Good day, ladies and gentlemen, and thank you for standing by. Welcome to Ovintiv's 2021 fourth quarter and year-end results conference call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Members of the investment community will have the opportunity to ask questions and can join the queue at any time by pressing star one.
Members of the media attending in a listen-only mode today, you may quote statements made by any of the Ovintiv representatives. However, members of the media who wish to quote others speaking on today's call, we advise you to contact those individuals directly to obtain their consent. Please be advised that this conference may not be recorded or rebroadcast without the express consent of Ovintiv. I would now like to turn the conference call over to Mr. Jason Verhaest from Investor Relations. Please go ahead, Mr. Verhaest.
Thank you, operator, and welcome everyone to our fourth quarter and year-end conference call. This call is being webcast, and the slides are available on our website at ovintiv.com. Please take note of the advisory regarding forward-looking statements at the end of our slides and in our disclosure documents filed on SEDAR and EDGAR. Following our prepared remarks, we will be available to take your specific questions. Please limit your time to one question and one follow-up. This will allow us to get to more of your questions today. I will now turn the call over to Brendan.
Good morning. Thank you for joining us. 2021 was a momentous year for our company. I want to start by acknowledging the incredible work of our entire staff, whose teamwork, expertise, and dedication generated the results we'll discuss today. The global events of this week are a reminder of how critically important it is that our team continues to provide the world with responsible, affordable, and reliable energy.
Corey and Greg will be touching on multiple proof points throughout today's call on how our strategy to deliver superior returns is resulting in value creation for our shareholders. We are absolutely committed to this strategy. I believe we are the only peer who is set to maintain production and not increase capital year over year in 2022. As a result, we are set to deliver some truly eye-popping cash return yields. We had a banner year in 2021.
I'm confident our team will continue to deliver industry-leading capital efficiency and value to our stakeholders in 2022 and beyond. Before we get into the details, I want to take a moment to cover some of today's key highlights. First and foremost, we are once again set to increase our base dividend. A 43% increase this quarter marks the second raise in the last six months and reaffirms the resilience of our business. We believe that a sustainable and growing dividend is a core component of our value proposition. Our efficiency gains and cost elimination are flowing through to increased shareholder returns. We continue to deliver on our cash return framework, with additional buybacks underway in the first quarter of 2022. Since we started our buyback program in the fourth quarter, we have purchased approximately 4.3 million of our outstanding shares.
Our incremental cash returns are set to double once we achieve our $3 billion net debt target, which we now expect to reach in the second half of this year. In addition to our financial and operational excellence, we continue to lead on the ESG front. We have set a new Scope 1 & 2 GHG emission reduction target of 50% by 2030. Finally, and importantly, we are reaffirming our previously announced 2022 capital and production plan. This 2022 outlook ranks number one among peers in capital efficiency. For now allows us to deliver an 8% cash return yield, which spikes even higher once we hit our debt inflection point. We had a banner year in 2021 that's given us financial and operational momentum into 2022. We achieved a number of key milestones in our pursuit of shareholder value creation.
Our strategy is working, and the evidence speaks for itself in our achievements. The capital allocation framework we announced last fall delivered approximately $150 million to our shareholders in the fourth quarter alone through share buybacks and our base dividend. We also generated approximately $1.7 billion of full-year free cash flow alongside net earnings of $1.4 billion. We reduced debt by $2.3 billion year-over-year and we are once again investment-grade rated. We also continued our focus on ESG stewardship. We knocked our methane reduction target out of the park, and we achieved full alignment with the World Bank Zero Routine Flaring by 2030 initiative, a full nine years ahead of the World Bank's target.
Finally, we more than offset inflationary pressures in 2021 and reduced our average well cost by 11% year-over-year. This performance was, and continues to be differentiating versus peers. Combined, these 2021 proof points demonstrate the successful execution of our strategy. I'll now turn the call over to Corey.
Thanks, Brendan. As outlined, our 2022 plan is underpinned by our industry-leading capital efficiency profile. This leading performance will generate over $400 million in incremental free cash flow for Ovintiv in 2022 alone when compared to the average capital efficiency of our peers. We are also reaffirming our previously announced $1.5 billion maintenance capital program that generates 180,000-190,000 bbl per day.
Of high-value oil and condensate. This full-year capital and production level is roughly flat to our second-half 2021 profile. At $85 WTI and $4.50 NYMEX, roughly in line with current strip, we expect to generate about $2.9 billion of free cash flow in 2022 and achieve our milestone $3 billion net debt target in the second half of the year. As Brendan mentioned, we take great pride in our sustainable and growing base dividend. Our substantial free cash generation, declining leverage profile, and lower legacy costs and interest costs give us the confidence to increase our base dividend for the second time in six months, with a 43% raise starting in March. One of the most exciting elements of our business is that our industry-leading capital efficiency is showing up in very impressive free cash flow.
At these prices, we're reinvesting about 35% of our cash flow, leaving 65%, or about $2.9 billion, to distribute to shareholders along with continued debt reduction. Our strong 2022 plan provides continued shareholder returns, and we are underway today on our first quarter buyback program of over $70 million. Collectively, we will return approximately $120 million to shareholders in the first quarter across our increased base dividend and incremental buyback program. Our 2022 cash return yield of 8% is very competitive in today's market across both industry peers and the broader economy. This yield is before we inflect from the 25%-50% distributions. We are set to double this yield once we achieve our $3 billion net debt target and increase shareholder returns to at least 50% of available free cash flow.
2022 stats are compelling. We see our cash return yield continuing to grow in 2023 at the same price deck. To illustrate this, we took the 2022 program and rolled it forward to show the free cash flow and cash returns that we can generate once we double the actual returns post $3 billion of debt. The returns also benefit from the roll-off of our 2022 hedges as we see free cash flow yield over 35% with cash returns exceeding 18%. As a reminder, we see no material cash taxes over the next five years at strip pricing. I'll now turn the call over to Greg to highlight the impressive strides his team is making on the operations front.
Thanks, Corey. Despite our strong full-year results and key milestone achievements, I wanted to take a minute to address a few headwinds we encountered in the fourth quarter. First, unplanned midstream outages and permitting delays in the Montney reduced fourth-quarter production volumes by 90 million cu ft of gas per day and 3,000 bbl of oil and condensate per day. Specifically, permitting delays in British Columbia prevented us from completing an eight-well pad in the Montney in the fourth quarter. In response to these issues, we are leveraging our multi-basin portfolio and flexible operations to redirect activity and minimize any go-forward impact. Also, our shift to longer lateral development across the portfolio led to a limited number of turn-in-lines for the fourth quarter.
For example, in the Permian, we only turned-in-line three wells from September through November, and 13 of our 16 fourth-quarter wells didn't have first production until December. I'll cover this in more detail in a minute, but our shift to longer lateral development is key to delivering a strong 2022 capital efficiency. Finally, higher commodity prices increased our Canadian royalty rates. These rates are calculated on a sliding scale based on price, which reduced our fourth-quarter Canadian production volumes and impacted our per-unit cost. Most importantly, and I really want to emphasize this, these items have a limited ongoing impact and are embedded in our strong 2022 plan. With that being said, I want to stop for a second to say how proud I am of our team. 2021 was a record operational year at Ovintiv.
We generated industry-leading efficiency metrics that resulted in 11% lower drilling and completion costs across the portfolio year-over-year. The development program we implemented last year has strategically positioned Ovintiv for success in 2022. In the Permian, we are using our technical knowledge of longer lateral development to significantly de-risk this year's program. In 2022, our Permian program will drill and complete an average lateral length of over 14,000 ft per well, a remarkable 25% increase from last year. The efficiency gains from extended laterals are critical in maintaining consistent year-over-year costs and achieving industry-leading capital efficiency. 2021 was a pivotal year for completions and provided us with a recipe for success heading into 2022. In 2021, we utilized local wet sand on 40% of our completions and will transition to 80% utilization this year.
We have a material competitive advantage in the sand sourcing space that will generate over $70 million in savings this year. Not only have we proactively secured local sand supplies, but we also have the logistics experience required to deliver the sand volumes needed to support our Simul-Frac operations. Last, we completed 75% of our wells last year using Simul-Frac. In fact, roughly one in every five Simul-Frac completions in 2021 was pumped by Ovintiv. We have been at the forefront of Simul-Frac development for several years and are well positioned to continue expanding the efficiencies of this technology into the future.
In 2022, we have already set a new Ovintiv Permian completion pacesetter , completing over a mile of lateral footage in just a single day. In 2021, we delivered differentiated performance versus peers across the portfolio by drilling and completing wells at a significantly faster rate compared to the industry average. In today's inflationary environment, the simplest path to mitigate higher cost is to reduce the amount of time spent on location, and that is exactly what we are doing.
By establishing a new efficiency frontier, we generated well cost savings of approximately $60 per foot in 2021 compared to the industry average. These savings were achieved simply by operating faster and more efficiently than the company on the other side of the lease line. Our path to industry-leading capital efficiency is a two-pronged approach, lowering well cost and improving well productivity.
We are delivering on both. Longer laterals and faster than peer drilling and completions activity are some of the ways we keep costs down, but we are also making better wells. Through enhanced completions and new artificial lift designs, we generated a 10% increase in STACK oil productivity and a 14% increase in Pipestone Montney condensate well performance. As a reminder, the economics of our Montney program are supported by our high-value condensate production, which received WTI pricing last year and a premium to WTI in the fourth quarter.
Also, in the Montney, we brought on 19 of the top 20 wells industry-wide across the play in 2021. In the Permian, we continued our leading well performance in the basin with consistent year-over-year well performance. As a reminder, we deliver these top-tier wells despite not resorting to upspacing, which would leave premium resource behind.
These well results are a great example of how we are actively utilizing our multi-basin portfolio to transfer learnings across assets in real time to enhance well productivity. I want to commend the incredible work our team has done to generate industry-leading capital efficiency in the face of multiple industry and macro challenges. From durable goods to service costs and labor, the inflationary pressures our teams are facing are very real.
However, our combination of spending fewer days on location through efficient operations, lowering the cost of key commercial inputs such as wet sand, and delivering industry-leading well performance will maintain industry-leading capital efficiency. In our well designs, pipe, pumping, and sand make up almost half of our drilling and completion costs. We have zeroed in on these areas of opportunity to utilize our culture of innovation to drive down costs and offset inflation.
Our fully integrated supply chain team is a competitive advantage in today's environment, and they have risen to the occasion. Today, we have 100% of our pumping pricing secured, approximately 85% of drilling completion services contracted, and over 80% of our OCTG supply secured. These achievements give us tremendous confidence in our reaffirmed 2022 plan. The combination of leading well results and leading cost performance is translating to that incremental $400 million per year of free cash flow relative to what our peers could achieve. I will now turn the call back over to Brendan.
Thanks, Greg. We believe it is just good business to continuously extend our ability to generate superior returns. Last year, we made significant progress extending the premium resource life across our portfolio. First, in conjunction with the rollout of our capital allocation framework, we announced our disciplined approach to low-cost property bolt-ons. We are committed to staying disciplined and only acting when we can generate a strong full-cycle return at mid-cycle pricing. Despite the current price environment, we've had a strong start to this program and added 80 net locations across our portfolio at a modest cost of only $11 million. At under $150,000 per premium location, I'm not sure I expect us to do quite that well over the long term, but we are off to a heck of a start with this program.
As a reminder, we see the magnitude of this program as up to $300 million per year. Second, we're actively pursuing organic inventory appraisal on an ongoing basis, and we assessed over 500 potential premium locations across our portfolio. It's worth noting that this organic assessment and appraisal program is built into our $1.5 billion CapEx budget. As a result of the organic efforts, our 2021 reserve replacement ratio was just shy of 270%. If we adjust out the impact of higher prices, our reserve replacement ratio was still a very impressive 200%. Our total proved reserves increased by 500 million bbl of oil equivalent to approximately 2.3 billion bbl of oil equivalent at year-end.
The strong performance across all three of these initiatives is providing sustainability to our business and helping us maintain over a decade of premium inventory runway across each of our three core assets. While we've run through our key financial and operational wins on today's call, I wanna take some time to highlight our recent accomplishments in our initiative to drive ESG progress. As I mentioned earlier, we are very pleased to announce that we have resoundingly beat our methane emissions reduction target. We achieved a reduction of over 50% at year-end 2021, four years earlier than our original target. Another key proof point of our progress is our strong venting and flaring performance of less than 0.4% in 2021.
In addition, we are one of the first E&Ps to declare full alignment with the World Bank Zero Routine Flaring initiative in 2021, nine years ahead of the World Bank's 2030 target. We're continuing our momentum by setting a Scope 1 & 2 GHG emissions reduction target of 50% by 2030. We're in action today on this initiative and have already achieved more than 20% reduction since our 2019 reference year. Starting in 2022, this target is tied to compensation for all employees. We believe that ESG transparency, consistency and continuous improvement are critical, and we are committed to further driving our ESG progress. Finally, before we turn the call over to Q&A, I'd like to reiterate the key reasons we believe we provide a differentiated value proposition. First, our leading capital efficiency remains advantaged versus our peers.
Second, we're providing a compelling cash return yield in 2022 of approximately 8%, and we see this doubling when we achieve our $3 billion net debt target and going up from there as our hedges roll off. We are committed to continued debt reduction, and we have a strong track record of delivering measurable ESG results. Finally, we're set to deliver on our strategy over the long term. We have over a decade of premium inventory runway, a top-tier multi-basin portfolio, and a unique culture of innovation. Our focus on disciplined capital allocation, responsible operations, and leading capital efficiency have positioned our business to thrive in 2022 and beyond. This concludes our prepared remarks. Operator, we're now prepared to take questions.
Thank you. Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one. Your first question comes from Greg Pardy with RBC Capital Markets. Please go ahead.
Yeah, thanks. Good morning, and thanks for the rundown. I was gonna ask you about efficiency gains and so forth, but it looks like you certainly got that covered. Brendan, we typically talk about the big three with you guys, you know, the Permian, you know, the Montney, and the Anadarko. What kind of role do you see the Bakken playing on a go-forward basis, either in terms of production contribution, and/or free cash flow generation?
Yeah. Thanks, Greg, and good morning. You know, first off, you know, what I'd just sort of comment on the portfolio, and I've said this before, but just to reiterate, we have no plans for large-scale dilutive M&A. We're very happy with the portfolio we've got, and M&A is not a strategic necessity. You know, as I think you've heard us say before, for us, it doesn't come close to competing with the strategy that we have today. You know, when we think about the Bakken, you know, we've worked very hard to get the portfolio where we want it. You saw us take action last year to exit the Eagle Ford and the Duvernay, since their returns weren't competitive with the rest of the portfolio. The Bakken's very competitive.
You know, I've said this before, it's a smaller asset compared to the larger three core assets, but it generates fantastic returns. The diffs have strengthened significantly recently. Our innovation's working well there, both on well performance and costs. You know, we really like what we've seen there. You know, I think it's playing an important role in our portfolio. I think, you know, the other thing I'd add, Greg, you know, in this market where we're still severely undervalued versus our peers, we have to ask ourselves whether getting materially smaller is gonna make it even harder to attract investors. You know, that's something we'll also think about. Yeah.
Okay. No, thanks for that. The second question is maybe just to dig into just the repositioning, just maybe a bit about what the trajectory is gonna look like this year in terms of capital and production. I mean, I know you provided first quarter guidance, which is super helpful. What does the year kinda look like? Is it again more of a front-end loaded CapEx, back-end loaded kinda production year, or is it around midyear that everything sorta comes together?
Yeah, no, appreciate it, Greg. You know, absolutely there's some shape to the curve here, and I'll let Greg chime in too on how we've designed the program. But really our entire strategy here is anchored on creating value by generating superior returns and being disciplined with our capital. You know, one of the challenges with our industry is that there's always a bunch of forces trying to leak returns away. Today, inflation and supply chain challenges are those culprits. We believe it's our focus to make sure that doesn't happen and that we capture the benefit of higher prices for our shareholders. You know, if you look at since the start of this latest price cycle, prices are up some $30 a bbl on oil and something like $1.75 on gas.
Over that same period, our capital efficiency has gotten better by 33%. On margins, we've captured 85% of that price increase. We think that's some pretty leading value capture, and we think it's very important to our performance today. When we built the 2022 program, our priority was to hang on to that capital efficiency and hang on to that margin expansion. You know, the cadence of activity and the production profile that you're seeing are really outputs out of that design. You will see some shape through the year as production grows. You know, Greg, I'll invite him to talk a minute here on just the sort of shape of the capital profile, but the biggest influence on that is a working interest factor.
Greg, why don't you tackle that one?
Yeah. Thanks, Brendan. Yeah, just to build on Brendan's comments, we're going through a bit of a transition right now in our operating tactics. As we go to longer laterals, which we think are critically important for us, not only to effectively, you know, develop our position, but to also combat inflation. As we go to these longer laterals, we think that it's just critically important that we stay efficient. We're gonna have some lumpiness that'll be built into that.
As we go to the longer lateral strategy and level loading our frac fleets, and we talk about level loading our frac fleets, one of the things we recognized as we were going into the planning for 2022, a way to ensure that we were getting the best cost on our frac services was to take the white space out of the schedule. We've worked with our providers, and we entered into some really innovative agreements that are win-win that allow us to really effectively utilize their equipment and to keep those crews busy year-round. By doing that, we're going to not only receive lower costs but see better efficiencies in our ability to execute.
The end result of all that is we're gonna have a little more lumpiness in the schedule as we go through, or lumpiness in the production and the capital, I should say, as we go through this transition. You will see a little more capital in the front half of the year as we do that. Really our intent is to have the most capital-efficient program we can for the full year. The production is just an output of that. We feel very confident in our ability to deliver on both the production and the capital that we've guided to.
Your next question comes from Arun Jayaram with J.P. Morgan. Please go ahead.
Yeah, good morning. Brendan, let me start with the 2022 guide. Your 1Q oil and condensate guide is a little bit below the low end of the 180-190 range. Wanted to get your thoughts. You know, obviously, as you shift to longer laterals, there'll be some shaping of their profile. But how long of a putt would it be to catch the midpoint of that range as you think about the full year?
Yeah, Arun, we're very confident in hitting the midpoint of that range. We're right on track as we sit here today. The piece that's driving the shape is really that turn-in-line timing that Greg was just commenting on. You know, I'll get him in a moment to just flesh out a little bit more of the details there. Really what we did, again, is kind of turned our heads to how do we preserve this capital efficiency and make sure we're capturing that value. That's why the shape of the program is the way it is. The production profile just sort of falls out of that. We're very much on track as we sit here today and feel very confident about hitting that midpoint through the year.
Greg, you maybe wanna touch on the turn in line timing cadence.
Thanks, Brendan. Yeah, on the turn-in-lines, as I was just saying, with our cube development strategy and going to longer laterals, we're seeing a little more lumpiness in the turn-in-lines. As I mentioned in the prepared remarks, in the Permian, we only had three wells come online from September to November and, you know, 16 of our wells coming online there in December or sorry, 13 of the 16 wells coming online in December. We had a back-end loaded turn-in-line. As we look forward to Q1, we're gonna see a similar profile there. We have a number of wells that'll be coming online. Roughly two-thirds of our wells that come online in the quarter will come online in the back half.
That's what's causing that dip in production. It's really just a timing effect. We're very happy with our well performance, which is some of the things we showed in our deck today. We're really happy with the efficiency of our crews and our teams. We're just seeing a little lumpiness with the turn-in-lines that are showing up in the production rates.
Yeah. My follow-up, thanks for that, would be just to get some thoughts on the portfolio, Brendan. There's been some press reports around Ovintiv potentially hiring an investment bank to look at potentially monetizing the Uinta Basin position. A couple questions regarding this press report. One is could you give us a sense of kind of the annualized kind of cash flow from the Uinta? And secondly, could you confirm or deny that you may be looking to do this? The question would be if you did get some proceeds from an asset sale, could this perhaps, you know, and from a timing standpoint, you know, get your debt down and maybe lead to an acceleration on the timing of increasing your cash return?
Yeah, Arun, appreciate the question. I don't think you'll be surprised to hear that we don't comment on speculative deals. You know, what I would say, I talked about the Bakken here earlier, but talk about the Uinta, I mean, it's a smaller asset, again, compared to our three core assets, but we really like what we've seen in the play. We drilled six new wells into what was our second cube there last year, and the performance has been very impressive. Team's done an excellent job on costs and the drilling and completion design. You know, there's a lot of undeveloped potential in the play. We're excited about the resource here.
It's not receiving a material amount of capital in 2022, but it is a key part of our portfolio. You know, maybe I'll just flip it to Corey for a moment. You asked about the sort of relative magnitude of cash flows, so he can fill in that.
Sure. Yeah. Just to give you some perspective, its production for 2021 was about 15,000 BOEs a day, and the cash flow is kind of $200 million-$250 million.
Maybe Arun, just to close it off for you, 'cause you asked about the impact potentially on the inflection point on cash returns. I would just say, obviously, we're getting quite close to that organically with the free cash flow that we're delivering from the business. You know, I think in terms of a value driver, it's not gonna materially move that around. Yeah, I'll just leave it there.
Your next question comes from Neil Mehta with Goldman Sachs. Please go ahead.
Morning, Brendan, team. I wanna start here on slide five because the free cash flow yields that you're showing are really robust at that commodity price environment. Brendan, it's been, I guess, three quarters now that you've been on the job. You know, as you think about the valuation discount that the stock trades at, have you figured out sort of the root cause of it, and how do you think about the catalyst to change that? Where I'm going with that is if you pull forward maybe some of this cash return as the balance sheet strengthens, do you think that's one of the mechanisms perhaps to close that valuation discount?
Yeah, Neil. Yeah, appreciate the question. I think you've hit it. I mean, when we study and then talk to our shareholders, really what we're seeing the market reward in today's environment is the ability to increase cash returns to shareholders. You're seeing us do that with the base dividend increase today. Obviously our strategy is aimed at accelerating our debt reduction and increasing those cash returns. You know, it's our belief that executing on the plan and delivering on that is what's going to shape that valuation going forward.
Yeah. To that end, if oil stays up here or stays elevated relative to your base case, what would it take for you to pull some of that forward and make that 2023 outsized capital return more of a 2022 event?
Yeah. Well, that's why we've you've seen us point to the second half of this year where we'd hit that $3 billion inflection point and to be in a position to dramatically step up those cash returns. That, that's absolutely our focus, Neil, and how we're thinking about operating and executing the business.
Your next question comes from Doug Leggate with Bank of America. Please go ahead.
Thanks. Good morning, guys. I'm so sorry. I'm gonna be on this cash return issue just for one more question. It seems to me that, you know, reflecting on what Neil just asked, folks still don't understand equity volatility and balance sheet, you know, capital structure. It seems to me that as you reduce your debt, your cost of capital comes down, your multiple expands, your valuation goes up. While you still have that amount of debt, you still have the opportunity to buy back your stock at such a deep discount. My question is, with the line of sight that you have to get to your debt targets, where do you ultimately want the balance sheet to be, and why not step in more aggressively?
Why do you have to wait till you hit the $3 billion before you step up the split of cash going back to buybacks? What's the reason for the wait?
Yeah, Doug, appreciate the question. It's something we spend a lot of time thinking about. I think really it comes down to risk. You know, we're in a business where we are price takers and there's commodity price volatility, and today it feels great. You know, you look at the prices on the screen and there's a lot of reason for the optimism that you hear from us. Ultimately we need to ensure that we create the financial resilience in the business so that it's prepared for, you know, what inevitably will be price cycles in the future. That's why you see us, you know, walking and chewing gum at the same time here, where we're marching up cash returns. You know, again, you know, we did increase the base dividend by 43% today.
Marching up those cash returns, achieving the debt reduction and, you know, really now we're very close to that inflection point that you're pointing to. I think, Doug, what you're hearing from us is just a balanced approach here. You know, I think we need to make sure we get to at least that $3 billion in net debt before we flip that switch on the cash returns.
Sure. I guess the net debt is the important point there, right? Not the debt.
Correct.
My follow-up is an operational question. You obviously had permitting issues, and it doesn't look like they're going away, at least in the near term. Can you walk us through how the reallocation of capital to your 100% working interest has still allowed you to hold the capital program at $1.5 billion?
Yeah. No, it's a great proof point of how the multi-basin portfolio can manage some of these unique basin risks. I'll flip it over to Greg here to just talk about how we've reallocated that capital and held to the 22 guide. Greg?
Yes. When we think about the issues going on up in British Columbia, we're in constant contact with the regulators there. We know they're working hard to come to a resolution with all of the Indigenous tribes there, and we're confident that they will do that. We think it'll be coming shortly. In the interim, we can rotate capital. That's the benefit of our multi-basin approach. We can rotate that capital to other areas. In the first half, that capital is being rotated over to Alberta, to our Pipestone projects, and then down into the Bakken.
If the issue continues to persist, we can continue to rotate that capital, but again, we feel very confident that they will resolve the issues there and we'll be able to go back to work in BC. Again, we see very competitive returns from all of our programs.
Regardless of working interest or location, we can allocate capital to any one of those programs and generate similar results. That gives us the confidence to deliver on the guide for this year.
Your next question comes from Neal Dingmann with Truist Securities. Please go ahead.
Good morning, all. Can you talk a bit about, obviously, Brendan, for you or Greg? I'm just wondering, you guys continue to progress very nicely on the obviously the free cash flow. My question is: as things progress, let's say on a sort of normalized level, what do you see on an ideal reinvestment? I mean, obviously, it's gotten down pretty low. Is there a base level or something that you would like to keep it under? How do you think about reinvestment versus having, you know, that capital for other things?
Yeah, Neal, you know, you're right, it's gotten real low, like down into the mid to low thirties here at today's prices. If you remember, we've got a commitment to invest no more than 70% of cash flow. Obviously, to your point, we're well inside of that limit here today. You know, we are committed to that disciplined capital allocation. Really what's driving our decisions here today is a little bit of the questions Doug was just asking, how do we make sure we get the debt reduction done as soon as possible and drive those cash returns up?
Got it. Maybe for you or Greg, are you seeing opportunities? I know now to have this cash, you wanna get to that next level where you can have the obviously bigger payout. I'm just wondering if you see some ideal bolt-ons and different things that you've talked about. Would that take priority over, you know, getting to that higher payout, or is it still let's get to the cash first and then, you know. We'll let Greg do more of his thing over there.
You know, I think that's why we wanted to give an update on the bolt-on activity to date, to just give a sense of scale and where, you know, it's obviously a pretty modest amount at $11 million. It's not really shifting around the timing of achieving those other objectives. You know, it's really just a piece of opportunistic business for us, whereas we see these accretive opportunities to add inventory, we'll step into them. It's something we're not gonna let kinda get in the way of getting to the other milestones.
Your next question is a follow-up from Neil Mehta with Goldman Sachs. Please go ahead.
Hey, Brendan, apologize for the follow-up here.
Oh, sure.
S&P inclusion, you know, you had a really nice GAAP EPS number, and, you know, I know that positive earnings is one of the criteria for S&P inclusion. How are you thinking about that possibility, and how should investors think about that?
I'll pass it over to Corey here to hit the punchline on that. Thanks for asking, Neil.
Hey, Neil. Obviously, yeah, the criteria for the index inclusion required the last quarter to be positive earnings plus the prior 12 months. Now we have met all the criteria with the positive fourth quarter earnings. We're looking forward to getting included in the index. Obviously, that prediction on timing there is a little bit more difficult as the decision process there is a bit more opaque. We've met all the criteria, and we'll do everything we can to get in there because it'll be a nice pickup in passive investment, kind of in the 5%-7% range is sort of the rule of thumb we looked at.
Great color. Thank you, guys.
Thanks, Neil.
At this time, we have completed the question-and-answer session, and I'd like to turn it back to Mr. Verhaest.
Thank you, operator. That's the end of our call today. Call is now complete.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.