Q2 2023 Magnolia Oil & Gas Corporation Earnings Call
Okay.
Yeah.
Good morning, everyone and thank you for participating in Magnolia oil <unk> gas Corporation's second quarter 2023 earnings conference call.
My name is Martin lease and I will be your moderator for today's call.
At this time.
Participants will be placed in a listen only mode is our call is being recorded I will now turn the conference over to Magnolia management for their prepared remarks, which will be followed by a brief question and answer session.
Go ahead.
Thank you Marlene and good morning, everyone welcome to Magnolia oil and gas in the second quarter earnings Conference call.
Participating on the call today are Chris Stavros, <unk>, President and Chief Executive Officer.
Ryan Corral senior Vice President and Chief Financial Officer.
As a reminder, today's conference call contains certain projections and other forward looking statements.
The meaning of the federal Securities laws.
They are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.
Information on risk factors that could cause results to differ is available in the company's annual report.
Our Form 10-K filed with the SEC.
A full safe harbor can be found on slide two of the conference call slide presentation.
The supplemental data on our website you can download Magnolia in second quarter 2023 earnings press release as well as the conference call slides from the investors section of the company's website.
Www Dot Magnolia oil gas dot com.
I'll now turn the call over to Mr. Chris <unk>.
Thank you Tom and good morning, everyone. We appreciate you joining us today for our quarterly update comments around our second quarter 2020, a result plan to reiterate some of Magnolia is primary corporate goal and discuss some of what we've accomplished most recently.
Those goals and objectives.
Also briefly speak to our latest quarterly yourself.
Around the strong execution, we've had related to our cost reduction efforts.
Brian will then review our second quarter financial results in more detail and provide some additional guidance before we take your questions.
As we marked our fifth anniversary earlier this week as a publicly traded company Magnolia gets recognized for having established a unique organization with high quality assets and a differentiated model.
Please.
This is guided by the principles of low debt high operating margins and our focus on capital.
These principles provide us with an orderly framework to help achieve our overall goals.
In terms of our objectives.
Magnolia strives to be the most efficient operator of best in class oil and gas assets generating the highest returns on those assets, while employing the least amount of capital for drilling and completing wells.
Second the return.
A portion of our free cash flow to our shareholders in the form of share repurchases, a secure and growing dividend.
Possibly utilizing some of the excess cash generated by the business to pursue bolt on oil and gas property acquisitions that help to improve our overall business sustain our high returns and increase our dividends share our share payout capacity.
As we crossed the milestone as an organization it's important to recognize some of our achievements towards these goals.
Five years ago, Magnolia was a much smaller company with a production base weighted towards.
All lines asset large relatively unknown acreage position of getting scale.
Five years later, our teams have been instrumental in transitioning getting full development and then as I think Pete what some of the best shale plays in the U S. In terms of growth low reinvestment rate and matures.
Majority of Magnolia is current production now comes from getting square, we have learned a lot in it.
Still in its earlier stages.
Yes.
This has enabled Magnolia as total production and reserves to each grow by more than 50% over the past five years.
We achieved this growth for the efficient reinvestment of almost 45% of our cumulative operating cash flow for drilling and completing wells, allowing us to generate significant free cash flow, while maintaining a strong balance sheet.
We utilized 23% of our cumulative operating cash flow or more than $850 million to repurchase 22% of our outstanding shares and four continuously improving our per share metrics.
We established a secured dividend, which has grown by 64% since 2021 to an annualized rate of 46 cents per share.
Cumulative capital return to our shareholders over the five years has exceeded $1 billion.
We have also improved our business and added to our asset base by completing numerous bolt on acquisitions totaling more than $460 million.
The strength of our second quarter financial and operating results were supported by our efforts initiated earlier this year to address higher capital and operating costs, which did not appropriately reflect the decline in product prices compared to last year.
Our teams were proactive in engaging early and working cooperatively with our oilfield service partners have material suppliers to reduce costs, while sustaining activity levels.
That work is evident in our lower capital spending for the quarter, which was approximately 15% below our earlier guidance. In addition to our cash operating costs, which declined 18% sequentially.
At current product prices, our actions should provide improved pre tax operating margins or free cash flow.
Actually redeploy in the business during the back half of the year.
With the benefit of these cost savings initiatives. We now expect our total D&C capital for 2023 to be in the range of $425 million to $440 million below our previous guidance of $440 million to $60 million.
This represents a 14% reduction from our initial 2023 capital spending plan.
This year's capital outlays are now expected to be lower than our full year spending during 2022.
The reduction in our capital spending and cash operating cost as a result of our efforts highlight Magnolia is focus on capital efficiency generating high operating margins and delivering strong.
Cash flow.
We also continue to see strong well productivity out of our getting faster and where most heart D&C capital is being allocated.
So we're raising the guidance for our full year 2023 production growth to between seven and 8% compared to earlier growth expectation expectations of 5% to 7% again. This speaks to the high quality of our assets and matches our goal of being a low cost capital efficient operator of those assets with D&C spending.
Only about half of our cash flow.
Lower capital spending and increased production, our free cash flow generation has improved providing us with greater flexibility.
During the quarter Magnolia generated $93 million of free cash flow supporting our dividend and share repurchase program with approximately three quarters of the free cash flow returned to our shareholders through these initiatives.
Earlier this week, our board of directors increased our share repurchase authorization by 10 million shares, bringing the total current remaining authorization to just over 14 million shares.
Allowing us to opportunistically repurchase our stock into next year.
We plan to continue to repurchase at least 1% of our outstanding shares per quarter.
Finally at the end of July we closed on a small oil and gas property acquisition in the giddings area for approximately $40 million.
As an example of continuing to execute on our strategy of pursuing bolt on assets and adding to our high quality batch in and around areas that we understand well and then improve our overall business.
This asset is outside of our core development area in Giddings and was a direct result of some of the appraisal efforts significant knowledge. We have gained from operating in the getting steel.
To pursue similar type transactions that add to complement our asset base and a trump the business.
I'll now turn the call over to Brian . Thanks.
Thanks, Chris and good morning, everyone.
We'll review some items from our second quarter and refer to the presentation slides found on our website also provide some additional guidance for the third quarter of 2023 and remainder of the year before turning it over for questions.
Beginning with slide three despite lower commodity prices I know you continue to execute on our business model as demonstrated by our excellent second quarter financial and operating results.
As Chris detailed Magnolia is focus is creating long term value for our shareholders through our differentiated operating model and a balanced approach to shareholder returns we have been successfully executing our strategy. During the first five years as a public company and plan to continue our disciplined approach going forward.
During the second quarter, we generated total GAAP net income of $105 million with total adjusted net income for the quarter of 97 million, a 40 46 cents per diluted share.
Our adjusted EBITDAX for the quarter was $203 million with total capital associated with drilling completions and associated facilities of $86 million well below our expectations and a testament to our team's hard work and reducing costs second quarter production volumes grew 10% year over year 81, 9000 barrels of oil equivalent per day at three.
Percent sequentially from the first quarter of 2023.
During the second quarter, we repurchased two 3 million shares.
Diluted share count fell by 5% in Germany.
Looking at the quarterly cash flow waterfall chart on slide four we started the second quarter with $667 million of cash cash flow from operations before changes in working capital was $204 million with working capital changes and other small items impacting cash by 26 billion.
In the quarter, we allocated 49 million towards share repurchases dividends of $25 million and at $7 million of bolt on acquisitions, we ended the quarter with $677 million of cash and above the level that we started the quarter.
Looking at Slide five this chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in the second half of 2019.
Since that time, we have reduced our total diluted share count by 57 million shares or approximately 22%.
I know you just weighted average fully diluted share count declined by more than 2 million shares sequentially, averaging 211 4 million shares during the second quarter.
As Chris discussed our board recently approved a 10 million share increase to our share repurchase authorization, leaving $14 2 million shares remaining under our current repurchase authorization.
Specifically directed towards repurchasing repurchasing class a shares in the open market.
Turning to slide six our dividend has grown substantially over the past few years, including a 15% increase announced earlier this year to $11.05 per share on a quarterly basis. Our next quarterly dividend is payable on September one and provides an annualized dividend payout rate of 46 cents per share.
Our plan for annualized dividend growth of at least 10%. It's an important part in bank noise investment proposition and supported by our overall strategy achieving buttered annually.
Moderates annual production growth and reducing our outstanding shares by at least 1% per quarter.
I know it has a benefit of a very strong balance sheet and we ended the quarter with a net cash position of $277 million or $400 million of gross debt is reflected in our senior notes, which do not mature until 2026, including our second quarter, ending cash balance of $677 million and our undrawn $450 million revolving credit facility.
Our total liquidity is more than $1 1 billion, our condensed balance sheet and liquidity as of June 30 are shown on slide seven.
Turning to slide nine and looking at our per unit cash cost and operating income margins total revenue per BOE declined by nearly 50% due to the substantial decrease in product prices in the second quarter of 2022, our total adjusted cash operating costs, including G&A for $10 33 per Boe in the second quarter.
22023, a decrease of $3 71 per Boe or 26% compared to year ago levels. The year over year decrease was primarily due to lower production taxes, and Chi P&G lower exploration expenses and reduce G&A, our DD&A rate of $10 34 per Boe increase.
Roughly 20% compared to last year as it related to higher well cost, resulting from increase all oilfield service material and labor costs.
Our adjusted operating income margin for the second quarter was $16.29 per Boe or 43% of our total revenue the year over year decrease in our pretax operating margin was driven by the significant decrease in commodity prices.
Turning to slide 10, we're happy to have recently published our third annual sustainability report detailing <unk> progress on ESG metrics key highlights from the report such as.
Such as our record low flaring rate are highlighted on the slide and the full report can be accessed on our website.
Turning to guidance for the third quarter and for the remainder of 2023. We are currently operating two rigs and plan to continue this level of activity through the end of the year.
One rig will continue to drill multi well development pads in our giddings asset a second rig will drill a mix of wells in both karnes and giddings areas, including some appraisal wells in gangs as Chris mentioned, we are further reducing our D&C capital guidance for 2023 to between $425 million to $440 million, which represents a.
Approximately a 14% reduction from our original guidance this year.
Lower capital spending expectations, we are increasing our full year 2023 production growth guidance to between 7% to 8% with growth expected to come from our development program mechanics.
Full year 2023, we expect our effective tax rate to be approximately 21% with most of this being differ.
Our cash tax rate is expected to be approximately 6% for 2023.
Looking at the third quarter of 2023, we expect total production volumes to be similar to the second quarter and our D&C capital is estimated to be approximately $100 million with some small amount of favorability subject to the timing of our activity oil price differentials are anticipated to be a $3 per barrel discount to MH, our fully diluted share.
Share count for the third quarter is estimated to be approximately 210 million shares which is four 4% below year ago levels will now ready to take your questions.
Yeah.
Yeah.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
You said anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yeah.
Our first question is coming from Neal Dingmann from Truest Neil. Please go ahead.
Good morning, guys Nice quarter. My first question is on your $40 million getting bolt on oil.
Well, yes part of the acquisition, specifically maybe Chris.
There anything we can read into those deals such as any near term potential for you all and now it's more delineated acres or how you would think that the existing 300 plus thousand acres.
Based on.
It seems like Youre seeing out there.
Sure, Thanks, Neal and good morning.
So I got to be careful what I say on this a little bit.
Yeah look the facts are that we purchased approximately 20000 acres in the Giddings field area.
And that came with a very small amount of production and no more than a few hundred BOE a day.
You know the acreage that's outside of our core development area and it was generated at the fed at a bar appraisal program at some of the detailed broader work we did in the field.
Through you know a lot of learnings that we've picked up over the years. So this is an area that we like.
And it was not a marketed deal.
<unk>, which is also sort of thought.
A better way for us to go about things more direct.
And usually leads to a better outcome.
Yeah look obviously this is Mike.
You know very competitive industry and business and so for competitive reasons I wouldn't want to say too much.
We may have stumbled on a potentially new area for development.
You know I think it's a little too early for us to say for sure, but you know we like what we see so far.
So that's about all I can say about this and hopefully more to come.
Yes.
Really excited to hear and then my second question, maybe just on the <unk>.
Specifically could you speak.
I know, you've kind of ebb and flow and what goes on your <unk> in the mix, but I'm just wondering how should we think about that you aren't mix maybe.
Maybe for the remainder of the year 24, I'm just wondering if the change.
What are you, placing wells or with your ops are there. Other drivers are just you know how to think about this yeah. You know the the answer is we don't know and that's not just because of Ah yes.
Just uncertainty because I don't know I. Just you know things are are tend to be lumpy quarter to quarter.
Just in terms of the mix and it depends on the timing of the wells coming online.
Inclusion of any karnes activity, both operated and non op.
So we'll sort of see but.
Some of what we've done probably you shouldn't repeat here.
<unk> talked about this a lot.
And you can see this in terms of where we've allocated the capital and activity over the last several years the emphasis.
For us it's been skewed towards giddings more so than an in car Skating's wells are generally a little gas here than karnes wells, but that's not always the case.
We've talked about this before but as I said, it probably bears repeating our wells in giddings typically produce our hydrocarbons and more oil over their lives in a karnes well.
The F&D costs in Giddings are generally lower than the full cycle returns are higher and the decline rates. So the giddings wells are normally shallower than a karnes well and so we we like our karnes area.
You know better full cycle returns. This is an asset that has driven double digit production growth.
In the area with with a reinvestment rate of less than half of our free cash flow. So I think it's sort of evident in terms of what we've done.
The outcome that is in and then the financials. So.
And at the returns have been good we like where this is headed.
And it's still in its relatively early stages. So.
We'll see we'll see I mean I I.
I smiled to myself whenever I get this question because it wasn't very long ago like within the last calendar year that people wanted us to drill more gassy wells our gas your wells and so there you go.
No love all the upside thanks, Chris for the details.
Okay.
Yeah.
Yeah.
Our next question comes from Omar Saad.
Barry.
From Goldman Sachs well Ma'am. Please go ahead.
Sure Hi, good morning, and thank you for taking my questions.
My first question was on the on the strong performance that you indicated in Giddings can you can you give us some color in terms of where the bedspread grid and what is driving the performance and I'm just trying to understand if there is some read across to your appraisal program.
I'd like to know what you are.
Sure.
I'm not going to tell you exactly where the west for sure, but I mean generally the wells most of the wells have been drilled in our core development area.
That we've been pursuing for the last couple of years, where.
Where the results have been very strong.
And continue to generate good results the appraisal program is <unk>.
Evidenced by the acquisition that we did you know, it's it's sort of.
On Earth some opportunities here that you know we can pursue and we have pursued and frankly, we will pursue.
Part of the benefit.
Up.
Improving our capital efficiency and through cost reductions that we've seen and and all the efforts around that including our cash operating costs.
With better margins more free cash flow as a sad and gives us some optionality with respect to you know doing other things.
You know in the back half of the year into next year as we have better aligned our costs with with what's going on with certainly gas and Ngls et cetera. So I feel pretty good about that and you know, we'll do a little bit of you know experimentation.
<unk> because you know we always try to do that if we can if it sort of fits into the overall.
Financial scheme and mix and so we do that where we can because we think that it's useful helpful to improve the business overtime and as I said it it enhances our opportunity set so.
That may sound, a little generalized but I mean, that's you know that's sort of what we've been doing.
That makes a lot of sense. Thank you and then a quick question on our operations.
First on service cost.
Environment, I mean, you talked about a 15% cost savings.
Dino flexible program with more spot exposure.
And where we are from a from a rates perspective, a pricing perspective, right now any thoughts around locking it up for <unk>.
For a period of time and then one housekeeping question.
I think last quarter, you indicated plans to defer completions can you remind us the baby odd for those words have you.
I plan to bring them online this year or are there more for next year.
Sure Yeah I'm on.
The cost side, you know where we're not.
Not really spot necessarily and I don't want to get too caught up in and exactly.
You know all of the contract.
Related items, but I mean, but we.
As you know.
You know steel and N O CTG.
Really double I guess into this year, and we saw that sort of peaking.
In the first quarter.
Pressure pumping stimulation.
50% higher drilling services, you know in that direction as well.
So far this year, we've we've reduced you know Oc.
CTG costs by probably.
30 ish percent.
Pressure pumping costs by by a quarter.
You know I I like where this is going and frankly I think there could be some more so to lock in right now I'm not I'm not really sure what.
How helpful that is to us will just sort of see where things go yeah. We we kind of operate from a position of strength here. We don't have a lot of financial risk and so this will be what it'll be.
But I I think there's some opportunity for further reductions.
Into the back half of the year, and we'll sort of see where we're 20 or things why after 24, so I'm feeling pretty good.
Hum.
Yes.
And I think just a housekeeping question on the deferred completions I think last quarter you had talked about.
Deferring some completions in Q2, I'm just trying to understand if you plan to bring those matters in.
In the back half of the yard or if or is that more for next year.
We havent, we havent made that call yet and you know again I think.
We will try to create increased and improved alignment between our costs.
And commodity prices will just sort of have to see where things go I think you know Oman. We said this I think back in the spring when we started this effort to that.
The deferrals don't really amount to much most of the the.
<unk> costs have come through our own efforts as a result of concessions from our service providers working closely together with them aligning ourselves with them and also our materials vendors. So yeah. This is never an effort around.
Sort of deferrals as much as it was just to align our costs. This was sort of a little bit of deferrals are ducks. If you will works the consequence.
Pushing things out and seeing if we can create a little bit more optionality for ourselves and if commodity prices improve mainly gas and Ngls later into the year into next year.
We'll revisit that but.
Again, I could tap these wells on sort of one hand.
Got it makes sense. Thank you.
Okay.
And our next question is coming from Leo Mariano from Roth.
Please go ahead.
Yeah. Thanks, I just wanted to follow up a little bit on karnes activity here, when you're kind of looking at <unk>.
So far this fall in.
The last couple of quarters, just wanted to kind of get your thoughts on how do you expect that to kind of trend.
The rest of the year and it seems like that's really maybe what's driven.
The oil cut reduction here between <unk> Barnes.
Barnes was down a fair bit in Giddings was up substantially so that obviously is the <unk>.
Mix.
So maybe just can you talk about kind of directionality on karnes and just trying to get a sense are you know you don't have a very large acreage position. There. It's obviously premature there in the Eagle Ford just can you give us a sense.
How much inventory you think you might have left there.
Kind of a handful of years or where do you stand on clients.
Yeah, we have things that we can drill and you know just said.
You know because of a timing schedule.
Scheduling planning permitting other factors.
We haven't done a lot of that this year.
The thing is that there is you know there hasn't really been much or any real non op activity. That's shown up so that's certainly a portion of it.
I I expect that given the generally higher rate of decline in karnes that it will continue to see a little bit of that but again it may be lumpy. There there may be some activity that you know where we're morphing in ore for blending it into the back half of the year there may be some more into next.
Year, we'll sort of see.
You know, we'll see how it goes but you know we have things that we can do there. We just you know skewed our focus as I said more so to giddings because over time. They the returns are higher so that's that's been the plan.
Okay. That's helpful. And then just getting all of these.
Lee you made an acquisition here in July .
So it kind of made one in the fourth quarter, which.
Ron was also.
More kind of been around getting some.
Some of these.
Phrasal areas I know you don't want to give away specific dwell location, which totally makes sense still competitive business, but can you give us a sense of like how many appraisal wells have you drilled I know you'd been appraising outside of the core area for the last couple of years. They get 10 wells in 15, well then I mean any sense you can give us I mean, maybe you can't.
Did you know a fair bit of stuff outside the core.
As a result these these two deals with sort of the culmination of that.
Yeah, I mean look we've tested that we've drilled a handful of appraisal wells you know theres a lot of work that goes into it prior to you know drilling these appraisal wells, where we're not just sort of.
You know sort of wandering around the field necessarily these are very you know.
Very well studied and there's a lot of work hub subsurface work and other work that goes into it prior to that so.
And we have some sense of what we believe may be the outcome.
Sometimes we're surprised well, it's sometimes we're surprised in the other direction and you know.
What we what we've done.
Directly to your point, you know, let us to the smallish acquisition that we did back in the in the fourth quarter that we closed.
I I'm very you know that that's an area that are subsurface team.
And.
Tech folks like a lot.
And we will turn out to be I think very good.
This area is sad is also very interesting and this.
This may be the startup something so we'll see and I think there could be other things and you know the 400000 net acres.
For us is it's kind of pretty vast and as you.
Now tried around you you know you may find other things to find on the fringes that you'd like to fill in over time and and that's you know sort of what we've been doing.
Yeah. Okay. That's helpful. And then just on the cost side here.
Oh, it was down like a dollar a barrel here yeah on the second quarter, obviously, it sounds like Theres been a big company focus to reduce costs both capital.
And operating can you kind of give us a little better sense.
It was maybe allowed there's just less work overs or was a big chunk of this actually ability to kind of reduce some of those costs, whether it's chemicals electricity labor et cetera, just trying to get a sense of where are we seeing kind of low cost are going to go in the second half of the year trying to figure out how much of these savings.
Correct.
Yeah, I mean, certainly the the there was some lower work workover activity that helped us along that way. It was you know certainly less than half of the benefit.
The majority of the savings.
I believe are sustainable moving forward.
As you know the work Overstuff can vary a little quarter to quarter, depending on the move in product prices, but the majority of it.
Should be sustainable and was directly or adult result of reduction in oilfield service costs.
To your point around our chemicals.
Chemicals and and other things.
Litany of things.
So you know the labor component is a little bit sticky as you've probably heard from others.
All of that is true.
You know, but I I think things are generally.
You know I would I would expect it to be sustainable through the year it feels to me.
Okay. Thank you.
Sure.
And our next question comes from Oliver Huang from T P H and company.
Oliver Please go ahead.
Good morning, Chris Brian and team.
Good morning, I had a question on the Capex side, when kind of looking at the budget for the rest of the year. It seems to imply about 100 million give or take per quarter, just trying to understand if there's anything within that number whether higher non op higher working interest in operated wells increased activity levels were fast.
Cycle times relative to the Q2 print run rate.
Yes, I think a lot of it is timing Oliver and I think you know we.
As I said.
You know as as things get better aligned between the coughs.
And our desire to generate returns and improve our efficiency.
As a result of the actions we've taken we may sneak in some additional things, we'll sort of see how it's going we may have baked in some other items, whether it's an appraisal well whatever.
But it may be in there. So we'll we'll see on a run rate basis.
I don't think that level that we talked about 100 million roughly or so is it reasonable.
For the time being I think that's about how the business is right now so we'll see.
Okay that makes sense.
And for a second question just on the topic of L. O. When we're kind of thinking about that lower print for Q2 being driven by lower Workovers and service costs flow through that you all kind of highlighted how much of a factor is the increased giddings contribution to driving that lower in other words should we be.
Thinking about the low cost structure being lower on the gaming side relative to current as it becomes a more significant contributor with each subsequent quarter.
Well, we continue to.
Focus on this.
Nevertheless, relentless way in terms of trying to drive down the costs.
As I said, there's there's labor things and contract workers.
<unk> tend to be a little bit a little bit sticky.
You know generally on a on a on a run.
Run rate basis, as we add.
Volumes things should look similar if not hopefully better with time as we try to drive efficiencies through the field as well so.
We will continue to work at this and I think certainly getting says.
Is that should be a positive contributor over time.
Awesome I appreciate the color.
We now have a question some zach parham from J P. Morgan.
Zack Please go ahead.
Hey, guys just one question.
Following up on on all of his question on Capex, you've got it did 100 million run rate for the second pad.
Any thoughts on what that looks like as you go into 'twenty four if you're still running a two rig program is that 100 million run rate kind of a good number to use as a placeholder for now.
Yeah, clearly it feels a little early for 24, but I know you guys love to ask these things.
Stage of the year so.
Yeah, I I think it's reasonable I mean, I think if I think it's a reasonable way to look at it for the moment.
You know if if pressed.
Yeah, we won't we won't deviate from our objectives, which means we will be disciplined in our fishing around spending.
And you know this so excellent yields and provide mid single digit growth.
But if I had to be pressed on them out for capital based on our current pace of activity.
Product prices are round out.
I think you know.
That'd be pressed on a number I think 400 to 425 feels like a reasonable range at the moment going into next year.
Got it.
Very helpful color, but that's all I had guys. Thanks, a lot okay. Thanks.
And at this time, our last question comes from Tien Raven from Keybanc, Tim You May go ahead.
Yeah, Thanks, everybody for taking my questions.
First I want to ask on the repurchase program you know the average share price was down pretty sharply for.
For you and all your peers in the second quarter. The number of shares repurchase, though was down and you still generated a lot of free cash flow.
Just to understand how sort of formulaic as you program and have tactically to it because I thought you might have picked away some more shares when they were selling off.
Yeah, I mean, it's it's.
It is tactical I mean, it's we don't we don't sort of deliver the program to any particular.
Broker per se, it's just sort.
Sort of how we feel on any given day.
We look for opportunities to be you know to be a little bit more aggressive or not around the share repurchase.
We sort of have our own self imposed outrageous, but you know 1% at least 1% of the outstanding per quarter I like to use that as a bit of a bogey, but you know we could do more.
You know.
Yeah.
Tim I I mean, you know maybe.
Somebody was on vacation like me or something like that did get at it.
Aggressively if they wanted to but you know at.
You know we will we'll look at how the shares perform on a relative and absolute basis. Then you know I like to think about it as is the way an investor or a shareholder would think about you know buying stock or owning the stock.
Okay, Okay fair enough I appreciate the comments.
And then I just wanted to circle up it you know.
Asking another question sort of related to giddings disclosures I appreciated the context on the $40 million bolt on and you said you don't want to talk a lot about this potential new development area.
Frank you haven't talked a lot about your old development areas and your current development areas and as we take a bigger picture view you know the stock is here he can get a little bit of an underperformer short interest has been been creeping up.
And.
You know valuations are now starting to look rich relative to kind of mid cap peers, who does that.
At a time when it is hard for the energy sector to kind of.
Get mind share with investors so <unk>.
Given that setup.
You still are you you know.
Is it at some point do you feel like you need to kind of pull back the curtain a little bit.
Because there are a lot of questions from investors on sort of the depth and quality.
W acreage in Giddings and sort of what your true development area looks like.
So any context would be kind of appreciate it. Thank you.
Yeah No I appreciate the question.
Hum.
I don't feel the need to pull back the curtain.
I feel like these.
It's this kind of direction is almost inducing us to say something weird like you can't handle the truth or something.
No there there the truth is in the facts are that.
It's it's borne out are manifested in the outcome of of you know the growth that we've seen the returns that we've seen.
The free cash flow.
Yeah.
All of that has worked out very well in giddings and as I said, we have a large corral of wells.
That highly economic wells that we can continue to drill and we will.
No.
On the acquisition again, a 40 million dollar acquisition. This this.
Sort of barely moves the needle in terms of the money.
And you know my hope frankly is that we can do more of these things because I'm always looking we're always looking for opportunities to further enhance our footprint in giddings and improve the quality and sustainability of the asset base.
This is nowhere nothing near anything most other companies. Many other companies have done in terms of larger scale acquisitions, while at the same time having been.
Very upfront or more and more so upfront in terms of pulling back the curtain on what they have talked about having in terms of runway or economic inventory or whatever you want to say and so you know this is sort of.
But no one's really pushed other folks as far as why would you have done billions of dollars of deals.
When you claim you got you know a.
Our pathway to you now.
The next decade, or whatever so I'm I'm perfectly comfortable with what we've done and how we've set it and how we framed it.
I think I'd be giving away too much.
Competitive information, if I said much more on the acquisition and some other things so I.
I don't know if that helps you but.
You know my job really is to improve.
The value of the business every day and with everything we do and so if the valuation is is better.
That means where we're doing the right thing and the outcome is borne out in that premium.
Thanks, Chris I appreciate the color.
Our situation is just to close the loop I mean.
The sort of bolt on pieces is that you're going to continue to be opportunistic in that well.
Well, you know $20 million to $100 million size, we could expect them.
More to come down the Pike as he could shake off acreage from peers or private.
Well you know you mentioned an interesting point about around the underperformance and I I look at this too it doesn't.
I, you know I understand the valuation and all and I get that.
You know, we we have quite a bit of cash on the balance sheet and I don't I don't say that to say well, we're going to use the cash tomorrow to do something.
Larger out of place you won't find us doing that it's just not I don't think it's in our DNA.
But.
You know.
This is not this shouldn't be perceived as a rainy day fund.
The cash is is designed it was built up in a period of much higher product prices.
Referred to it as as the winnings.
And you don't want to squander. The winnings you just wanna allocated appropriately to generate higher returns while it might be interesting to look at you know $6 million to $700 million of cash on the balance sheet.
It's interesting, but that's it it doesn't do anything much for you unless you start to deploy it in a way that can generate better returns. So it's frankly, a bit capital inefficient and I know that's not lost on you in the audience. So my my goal would be to try to find something that we could do with it.
That's better than just.
Alice Xing it on the balance sheet.
So you know that's that's the plan.
I'd like to find some other opportunities that makes sense for us and fit within our skill set and that we can manage and operate and that improve the business and that's and that's the plan.
Okay. Thanks, Chris I appreciate all the answers thanks, okay. Thanks.
Pardon me, we are going to take a question from Paul Diamond from Citigroup.
Please go ahead.
Hi, Good morning, Thanks for taking my call just a quick one for me.
Regarding your inflationary view I guess what.
What how do you benchmark that against what should we think about as the narrative that you guys saw coming earlier this year really playing out.
But you guys have in mind or is it more just seeing.
You're comparing the cost side too.
How does the pricing side.
Yeah.
Yeah.
Well, we look at you know we look at.
Benchmarks for Oc T G items for steel prices for.
Rig rig activity and we try to gauge yourselves based on.
How were doing relative to you know market pricing et cetera. So we look at this pretty pretty often it pretty carefully and pretty diligently. So you know we think we're we believe we're capturing a lot of what we're able to capture and maybe more so sooner than what.
Others have done and I think that that speaks to the first mover.
Actions that we took much earlier this year and I think we'll continue to see a bit more in the back half of the year end and you know, we'll see where 'twenty. It takes us for 2024, but I think we've done a decent job sort of benchmarking.
Marking ourselves on a larger scale.
Market items materials.
Understood. Thanks for the clarity there.
Okay.
And the conference has now concluded we all thank you for attending today's presentation you may now disconnect.
Have a good day.