The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Holly Meredith Barrett Stewart - Scotia Howard Weil, Research Division - Analyst
: Maybe just a follow-on to Neil's question. So for Tom or Scott, any items to highlight as you guys have kind of sat down and rolled up your sleeves
that maybe you didn't think about as you put these 2 companies together?
Question: Holly Meredith Barrett Stewart - Scotia Howard Weil, Research Division - Analyst
: Well played. Maybe my follow-up just on M&A, there appears to be a lot of assets hitting the tape, both on the oil and gas side of things. And
certainly, on the gas side, there are some things that might fit into the legacy Cabot footprint. Without speaking, I guess, of the specific assets,
could you just comment on your appetite for M&A maybe and gas M&A along with that?
Question: Leo Paul Mariani - KeyBanc Capital Markets Inc., Research Division - Analyst
: Just wanted to follow up a little bit on a few of your comments here. Certainly, I guess you guys have pledged to return 50% of basically cash flow
to shareholders here. And just want to get a sense if we continue to see just a very robust commodity tape as we roll into '22, it sounds like that
number could be a fair bit higher than that. You guys did talk about discipline. So it sounds like you're not planning on all that much growth for
'22, so commodities are high. Just given the fact that balance sheet is really strong, it just sounds like we could be expecting certainly some increases
in the returns here. Is that generally how I'm hearing here?
Question: Leo Paul Mariani - KeyBanc Capital Markets Inc., Research Division - Analyst
: Okay. That's helpful. And I just wanted to touch base on a couple -- number of questions here. So certainly noticed that Cabot standalone LOE was
up a little bit in third quarter. So I just wanted to get any kind of color around that, if that was more maybe onetime in nature. And then just from
a high-level perspective, I know you guys did provide some guidance on deferred taxes here in the fourth quarter, which is helpful. But would you
guys continue to expect a decent sized cash tax shield in '22 kind of like you're seeing in 4Q? Just want to get a sense of the tax shield on the
combined entity.
Matthew Kerin
Leo, this is Matt Kerin. On the LOE for legacy Cabot, those numbers can move around a little bit quarter-to-quarter depending on some of the
workover projects we have. So we did have an increase in workover in Q3 that kind of caused it to come a little bit above the high end of the range.
But somewhere in that $0.08 to $0.10 range on a legacy Cabot basis is where we would expect that number to be kind of on a go-forward basis.
As it relates to deferred taxes, I'm going to hand it over to Dan Guffey, who's the whiz when it comes to that.
Daniel Guffey
Sure. Thanks, Matt. So we gave guidance for 30% to 40% on a deferred tax basis. And we've communicated in terms of 382 limitations and built-in
gains, we would expect a $1.3 billion of NOLs that were on Cimarex's balance sheet at 9/30 to be a shield that is ratably spread over the next 4 to
5 quarters. As we've discussed in prior calls, we would expect that NOL to be fully utilized during 2022 based on current strip prices.
As we walk into 2022, you can expect the deferred portion to be in that 30% to 40% range, again, depending heavily on commodity prices and
investment levels, but we do expect full utilization of the NOLs by year-end 2022.
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