Status Update

Mar 18, 2020

Press Release

Welcome to the ConocoPhillips Market Update Call. My name is Jenny. I'll be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded. I will now turn the call over to Ellen DeSanctis. You may begin. Thank you, Jenny, and good morning to our listeners. Thanks for joining us today. We're going to take some time to discuss this morning's press release, which describes some actions our company is taking in light of current market conditions. Our speakers today will be Ryan Lance, our Chairman and CEO Don Wallet, our CFO and Matt Fox, our COO. By the way, just for logistical purposes, they are in different locations today or our team is in different locations today due to our COVID mitigation measures. For today's call, Ryan will make some short opening comments and then we're planning just to turn the call over to you for questions. We don't have any slides, but we will post a replay of today's call later in the afternoon. A couple of other quick notes, this is not a guidance call, so we won't be addressing any specific outlook questions beyond what's in the release. We'll hold that for our upcoming Q1 call. However, of course, we may make some forward looking statements. Please refer to our SEC filings for a description of the risks and uncertainties that could impact future performance. And then finally, we understand global conference call logistics have been strained lately given the large work from home demand. So if you do get disconnected, we apologize, but please just dial back in. With that, I'm going to turn the call over to Ryan. Great. Thank you, Ellen, and good morning. Earlier today, we announced several actions that ConocoPhillips is taking in response to recent market conditions. The press release we issued was quite straightforward, but we thought it would be helpful to give you some perspective on our thinking behind those actions and to really have a dialogue and answer your questions. I want to first acknowledge that none of us have ever seen what's currently taking place in the energy markets. We know in our minds that this will pass, but it doesn't bring much comfort at the moment. So that's why we want to talk to our stakeholders to let them know how we're addressing the current circumstances. As you know, we've been preaching volatility in scenario planning for a long time, but even we didn't anticipate the extreme simultaneous supply and demand events the world and our industry are seeing today. In our mind, this is at least a 2 Sigma event. So the question is, how are we addressing it? It shouldn't surprise you that we're approaching this situation in the methodical, rational way you've come to expect from us. Make no mistake, we're taking this very seriously. We're also applying the lessons we learned from the last time our company faced a significant market shock. Coming out of that downturn, we intentionally restructured our portfolio and set a strategy for our company that would give us an advantage in times like these. Today, we believe we are in a strong position to take this methodical approach because ConocoPhillips is in a relatively advantaged position compared to most industry. And why is that? Well, first, we ended 2019 with over $14,000,000,000 of liquidity. 2nd, we have an advantaged portfolio with a diversified low cost of supply resource base, low base decline rate and low capital intensity. 3rd, we have significant flexibility in our capital program and in our buyback program. We can take some time to gather more information, develop scenarios and test our plans against these various scenarios. So while we have significantly more flexibility that we could deploy, we're choosing to exercise only a portion of it until we get more clarity on how and when prices recover. In other words, our longer term actions will be price path dependent. Still, we believe it's important to take some short term actions and that's what we announced today and here's what we're doing. We're reducing our 2020 capital program by approximately 10% or $700,000,000 We'll source these reductions from decreases in operated and expected decreases in non operated development activity in the Lower forty eight and deferral of development drilling programs in Alaska. These reductions will impact 2020 production by about 20,000 barrels per day of oil equivalent. In addition to the CapEx reductions, we'll reduce our share repurchases from a run rate of $750,000,000 per quarter to $250,000,000 per quarter starting in the second quarter. While we're cutting back, we're not stopping the program altogether at this stage because we have stated a preference to be able to buy our shares continuously through the cycles. These capital and buyback reductions represent about $2,200,000,000 of planned 2020 cash uses that we will not deploy. And importantly, this $2,200,000,000 pullback will have limited impact on the company's productive capacity in the year. And finally, as you would expect, we're looking closely at operating expenses and identifying areas where we can make reductions in light of the current environment. In fact, we're scrubbing all our numbers. And as Ellen said, we'll provide a full guidance update when we report our Q1 earnings on April 30. So those are the actions we announced today. We are choosing to take an approach that strikes a balance between the obvious urgency of the moment and uncertainty about how the situation plays out. We believe today's actions are the right actions at the right time for us. We'll run our scenarios, test our plans and determine what future actions we might take depending on the expected timing and shape of a recovery. As we go through the process, I can assure you we'll be guided by our principles, our priorities and our commitment to long term value creation. Certainly, long term value creation may seem like an abstract concept at the moment for some, but we believe ConocoPhillips continues to be well positioned to deliver exactly that, especially through the cycles. So I'll turn it over to Q and A, but before I do that, I did want to take a moment and say thank you for all your support. I know these are tough times. We're probably all working from various locations in response to the coronavirus outbreak, But I really want to thank you all and reiterate that we're all in this together. So thanks for your support. And operator, I'll turn it over to questions. Thank And our first question comes from Phil Gresh from JPMorgan. Yes. Hi, good morning. Can you hear me all right? Yes, we can, Phil. Okay. Ryan, thanks for hosting the call today and taking questions. My first question is, you mentioned that you would have potential additional flexibility from here. This is just a first step in response to the macro environment. So maybe you could touch on how you think about that additional flexibility from here? And in particular, with respect to the changes that you've chosen to make, would you say that the areas that you have not cut, basically the international pieces, Is that because those businesses are already operating near sustaining capital levels? Or just maybe you could just walk through how you think about the different assets and what you chose to do? Thanks. Yes. Thank you, Phil. No, we're looking obviously across the whole portfolio. As you can imagine, there's quite a low amount of capital really in our Asia Pacific, Middle East region. So most of that is kind of maintenance and supporting and sustaining capital that's going there. The flexible capital that we have currently rests in the Lower 48, as you might expect, which is just development drilling activity up in Alaska where we have some development activity. We're looking certainly in Canada, mostly of that is centered around the Montney, which is kind of a slowly ramping up capital. So we're looking at all sources of that, and I'd say the flexibility that we could exercise going forward rests around those kinds of programs. And then we've chosen not to exercise all our flexibility on the buybacks. So we continue to understand that you want to buy some shares even during the down cycle, but that represents some additional flexibility we could exercise. If our view of the market stays a lot lower for quite a bit longer time, and we'll exercise both those channels of flexibility as we go forward. And our next question comes from Emily Chang from Goldman Sachs. Maybe just on the Lower forty eight production trajectory. In light of the revised capital spend that you guys have announced today, how should we be thinking about the shape of the quarterly production path throughout 20 28, maybe into 2021, just based on today's initial cuts? And then we can talk about what that looks like if we were to go even lower than that? Yes, I'll let Emily, I'll let Matt take that question. Yes, Emily, with these cuts, just now the trajectory we'd expect for the Lower 40s, so the Big 3 and would be relatively flat from the Q1 of this year through the end of the year. So, we will see some growth in the Q1 from last year's average. So flat from this year's Q1 and that will represent about a 7% increase in average production from the Big 3 compared to last year, whereas in our initial trajectory, it was more like an 11% increase. Great. And our next question comes from Josh Silverstein from Wolfe Research. Thanks. Good morning, guys. Back in November, you outlined a 10 year plan that was based on $50 and had some flexibility that went down to $40 but generally stayed on track. Now that we're in a $30 potentially lower environment, just less months into this, how much does the long term outlook shift relative to what you provided for us? Or should we already be thinking about kind of a new long term plan starting to come together? No, I think if anything, Josh, we probably have greater conviction around our 10 year plan because it really is a philosophy for how to run an E and P business in a volatile market environment. So it is one that's focused on returns, not necessarily on growth. We think you ought to be investing 70% of your cash to grow and develop your company and returning 30% back to the investor. So we want to keep a strong balance sheet, which we've done. We want to keep some cash on hand, which we've done to handle the volatility. So generally, in terms of a philosophy for running we've got more conviction around that relative to the plan that we laid out in November. So I would say exactly the opposite. Now maybe there's some short term things that have changed in response to the market environment we find ourselves in, yes, but we believe the demand will come back and the price will equilibrate back to sort of a long term equilibrium similar to what our reference price was in November. So we've got more conviction to our plan. Frankly, if more people would do this, we may not find ourselves in this kind of a situation as much as we have today. Our next question comes from Bob Breckett from Bernstein. Good morning. The elephant in the room in November's analyst meeting was the idea of acquisitions and at the time you laid out the rationale. You ended 2019 with $8,000,000,000 of cash and cash equivalents. Is it too early to think about being sort of on the offensive at the bottom of the cycle, or where does that fit in your thinking right now? No, thanks, Bob. No, it's not too early. I think the rationale for consolidation in this business only got stronger with this downturn. It's a way to take fixed cost out of the system that ultimately lowers the cost of supply across the whole industry. So I think the industrial logic is stronger than ever when you have these kinds of dislocations that we're currently experiencing today. So we're watching it, we're paying attention, but it's got to fit the financial framework that we laid out based on our long term view of mid cycle pricing. So as long as it fits that financial framework and is additive and accretive to our value proposition, that's what we're looking at and we're kind of sticking to that framework that we laid out in November. Our next question comes from Jeanine Wai from Barclays. Hi, good morning everyone. Good morning. Can you hear me? Okay. Hi, good morning. In terms of the new plan and the current environment, can you talk a little bit about what exactly you're solving for? We know that you have a lot of levers. We know this is exactly you're solving for? We know that you have a lot of levers. We know this is kind of your first cut on things. But, can you discuss what your financial framework is for the Lower forty eight? For example, do you have a certain 8? For example, do you have a certain hurdle rate that activity needs to pass right now? If so, what is that hurdle rate, and what are the returns roughly in the lower 48 at $30 oil, say, or maybe $25 now? Yes. I can let Matt take maybe some of the more details right now. And obviously, we're long term, we have a reference price and we test our programs against that long term reference price. And right now, it's a cash flow situation that we're in right now, and I don't think everybody recognizes that. And you're trying to manage liquidity as best you possibly can with an outlook for what the shape of this recovery is going to look like. So that's the current mode we're thinking. And maybe I can let Matt weigh in on some of the specifics around the Lower 48. Yes, Janine. And the in terms of the returns in the Lower 48 at $30 a barrel, the average cost of supply in the Lower 40 is below $30 a barrel. So the returns are above 10 percent even in the high 20s. So if you're looking for sort of economic criterion, of course, now that assumes that for the life of that well, prices are at that level. And we don't really expect that to be the case. We certainly expect that prices will dip down. We're not sure how long that will be for, but we're pretty confident in the assets that are that have a cost of supply the '20s are still going to deliver returns above the cost of capital. Great. Thank you very much. Our next question comes from Paul Cheng from Scotiabank. Hey, guys. Good morning. Good morning. Ryan, earlier that you say this is your first reaction and you have more flexibility. So can you give us some framework that what is the parameter or the timeline you're looking at to see whether you release the remaining of for that the second wave of your reaction or the remaining of your flexibility? We were a little bit surprised that you decide to maintain the buyback even though that you have cut yet given the current market environment, it look like it could easily be a 18 months or a 2 years downturn long view. So wondering that when you're coming up with your current first reaction, what kind of environment or framework that you are based on? Yes. Thanks, Paul. Yes, so we kind of have a, what you might call a base case for what we think the recovery might look like. And then we have a stress case and we're developing probably 4 or 5 different scenarios to try to describe what this recovery and downturn might look like. You're not you probably wouldn't be surprised with some of what we're doing in that regard. So it's everything from Russia and Saudi get back together quickly and get back to some curtailment agreement all the way to a longer sort of U shaped recovery and certain various themes in between. I would describe sort of our base case maybe as kind of a mid-30s average price over the course of this year. Obviously, oil prices in the Q1 were in the 50s and they're going who knows where they'll bottom, but in the 20s or even lower and maybe some recovery later this year. And if we see a stress case, to your point, that is flatter and longer, then that would signal to us that we may have to think about taking using some more of the flexibility that we've described earlier, either through the capital program or through our share buyback program. The move we made today that we talked about today is frees up $2,200,000,000 of cash flow that we had delegated or designated somewhere else. So that's pretty significant and we've got equally as much more we could do if we chose to do that. And I think earlier that people asked about the M and A. When we're looking at the market today, why do you I mean, the tip in the stock in general probably dropped that for a lot of the E and T company that's somewhere between 60% to 80% already. So based on the previous framework and the long term commodity prices that you guys have, the valuation seems to have become much better. So unless that we have changed the long term commodity price tag, but I don't think you have done so, right? Not at this point in time. And so, if we're looking at the M and A market, is that really that the bid ask price or that is the valuation is still not attractive? It seems like today's valuation is better to buy than to drill. Yes. I don't dispute that at all right now. At the current valuations of some of the companies, I think the question is who wants to transact at these kinds of distressed prices when people have a view of what it's going to recover to. So I think that's the dilemma, Paul, right now is the whole market has got to stabilize a little bit and then you can probably entertain some of those kinds of activities. And our next question comes from Kelly Ackerman from Bank of America. Hey, good morning, guys. This is Kalei on for Doug. I've got two questions and I apologize if these have already been asked. I dialed in a little bit late. But I wanted some clarity on the sustaining capital number, which I believe was somewhere around $4,000,000,000 We noticed production was impacted by 20,000 barrels per day this year and you guys are spending $6,000,000,000 So there was some disconnect there. Wondering if you can help me frame that up. Yes. I'll let Matt address that, Kelly. Yes. So the yes, just under $4,000,000,000 is sustaining capital. So what that refers to is in our 10 year plan, if we wanted to sustain our production at 2019 levels for 10 more years, on average, what capital would that require? And it's about $3,800,000,000 That moves around from year to year depending on the status of major projects, but that's the average and then that's still the case. Got it. So how would you characterize the production impact? Sorry, say that again, Taylor? So production is falling about 20,000 barrels. How do you connect the 2? Well, Kelly, that 20,000 barrels, Dave, was part of our growth that we were going to experience. We're taking off some of the growth in 2020 with the capital reductions we made that's disconnected from a sustaining capital conversation. Got it. Thanks for the clarification. My second question is just on the buybacks. Why sustain them when this weak oil price could last for quite a while? And I'll read it there. Thanks. Well, we've chosen to exercise some of our flexibility on the buybacks, so we've taken them down from $750,000,000 a quarter to $250,000,000 a quarter and that's informed by kind of a base case we have with what a recovery might look like. Certainly if to the earlier comments, if this is more of a sustained lower type of recovery, we would have to look at exercising additional flexibility in that channel as well. But for now, we prefer to buy some shares at this kind of a price because that's informed by a view of a recovery, but we're watching that daily, weekly and monthly right now. And our next question comes from David Heikkinen from Heikkinen Energy. Good morning and thanks for taking the call. Really just thinking about the Alaskan tour and like your business continuity, you bring people from all over the U. S. And you have people traveling and flying up to the North Slope. How do you handle and think about business continuity of Alaskan production and operations amidst the coronavirus? Yes, David, I can we're taking that very seriously. I'll let Matt maybe address the specifics around Alaska, but we stood up the crisis management team quite a while ago with their total focus to kind of support this activity around our whole global operations to make sure we're managing it appropriately to keep the continuity of our operations going. To date, we've been unimpacted by the coronavirus in terms of production, but I can let Matt talk to the specifics we're doing in Alaska to safeguard our workforce and our operations. Yes, David. It's not just Alaska, of course, it's places like Norway and China and other places where we have remote work sites and a relatively tight density of people. So in those sort of cases, we have helicopter flights and in fact in Alaska, where we operate the flights to the North Slope ourselves. We can do pre checking with people. For example, we take the temperature to see if there's any evidence of fever. We ask the travelers to fill out the questionnaire considering where they've been recently, have they been in contact with anyone that's had a fever and so on. We have reduced the number of people working in these locations down to the minimum manning level, so that we are minimizing exposure off shore or on the North Slope. That allows us to clear more space, bed space, so that if necessary, we can have quarantine available in these locations. Now we haven't had any COVID cases on any of these locations yet, but you're absolutely right to ask the question, are we thinking this through and are we preparing for the possibility that could occur in these highly populated areas and or high density population and we are very much aware of that and on top of that. Yes. Thank you. Good luck and I hope that you don't have any cases. So thank you guys. And our next question comes from Phil Gresh from JPMorgan. Yes, sorry. I just had a quick follow-up. With respect to the activity levels in North America now versus what you were thinking at the end of the year, Matt, maybe you could just give us the new thought around rig counts and in terms of the flexibility that you have, like how low would you say you'd be able to go? And also just on the Montney as well? Thanks. Yes. So, what we have done in this cut is the $700,000,000 is roughly $400,000,000 in the lower $48,000,000 And the rationale here was to defer any further production ramp from Q1 just to see how the outlook develops. So as an answer to an earlier question, we keep production flat from Q1's levels. That $400,000,000 is made up about half of it is coming from lower frac activity, looking down from 4 or we'll go down from 4 to 3 crews in Eagle Ford and we'll release the crew that we have in the Permian unconventional. About $50,000,000 is the ferrule of a third rig that we were planning to add in the Delaware later this year. We expect to see about $100,000,000 reduction in our partner operated activity. That's predominantly in the Bakken. And we can see about $50,000,000 of deflation. So that's the $400,000,000 that we expect to see in the Lower 48. That brings our growth from 2019 to 2020 down from 11% to 7%. In Alaska, it's about $200,000,000 there. We're just drilling in Kuparuk in the Western North Slope, just laying down a couple of rigs there for some time in the Coparac and Alpine area. That's going to be a bit of 2,000 barrel a day impact on production. And the remaining $100,000,000 is coming sourced elsewhere across the portfolio. The aggregate effect is 20,000 barrels a day. So that's what's going on specifically within the $700,000,000 reduction. I think Ryan answered the question to some extent on if we were to cut further, where would we look. I mean most of the flexibility is in North America, contain more flexibility exists in the lower slothly and Alaska and in Canada. But we'll make that call once we let a little bit of time pass and get a better sense of how the price is likely to behave and then we'll make a call for that. Okay. And our next question comes from Mohammed Ghulam from Raymond James. So given your status as a global player in the oil markets, have you guys seen coronavirus impact demand for your customers specifically? Can you provide any insight into where you've seen the greatest impact? The greatest impacts on coronavirus. Did you say our customers, Mohammad? Yes. Have you guys been have your customers been have there been any impact delivering crude or them being able to take the crude given how much demand has fallen in some regions? Okay. Thank you. I'll Don can handle that. He runs our commercial organization. Yes. So far, we haven't seen any impacts on the marketing side. We've got LNG sales into Japan and China, and we haven't had any force majeure notices or requests to reduce deliveries yet. Okay. Thank you. Our next question comes from Roger Read from Wells Fargo. Yes. Thank you. Good morning. And I think as you all mentioned at the start of the call, although I've missed most of it in between, we're all working from home. So apologies for noise in the background. Roger, can you speak up, please? Can you hear me? Yes, go ahead. Sorry about that. Anyway, quick questions for you in the market. I guess, Don, probably the question for you. Any things coming up in terms of just timing of CapEx, timing of cash flows and we should be thinking about unique stress levels for Conoco as you look across your portfolio? Roger, I had a little bit of difficulty understanding your question. Can you try it one more time? Yes, sorry about that. So the question is, are there any unique issues of financial requirements or stress across Conoco's portfolio we should be thinking about in the near term? Not that I can think of, Roger. We're sitting on at the end of the year, we had $8,500,000,000 of cash and $6,000,000,000 credit facility that we haven't drawn on. I can't think of anything unusual out there that would be sort of a call on that liquidity. We don't have any debt maturities coming up of any significance over the next few years. So we're really in really good shape to contend with the environment that we find ourselves in. Okay. And then I guess, I'm sure some of these questions have been asked, I'm a little late to joining here. But Ryan, the question for you strategically, periods of stress also tend to create opportunities. And how are you from a strategic standpoint really looking at this and thinking about oil price downturns tend to last somewhere between about 6 and maybe 15 to 18 months on the longer term. Do we expect you to at least wait and see how this plays out any major changes are made, both internally and externally? Well, I think as we tried to lay out, Roger, this is kind of a first round of exercising some of the flexibility we have in the company. We're going to continue to watch the markets. To your point, is this a 6 to 8 month thing? Is this a 15 to 24 month kind of thing? We have additional flexibility we get exercised that we described both on the capital side and on share buyback side that would be roughly equivalent to what flexibility we're exercising today. So we continue to have a lot of flexibility inside the company in thinking about that, and we'll exercise it if we see a price path that indicates stress for a further and a longer period of time. All right. Thank you. Good luck out there. Yes. Thank you. Our next question comes from Jason Gammel from Jefferies. Yes. Thanks, guys. And I appreciate you doing the call today. A lot of questions on the buy side of transactions and assets. I wanted to ask more on the sell side. Do you I believe you already completed the Niobrara divestiture, but do you anticipate you're going to have any problems completing the Australia West divestiture as a result of the downturn? And then further to that, the expectation is that you would potentially be selling down equity in Alaska on the essentially 100% assets. Is that something that you think probably now needs to get pushed out by a fair period of time because of the downturn? Do you just have any thoughts around that Alaska sell Jason, this is Don. I guess first on Alaska. Back in November, we talked about our timing on Alaska that we didn't expect that to happen in 2020 and so it's not been part of our plans. We felt like we would probably go to market sometime very late in 2020 and maybe have a transaction in 2021. So our view hasn't changed. I think we'll go through the summer and the fall and see how the markets are and how we feel about taking it to market in 2021, but that's been our plan all along. And on Australia West, we continue to we and both the buyer continue to progress to closing there and we believe we're pretty close to satisfying the last few remaining conditions precedent there. So I would say, we had said that we would close expected to close by the end of the Q1. We've only got a few weeks left in the Q1. And I would say that clearly the pace has not been as we would expect, probably mostly due to some of the travel restrictions. We've got a number of partners involved here that come from multiple countries. We've got multiple jurisdictions involved. And so the hindrance around traveling right now has slowed the pace somewhat, but we're still optimistic that we'll close before too long. I appreciate that. And then just maybe as a quick follow-up, Don, you pointed out in that presentation that you made in November that your operating cash requirements were about $1,000,000,000 So kind of looking at where the balance was at the end of the year and the changes that you made to plan here, flexibility would seem to be pretty significant that you currently have. Can you just kind of confirm that $1,000,000,000 of operating cash and $2,000,000,000 to $3,000,000,000 of reserve cash is still a good number given the price downturn? Yes, I think those are I mean, not to put too fine a point on it, but our operating cash is actually somewhat less than 1,000,000,000 dollars reserve cash still running $2,000,000,000 to $3,000,000,000 So I think those are good numbers. Thank you. Our next question comes from Emily Chang from Goldman Sachs. Thanks for taking my follow-up. I just wanted to talk a little bit about APL and D distribution. Can you perhaps remind us how we should be thinking about these in the current oil price environment that we're seeing? 2, is there any sort of capital injection required for the project at current crude prices? And then maybe when can we start to see this distribution recommence at what sort of oil price levels? Thank you. Well, first of all, we're not expecting to be required to make cash infusions into APLNG this year even under the current price environment. And as far as distribution levels, we'll give you an update on that and some guidance at the Q1 call at the end of April. Got it. Thanks. Our next question comes from Joel Almond from Baird Equity Research. Thank you. Two part question. One is, is Q1 production intact versus prior expectations? And so therefore, the reduction you're talking about for full year 2020 is mainly 2nd quarter, 3rd quarter, 4th quarter, mostly the second half. And then the second part is for 2021 production, are the decisions that you're making today more impactful to 2021 production, all things all else being equal versus 2020 production? Yes. I'll let Matt describe that to you, Joel. Yes. The action that we're taking, Joel, on the capital programs shouldn't have any significant effect on Q1 production. In terms of 2021 production, if we were to go back in 2021 to the same capital level as we had assumed before the downturn, And the 20,000 barrels a day of reduction that we see this year would be close to about 30,000 barrels a day next year. But just to clarify, because I know that some people may be confused, that's just a reduction in the growth. We won't be going ex growth, but 2021 production will be affected by about 30,000 barrels a day by the cutback that we have in Capstone in 2020. Okay. And then, and again, just to follow-up, just not assumed that you would go back to the prior spending that you planned before this downturn? Correct. Okay, great. All right, very helpful. Thank you very much. And our next question comes from Michael Hall from Heikkinen Energy. Thanks. Appreciate the time. Yes, I just kind of wanted to follow-up a little bit on the CapEx reductions and the cost side of the equation. Are you guys contemplating any service cost reductions in the capital cost reductions that you outlined today? And then on the operating cost side of things, do you expect any movement there that would impact the previously provided sensitivities to cash flow that you guys have outlined? Go ahead, Matt. Hello, did we lose Matt? Sorry, Ryan, I forgot to come off mute. Yes, on the deflation front, we should expect to see some deflation. I said earlier, on the lower $48,000,000 of the $400,000,000 that we are expecting. We're expecting about $50,000,000 of that to be sourced from deflation. We could see more than that, but that's what our current expectation is to speak down to the $400,000,000 In terms of the operating cost, we should expect to see some operating cost reductions, I mean, at a minimum of lower energy costs and lower transportation costs, and there should be operating cost deflation across the portfolio to some extent. So we'd expect to see some OpEx savings, but we haven't quantified those yet. We'll get a better sense of that as we go through the year. Okay. So for now using the cash flow sensitivities you guys have previously provided, is still reasonable? Yes, I would say so, yes. Okay. Thank you. Jenny, this is Ellen. I'm going to interrupt here and suggest that we wrap this up. We appreciate everybody's time and interest this morning and look forward to staying in touch with you as this plays out. Thank you, everybody. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.