
Operator (participant)
Our next question is a follow-up from David Deckelbaum with TD Cowen. Please proceed.
David Deckelbaum (Research Analyst)
Hey, guys. I just wanted to sneak one more in here, just commenting back, or coming around again to the balance sheet. Just curiously, if, if internally you have explicit goals of, of moving towards investment grade at this point, how critical you think of it as moving forward, especially as you think about LNG counterparties and things like that, and how, how you think some of the, the draws on the facility or how you're sourcing operations right now is, is informing some of the rating agencies?
Michael Kennedy (CFO)
Yeah, we're one upgrade away from being investment grade. We are investment grade from one of the three, and one of the others we're on double B plus positive watch. I would assume that if this commodity price deck comes to realization, meaning, you know, $3.50 and 2024 and beyond, that we will be investment grade sometime next year. It's kind of an outcome of just where our balance sheet is and how efficient we are in our size and scale, and how low our development costs are. It should come if the commodity prices hang in there, it would be positive for future transactions. It's not something that's required to realize our financial goals and to realize our results.
David Deckelbaum (Research Analyst)
Thanks for fitting me back in there.
Michael Kennedy (CFO)
Mm-hmm.
Operator (participant)
The next question is a follow-up from Subash Chandra with The Benchmark Company. Please proceed.
Subash Chandra (Senior Equity Research Analyst)
The land budget, any color you can give us? I think, you know, you had a strong quarter, the quarter before. The guidance didn't change very much. Had another strong quarter now. Are these, you know, really, you know, sort of last-minute opportunities, or, how do you think of the balance of the year, and then is 2024 completely unpredictable at this point?
Michael Kennedy (CFO)
First of all, talk about 2023. I think we had $75 million in the first quarter, $35 million in the second. Our guidance is $150, so that would suggest $20 million, you know, a quarter, and we're on that pace. I think we saw a lot of opportunities last year that we acted on. A lot of those closed in the 1st quarter. There was a little bit of momentum behind that as well, that leaked into the second quarter, but right now it's just your typical run rate of more like $20 million a quarter. That's how we talk about next year and the following years. We generally expect $20 million-$25 million a quarter, and that's that $75 million-$100 million typical land budget that we have.
Subash Chandra (Senior Equity Research Analyst)
That's helpful color. Thank you.
Michael Kennedy (CFO)
Mm-hmm.
Operator (participant)
At this time, there are no further questions, and I will turn the floor back over to Brendan for any closing comments.
Brendan Krueger (VP of Finance)
Yes, thank you for joining us for today's call. Please reach out with any further questions. Have a good day.
Operator (participant)
Ladies and gentlemen, that concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, have a great day.