Whitecap Resources Inc. (WCP) Earnings Call Transcript & Summary

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Whitecap Resources Third Quarter 2026 Results and 2027 Budget Conference Call. [Operator Instructions] And I would like to turn the conference over to Whitecap's CEO, Mr. Grant Fagerheim. You may begin.

Thanks very much, Sylvie. Good morning, everyone, and thank you for joining us today. There are 5 members of our management team here with me today are President, Joey Wong; our Senior Vice President and CFO, Thanh Kang; our Senior Vice President, Asset Development and Information Technology, David Mombourquette Chief Operating Officer,Travis Tweit; and our Vice President, Conventional division, Reserves and Reservoir Development, Chris Bullin. Before we get started today, I would like to remind everybody that all statements made by the company during this call are subject to the same forward-looking disclaimer and advisory that we set forth in our news release issued yesterday afternoon. We are once again pleased to report very strong operational and financial results for the third quarter of 2026. Our technical and operations teams continue to execute efficiently with our asset productivity once again exceeding our expectations. Third quarter production averaged 390,720 BOE per day comprised of 237,252 barrels per day of condensate, light oil and natural gas liquids and approximately 920 million cubic feet a day per day of natural gas. Production was well above our internal forecast, driven by strong base production and new well performance at Gold Creek, new wells at Cabot and better-than-anticipated base production in our conventional division. On a per share basis, production increased 5% and relative to our third quarter of 2025. Elevated light oil and condensate prices, coupled with strong operational performance, resulted in funds flow of $1.2 billion or $0.96 per share an increase of 32% per share compared to the third quarter of last year. After capital investments of $533 million, we generated $640 million refund flow in the quarter, bringing free funds flow to $1.9 billion or $1.57 per share through the first 9 months of 2026. From an activity perspective, we drive 84 wells in the third quarter, 35 in our unconventional division across our Montney and Duvernay assets and 49 in our conventional division in Alberta and Saskatchewan. With quicker cycle times, we are executing our 2026 capital program ahead of schedule. Rather than slow activity into year-end, we will maintain our current activity levels to the fourth quarter and take advantage of the elevated crude oil and condensate pricing environment. As a result, we are increasing our 2026 capital budget by approximately $100 million to $2.2 billion. These quicker cycle times, along with strong performance from our assets is prompting us to raise our 2026 average production guidance for the third time this year to 392,000 BOE per day. which equates to the fourth quarter production of 395,000 to 400,000 BOE per day. This represents a total increase of approximately 19,500 BOE per day or 5% from our original budget guidance. Incremental activity is focused on our highest return programs at Kaybob, Rotor and our Saskatchewan light oil assets, and it carries additional momentum into 2027. Increasing returns to our shareholders is a priority for Whitecap. Reflecting the strength of our business, our Board of Directors approved an increase to our annual our monthly dividend of approximately 1.5% and to $0.0617 per share or $0.74 per share annually, effective with the November dividend payable in December. Increase equates to approximately $13 million on an annual basis and follows the substantial improvement of our cost structure and our overall highly economic growth we have delivered to date. Beyond our base dividend, we continue to prioritize the balance sheet. For the first 9 months of 2026, a refinance flow of approximately $1.9 billion funded $665 million of base dividend with the remainder directed to debt. reduction. Net debt decreased by approximately $1.3 billion since year-end 2025 and now being $2.1 billion at the end of the third quarter or 0.4x net the annualized funds flow. Our balance sheet is in excellent condition, and Tom will talk through more detail shortly. Moving to our 2027 budget, we are excited to announce $2.4 billion to $2.6 billion of capital program includes the drilling of 332 total wells comprised of 127 unconventional Montney and Duvernay wells and 205 conventional wells. Delivering average production, as I said before, 400,000 to 410,000 BOE per day. On a per share basis, the budget delivers approximately 3% annual growth or approximately 5% and excluding the planned major turnarounds at Kaybob in the third quarter of 2027. Our forecast for 2027 will continue the operational momentum achieved to date in 2026 and build on recent results we've achieved managed to achieve on our asset base. Our 2027 average production forecast includes 140,000 BOE per day from our conventional division, which is more normalized leverage after a strong 2026. The designed to generate significant free cash flow in the current commodity price environment. Our unconventional division forecasted to grow by 8% to 265,000 BOE per day. And more importantly, to grow condensate production, our base of 60,000 to over 70,000 BOE per day as we anticipate demand and condensate continuing to be most topical. At strip prices, our forecast will generate $4.6 billion of funds flow and free funds flow of $2.1 billion. It is important to note that the free funds grow will increase by approximately $400 million to $2.5 billion in 2027, if the recently announced productivity mega deduction is enacted as proposed. The underbase dividend of $900 million, this would leave $1.2 billion to $1.6 billion of unallocated free funds flow. We will continue to be prudent and patient with respect to our unallocated funds lot and we'll look for opportunities to redeploy the excess funds flow through 2027. We remain diligent on looking to drive further shareholder value for longer term for the longer term. And until we feel the time is appropriate, we are comfortable parking the excess refunds flow on our balance sheet in the short to medium term. I will now pass the call on to Thanh to further discuss our third quarter financial results.Thanh?

Thanks, Scott. Petroleum and Natural gas revenues increased 45% to $2.4 billion compared to the third quarter of 2025. Third quarter WTI averaged USD $85.79 per barrel up $0.32 from last year as the conflict in the Middle East continued to stop global crude oil supply. Edmonton MSW and condensate differentials, which averaged USD 0.62 per barrel and USD 3.42 per barrel, respectively, in the third quarter were much tighter than the headline WCS heavy oil differentials, which averaged about USD 14 per barrel in the third quarter. . As a result, our realized crude oil and condensate price was $113.89 per barrel in the third quarter, an increase of 35% relative to the third quarter of 2025. Our realized NGL price increased 56% to $36.84 per barrel, driven by a higher weighting of NGL sales price on the Far East Index which strengthened our global NGL supply constraints. In total, liquids accounted for approximately 92% of our revenue during the quarter despite being only 61% of total production. AECO prices averaged $1.57 per Mcf in the third quarter, up from $0.63 last year as export pipeline maintenance restrictions were lower than in the third quarter of 2025. The benefit of our natural price diversification was again evident with our realized natural gas price averaging $2.32 per Mcf, which is 77% higher than a year ago and a $0.75 premium to AECO approximately 30% of our third quarter natural gas revenue came from sales into U.S. markets. And beginning in 2028. Approximately 5% of our natural gas production will be exposed to European TTF pricing. We continue to see the benefits of our lower cost structure. Operating costs were $10.22 per BOE in the quarter. I do want to highlight that the third quarter includes onetime favorable cost adjustments. Excluding those adjustments, operating expenses would be $11.70 per BOE which is still below both the second quarter and the third quarter of last year, reflecting lower fixed costs and higher production volumes. For 2027, we forecast operating cost in the $12 to $12.50 an per BOE range, which is compared to 2026, include higher power and fuel cost expectations and the costs associated with the KBB turnaround in the third quarter. Transportation expenses increased 10% to $3.76 per BOE, reflecting the growing weighting of our unconventional production, which is further from sales points including the U.S. markets where we receive higher realized prices. Our transportation costs are expected to remain in the range of $3.50 to $3.75 per BOE for 2027. Royalties were 14.5% of revenue or $9.70 per BOE compared to 12.2% last year, primarily on higher commodity prices. Funds flow was $1.2 billion or $0.96 per share, up 32% per share compared to the third quarter of 2025. Through the first 9 months of the year, funds flow was $3.6 billion or $2.91 per share, an increase of $0.73 in total and 30% on a per share basis. Net income was $326 million or $0.27 per share compared to $204 million or $0.17 per share in the third quarter of last year. During the quarter, we recorded an unrealized loss on commodity contracts of $333 million. This is a noncash mark-to-market movement that will fluctuate with changes in forward commodity prices. Capital expenditures were $533 million in the quarter, below our internal forecast as continued cycle time compression and operational execution are improving efficiencies. This resulted in free funds flow of $640 million, bringing year-to-date funds flow to $1.9 billion. Year-to-date, free funds flow funded $665 million of base dividends with the remainder directed to debt reduction. As a result, net debt at September 30 was $2.1 billion down approximately $450 million from the end of the second quarter and approximately $1.3 billion since year-end 2025. That represents a net debt to annualized funds flow ratio of 0.4x. We ended the quarter with no draws on our $2.5 billion credit facility and $1.7 billion of investment-grade senior notes at a weighted average interest rate of 4.76%. Our remaining $195 million of senior notes that mature in December of this year, we will anticipate using cash on hand to fund that payment. We expect to exit 2026 with net debt of less than $2 billion. Turning back to 2027 at our price deck of $80 WTI, $2 per GJ AECO and a CAD 0.71 U.S. exchange rate we forecast fees flow of approximately $4.1 billion or $3.34 per share, which generates approximately $1.6 billion of free funds flow after capital investments of $2.5 billion at the midpoint. Our guidance reflects the current tax rate of 10% to 12% of pretax funds flow. This does not include the impact of the productivity mega deduction. If enacted as proposed, the mega deduction would increase our 2027 free funds flow to approximately $2 billion. On current strip pricing, that would be closer to $2.5 billion of free funds flow in 2027. Refunds flow beyond this level provides flexibility for additional shareholder returns, which we will assess in 2027. As Grant mentioned, we take a countercyclical approach to capital allocation and have been prudently allocating excess refunds flow to our balance sheet to provide maximum flexibility to increase shareholder returns. The opportunities that are in front of us today, whether they be additional growth, share repurchases and further dividend growth or tuck-in acquisitions will be thoughtfully considered, and we will not rush into anything. I'll now pass it off to Joey for remarks on our unconventional results.

Yes. Thanks, Thanh. Our unconventional division delivered another strong quarter, drilling 35 wells in the quarter and 90 year-to-date across the Montney and Duvernay. Third quarter outperformance was led by strong base and new well performance at Gold Creek, along with new wells at Keybob. At Lator, we completed construction of our 413 battery during the third quarter and successfully commissioned and introduced production into the facility early in the fourth quarter, which was within our expected time frame and on budget. We have redirected existing area volumes and brought on our recently drilled 5 well Montney pad through the facility with throughput and on-time meeting expectations. . Our 2027 plan on Motor includes a 2-rig program to spud 22 wells and bring on 17 wells and the ramp-up up to the 413 facility capacity of 35,000 to 40,000 BOEs per day is expected to take 12 to 18 months as we incorporate learnings from our first development pads and continue to apply our established development workflows to area development. At Kaybob, our Duvernay assets have been producing at the existing productive capacity of 120,000 BOEs per day since midyear during the third quarter, our technical teams identified numerous projects to increase the productive capacity of the asset to approximately 130,000 BOEs per day in the near term, and approximately 135,000 to 140,000 BOEs per day by the end of 2027. These projects are a combination of targeted compression additions and optimization, along with process optimization that allowed for increased utilization of existing infrastructure. The realized and planned capacity improvements involve nominal capital spend as bottlenecking and targeted optimization projects often do. Our facility and production teams are constantly looking for ways to adjust our infrastructure portfolio to match characteristics of our production, and this is a great showcase of that. We will look across the balance of our portfolio for similar opportunities as well as the next material facility project. Our upcoming capital programs at Kaybob will utilize this capacity to further take advantage of the increased profitability we are experiencing in our development there. That profitability reflects better well performance, driven by improvements in both design and execution. -- inventory enhancement initiatives, such as wine racking and our ongoing downspacing pilots are further extending inventory life at Kaybob Drilling operations on 2 downspacing pilot pads are done with completion and early time flowback operations now underway. Upon success of the downspacing pilots, along with the successful wine racking initiative, the estimated value generated through our development on these lands increases by 20% to 25%, and we anticipate adding up to 2 years of additional inventory in the heart of our Kaybob asset. These improvements are being further strengthened through operational execution with improvements to frac design and the application of our real-time frac optimization we have increased our frac effectiveness by 14% on legacy Veran lands, which is contributing to stronger production results and better capital efficiency. Gains in both design and execution are products of our integrated development workflow which is built to carry concepts from identification through application and to evaluation. How far learning then transfers across our portfolio depends on the demonstrated results and how well each concept fits the asset. Each pad feeds the next. And over time, that loop has helped us identify the approach that delivers increasing risk-adjusted returns in each area. The improvements we have demonstrated in our operated results are evidence that it is working. Turning now to 2027, our unconventional division will invest approximately $1.9 billion or about 75% of our capital budget to drill 127 wells consisting of 77 Montney wells and 50 Duvernay wells. Unconventional production is forecast to average approximately 265,000 BOEs per day at 50% liquids, representing a growth of approximately 8% relative to 2026 and about 10% growth on an exit-to-exit basis. That growth is led by the ramp-up of our Lator 413 facility and by Gold Creek, Car and Kaybob continuing to go into available infrastructure capacity. One item to flag for 2027 is a planned turnaround at our 1507 gas plant and a third-party processing facility both at Kaybob in the third quarter. We expect it to impact third quarter production by approximately 32,000 BOEs per day and annual average production by approximately 8,000 BOEs per day. Condensate is a key driver of the economics of our liquids-rich Montney and Duvernay assets. In 2027, we anticipate condensate growth to 70,000 barrels per day. Condensate often trades at a premium to local light oil prices due to its required use of a diluent to transport heavy oil production and Whitecap is well positioned to capture this incremental growth and pricing opportunity. The successful execution of our 2026 capital program has now been well documented with demonstrated improvements on our capital efficiencies visible on both acquired and legacy White Cap lands. Cycle time compression has played a key role in these improvements, along with optimization of our cost structure. For the compressed cycle times, we are building on the gains we have seen from well design features such as lateral length, landing depth, as in configuration and completion design. In 2027, we are also implementing new initiatives, including dual rigs and dual frac crews on multiple pad sites. We are also scaling our data-driven execution building on the real-time frac optimization discussed earlier to improve the accuracy and efficiency of our frac and drilling programs. With our large proprietary and public well data set, we expect these tools to keep getting stronger as every new well feeds back into them. Lastly, our size and scale are benefiting our cost structure and supply certainty. Our consistent rig lines and strong operating practices make us a preferred operator and those benefits are showing through. With that, I will now turn it over to Chris to discuss our conventional assets.

Thanks, Joey. Our conventional division continued to deliver in the third quarter with strong base production contributing to corporate production of performance. Our third quarter program was active, drilling 49 gross 39.1 net wells in the quarter, up from 36, 25.3 net in the third quarter of 2025. Base production outperformed expectations, driven mainly by proactive optimization in our Central Alberta Buckanite assets, including a more aggressive drawdown strategy developed from our observation of reservoir response drawdown, this strategy applies the methodologies and learnings from our extensive analysis of the unconventional asset base. We are pleased with the subsequent reservoir response and have adjusted our development plans accordingly, lowering the near-term capital requirement of the asset. This is a good example of the strength of our diversified asset base where we can scale and transfer earnings quickly and consistently to deliver incremental value. The conventional division has outperformed expectations for the first 9 months of 2026, averaging approximately 147,000 BOE per day. Looking ahead to 2027. We plan to invest approximately $600 million or about 25% of our total capital budget and forecast a more normalized level of production at 140,000 BOE per day. Stronger-than-expected 2026 production has been incorporated into our 2027 forecast, which allows us to moderate activity levels and generate higher free cash flow. In the Peace River Arch area of Northern Alberta, our recent legal focused Harley Lake wells have continued to perform above our expectations and offset wells. With 9 months of production history now behind them. These wells we completed with our higher intensity design, have outperformed wells completed with our previous design. We are carrying forward the learnings from that frac design, along with an optimized landing depth into an expanded Charlie Lake program of 10 gross 7.8 net wells in 2027. This program will incorporate updated drilling and completion design inputs that we expect will improve productivity and enhance capital efficiency. In Saskatchewan, our short-cycle light oil-weighted assets in the Bakken Rober shirt and Viking will represent over 80% of our Saskatchewan drilling activity in 2027, with 141 gross, 132.6 net wells planned. There are -- these are plays where our technical progress is evident. Over 40% of our 2027 Saskatchewan drilling capital will be focused on open hole multilaterals across Frobisher, Bakken and Weyburn assets. The use of this technology is repeatable, high confidence design for us ranging from 2 to 4 leg wells in the Frobisher and up to 10 legs in the Bakken. Open-hole multilateral drilling is core to how we develop our Saskatchewan assets and our confidence comes from a deep understanding of the subsurface and technical rigor. When we are drilling up to 3 miles out and treating each leg through the target zone, success depends on reservoir characterization, geosteering and precision in operational execution. We continue to look for more opportunities to deploy open-hole multilateral technology across our portfolio. The division is further supported by approximately 50,000 barrels per day of aggregate waterflood and EOR volumes that have an average decline of approximately 12%. Waterflood and UR initiatives are ongoing, and we continue to advance projects within our portfolio that strengthen our base. Since the beginning of 2026, we have increased production from existing assets under waterflood by approximately 2,000 barrels per day through our rigorous technical workflows, providing greater long-term sustainability of our asset base. On an overall basis, our conventional assets are approximately 80% oil weighted and the economics of these assets are extremely strong in the current commodity price environment. Continuous improvement in operational execution and well performance along with inventory enhancements such as drilling design, lateral placement, 1- to 2-mile inventory consolidation and additional lateral length extensions are further improving the long-term profitability of these assets. With that, I'll turn it back over to Grant for his closing remarks.

Thanks very much, Thanh. Joey and Chris for your comments. And before we close, I want to summarize our outlook for 2027. And our 2027 budget invest $2.4 billion to $2.6 billion, with approximately 75% allocated to our unconventional division and 25% to our conventional division to deliver average production growth to 400,000 to 410,000 BOE per day. That translates into approximately 3% production per share growth of approximately 5%, excluding the planned turnaround at Kaybob in the third quarter. . At current strip pricing, WTI pricing, the budget generates approximately $2.1 billion of refunds grow and up to $2.5 billion if the productivity mega duction is enacted as proposed. Whitecap ongoing improvements in operational execution, lower cost structure and production growth are becoming out of time when elevated light oil and condensate prices are further increasing our profitability. But beyond the current price environment, Canada is increasingly well positioned to grow its share of global energy supply. Additional pipeline egress is opening new markets for Western Canadian crude oil and the federal government's recently announced productivity mega deduction is expected to materially improve the competitiveness of the investment in the Canadian energy sector. At the same time, oil sands growth, LNG exports and power demand from data centers are expected to drive demand for each of Whitecap 3 core products, light oil, condensate and natural gas. Whitecap is fortunate to have scale in all 3 we are the fifth largest oil and condensate producer in Canada, and over 90% of our oral and condensate production exposed to light oil and condensate pricing, which has strengthened relative to WTI. As the fourth largest condensate producer in Canada, we are positioned to supply the diluent needed to transport growing oil sands volumes and approximately 75% of our 4,700 Montney and Duvernay drilling locations are liquids-rich, providing the inventory to support further demand-driven growth into the future. Approximately 30% of our third quarter natural gas revenue came from sales into U.S. markets. And beginning in 2028, we approximately 5% of our natural gas production will be exposed to European TTF pricing. Longer term, the rest of an area provides significant natural gas optionality with over 1,000 undeveloped locations under management. With deep inventory across all 3 products, available infrastructure capacity and exceptionally strong balance sheet, ECAP has the flexibility to direct the highest return opportunities as these markets develop. We also have the track record to back up our approach. Since we closed the Baron transaction in mid-2025 and we have executed on our strategy, delivering annualized production growth of over 5%, reducing our debt by $1.2 billion and returned $1.5 billion of free funds to shareholders to the base dividend and share repurchases. We are extremely excited to finish off the balance of a great 2026 and deliver on our stated goals for 2027. On behalf of our employees, our management team and our Board of Directors, I want to thank you our shareholders for continuous support and confidence. With that, I will now turn the call over to the operator.

[Operator Instructions] First question will be from Travis Wood at National Bank.

You mentioned some comments around the Q3 turnaround. Would you be able to provide any kind of incremental commentary if you could? And do you see some opportunity to redirect some of those volumes during that downtime given some maybe capacity flex in the area? .

Travis, thanks for the question. Yes, first and foremost, like we said, there the 2 facilities in the area, 1 operated by us, 1 operated by a third party. And again, both coinciding in the third quarter there, you see the volumes back up in the quarter itself. With respect to some background behind it. I think most will be aware, but worth highlighting that plan maintenance, and that's what the turnaround is a core part of our business. We plan around these things. They come in predictable cycles and we optimize all things around it being the cost it takes to do them, the time associated with it, and therefore, the lost productivity. And then to your question there, the back part of your question, Travis, our ability to mitigate those downtime events. What we've included in the 32,000 BOEs per day of downtime in the quarter or 8,000 on the year, actually is net of our efforts to do that our anticipated efforts, I should say. With that said, will we see further opportunities to further either offload or mitigate those impacts through like I say, offload or compressing the time associated with doing it. Of course, we will. But at this stage, that's our best estimate for the impact.

Okay. And I might have missed it. Was there -- did you guys disclose the days during the quarter in terms of downtime?

We didn't Travis. And again, we decided it's a better perspective to give to the world kind of the impact of the net barrels because effectively, that's what's going to be impacting, of course, production and therefore cash flow in the quarter. the days themselves will again be looking to work not just with our own teams and associated contractors, but of course, third party as well to make sure that we've optimized around that, and we've brought it down to as few days as possible, as you might imagine, Travis.

Okay. No, that's fair. I was trying to figure out if there was -- or rather how much upside would be associated with that if it was ahead of schedule. So I'll leave that there. And then last question, probably for Thanh. You shared color in the opening remarks around the debt reduction. I think that was probably ahead of forecast as we think back to the start of the year in terms of debt the pace of debt reduction. . You've commented that the return profile for next year might lead more to a return of capital. But could you help us with some guardrails with respect to kind of debt levels, how you're thinking about buybacks in this commodity price environment given where we're sitting and just kind of help us understand how we could look at the pace of an NCIB through 2027.

Yes. No -- thanks for that question there, Travis. As we think about free cash flow allocation in 2027, as you know, we take a countercyclical approach which means in an elevated pricing environment there, we do prioritize delivering on the strength of the balance sheet and then looking for opportunities to redeploy that in 2027 you're right, our leverage is quite low at this particular time. At the end of this year here, we're expecting our debt to be $1.8 billion, which is 0.4x debt to cash flow there. As we look out into 2027, on strip pricing and including the impact of the productivity mega deduction there. Our free cash flow will be about $2.5 billion so there's $900 million that we would be allocating to the dividend, including the increase that we recently announced here effective with the November dividend -- but there's a lot of optionality that's remaining for us to allocate that excess cash, whether that's towards additional growth projects, specifically around improving our long-term sustainability being able to mitigate our decline rate, dividend enhancements, share repurchases or even smaller tuck-in acquisitions as well as continuing to put cash on the balance sheet there. So those are all the options that are available to us. I would say, specifically around the share buybacks, they remain very compelling for us. And there's a few different reasons for that. Number one, as we look at reducing our share count, it is a permanent improvement to our capital structure. Not only does it enhance our per share growth metric but it also improves the sustainability of the dividend longer term as well there. And you have to keep in mind that when we look at the inventory set that's in front of us, only 30% of our inventory is currently booked. So there's a huge opportunity for us to continue to increase our net asset value as we move through time. So we'll continue to remain very disciplined and patient with deploying that excess cash so we'll look at those opportunities as we move through 2027.

And not to hold you to it, but there is a scenario given if commodity prices continue to stay at these levels through at least the first half of the year, there is a scenario from reading between the lines that debt repayment will continue to be the priority to lead more flexibility if there's a pullback in the commodity and then lean into the buyback at better parts of the cycle?

Yes. I think there's opportunities to -- certainly in the short to medium term to park that excess cash on our balance sheet. But our objective is in 2027, there to redeploy it to enhance returns for our. Shareholders.

Next question is from Dennis Fong at CIBC.

My first 1 follows a little bit along the lines of what Thanh was discussing here. But a shift will the focus a little bit. So I'm just curious in terms of the PMD, you mentioned it a few times, how does the potential implementation of this productivity, mega deduction, influence, we call it, investment opportunities as well as how do you guys think about balancing, call it, short-term quick payback projects like those seen in the unconventional or is kind of the longer-term opportunities like waterflood or EOR.

Yes. So it's Thanh here. With respect to the PMD, the way that it works is it needs to pass second reading because we're in a majority government currently here. before we start reporting the benefits on our financial statements. So just a bit of a quick refresh. What that allows us to do effectively is on our drill complete equipment tie-in costs there, specifically on the CDE instead of being 30% deductible on a declining basis, it's 100% deductible in year 1. . So really, that improves the economics on our capital program quite significantly, especially from an NPV perspective. I think we're that becomes, I think, more important as we think about our conventional division is we have a big opportunity set in front of us in terms of enhanced oil recovery, which really helps the long-term sustainability of the business. low decline generates a ton of free cash flow and low capital investment ratios there. So the PMD really accelerates the payout of those type of projects. So there will be opportunities for us, and it's an internal process that we're going through right now, looking at those projects that we could potentially accelerate in this pricing environment, but also taking in context the fact that for every dollar that we spend, it's 100% deductible now.

Just to further add Denis we're talking about the productivity mega deduction at this particular time, we did not work it into our capital program or our budget for the year. We're growing production 5% from fourth quarter to fourth quarter, $26 million to $27 million already at the high end, and that is including the average that we have at 3% includes that 32,000 BOE per day of downtime in the third quarter that we'll try, as Joey said, try and eliminate but when we look at the conventional portion of our assets, our base plan, we'll look to enhance that. If we do get final reading out, will enhance per share growth as we've done in 2026 with operational performance. but stability and long-term sustainability of the conventional assets has put us in a wonderful position at this particular time with the excess free cash flow. So we'll continue to look forward on that into '27. Certainly, we're not completed, and this is a budget outlook that we provided at this particular time.