Good day, ladies and gentlemen, and thank you for standing by. Welcome to Encana Corporation's third quarter 2019 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. For members of the media attending in a listen-only mode today, you may quote statements made by any of the Encana representatives. Members of the media who wish to quote others who are speaking on this call today, we advise you to contact those individuals directly to obtain their consent. Please be advised that this conference call may not be recorded or rebroadcast without the expressed consent of Encana Corporation.
I would now like to turn the conference call over to Steve Campbell, Senior Vice President of Investor Relations. Please go ahead, Mr. Campbell.
Thank you, operator, and welcome everyone to our third quarter 2019 conference call. Let me remind you that this call is being webcast, and the slides are available on our website at encana.com. Before we get started today, please take note of the advisory regarding forward-looking statements in the news release, and at the end of our webcast slides. Further advisory information is contained in our annual report and other disclosure documents filed on SEDAR and EDGAR. I also wish to highlight that we prepare our financial statements in accordance with US GAAP and report our financial results in US dollars. References today to dollars mean US dollars, and the reserves, resources, and our production information are after royalties unless we state otherwise. Following our prepared remarks today, we will all be available to take your specific questions. Please limit your time to one question and one follow-up.
This simply allows us to get to more of your questions. I will now turn the call over to our CEO, Doug Suttles.
Thanks, Steve. Good morning, and thanks for joining us today. Recently, I read a sell-side note that was titled Likely a Boring Quarter for Encana. Well, from today's news, you can see it was anything but boring. We generated a quarter of a billion dollars of free cash flow, executed exceptionally well across the company, and announced a strategic move to establish corporate domicile in the United States that we believe will create long-term value as it ultimately better positions our company. Our recent actions are proof positive that we are committed to unlocking the significant value we see in our equity. We will leave no stone unturned to capture this value for the benefit of our shareholders. We have a lot to cover today on today's call, so we will organize it around these key topics.
First, we'll cover our third quarter financial and operating performance, as well as year-to-date highlights. We are increasing the midpoint of our full-year production guidance on the back of continued strong performance from the Anadarko and the integration of Newfield has gone exceptionally well. In addition to our brief remarks today, there is supplemental information in our corporate presentation located on our website. Next, we'll discuss our recent and significant actions to increase shareholder value. We intend to establish a U.S. domiciled company that will expose us to significantly larger and growing pools of investment. By looking at peer data, this will expose our company to almost three times the amount of index participation we see today as a Canadian company. It is very important to note that we do not anticipate any material cost to the company in executing this move.
In recognition of this significant transformation we have made to our company, we have also decided to change the name to Ovintiv. On more of an administrative note, we will also be consolidating our share count in a one-for-five exchange to enhance peer comparability and decrease volatility. Third, we will close today's call with some high-level thoughts on our outlook and how we are planning to approach 2020. As always, we'll take your questions after our prepared remarks. Let's get started. We continue to deliver outstanding financial results, reflecting the quality of our asset portfolio and our constant drive to innovate and find new efficiencies in our cost structure. In the third quarter, we posted net earnings of $149 million, or $0.11 per share, and generated more than $250 million of free cash flow.
When combining the last two quarters, we have now generated $378 million of free cash flow. We generated free cash in 2018, in 2019, and we intend to do this again in 2020. As we've said before, many in our industry are trying to navigate to where we are today. As our business matures and we transition to a more industrial business model, we're delivering against broader market competitive metrics, such as earnings per share, cash flow per share, and free cash yield. We have a growing list of highlights for 2019. Perhaps the most important of these is the successful integration of Newfield. Tomorrow will mark the one-year anniversary of the Newfield acquisition announcement. Since that time, we have exceeded the identified synergies, and they are showing up in our bottom-line results. Our people across the company are working as one team and delivering exceptional results.
For the third time this year, we today raised our projection for annualized G&A synergies from this transaction, now set at $200 million. This compares to our original target of $125 million. More telling is the fact that we have now eliminated nearly 90% of Newfield's G&A. Our rapid reduction in STACK well costs from a legacy $7.9 million to an average of $6.5 million have moved returns higher and made this play very competitive within our portfolio and the industry. Today, we present longer data production data from all of our wells showing consistent performance from the play. We have continued our track record of returning cash to shareholders. In fact, we are at the top of the list of E&P companies for total cash returned, and we fulfilled our buyback plan in a timely fashion.
We've repurchased $1.25 billion of our stock at what we believe to be a very compelling valuation. In addition, we raised our dividend 25% this year. As our company and cash flow grows, we expect the dividend to grow as well. We see this as a sustainable practice and a requirement for healthy investor-focused E&P companies on the road ahead. Setting aside the first quarter, which was noisy due to the timing of the Newfield closing, we've generated $378 million of free cash flow at current commodity prices, and we estimate additional free cash in the fourth quarter. As we have said before, the first port of call for our free cash flow is the balance sheet and the reduction of short-term debt. Consistent with prior practice, we continue to refine and high-grade our asset portfolio.
Earlier this year, we exited from China and sold a non-strategic dry gas asset in the Arkoma. The proceeds went to the balance sheet. In addition, we recently made a few key succession moves, with four internal promotions and other moves below them to build tomorrow's leaders and ensure continued execution at all levels in the organization. Today, the announcement of our intent to establish a corporate domicile in the United States and our new brand are added to the list and reflect the significant transformation of our company. We are excited about our future and our ability to compete and win in both the E&P space and the broader market. Now, I'd like to turn the call over to our President, Mike McAllister, for a brief operations update.
Thanks, Doug. Good morning, everyone. As you can see, we post another quarter of strong execution. Our approach to reservoir development, combined with solid operational and commercial execution, is what enables us to deliver quarter after quarter. We have a quality multi basin portfolio. Our people have a proven ability to adapt, managing risks, and continually shifting resources to generate desired corporate level outcomes. Our three liquids-rich core growth assets continue to perform very well against our production and cost targets. Our capital efficiency metrics continue to improve through meaningful reductions in cycle times across all core assets. Our total production from the core growth assets averaged nearly 480,000 BOE per day, up about 10,000 BOE per day from the previous quarter. Our core assets remain on track to deliver 15% year-over-year liquids production growth.
You will notice today that we raised our expectations for full-year production, primarily related to continued outperformance from the Anadarko Basin. In the Permian, our third quarter volumes were up 13% over last year's third quarter. Although most of our activity has been focused in Midland, Martin, and Upton counties, we have been really encouraged by strong recent results in Howard County. In the Anadarko, we see strong year-over-year growth in oil and liquids, up 16% when compared to the same period in 2018. The story here is really pretty simple. Production results are consistent, and the team continues to find operational efficiencies to reduce costs and cycle times. More on this in just a minute. The Montney averaged 54,000 barrels per day of liquids during the third quarter, in line with expectations. This represents a 22% increase year-over-year.
Most impressively, our cycle times in the Montney have improved to the point where we are delivering our stated objectives with just three rigs instead of the four rigs as we had planned. It's always worth reminding folks that with $4 million well costs, sub 80-day cycle times, single-digit royalty rates, and a realized condensate prices at 90% of WTI, our investments here compete with anything in our portfolio. Our base assets are delivering significant free cash flow today and play a critical role in our corporate level performance. Collectively, our base assets produced just over 100,000 BOE per day in the third quarter, up nearly 8,500 BOE per day over the second quarter, with the growth driven by oil and condensate. Our Williston infill program is giving us confidence in a much larger inventory count than we originally estimated.
In the Eagle Ford, consistent well performance and solid execution are continuing to produce free cash flow. In the Duvernay, strong well performance from our recent pad led to a 40% quarter-over-quarter growth. Let's move on with a little more detail on our strong STACK performance to date. Our development in the STACK Meramec is focused on the black oil window in the heart of our contiguous acreage position. This is a dominant acreage position that is early in its ultimate development. Our strong well performance in the area and focus on base production delivered 162,000 BOE per day through October. In addition to our consistent well results, the team continues to find operational efficiencies, deploying our cube development model, resulting in rapidly reduced well costs, cycle times, and improved returns.
Black oil performance continues to be consistent. The plots on this slide focus on a subset of wells in the black oil region. To date, we have pumped 40 high-intensity cube cell completions, and as you can see, oil production is outpacing our expected oil type curve at 180 days from initial production. Please mark your calendars for our STACK Day event in late January. Since we acquired this asset, we continue to be encouraged by the significant value we're seeing and the competitive returns the play is generating today. By late January, we will have nearly a year of new data from the Anadarko, and we look forward to sharing a great story with you. I will now turn the call over to Corey.
Thanks. Good morning, everyone. Let's discuss the list of whys regarding our decision to establish a corporate domicile in the United States. Let me say upfront, this move does not represent a shift in strategy. It is simply about gaining access to deeper pools of investment capital. We believe the opportunity to enhance long-term value for shareholders will be greater as a U.S.-domiciled company. Despite significantly and strategically repositioning our multi-basin portfolio in North America's top basins, while constantly innovating to improve our returns and corporate financial performance, we believe our valuation continues to be disconnected from our U.S. peers. This is due in part to the inability to access certain pools of capital in the United States that are limited in investing in securities of foreign companies.
As a U.S. company, we may be able to attract deeper and growing pools of passive investment capital in the United States, particularly if our shares are included in U.S. indices and other investment vehicles that only include securities of U.S.-domiciled companies. We believe this change will level the playing field with our principal competitors, most of which are U.S.-based companies. There will be a great deal more information in our preliminary proxy statement, which will be filed with regulators next week. Please take time to read this document to more fully understand our rationale and the mechanics behind this planned move. We estimate that we can make this domicile change without material cost to the company, allowing access to the larger pools of investment in the U.S. capital markets.
To remain accessible to both our U.S. and Canadian shareholders, we plan to remain dual-listed on the New York Stock Exchange and the TSX. There's no doubt that passively managed money and the importance of index funds and ETFs is on the rise. Using public data, we estimate that today under 10% of our ownership is comprised of passive accounts, far less than the 30% average for our U.S. peers. This is not a trend that is likely to reverse, and we want to expose our equity to new and rapidly growing pools of money in the U.S. We know that you might have some more specific questions as a shareholder regarding the change, so we have included a frequently asked questions page on our website for you to reference now. Our preliminary proxy statement will be filed next week with more details.
I'll now turn the call back to Doug.
Excuse me. Thanks, Corey. We are also using this opportunity to rebrand to better reflect who we are today and further break down perceptions that we believe are dilutive to our valuation. This move represents the significant and transformational changes we have delivered. We are an entirely different company today, and we are positioned to lead on the road ahead. We are one of the largest independent producers with approximately a quarter of a million barrels per day of oil and condensate production. We are often reminded that some folks still perceive us as a natural gas company. We are proud of our company's history, but we have meaningfully transformed our business and created a company that is built for today's environment. It is important that our transformation is recognized in our valuation.
Make no mistake, we have a long and proud history in Canada, and our assets here are world-class. As Mike described, with our cost and productivity, our returns in Canada continue to be every bit as strong as the rest of our portfolio. We will continue to make profitable investments in the Montney and the Duvernay and manage these assets out of our Calgary office. We do not expect any impact on our Canadian workforce, either in the office or the field. We define the new E&P. We have a sustainable business model delivering today what many others are aspiring to do in the coming months and years ahead. This business model is generating leading results in our sector and competes head-to-head for capital and investments in the broader market. We are leading the way in an industry at the cusp of transformation.
We have successfully positioned our company to achieve differentiated performance in this market. We are balancing industry competitive liquids growth, disciplined capital allocation to generate free cash flow, and a consistent return of cash to shareholders. These are the key ingredients that should lead to long-term shareholder value. Our strategy is to produce strong and sustainable corporate financial performance. Since 2013, we have taken great strides to reshape the company and deliver the corporate metrics you can see today. We have greatly increased our multi-basin scale, focusing on high-value oil and condensate production. Our proved reserves are now 2 billion barrels equivalent, but more important, they have moved from 15% liquids to 55% liquids. Our oil and condensate production has expanded sevenfold over this time period.
We have significant scale with almost a quarter million barrels of oil and condensate production that sold this quarter for an average of 95% of NYMEX WTI pricing. When annualizing the second and third quarters, we generated $3.4 billion in cash flow. For an illustrative reference, we compare our 2013 results adjusted for the current oil and gas prices, and you can see how dramatically our business has improved. Finally, we continue to focus on our strong balance sheet. We have an investment-grade rating, about $3.4 billion of liquidity, and a clear path to further de-leveraging. We know that the market is growing increasingly more concerned with leverage and testing downside scenarios for lower prices. As we execute our forward plan, we see our balance sheet continuing to de-lever. It is this transformational execution that underpins the next chapter in our company's life. I'll now turn the call over to Brendan.
Thanks, Doug. The framework for our 2020 outlook is highlighted on this slide. Our number 1 priority will be the generation of free cash flow, delivering modest liquids growth at mid-cycle prices. We will do this by allocating capital to the high-return liquids opportunities that we have in our portfolio. In a lower price environment, we have tremendous flexibility, with no long-term rig contracts or HBP requirements. We would adjust our capital accordingly and prioritize free cash flow over production growth. Prices strengthen, this will lead to a higher free cash flow generation. In this scenario, free cash will go to the balance sheet. Thanks for your time today. We're now happy to take your questions. Operator?
Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one. We will now begin the question and answer session and go to the first caller. Your first question comes from the line of Greg Pardy of RBC Capital Markets. Please go ahead. Your line is open.
Yeah, thanks. Good morning. Really just two questions. I guess one is from everything you're saying around the change in where the company's domiciled, effectively there's really no movement of people. The name changes, but that's about it. It's pretty much business as usual. Is that fair, Doug?
Yeah, Greg, you've got that exactly right. This move is the intent and purpose, and what's driving this is quite simply accessing the capital market and the passive flows that are in it today. How we operate the business and run the business will not change. There'll be no movement of roles or responsibilities, no reduction in staff, and actually no change to how we're allocating capital.
Okay. You also mentioned just on the share consolidation, the 5 to 1, and you mentioned volatility, but is there broader thinking around that?
Greg, it's really around peer comparability. We actually produce one of the largest annual cash flows in the sector, but with our current share count on a per share basis, it looks considerably lower than peers. We think this just makes sense to do this at the same time as we do the domicile and name change. It feels like for comparability and ease of understanding, we think it's a simplification move.
Okay, great. The second one is really just operational around Montney, but can you just lay out what the growth trajectory is coming? There's a fair bit of growth as we've got coming in 2021, I believe.
Yeah. Greg, as you know, we've been working with Keyera to build the gas plant in Pipestone. That's going very well. That should start up in early 2021. As we're finalizing details and budgets for 2020, the real question is how we ramp into that new facility, and obviously we want to maximize capital productivity, so not spend capital too far in advance. I would say, though, that one operational detail here, which is advantageous to it, is that we have the ability to route existing production to that plant as well, which means as the timing gets closer and it comes on, we don't have to actually drill wells to start the plant up. We could actually route existing production and then build production into the startup once it's occurred.
Got it. Thanks very much.
Thanks, Greg.
Our next question comes from the line of Brian Singer at Goldman Sachs. Please go ahead. Your line is open.
Thank you. Good morning.
Morning, Brian.
I wanted to see if you could discuss the oil production trajectory in the Anadarko Basin, and oil specifically versus liquids broadly. The well performance that you've consistently reported and put in your slides is very strong. It doesn't necessarily always maybe translate into what we see for a total basin quarter-to-quarter oil, and I wanted to see if you could talk a little bit more about those moving pieces, the base declines, the timing of completions, and then ultimately what that trajectory looks like over the coming quarters.
Yeah, Brian, I think the two factors I'd highlight, and to be honest, some of the rest of that we may just need to follow up with you afterwards. The two things I'd highlight, as you can see in the results Mike talked to, the wells are performing quite well. In fact, with our new high-intensity completions, BOEs are on track with the type curve, but oil is above type curve, and of course, that's the product that matters most there. Well performance is strong. The second effect is obviously entering the year at the time the transaction closed, I believe it was what, Mike, 13 rigs active?
Yeah, that's right.
Of course, we've ramped that down to a more sustainable level. You can see we actually basically had flat production from two Q to three Q despite the drop in activity. Other than that, to be honest, I would probably just need to follow up with you offline on the rest of your questions.
Great. Thanks. The follow-up is a little bit more on the 2020 outlook, how you're thinking about more broadly achieving your free cash flow objectives and the sequential production trajectory that would entail.
Yeah. Brian, by the way, for all of us in the E&P sector and people like yourself who follow it, I think, obviously, the gods like to mess with us at the end of the year by creating maximum volatility in the commodity price while we try to do planning. One of the things we're very clear on is that we're prioritizing free cash flow first as we look to the business in 2020. Under today's conditions, prices similar to what we see right now, we would anticipate modest liquids growth with free cash generation, but we're refining that model as we go into the year. Then, of course, if the world worsens from where it is today, we would continue to prioritize free cash, so we'd pull back on capital. If it turns out stronger, the additional cash flow will go to the balance sheet.
Great. Thank you.
Our next question comes from the line of Gabe Daoud of Cowen. Please go ahead. Your line is open.
Great. Thanks. Good morning, everyone. Maybe just sticking with 2020 again. Modest single-digit liquids growth plus free cash flow on a mid-cycle price. I guess, Doug, is that mid-cycle price kind of what we're seeing on the screen today? Then would plan B essentially represent a kind of a maintenance level program that holds volumes flat year over year?
Gabe, I would say that what we're really indicating at prices like today, because I would say if you think about the three pieces, oil, gas, and NGLs. Oil's probably around where we think mid-cycle is. Gas is obviously weak, and NGLs are weak. We still believe even in that environment, we would actually have liquids growth and free cash generation. If, for instance, if we can further what we're indicating is we would pull back capital and pull back some of the growth to make sure we still generated free cash flow. I think we've talked before that the business we built even into the $40 WTI range, we can hold production flat and be free cash flow neutral, which just shows the efficiency of the business.
Understood. Thanks for that. Just, I guess, Doug, as a follow-up, going back to the STACK, this year, I think on average, the rig program was about 6 to 7, but then obviously you blew down a number of Newfield DUCs, which led to on streams being significantly higher. I guess just trying to think about capital efficiency out of the STACK for next year. Do you have to add a lot of activity to achieve your goals there next year? Just given that some of the well cost savings you guys have obviously seen, just trying to figure out how that could potentially move all those moving pieces, how that could move the budget and the STACK next year relative to the number this year, which I think was $825 to $875.
Yeah. Gabe, I don't want to go too far here because we haven't finalized plans for the year yet for 2020 and how we're going to allocate capital across the portfolio. What we've been trying to do is level load the program like we've done in the Permian, and you've seen the efficiency benefits that's delivered. Obviously, we're not going back to 13 rigs. We're probably in and around where we are today or maybe just slightly higher. We'll see as we do the budget. We don't intend to go back to 13 rigs, which is where it started the year.
Okay. Understood. Thanks a lot, Doug.
Thanks, Gabe.
Our next question comes from the line of Asit Sen of Bank of America, Merrill Lynch. Please go ahead. Your line is open.
Thanks. Good morning. I have one for Mike and one for Corey, if I may. Mike, on the Permian, you talked about strong Howard County results. I think you mentioned 28 gross wells online. Any more color as to what you're thinking? When you're thinking broadly Permian, and you're thinking about 120 well till this year, how are we thinking about, again, very early next year and allocation towards Howard County?
Hi, Asit. Yeah. Howard County represented about 25% of our program this year. Would expect that not to change as we go into next year. Again, as Doug mentioned, we haven't finalized the budget yet for 2020. The real surprise and really encouraging results that we're seeing is coming out of the Wolfcamp play in Howard, and it's basically well above our type curve expectations. We're really feeling pretty good about those results.
Okay, great. Corey, on cash margin per BOE for the quarter was, I think, $14.67. Just wondering if in the current environment you could rank the four different assets, Permian, Anadarko, Montney, and the base assets on unit cash margins. Any drivers outside of pricing that could differentially affect margin outlook? Again, big picture over the next 12, 18 months.
Yeah. Asit, sorry. If you look across all four of them, they all get to a very similar margin, albeit with slightly different product mix and well cost. They all compete really well in our portfolio, and we tend to allocate capital to them on that basis.
Okay. Thank you.
Our next question comes from the line of Jeanine Wai of Barclays. Please go ahead. Your line is open.
Hi. Good morning, everyone.
Good morning.
Hi. On the STACK, that's my first question. On the well cost, you cited the same $1.4 million savings as last quarter, although the pacesetter wells are under $6 million, which is great. It seems like things are continuing to progress well on the cost front in your last update. Are there any completion design changes in the STACK that you've been testing that potentially are offsetting some of these continued cost reductions?
Yeah. This is Doug. I'll make a couple of comments and see if Mike wants to add in. It's a great question because we have put up more intense completions in the ground, our high-intensity completions we've done elsewhere in the company with really strong success. We do think that's one of the things leading to the strong oil production performance there. They do add, on a like for like basis, they do add cost compared to that 7.9. What we're doing is, before we put another new number out there, is looking at this balance of where we're going with the completion versus the cost savings. As Mike indicated, we've had wells under $6 million now, and this is one of the areas you should expect us to talk a lot more about at the STACK Day at the end of January.
Mike, anything to add?
Yeah. No, not a lot here, Doug, other than we're working on additional opportunities to reduce costs that will help us continue to drive down to the $6 million and below. Offsetting that is we're testing higher intensity completions up to 3,000 pounds per foot and looking at those results. It's a bit of a balance of the more intense completions, but coming in with a number of ideas that we're chasing to drive our cost down per well.
Could any of these changes potentially bias you towards the lower end of your 6-8 wells per section cube configuration? That would enhance returns, and we're just trying to think about any incremental capital efficiency tailwinds that there might be next year that the market's underappreciating.
Yeah, I think on the spacing and stacking, this sort of density question, I think, of course, that always moves around on where you're at in the play and how thick the sections are, and do you have the Osage underneath you, all sorts of things. The interaction between the completion design and the spacing, I'm not sure is going to have a huge influence at this point. I think what we're looking to see, though, is if we spend a bit more money on the completion, does it make a better well and therefore generate better returns, which will improve capital efficiency at the same time. As Mike mentioned, actually right across the business, actually, we just took our board on Monday of this week out to the Anadarko, and they got to firsthand see what we've been doing.
Our teams just continue to innovate all across the business and come up with new ways to execute, which improve efficiency. You've probably seen our focus on cycle times. One of the reasons we do that is a lot of the costs in this industry are paid for on a day basis. If you can actually do things more efficiently and quicker, it's less expensive. The other thing we get out of that is, of course, we get information back sooner, therefore we can weave that information into our thinking. I don't necessarily see the spacing and stacking being driven dramatically off these completion designs. It's just can we make better wells, get better recovery for the capital we're investing.
Okay, great. Thank you for taking my question.
Our next question comes from the line of Jeffrey Campbell of Keefe, Bruyette & Woods. Please go ahead. Your line is open.
Good morning. Congratulations for the quarter and the excitement that the sell side didn't see coming. I wanted to ask you about the Anadarko decline rate. I was just wondering, is this just represent better than expected well performance, or are you doing something proactive to influence the base?
Yeah, Jeff, good question. One of the things the team does, if you think about a company of our size, we produce about 600,000 BOEs a day, about a quarter of a million barrels a day of crude and condensate. With a large base, you can imagine if you can optimize that base, even a 1% move is a big number. In the Anadarko specifically, the team's been doing a very good job of optimizing the base, including things like artificial lift and managing line pressure in a number of things which are having an impact. Of course, the other piece about that is these are usually at little to no cost. The economic value is very strong. We have had some very good results on the base here recently with optimization.
Thanks for that color. My other question was with regard to the Williston infill well outperformance that you cited. I was just wondering, could you discuss maybe what the prior spacing assumptions were and what it might look like going forward based on these results?
Hi, Jeffrey. It's Mike here. Prior, we had 1,320 foot inter-well spacing. We're planning on putting a well in between, going down to 660 foot and actually even testing tighter than that. Also you need to understand we're going with larger completions going up to 700 pounds per foot. What we're seeing is significant improvement over the parent well performance. In fact, we're also seeing enhancement in the offset parent wells. Basically improving production after their frac hit by the child well. Things are really encouraging in the Williston Basin, and we're pretty excited about some of the well results we're seeing.
Okay, great. Thanks for the color. I appreciate it.
Our next question comes from the line of Neal Dingmann of SunTrust. Please go ahead. Your line is open.
Morning, Doug, great color this morning. Doug, my question is, what's your, for I guess as you go into 2020, maybe even 2021, kind of a general leverage target, and then how do you balance this with any potential additional share buybacks?
Yeah, Neal, it's a good question there. We've said pretty consistently at mid-cycle pricing that we'd like to be 1.5 times or less. As I mentioned, I think earlier in a previous question, we're probably a bit under mid-cycle pricing today, which would mean that the leverage looks a little higher. Of course, the other things you have to consider in this is liquidity. You also have to consider when our debt is due. Our next debt is not due till end of 2021. When we look at that, what it means is we're comfortable where it's at. Obviously, the business is generating free cash flow at the moment. We see it naturally de-levering through time, and we're very comfortable with that. We don't think we have to do anything dramatic to get to that sooner.
We want to get to that one five or under, and the business will do that naturally. When we combine that with the liquidity and the debt schedule, it feels very doable to us.
Okay. Last follow-up. You all have certainly seen some nice improvements with your cube development in Anadarko. I'm just wondering, do you have an idea of what the ultimate spacing will be in key areas of this play as this becomes more mature?
Yeah, I think if you had a typical, it's probably the 6 to 8 we're doing today. It will vary a little bit based on the local geology and the thickness and other things. That's true in every play. That's why we always be a bit cautious about putting a single number out there. The development pattern and spacing, the STACKing and spacing piece that we're using today feels about right, and it may move a little bit, but this feels like the base case. Of course, this is something on our STACK day at the end of January we'll talk a lot more about. What we're seeing is very consistent results using that spacing and then use some performance improvement, which we actually believe is tied to the completion design we're using.
Very good. Thanks for the time.
Our next question comes from the line of Marshall Carver of Heikkinen Energy Advisors. Please go ahead. Your line is open.
Yes, good morning. I saw that the costs were coming down and the guidance, a little bit of a downtick on cost per BOE. Which costs are you seeing improvements on? Just wanted to get some color on whether that's LOE, T&G&A or what.
Yeah, Marshall, it's actually in essentially every bucket. We've had great progress here. Obviously, the G&A's come down significantly as we've raised the synergy target from the original $125 million per year to now $200 million per year. You're seeing that flow through. One of the things that may be overlooked in places is just how efficient this organization is. We produce 600,000 BOEs a day with 2,500 people. By the way, we essentially operate everything we do, which means that we don't get to that head count through letting other people run the activities. We do that ourselves. The constant focus on efficiency improvements and innovation, it's actually had a direct impact on our LOE across the business.
In our T&P team, we're always trying to optimize the value of the product that we receive and where we sell it with the cost to get it to those markets. There's a bit of give and take in there, because in the end of the day, in that bucket, what we're really trying to do is the maximum realized price after cost. We are seeing it right across the board in every bucket.
Okay, thank you. When you're thinking about modest liquids growth, do you want to give any extra color on what you think of modest? Is that high single digit, low single digit, or any extra color there?
Yeah, of course, the trick here is not to guide before we guide, but this will be mid-single digits is sort of the range. Exactly what that number is, it's a little too early to tell as we optimize. We also need to see over the next couple of months how the commodities shake out as well. Of course, we've updated the status of our hedge program as well, which has some impact. I don't want to give you a precise number because I need to actually have some sense of where price and costs are. Then we're very clear we're going to generate free cash in 2020. How we toggle growth against the commodity price to make sure we get there is what we're finalizing on now.
All right. Thank you very much.
At this time, we have completed the question and answer session. I will turn the call back over to Mr. Campbell.
Thank you, operator, and thank you everyone for joining us this morning. We're clearly excited about today's results and look forward to seeing you on the road ahead. Thank you.