Q1 2021 Brigham Minerals Inc Earnings Call
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Good day and welcome to the Brigham Minerals first quarter 2021 earnings conference call all participants will be in listen only mode.
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Please note. This event is being recorded I would now like to turn the conference over to Jacobs section.
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Thank you operator, and good morning, everyone welcome to the Brigham Minerals first quarter 2021 earnings conference call. Joining us today are Bud Brigham founder and executive Chairman, Rob Roosa, founder and Chief Executive Officer, and Blake Williams, Chief Financial Officer before we begin I would like to remind you that our remarks.
Including the answers to your questions contain forward looking statements and we refer you to our earnings release for a detailed discussion of these forward looking statements and the associated risks.
In addition, during this call we make references to certain non-GAAP financial measures reconciliations to applicable GAAP measures can be found in our earnings release and our investor presentation.
Our investor presentation, titled first quarter, 2021, Investor presentation and is available for download on our website www Brigham minerals Dot com, we recommend downloading the presentation in the event we refer to it during the conference call Lastly, as a reminder, today's call is being webcast and is accessible through the audio link on our IR website I would now like to turn.
On the call over to Bud Brigham founder and executive Chairman.
Thank you Jacob we appreciate everyone joining us this morning for our first quarter 2021 earnings conference call.
Our business continued to deliver outstanding results this quarter, including record total revenues and adjusted EBITDA, which I attribute to our team's disciplined and thoughtful management of our diversified mineral portfolio.
<unk>, 5% reduction in production volumes due to the impact of winter storm release, our total revenues were up 42% adjusted EBITDA was up 57% and we increased our dividend 23% sequentially from the fourth quarter.
I will note that the 23% increase in our dividend comes on the heels on further increasing our dividend retention from 10% to 20%.
Said differently, we are distributing 80% of our cash this quarter as compared to 90% in the fourth quarter 2020.
It's readily apparent that the minerals business model benefited tremendously from improved pricing and Brigham minerals was in particular able to pass along the improved macro directly to our shareholders.
Our sound balance sheet, which we intend to maintain benefited us in two important ways.
First we did not need to panic at any point during the rollercoaster year of 2020 and execute hedges, which today are currently serving as strong headwinds to numerous companies in the energy space.
Here at Brigham managers from.
Minerals portfolio non commodity traders and we prefer to give our investors full exposure to the commodity.
Second since the third quarter of last year, we've continued deploying capital to mineral acquisitions and believe the assets we've acquired over the past three quarters, we will generate differentiated performance over the next several years.
We will continue to employ our disciplined underwriting of deals to enhance shareholder value and at the same time see more of our acquisitions internally funded field retained cash.
A related key point that I want to make is that our retained cash and lease bonus funded approximately 30% of our first quarter mineral acquisitions.
In a similar vein, we have and will continue to monitor the risk of increased federal regulation with respect to our ongoing acquisition efforts.
While it appears permits are being issued there is no doubt that the processes flow and increased rhetoric is a concern.
As a reminder, however, our current portfolio has less than 5% exposure to federal lands across New Mexico, Oklahoma, The DJ in North Dakota.
And in particular, only two 5% of our assets on a net royalty acre basis are located in new Mexico and federal units.
We therefore currently have minimal exposure to potential federal regulatory changes.
Further when we look at deals in these areas, we are only giving credit to visible and near term development and federal units.
Finally, I'd also like to highlight the continued value of our diversified portfolio. Another critical element of our differentiated approach.
Our multi basin asset both reduces the gross to any specific operator or operating basin, while also allowing us to play in a bigger sandbox in terms of mineral acquisitions.
We continue to find incredible value and deals in the DJ Anadarko and Williston basins, and we will opportunistically add to our portfolio in these areas when the economics towards achieving favorable risk adjusted returns.
Looking ahead on.
Particularly encouraged by our ground game deal flow and I like the fact that we are internally funding a portion of our deals from <unk>.
Macro setup is extremely positive and I believe our experienced management team and differentiated strategy will continue to produce outstanding results.
With that I will turn the call over to Rob.
Thanks, Bob as Bob noted our team was able to achieve record results in the first quarter driven by a combination of factors, including a significant rebound in commodity prices, but more importantly, the team's disciplined management on for Premier diversified asset we need to keep leverage levels low this allowed us to maintain a 100% distribution in the second quarter of 2020, and importantly entered.
'twenty, one unhedged with our investors fully exposed to the run up to commodity prices as the economic reopening took hold towards the end of last year and more fully during the first quarter of this year associated with the vaccine rollout as we sit here today I think research analysts and investors are beginning to understand that mineral companies and in particular Brigham minerals offers are more efficient.
Vehicle to return capital to investors, especially when times are challenging as we saw at the onset of COVID-19 and the shutting down on the economy. During early 2020, if you've seen in the second quarter of 2020 with the ultimate trough for the energy space I sincerely hope that that is the case remember that we distributed <unk> 14 per share via our dividend for that quarter, which when annualized and assume.
A $17 stock price equates to roughly a three 3% yield based on all of those assumptions with Brigham minerals, you theoretically have a downside for yield of three 3%, which is higher than the yields on many e&ps today without exposure to and the continuing need to deploy capex.
Looking at the first quarter of 2021 re able to pay out a dividend at roughly at seven 5% yield which represents an incremental yield of four 2% above the trough level. We saw in Q2 2020 importantly, we were able to deliver that seven 5% yield with over 13000 gross undeveloped locations in inventory that will be organically.
For shareholders over time again free of Capex. We've included slides on our presentation deck on pages, three and four depicting our yield relative to our peer group with E&ps in the S&P 500 index as you will note Brigham minerals Q1 yield exceeds both of these comparison points for.
Further during the first quarter of 2021, we're able to retain 20% of our cash and utilize that retained cash plus or lease bonus to internally fund approximately 30% of our Q1 mineral acquisition capital, we deployed 90% of our mineral acquisition capital to the Permian and in particular to the Midland Basin. Our net locations associated with these acquisitions were comprised of approximately 75.
Percent PDP, DUC and permitted locations, which represents a record percentage of net PDP DUC and permanent locations acquired during any one quarter I believe when you Digest all of the aforementioned positive you can clearly see Brigham minerals offers an extremely compelling differentiated positioning relative to the remainder of the energy space turning to our operating.
Results of our first quarter production volumes from roughly 8900 barrels of oil equivalent per day down roughly 5% from our fourth quarter production volumes, excluding the impact of winter storm here, we estimate our production volumes would have been approximately 9300 barrels of oil equivalent per day were in line with our fourth quarter of 2020, our net activity wells at the end of the first quarter.
<unk> 2021 were $9, one net locations up 17% from year end and were comprised of $4 four net docs and $4 seven net permits again the importance of these locations is that our ducks will contribute to production volume over the next 12 months and our permits likely will contribute to production volumes over the next 12 to 24 months.
Our net ducks grew over 20% from year end 2020, again to four four net locations largely attributable to the strong rebound in drilling activity that we saw on our minerals.
During the quarter, we saw 132 gross or one net well spud on our minerals. This represents a 67% increase in gross wells drilled and 150% increase in net well spud from the fourth quarter of 2020, it's readily apparent we are now seeing the recent increase in rig activity directly impact our minerals portfolio.
In particular, we saw strong drilling activity on our position in both the Permian and DJ Basin in the Permian Basin, we saw additional wells spud in Chevron's <unk> pad in the southern Delaware Basin, which I mentioned in our last conference call. We also saw continued drilling by Exxonmobil and our St. John's unit in loving County, where they appear to be testing the bone springs.
An area, where EOG has had substantial success in the DJ Basin, we saw Chevron spud approximately 12 gross wells and are regularly pad in Weld County to what historically has been first day. This noble's wells ranch area drilling.
Drilling down in additional detail into our DUC balance more than 60% of those docs are positioned in the Permian basin. Further the majority of our net docs are anticipated to be converted by Chevron Exxon Mobil PDC Continental resources, and Devon based on our analysis of state and satellite data, we estimate that roughly one two of our net docs have either.
One and turned in line to production and we are awaiting additional production data from the operator or state to begin the accrual process or two have been fracked and the operators waiting to turn to wealth in lines production, we can't control the ultimate timing of when these wells will get turned in lines of production, but it is extremely encouraging to see approximately 25% of our net ducks on.
The verge of being contributory to our production volumes our permit inventory also saw a strong growth of 12% from the fourth quarter to $4. Seven net permits growth was driven by both strong organic permit generation and first quarter acquisitions, we saw strong growth in our Permian permit which grew by over 90% to $2 five net locations.
And therefore, the Permian now represents over 50% of our net permits in inventory we saw on Mewbourne, who is currently running 11 rigs in the Delaware basin permit locations in March and Western Loving County, and track that we acquired in early January of this year in the Midland Basin, We acquired interest in the pioneer resources with 11 gross permits in Martin County, where pioneer.
Moving to spudder rig onto location in April to set surface casing, and we anticipate the big rig show up shortly.
To summarize our activity wells sitting here at the start of the second quarter. We currently have over five net Permian activity wells comprised of our ducks and permits in inventory, which represents a record total since our IPO in April 2019, and importantly, as I previously mentioned those desks are under high quality operators with strong balance sheets, who are able to consistently execute upon.
On our capital plan. These docs and permits are newer in terms of vintages and it could take time for operators to turn on wells in line to production, we anticipate that at some point during the second half of 2021, our production volumes were approached 10000 barrels of oil equivalent per day dependent of course again on the pace at which our operators turn in line to production our wells the key takeaways are.
Ducks in quantity and quality are extremely strong and with time will contribute to our production growth.
Two of ground game mineral acquisitions during the first quarter, we closed roughly $22 million of acquisitions deploying approximately 90% of that capital to the Permian basin and in particular declined a record 56% of our capital to the Midland Basin again, it's worth highlighting that these acquisitions were comprised of a record percentage of net PDP DUC and permit locations rather.
75% of our net Q1 acquisition locations were comprised of these inventory buckets, which I outlined earlier as being highly likely to contribute to production growth over the next 12 months to 24 months.
Finally, I want to reiterate <unk> point that we're able to increase our dividend, 23% to 32 per share versus the 26 per share in the fourth quarter as a result of capturing the full benefit of higher prices in the first quarter, we were able to modify our payout ratio to 80% from 90% in the fourth quarter and still increase the dividend by 23%.
Using that retained cash and $1 6 million of lease bonus that we generated during the quarter, we were able to internally fund approximately 30% of our $22 million in mineral acquisitions Lastly, as a reminder, and as we discussed in late February we will update guidance for the second half of 2021 in early August of 2021 associated with our second quarter 2010.
One conference call I'll now turn the call over to Blake. So he can summarize for you our financial performance Blake.
Thank you Rob our daily production for the quarter was roughly 8900 barrels of oil equivalent per day down 5% sequentially due to the winter storm. It is important to note that we believe we have fully captured the production impact of the storm, but will true up differences in the second quarter. Once we received the revenue checks from our operators.
Our portfolio generated royalty revenue of $32 $2 million per the quarter up 35% sequentially due mostly to a 45% improvement in realized pricing.
Realized pricing for the quarter came on at $40 <unk> per Boe.
Importantly realized pricing per barrel of oil was $55 55 up 38% sequentially realized gas and NGL pricing were also impressive with $3 75 per Mcf and $25 97 per barrel of NGL.
Also with respect to the financial impact of the storm, we believe there could be additional upside to gas pricing realized in the first quarter that will be true up in the second quarter.
We also were able to capitalize further on the improving macro environment through lease bonus revenue of $1 6 million out of the Delaware Basin.
Net income for the quarter was roughly $12 million adjusted EBITDA for the quarter came in at a record $27 1 million and adjusted EBITDA. Excluding lease bonus was $25 5 million, which is up 48% sequentially from Q4 2020.
Moving to costs.
Gathering transportation and marketing expenses were $1 7 million or $2 16 per Boe.
Severance and AD valorem taxes were $1 8 million or five 4% of mineral and royalty revenue and in line with historical levels.
G&A expense before share based compensation was $3 $1 million.
While we are pleased to come in at the low end of our guidance range. Thanks to our continued cost saving initiatives, we need to get past the second quarter before we are ready to look at tightening our full year G&A range.
Our team continues to originate and prudently deploy capital and targeted highly accretive acquisition opportunities as for the balance sheet, we exited the quarter with $5 6 million of cash and $32 million drawn on our revolving credit facility for net debt of $26 4 million, leaving us with total liquidity of 109 million.
We have $103 million undrawn on our current $135 million borrowing base further as a result of our spring Redetermination, which is expected to be finalized at the end of May our administrative agent has given us an indication of an increase in the borrowing base to $165 million with <unk>.
Another $30 million of liquidity, bringing with new total to $139 million.
With the anticipated increase in debt availability and our retained cash we should have ample liquidity to execute on our strategic objectives and anticipate that we will not need to access equity capital markets in 2021.
There is no change to our thoughts on capital structure as we continue to reiterate our comfort level at an upper bound on net debt to adjusted EBITDA ratio of less than one half of two times.
Lastly, as Rob already stated we declared a dividend of 32 per share of class a common stock. This dividend is payable on may 28 to shareholders of record as of May 21, we.
We continue to believe that through our superior business model, coupled with our active and prudent management Brigham minerals offers investors a unique opportunity to own premium assets in a yield vehicle that is highly attractive when compared to any other investments energy or otherwise I will now turn the call back over to Rob to wrap things up.
Thanks, Blake. We appreciate you joining our first quarter 2021 call. We believe Brigham offers a tremendous value to investors. We have our heads down solely focused on executing our business plan and demonstrating the value of our portfolio and our team operator, I'll now turn the call back over to you to begin the question and answer portion of our conference call.
We will now begin the question answer session.
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At this time, we will pause momentarily to assemble our Ros.
Our first question today will come from Chris Baker with Credit Suisse. Please go ahead.
Hey, Good morning, guys just wanted to ask on the dividend yield side side.
Definitely a solid comparison, there, hoping you might be able to just frame up how you think about the relative risk profile of the company.
And specifically just thinking about the absence of operational control versus on.
We see the benefit of diversification and not having to.
Maybe reinvest half your cash flow like we see on the E&P side would be helpful. Thanks.
Yes, just initially Chris Thanks for joining us on I'll start on the hand, it off to Blake, but I think in terms of the overall risk profile of our dividend yield it's much less risky than an E&P or other.
Companies involved in the energy space when I think about it many of the points that you mentioned is our higher margin business, our low debt levels that we've consistently maintained and will continue to maintain which have enabled us to experience full growth flow through of crude oil pricing.
As you have also mentioned we have over 13000.
Gross undeveloped locations that we think will continue to.
Move our production volumes up into the right without Capex and so when I think about it when you think back to the second quarter of last year and really.
On the tough environment that we're in than because of the shutdown on the economy and COVID-19 and I think about that 14th that we distributed when many had to peel back to a much stronger much larger degree.
A lot of our commentary regarding that three 3% yield in that second quarter of last year being kind of a theoretical floor. So there is tremendous upside as we think about crude oil pricing and the stabilization on the tailwind that we're currently seeing out there in the market, but we think that that three 3% theoretical floor.
<unk>.
Is really much less risky than other companies not just in the energy space, but probably elsewhere, just given our high operating margins are low debt levels, which have indicated we will maintain and so I'll hand off from <unk> for additional comments, yes, I think also.
Obviously on our assets underwritten by by all of these large well capitalized operators so as they work through this year.
We continue to repair their balance sheets to pay down debt and stick to our return of capital model I think that is.
It's going to play well for us, especially as they get past hedge.
Hedges that they've got in 'twenty, one so as you think forward to 'twenty two I think as Robert said, we are going to be exposed to quite a bit of upside and as these guys continue to stick to their business models and drill out.
Drill out our assets I think that shareholders will be a beneficiary of that.
The other thing I would note as well as we're all kind of already touched on is that three 3% yield that we're showing there on P.
Page three of our slide deck as had been battle tested in the second quarter. So.
We're very comfortable with our ability to to return capital to shareholders in a big way.
Great. That's helpful and then just as a follow up.
Definitely a strong update on the ground game, but just curious.
Could you kind of update us on.
On your thoughts around larger scale sort of more transformative opportunities.
And the potential to see something.
Later on this year and next year.
Yes, Chris I appreciate that question I think first and foremost just want to reiterate what a tremendous job. The deal team. The acquisition teams are doing in terms of getting out there processing large amount of deals and ultimately will.
What we saw on the first quarter closing on $22 million on acquisitions, adding about 2% of the portfolio in terms of net royalty acres, but probably most importantly, when you think about the net locations associated.
With those acquisitions added $6 million per net vocation cost, we added 75% to our PDP docking permit inventory buckets, so really a tremendous job by them. They are doing tremendous work out there each and every day the deal flow levels that we're seeing a really strong probably stronger than we've ever seen and so its really tremendous that they've been able.
To ramp up and execute in a process that many deals and so feel really good about that and in fact couple of weeks back we were at the mineral and royalty acquisition conference in Houston in one of our competitors, that's actually still out there buying.
Alongside us that number has been greatly reduced but had Kim came up to me indicated that we're probably two to three weeks ahead of them in terms of getting to sellers and being out there in front of people. So I think it's a big complement to our team, but I think as you mentioned, Chris one of the things that we've seen in particular of late and we're really working on now as there is more so than we've seen.
Probably in the past nine to 12 months a lot of marketed transactions out there. So theres been a big ramp in those probably five or so marketed deals that are out there. So it's been interesting to see those evolve and come to market in the past several weeks some of which are interesting extremely interesting and so we will continue to evaluate those and so we've structured the.
Team such that we can handle the ground game plus incremental opportunities and so we will look at those but rest assured key to us is being disciplined in our underwriting process and so when we do so in looking at deals and making sure that those deals are accretive near term as well as longer term on an NAV basis and so it's real.
The goal of the team is to process a large number of deals both the ground game as well as these larger opportunities, but to do so in a disciplined manner and making sure it's highly accretive for our shareholders and one of the things auction. Obviously came about as a result of board discussions as it related to distributable cash flow on what was ultimately distributed as the opportunity set.
We saw our tremendous out there and as such the board was comfortable reducing.
Net distributable debt.
Percentage that we distributed to our shareholders from 90% to 80% because of the tremendous opportunities that we saw out there in terms of our mineral acquisitions.
Great I appreciate the update.
Our next question will come from Leo.
Mariani with Keybanc. Please go ahead.
Hey, guys I wanted to follow.
A follow up a little bit on the commentary around <unk> getting close to 10000 Boe per day in the second half.
The year.
Wanted to get rich.
Stance on what gives you confidence on that does that take you on analysis of.
On the operator activity and would you expect to kind of be maybe at 1000 as we exit this year and into next year.
I'll start and then hand, it off to Blake, but to me what gets me comfortable about reaching that range that we talked about in the press release on what you discussed is really the key building block our activity wells.
We have an inventory so that's really the ducks and permit that we have that are going to be developed force over the next 12 to 24 months and so really I really want to emphasize what I talked about on the conference call opening comments that those that activity well inventory is extremely strong from both the quantity and quality perspective.
When you think about the activity wells were able to increase those 17% this quarter from year end, so taking that up from seven 8% to nine one net locations and importantly, we're at record levels in terms of activity wells that we have that we're going to be developed for a sort of turned in lines of production in the Permian basin. So that's roughly about 57 <unk>.
Of those total activity well net locations in particular, when you look at the near term contributors to the production volume is going to be our docs. So very importantly, we saw our debt balance increased by 22% to four four net locations well over 50% of that balance again being in the.
In the Permian basin, and some of the key operators are going to going to turn in line those wells for production, our Chevron and Exxon Mobil Continental Devon, PDC and so we really were able to strengthen and bolstering that DUC balance by the drilling activity that occurred on a organic basis for us and so you saw there.
That really play out this quarter with the gross wells spud up 67%, the net well spud up over about 150%.
And then kind of the next key building block on our permits we increased those about 12% to four seven net locations and so really importantly, there are Permian permits were up 90% and so now the permanent bucket is over 50% on a net basis in the Permian and so when you look at all of those.
There was different building blocks in terms of ducks and permanent it really gives me comfort confidence that we're going be able to hit those levels and then.
We've also spoken about.
Our acquisition program because that will also be additive this year and so again reiterating what a tremendous job. The team did in the first quarter still seeing good deal flow here into the second quarter and would expect to see good deal flow through the remainder of the year. So really when I think about that those key building blocks as we develop and think about our <unk>.
Model on our production and cash flows not only towards the end of the year. So now break pent up the Blake for additional additional commentary.
The thing to keep in mind as well that that Dr bucket as a fresher Dr buckets as far as the vintages is concerned obviously as the as the recovery sort of started back in the third quarter fourth quarter as operators started to put equipment back to work.
We've seen that translate through to our inventory of all of the buckets that Rob just mentioned so it was always our expectation that.
This would be sort of more back half weighted that will be ramping into the end of the year.
So <unk>.
As he also said in his prepared remarks.
We will we'll touch guidance again in August, but no changes right now.
Okay I just wanted to follow up on some of your comments here you guys talked about roughly five marketed deals out there.
So we will pass on.
On slide below those caught on.
While others have.
That sort of a mix of stuff.
So on vulnerable.
No I would say that those deals are more kind of doubles triples type of opportunities, though where I consider the ground gain more of the singles that kind of <unk>.
50 to 60 acre deal the seven 700 odd transactions that we've done over the life of Brigham minerals to build up to this 88000 acre position, that's really the lifeblood of the company and so these kind of marketed deals that are out there that again really interesting Lee of kind of surfaced over the past month or so they are more in that double or triple.
Bucket and so.
We will evaluate those some are more interesting than others.
But again the key there is to be very disciplined in our underwriting so to the extent, we if we are to announce any closing or.
Any of those deals over the next couple of quarters now rest assured from an accretion standpoint, both near term as well as longer term that those deals would be highly accretive to our shareholders.
Sure.
And I think you guys also just made a comment that you need for equity here in 'twenty, one just to clarify that.
Basically just referring to the <unk>.
If you guys are able to successfully execute on the ground gain call. It 2000 $25 million a quarter between rich.
We're really comfortable with that but on the flip side. If there was a larger deal than possibly that might have on equity component.
Yes, I think equity to the seller.
We typically look at it all deals ground game in larger ones on an all equity basis anyway.
To ensure that we're able to add value for shareholders from the from the beginning as Rob was already.
It was already talking about so.
It's certainly.
Possibility, if we get to the right valuation that we're comfortable with that.
On the seller it could be a component yes.
Okay. Thank you.
Thank you I appreciate it.
Our next question will come from Pearce Hammond Simmons energy. Please go ahead.
Good morning, and thanks for taking my questions and thanks as well for all helpful information and commentary on my first question pertains to the acquisition of <unk> minerals in the DJ I know it wasn't a huge amount, but just curious what you see there or is it more of a value play.
And.
Just overall thoughts, especially in light of the political risk in that state.
Yes, no I appreciate you joining when you think about the acquisitions that we undertook here in the first quarter and 90% of them were weighted towards the Permian, but as Bud mentioned in his comments, we are still active in looking at deals in both the DJ Basin in North Dakota, and Oklahoma. The key thing there is that we look at these deals on a risk adjusted basis.
Pre typically when you think about those deals note the areas other areas, we're looking for higher risk risk higher rates of return on those deals and so were very cautious when we underwrite those deals obviously political risk in the DJ Basin is first and foremost in our minds as we think about deals and so when we look at deals obviously PDP.
<unk> docs and permits.
Beyond that really not going to give credit for and so we're very excited about this deal.
To close it in the first quarter and Weld County.
And kind of right after closing that deal I think within a couple of weeks or so the frac crew showed up and obviously waiting on incremental data, but extremely pleased to see kind of right. After that deal being acquired that frac crew, showing up and starting to frac that location.
And so we still think that there's really nice opportunities out there in these other basins and it's just really the.
The key thing we built this diversified portfolio. The acquisition team has the experience the knowledge and expertise to acquire in these other basins and so we can very efficiently and from a returns perspective really high grade each and every quarter as acquisitions by supplementing the Permian activity with acquisitions in these other areas.
Thanks, Rob and very helpful. And then my follow up.
The attribute Brigham minerals has been working with the high quality operators some of the major integrated oil et cetera that give you.
More consistency and again, well capitalized operators, but Henry.
<unk>, there's been a dichotomy whereby the it's really the private operators pushing the drill bit on the public companies, having more capital discipline. So.
I guess the question is are you seeing more private activity on your minerals or are you at a disadvantage in any way with your focus on more of the high quality companies and then secondarily.
Are you seeing any spring of the capital discipline from some of those public.
E&ps, especially as prices hang out at these levels.
I'll probably start with the last question first in terms of on.
Obviously, a lot of what's investors' minds right now is capital discipline and.
Maintenance mode Capex.
Not wanting to see significant production growth such that.
We are able to achieve that what.
Some people have written out of late the Golden age of oil and gas and so we are seeing public operators be very disciplined as I scour all the different transcripts and press releases all the public seem to be very disciplined in terms of maintaining capex.
Pointing to low to no growth as we think about going forward.
Probably importantly today key indicators on the very large e&ps had a big special dividend that was announced kind of pointing towards capital discipline. So.
To me across the board, we're seeing the public operators.
Either pay down debt or enhance their dividends or special distributions to their shareholders. So I think that should be very comforting to the investment community as you think about P.
Been able to maintain that mid $60 plus pricing that we're currently seeing as inc. And eventually maybe getting to the $80 level, but that Goldman referenced when.
When I think about the first part of your question I don't think that we're at all at a disadvantage because of our focus on public operators because there have been some several key private operators that we focused on in the past and continue to focus on and so when I think about some of the important folks that we've targeted or tried to binder.
That includes Mewborn with 11 rigs, we did a really nice transaction with them that are referenced in the conference call transcript. There in January that they then came and issued.
Let's begin on the number of permits in March of this year, we have consistently targeted endeavor. He has run run a decent amount of rates I think currently running about nine rigs, we'd like BTA they've done a good job with.
The double point guys have done and obviously now that portfolio transition too.
The pioneer guidance, but our focus on public operators has always been supplemented with focus on high quality operators and thats both from.
I am sorry high quality private operators those that are doing a good job when we look at their wells on the Fracs and generating high level high <unk> relative to others and so.
I would say key there is to again standard quality operators, but that can be both public and private operators.
Okay. Thank you every day.
The only thing that I would add to that is just staying on to these well capitalized operators gives us sustainability. So going forward as you think about some.
Some of these private private operators selling their assets to the public like we saw with double point going to pioneer and pioneer kind of ramping down from where Theyre double point was.
That's going to end up being more sustainable for us going forward.
Which I think will play out well for investors as far as our ability to continually return capital.
I appreciate it thank you.
Thanks, Gary.
Again, if you'd like to ask a question that has started on the one side.
On the one to ask a question.
Our next question today will come from Jeanine Wai with Barclays. Please go ahead.
Hi, good morning, everyone. Thanks for taking our questions.
Good morning, Thanks for doing a good morning.
My first question, it's really a back to the M&A or the sorry, the A&D conversation that market is recovering very well I think you said previously that it was stronger than you've ever seen but importantly, youll remain disciplined in acquisitions and you ought to expect some strong deal flow in the second half of the year. So.
Given all of that would you consider again lowering your payout ratio and.
Q3, Q4, Q given the opportunity set that you see that is currently available.
Thanks, Dan I. Appreciate the question I think one of the things that we've consistently messages where the goal is to have a dividend that's consistently moving upward and so that's the ultimate goal of the board.
As we think about implementing that we've talked long term about that ultimate payout ratio being in the 75% to 80% range and so.
I think as a company and our management team at very been very consistent in terms of doing what we said, we're going to do and so I would expect the range really at some point to hover in that 75% to 80% band.
And so I think when I when I think about.
The dividend as I've mentioned on probably several different conference call. This more of an art and a science and so we'll continue to monitor and evaluate cash.
Cash flow deal of opportunity is moving forward as a board and so I think one of the things that happened is obviously prices were very supportive with a 45% increase in realized prices in the first quarter that allowed us to step down.
On the payout ratio from 90% to 80%, which was obviously very constructive and allowed us to fund about 30% of our mineral acquisition capital and so we will continue to monitor that have board discussions, but I think in terms of where we ultimately land will be in that 75% to 80% distribution ratio that we've consistently talked to folks about our.
<unk> investors.
Okay. Good to hear on my follow up question is maybe just dovetailing off of <unk> question is there on the private versus public is there a difference between what you see is available in the minerals market between private and public operators and is there an opportunity to stand on the subset of high quality.
Operators that you consider I thought your commentary with interest and we've seen.
The M&A market kind of pick up and some of the smaller players versus what Youre talking about do you eventually get picked up by the larger publics then they automatically get a boost in being high quality and well capitalized. So I thought maybe there could be an interesting opportunity to expand by ear subset is that youre looking at but just wanted to.
Get some color. Thank you.
Yes, no I appreciate the question. So I think in terms of the private there are.
A handful of privates that we think are high quality and that is in terms of the number of rigs running which if they don't ultimately get.
<unk> taken over in some type of M&A activity, they still will have consistent activity on our minerals.
As well as high quality in terms of the <unk> because we wanted to make sure that we're under the very best operators that are employing the blasts completion and drilling techniques and so I would say probably my interpretation of the first quarter and thus far in terms of the second quarter. We are seeing really nice deal flow under private and so we are actively targeting that are not going to shy away.
On that because as you did mentioned we've had multiple instances throughout our lifecycle of the company, where a smaller operator gets acquired by a much larger one which then translates into probably more consistent development on much larger balance sheet.
That really becomes critical when I think about really the multi zone coordinated development that youre seeing out there so when I think about <unk>.
In particular on the Midland Basin on.
On a half section drilling 11, or 12 wells really to efficiently develop that you want these well capitalized operators are going on and be able to drill 11 12 wells on a half section 22 to 24 wells. When you think about 7 million per well cost that youre talking about.
$100 million to $200 million section.
Half section to full section to get developed so we are seeing really nice opportunity under privates and are actively engaged in processing those deals and so we'll continue to do sales going forward.
Great. Thank you very much for the detail appreciate it.
Appreciate you joining us.
Ladies and gentlemen, this will conclude our question and answer session.
I would like to turn the conference back over to Robert <unk> for any closing remarks.
Yes, again, we really appreciate you joining us on our first quarter conference call and we look forward to reporting back to you on our second quarter in early August thanks for joining.
Yes.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.