Crescent Energy Co

NYSE:CRGY

Earnings Call Transcript 2021-Q4

[Operator]

00:06 Greetings. Welcome to the Crescent Energy 2021 Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] 00:25 I would now like to turn the conference over to Emily Newport, SVP of Finance and Investor Relations. Thank you. You may begin.

[Emily Newport]

00:36 Good morning and thanks for joining Crescent’s 2021 earnings call. A brief prepared remarks today will come from our CEO, David Rockecharlie; and our CFO, Brandi Kendall. Todd Falk, Chief Accounting Officer; Ben Conner, and Clay Rynd, both Executive Vice Presidents are also here today and will be available during the Q&A session. 00:57 Today’s call may contain projections and other forward-looking statements within the meaning of the federal security laws. These statements are subject to risk and uncertainties, including commodity price volatility, the continued impacts of COVID-19, geopolitical conflicts, including in Russia and Ukraine, our business strategies and other factors that may cause actual results to defer from those expressed or implied in these statements and our other disclosures. 01:25 We disclaim any obligation to update any forward-looking statements after today’s call. In addition, today’s discussion may include disclosure regarding non-GAAP financial measures. For reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measures, please reference our 10-K and earnings press release available on our website. 01:46 With that, I will turn the call over to David.

[David Rockecharlie, Chief Executive Officer]

01:49 Great. Thanks Emily and good morning everyone. We appreciate you joining us today on our first earnings call as a public company. For our company, 2021 was truly a transformational year. We issued our inaugural bond offering in April, we announced the merger with Contango in June, and were publicly listed in December. 02:11 Last month, we announced the accretive acquisition of EP’s Uinta Basin assets, and we continue to advance our ESG strategy. Before we discuss our 2021 results and this year’s outlook, I want to take a moment to ensure you appreciate our strategy and the attractive and differentiated investment opportunity that Crescent presents. 02:33 The guiding principles behind all of our decisions are quite simple. Cash flow, risk management, and returns. Our model is unique, combining an investor mindset with deep operational expertise and we have successfully executed this strategy for nearly a decade. 02:54 Cash flow is the foundation of our business. We have a large diversified and low decline producing asset base that generate significant free cash flow. I hope you've had a chance to review our 2022 outlook and recognize the scale and stability of the business. 03:12 Assuming nine months contribution from the Uinta acquisition, our 2022 estimated adjusted EBITDA is nearly $1.2 billion with $425 million of projected levered free cash flow, at $75 per barrel oil. 03:31 Our proved developed PV-10 is more than $5 billion at SEC pricing of $66 a barrel of oil, with an industry leading PDP decline rate of only 21%. We have a proven track record in effectively managing risk to protect asset value, generate strong returns, and pursue profitable growth. 03:56 We maintain low leverage and a strong balance sheet. We utilize hedging to protect cash flows and our capital investment decisions. We acquire and develop a diversified portfolio of low risk assets, and we don't pursue any exploration. 04:14 We also recognize the energy market is in long-term transition, and we're committed to continuous improvement on ESG measures as a core part of our strategy. Disciplined capital investments allow us to generate strong cash returns and we have a well-defined framework of returning cash to shareholders through consistent dividends. 04:36 We approach capital decisions from a risk adjusted returns perspective for both organic and acquisition opportunities. On the organic side, we have 10 years of high-return inventory in the Eagle Ford and we believe the recently announced Uinta acquisition will provide a similar multi-year drilling inventory. 04:59 While we have ample runway on our existing asset base, we do not simply drill to grow production. We focus on generating sustainable returns. This means we scale back our capital program when commodity prices are low or when the returns do not justify the investments. 05:17 On the acquisition front, Crescent is well positioned to participate in what we believe is an attractive market for industry consolidation. On top of our stable base business and dividend, we continue to see a substantial opportunity to drive shareholder value through accretive acquisitions that add cash flow and net asset value at attractive valuations. 05:42 We've completed nine transactions in the last two years, or as we think about it approximately one per quarter. In-line with our acquisition strategy, we are very excited about our accretive entry into the Uinta Basin of Utah. The assets are a great addition to our existing Rockies footprint and will have substantial cash flow while maintaining our strong balance sheet. 06:07 The Uinta acquisition provides a scaled, largely contiguous, 145,000 net acre position in the oil window of the Uinta Basin with high margin oil production, low operating costs, and substantial cash flow. The asset is nearly 100% operated, with greater than 80% working interest. 06:30 At $75 per barrel of oil, we project the assets will generate annualized 2022 adjusted EBITDA of roughly $425 million, and $100 million of free cash flow. About 85% of expected EBITDA comes from existing production or drilled, but uncompleted wells, providing a lot of certainty around the cash flows from the assets. 06:58 We were able to acquire this asset at an attractive entry point. The $815 million purchase price represents a cash flow multiple of less than 2x 2022 estimated projected adjusted EBITDA, and an approximate 1x multiple to our estimated proved developed PV-10 of [$800 million] [ph] assuming SEC pricing of $66 per barrel of oil. 07:26 In addition to substantial PDP, we also acquired a multi-year inventory of high quality oil weighted undeveloped locations and see about $1.5 billion of potential future development opportunity on the asset. 07:42 The Uinta into is a well understood basin with substantial existing production and a significant amount of resource in place. Offset operators have demonstrated the potential across multiple stacked reservoirs and highlighted the opportunity to improve performance and profitability with the application of modern completion designs. 08:03 The Uinta transaction aligns well with our goals for any acquisition. position. From a financial perspective, it is accretive, leverage neutral, and allows us to significantly increase the scale of both our free cash flow and adjusted EBITDA. 08:19 The transaction also meets our strategic goals of increasing operatorship and production from our Eagle Ford and Rockies regions and maintaining our industry leading PDP decline. On a combined basis, we estimate that 70% of our 2022 production will come from the Eagle Ford and the Rockies regions. 08:41 Before turning the call over to Brandi, let me quickly comment on our commitment to ESG and its integration into our business. We've achieved several important milestones, despite only being public for three months. 08:56 In December, we issued our inaugural ESG report in accordance with FASB standards and announced the formation of an ESG advisory council to advance our ESG efforts. In February, we joined the Oil & Gas Methane Partnership 2.0 initiative or OGMP 2.0. Reducing emissions is critical to slowing the impact of climate change. 09:22 The first step to methane reduction is high quality measurement data, and the OGMP 2.0 framework is among the most rigorous. Our membership will aid efforts to create targeted emissions reductions programs, perform accurate reporting, and establish us as a leader in emissions reduction. We view all of this as a core part of our business strategy. 09:46 With that, I'll now turn the call over to Brandi to cover our 2021 results and 2022 outlook.

[Brandi Kendall, Chief Financial Officer]

09:53 Thanks, David. Before I turn to our results for the 2021 period and our 2022 outlook, I would like to provide an overview of our capital allocation strategy. Priority 1a and 1b is the dividend and balance sheet. We allocate free cash flow to our shareholders in the balance sheet before making any capital investment decisions. 10:13 Today, we announced our first dividend as a public company, $0.12 per share for the fourth quarter of 2021. We target a dividend equal to 10% of adjusted EBITDAX, which we referred to as fixed within a framework given the inherent stability of our business with our low decline rates, our low leverage, and a robust hedge book. 10:34 Unlike many of our peers, our dividend framework is based on a percentage of EBITDA not free cash flow, so it is not impacted by decisions on our capital program. We paid consistent dividends to our private investors for nine years and will continue the same consistent dividend policy as a public company. 10:50 We expect our quarterly dividend will increase to $0.17 per share upon closing of the Uinta Basin transaction based on our 10% of EBITDAX framework. On the balance sheet, we exited the year at 1.3x net leverage in-line with our long-term goal of 1x. Over the past decade, our leverage has averaged 1.2x while making consistent acquisitions and facing volatile commodity price environments. 11:15 We know the importance of a strong capital structure and it allows us to weather the commodity price cycles inherent in this business. Only after the dividend and balance sheet do we think about reinvestment securities both on our existing footprint and through potential acquisitions. 11:29 Due to the stability of our business, we are uniquely positioned to evaluate all of our investment decisions on a purely risk adjusted returns driven basis. Depending on broader market conditions, we can and have elected to delay drilling when single well returns do not support our targeted return thresholds. In fact, we paused our development activity in 2020 and the half of 2021 when commodity prices were depressed and returns didn't meet our targets. 11:57 We are uniquely positioned to do this, given our low base decline and [high HBP] [ph] nature of our inventory. We’ve historically invested approximately 45% of EBITDAX on average on organic development opportunities. And in stronger commodity priced markets like today's, we develop our low risk inventory and draw on our substantial proven resource base and strong drilling capabilities. 12:21 Our hedge strategy supports our disciplined approach to capital allocation and the stability in our business. The hedge program is designed to achieve two key goals. First, we focus on protecting our balance sheet. We hedge a portion of our PDP cash flows to allow us to repay our debt with hedged cash flow within the tenor of our hedge book in a downside scenario. 12:42 Second, we lock in expected returns when we commit capital to drilling or acquisitions. Consistent with the strategy upon signing the Uinta transaction, we entered into additional oil slots covering about 80% of our acquired [Uinta PDP] [ph] for a three-year period. 12:58 On a combined basis for the Uinta transaction, we are approximately 60% hedged in 2022. Our hedge book provides near-term downside protection, but also provides long-term exposure to future commodity prices and we only have roughly 10% of our proved developed reserves are currently hedged. We achieved impressive results in 2021. 13:21 Proforma for the combination of Contango and Independence, we generated roughly $680 million of EBITDAX and $385 million of levered free cash flow in 2021 after 230 million of development capital. We exited the year at 1.3x net debt to proforma adjusted EBITDAX, and Crescent produced 116 net MBoe per day in December 2021. 13:49 Turning now to the Uinta transaction and combined guidance. We plan to initially fund the transaction with borrowings on the revolver and cash on hand. Our lenders authorize an increase of the elected commitment amount under the existing revolving credit facility to 1.3 billion from $700 million contingent upon closing. 14:10 We estimate the adjusted purchase price, assuming a March 31 closing date is roughly $700 million based on customary purchase price adjustments. We announced the 2022 capital budget of $600 million to $700 million assuming nine months of Uinta capital on our books. This budget reflects an approximate 1-rig program in the Eagle Ford, a 2-rig program in the Uinta Basin and modest non-op activity. 14:38 To operate Eagle Ford program includes 32 to 38 gross wells with greater than 90% average working interests. As I mentioned earlier, we’ve paused Eagle Ford development in 2020 and early 2021, and restarted activity in mid-2021 so that 2022 budget reflects some rollover over activity and one-third of the Eagle Ford wells will come online towards the end of the first quarter. 15:00 The impact to production will occur in Q2 and we expect our standalone ex-Uinta CapEx guidance of $400 million be weighted towards the first half of the year. EP Energy is currently operating 2-rigs in the Uinta and our proforma capital guidance reflects this rolling pace. 15:18 Like others, we are seeing inflationary pressures across the business. Our people are some of the best in the industry and we are finding new ideas to safely offset some of these pressures. 15:29 We have factored expected inflation in our outlook today. Crescent is well-positioned, relative to our peers to whether this inflationary period as our cash flow is weighted towards PDP production, which is less impacted by inflationary pressures than drilling at completion activities. 15:47 Specifically on operating expense per Boe, I would note that our guidance includes certain costs that are indexed to commodity prices, including production taxes, and certain another input costs such as CO2 purchase costs related to our CO2 flood asset in Wyoming. Our guidance figures for OpEx per Boe are based on $75 per barrel WTI and $3.75 per MMBtu Henry Hub pricing, but a portion of these costs move in tandem with oil commodity prices. These higher costs are expected to be offset by higher price realizations. 16:22 On a combined basis for the Uinta acquisition, we project 2022 production of 134 to 148 MBoe per day. Assuming $75 oil and [375] [ph] natural gas, we would generate 1.15 billion of adjusted EBITDAX and 425 million of leverage free cash flow in 2022 at the midpoint of guidance. This transaction would allow us to increase the $0.12 dividend we announced today to $0.17 per share. 16:53 In summary, we believe Crescent is well positioned in today's market with significant stay up scale and industry leading decline rate and attractive dividend program. 17:02 With that, I'll turn the call back to David.

[David Rockecharlie, Chief Executive Officer]

17:04 Thanks, Brandi. Before we take your specific questions today, let me quickly summarize today's key highlights. First, we have a proven strategy to deliver long-term value to investors. We've been successfully executing this strategy for the last decade. Our strategy is simple and unwavering. We are focused on cash flow, risk management, and returns. 17:28 Second, we are a large scaled business with $1.2 billion of projected 2022 adjusted EBITDA and proved developed PV-10 of over $5 billion and SEC pricing. We have a deep inventory of low risk, high return drilling opportunities, scale is incredibly important to being competitive in today's E&P industry, and this is one of the key factors driving consolidation across our industry. 17:56 Lastly, we have a proven track record of adding value through quality acquisitions. Our people are able to identify accretive opportunities that play to our operating strengths, capture financial and operational synergies, and maintain our strong capital structure. 18:13 Thanks again for joining us today and for your investment in our company. We will now be happy to take your questions. Operator?

[Operator]

18:21 Thank you. [Operator Instructions] Our first question comes from the line of Tarek Hamid with J.P. Morgan. You may proceed with your question.

[Tarek Hamid, J.P. Morgan]

18:54 Good morning and thanks for taking my question.

[Brandi Kendall, Chief Financial Officer]

18:58 Hi, Tarek. Good morning.

[Tarek Hamid, J.P. Morgan]

19:00 It's obviously a very complicated for quarter with the transaction in only a 25 day stub period, but sort of walking through the math, I get to roughly 240 million of kind of true proforma EBITDA, if the transaction didn’t close this is start of the quarter. As I look at that kind of versus the 2022 guidance, I just wonder if you kind of help me understand, sort of how to bridge that to the standalone guidance? I assume a big part of it is the hedge book versus also guidance being at $35 below strip pricing at this point, but anything you do to help would be appreciated?

[Brandi Kendall, Chief Financial Officer]

19:35 Hey Tarek, it's Brandi. Thanks for the question. So, we announced proforma 2021 EBITDAX of 682. On a standalone basis it is 800 to 850. I would agree with you that it's largely related to an increase in our hedge book. We were hedged at just over $50 a barrel for 2021 and the hedge book increases to [16] [ph] in 2022, so largely attributed to the increase in the hedge book.

[Tarek Hamid, J.P. Morgan]

20:03 Got it. And then I think you touched on this Brandi, but in terms of production cadence, I think you had a note in the release that you, sort of, it was kind of 115, it’s probably close to 120, I guess if you sort of do the math correctly on the stub period, could just may give a flavor for what that kind of looks like first quarter then heading into sort of hopefully at closing on the Uinta transaction?

[Brandi Kendall, Chief Financial Officer]

20:28 Yes. So, I agree that we're probably closer to 120 from an exit standpoint, if you account for the Contango production, for the period of time which we actually owned it. We did mention in guidance that we expect roughly a third of our Eagle Ford wells to come online in the first quarter. I will note that towards the end of the first quarter so that production and cash flow will really impact 2Q forward.

[Tarek Hamid, J.P. Morgan]

20:59 Got it. And then maybe just a bigger picture question. Obviously, the Uinta, sort of trade came up relatively quickly, but obviously in a very interesting environment, I’d say at least just with commodity prices and sort of buyers and sellers and can any flavor that you guys have in terms of kind of what’s out there from a potential transaction target standpoint? And kind of anything that you, sort of, think is worth, kind of highlighting at this point?

[Ben Conner, Executive Vice President, Investments]

21:28 Hey, Tarek, it's Ben. It's a good question. I'd say, the big thing that we’ve seen coming into the year and expect to see is that there's going to be a large supply of assets continuing to come to the market with a backdrop of really no capital formation in the space. So, we think that that does continue to set up a pretty interesting acquisition market. 21:49 Having said that, though, I would say that obviously with the recent volatility, we would expect that to potentially put a little friction on the market just in terms of timing of getting deals done and just [indiscernible] spread in the context of that volatility. What I would tell you is that, we do expect people to be opportunistic and continue to look to find liquidity in this market. And so, we do expect to see a large supply. 22:14 Our focus continues to be around our two business segments, which is our low decline conventional, as well as our mid-cycle, which is reflective of the Uinta acquisition. We've been very successful over the last 12 to 18 months buying low decline production where there's really just been less of a bid for those assets, but we expect to see a kind of a steady supply, kind of in both segments, and we think that our strategy sets up for us to be pretty opportunistic there. And so, the curve is still heavily [indiscernible] with our risk management strategy. 22:45 We think were able to continue to capture things at interesting risk returns, but we continue to watch the back of the curve, which is certainly moving up here over the last quarter. Clay, I don't know if you’d anything else to that.

[Clay Rynd, Executive Vice President, Investments]

22:59 I think that's right.

[Tarek Hamid, J.P. Morgan]

23:02 Well, thanks, guys. I appreciate it. And congratulations again on your first earnings call as a public company. I'll now get back in the queue.

[Brandi Kendall, Chief Financial Officer]

23:10 Thank Tarek.

[Ben Conner, Executive Vice President, Investments]

23:11 Yeah. Thank you.

[Operator]

23:14 Our next question comes from the line of Joseph Mackay with Wells Fargo. You may proceed with your question.

[Joseph Mackay, Wells Fargo]

23:21 Hey guys. Thanks taking the questions. Just kind of curious to get your thoughts around how you envision incremental cash flows coming in from higher commodity prices, just thoughts around the dividends, debt reduction, continued M&A activity, just any color you can provide there?

[Brandi Kendall, Chief Financial Officer]

23:47 Hey Joe, it's Brandi. As we’ve talked about before, with respect to our capital allocation strategy, our priority is that the balance sheet and the dividend, just a reminder from a dividend standpoint, we set the annual dividend at the beginning of the year based on guidance pricing and our 10% of EBITDA framework. That obviously resulted in $0.12 a share, which we announced earlier this morning. 24:11 If we do generate more free cash flow at higher prices, we'd expect to pay down additional debt and selectively pursue accretive acquisitions. So, no intention in the near-term to increase the dividend outside of obviously the Uinta Basin transaction that we announced us going from $0.12 to $0.17.

[Joseph Mackay, Wells Fargo]

24:34 Got you. Okay. That helps. And then maybe, just kind of touching again on the M&A front, can you just kind of talk about what you're seeing, you know industries in consolidation mode, just kind of what you're seeing out there in terms of other potential opportunities, and how that's being shaped by the higher commodity prices that we're seeing today?

[David Rockecharlie, Chief Executive Officer]

24:58 Yeah. Hey, it's David. I'll give you a quick high level, and then I'll let Ben and Clay be a little more specific. I think one thing to highlight is that we typically see 150 to 200 transactions a year come across kind of the business. We'd expect to be at the high-end of that this year. As you heard us say, we typically on average have done three or four deals a year, so low-single-digit percentage of conversion on any of those. 25:30 So, at a high level, the market environment looks attractive from the supply. We have a pretty low probability of getting things done in general and any particular thing we're looking at. The one thing I would highlight, I think different in this market environment and may specifically address your question. 25:49 There's sort of two sellers in this market environment. They're are the sellers who have a very strong keep case and are looking to get paid for $100 oil and then there are sellers who've been invested for a long time and have decided to reshape either their portfolio or just exit their position. And they just want to get paid for this environment in general relative to a $40 environment that existed before. 26:14 And so, you can definitely assume that what we're looking for is to be patient and sort of find attractive sellers who are looking to just exit into the environment rather than opportunistically top check things. And that's always a challenge when things move this quickly on price line.

[Joseph Mackay, Wells Fargo]

26:35 All right. Thanks. That helps. Thanks for taking my questions.

[David Rockecharlie, Chief Executive Officer]

26:40 Yeah. Thank you.

[Operator]

26:44 Our next question comes from the line of Gregg Brody with Bank of America. You may proceed with your question.

[Gregg Brody, Bank of America]

26:50 Hi, good morning, guys. Just starting with – for the transaction that you announced, the Uinta transaction, what is performing your maintenance CapEx for the [indiscernible] asset profile? And just as you answer that question, can you talk a little bit how you do think about potentially growing? I know you said where cash will be allocated prioritizing for debt. Repayment in the acquisitions, but how do you think about allocating more capital to growth? And is there a point where it makes sense?

[David Rockecharlie, Chief Executive Officer]

27:29 Yeah. Hey happy to take the question. Obviously, we're adding an asset where EP is currently actively and we expect to continue to be active. And so, as we kind of look at that, you know, look where we continue to maintain a low decline, but as we look at the asset kind of roughly we kind of, in this environment, where prices are, kind of $500 million to $600 million tightening in its capital business. 27:54 And so, I think, as we've talked about before on our strategy, we're extremely focused on returns on capital and really strong operational execution. So, I think as we sit here today, running a rig in the Eagle Ford and [then two] [ph] in the Uinta, is kind of, where we would see ourselves continue to be. 28:13 So, and from a pro-rata perspective, I think that's between those two basins is largely where our capital will be going for the foreseeable future. I think that’s close to 85% of our proforma capital spend would be between those two basins. So, I think it's fair to kind of think in this environment. We'd be at a consistent pace and not looking to really expand beyond that.

[Gregg Brody, Bank of America]

28:34 That's with – you said $500 million to $600 million, you your budget is $600 million to $700 million this year. So that implies some proforma growth, is that right? And then just, is that, should be thinking that you won't be able to have a low growth strategy from here into 2023 and 2024, assuming things stay where we are?

[Brandi Kendall, Chief Financial Officer]

28:55 Hey, Gregg, it's Brandi. So, it doesn't imply some slight growth for the year. I will also just highlight given we just restarted our capital program in the Eagle Ford and the back part of 2021 there is some, kind of carryover capital that's coming into 2022, which just makes it a little bit noisy, but I think spends right in the $500 million to $600 million range is a good maintenance level for us going forward.

[Gregg Brody, Bank of America]

29:25 Got it. And as you said, one in Eagle Ford, two in Uinta that's 85% of your capital, is the – [indiscernible] infrastructure or is that for not-op or could you explain what that is?

[Brandi Kendall, Chief Financial Officer]

29:37 Yes. Mostly non-op for the remainder.

[Gregg Brody, Bank of America]

29:43 When you guide your, that 85% that you say is Eagle Ford and Uinta that includes equipment and it’s a full [DC&E] member or…?

[Brandi Kendall, Chief Financial Officer]

29:55 Correct. [Indiscernible].

[Gregg Brody, Bank of America]

29:59 Look, you are public now, obviously, you have a unique structure. I know management is centralized, with shares, I'm curious if you can think of just kind of help for the new investors here, and how do you think, how do you benchmark your incentives versus the general public market? Pluses and minuses, are you thinking about making any changes? Be interested to hear your thoughts now? If there is any updates?

[David Rockecharlie, Chief Executive Officer]

30:25 Yeah. Happy to take that. It’s David. I'll call it – no updates or changes from what's been disclosed. Happy to your point to just cover it again from how we think about it. We think that two things are important: one, the absolute level of I'll call it, cost in the business needs to be in-line or better than market. And then secondly, the incentives to management should be heavily driven by performance. And so, in the first case, when we benchmark ourselves and the public data that is out there from the industry, we think that the overall [Technical Difficulty] operating costs of the business associated with management are in-line or better than the peers. 31:28 And then on the performance and incentive compensation, it's 100% stock based and it's 100% performance based, which we think is unique in the sector. There's no time based vesting or anything like that. So, just as a reminder for everyone on the phone, 60% of the potential long-term incentive on the equity side is based around total shareholder return, which has a minimum of an 8% IRR, and the second piece of that, which represents 40% of the long-term incentive comp is a requirement to have strong relative value performance compared to peers. 32:13 So, we feel great about how that compares. We also feel motivated by the opportunity to do good work and have performance for the shareholders and all the investors also be well aligned with how management is compensated.

[Gregg Brody, Bank of America]

32:30 And you talked about you shareholder return strategy. I appreciate the limited flow that makes it difficult to buy back shares, but is there clearly where your stock is traded, it definitely points to that might be a good use of capital? Is this shareholder program, is a buyback, just not [indiscernible] contemplate today or is it something maybe be in the future you might?

[David Rockecharlie, Chief Executive Officer]

32:55 Yes, I think in the current mindset and market environment, we're all about two things. One, really transitioning the company from, I'll call it smaller market capitalization that Contango had pre-merger into, I'll call it institutional recognition both on the research, as well as the investor side that would be more typical of a company of this scale. And I think that's, [long sure short] [ph] we're focused on creating incremental liquidity, as well as awareness and coverage of the company. 33:38 In terms of what we would do with the cash and in particular, obviously we have a very strong focus on free cash flow. As Brandi said, we're focused on maintaining the historical framework for the dividend, which we've announced now publicly. And so, we're very – actually excited to deliver the first cash payment through dividends to the public investors of Crescent. 34:05 And secondly, it's going to be all about the balance sheet. We think in this type of environment, the free cash flow available to the business should be really strengthening the value proposition of the company and that includes the balance sheet. So, I think you can assume that we're going to really heavily focus there and no change in that strategy from what we’ve historically done.

[Gregg Brody, Bank of America]

34:26 I got it. And last question for you. I think you're assuming some inflation in there. Could you give us a sense of how much you're assuming right now?

[Brandi Kendall, Chief Financial Officer]

34:36 Yeah. So, we are experiencing, as you can imagine similar impacts as the rest of the industry. We've embedded all of the known inflation into our guidance. I would say in the range of 5% to 10%. I will note so given we have a really large base decline and we're only really running one rig today, and three rig proforma for Uinta, our cash flow is weighted towards PDP production, which is less impacted by these inflationary pressures.

[Gregg Brody, Bank of America]

35:07 And that's 500 million to 600 million of maintenance CapEx that includes the 5% to 10% inflation?

[Brandi Kendall, Chief Financial Officer]

35:13 That's right.

[Gregg Brody, Bank of America]

35:15 Right. Thanks for the time guys and welcome to the public markets.

[Brandi Kendall, Chief Financial Officer]

35:19 Thanks you Gregg.

[David Rockecharlie, Chief Executive Officer]

35:20 Thank you.

[Operator]

35:23 At this time, we have reached the end of the question-and-answer session, and that also concludes today's conference call. Thank you everybody for participating. You may disconnect your lines at this time. Thank you for your participation.