Q2 2023 Matador Resources Co Earnings Call
Okay.
Good morning, ladies and gentlemen, welcome to the second quarter 2023 Matador Resources Company earnings Conference call. My name is levy and I'll be serving as the operator for today.
At this time all participants are in a listen only mode.
We will facilitate a question and answer session at the end of the company's remarks.
As a reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website for one year as discussed in the company's earnings press release issued yesterday.
I will now turn the call over to Mr. Mac Schmitz, Vice President Bachelet shows what Matador. Mr. Smith you May proceed.
Thank you Olivia good morning, everyone and thank you for joining us for Matadors second quarter 2023 earnings conference call. Some.
Some of the presenters today will reference certain non-GAAP financial measures regularly used that matador resources in measuring the company's financial performance reconciliations of such non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP.
Are contained at the end of the company's earnings press release.
As a reminder, certain statements included in this mornings presentation, maybe forward looking and reflect the company's current expectations or forecasts of future events based on information that is now available.
Actual results and future events could differ materially from those anticipated in such statements.
Information concerning factors that could cause actual results to differ materially is contained in the company's earnings release and its most recent annual report on Form 10-K and in <unk>.
Subsequent quarterly reports on Form 10-Q.
In addition to our earnings press release issued yesterday I would like to remind everyone that you can find a slide presentation in connection with the second quarter of 2023 earnings release under the Investor Relations tab on our corporate website and with that I would now like to turn the call over to Mr. Joe Foran, our founder Chairman and CEO Joe.
Thank you Vas.
And welcome to the call.
To all out there and tell you how much. We appreciate you all taking the time to.
Colin they listen and we will provide you with the opportunity to ask.
Uh huh.
They'd like to.
Began.
With the simple fact that Matador.
Is in very good health and we feel we have a very good plan that is underway and producing favorable.
Results.
Hi.
Yes.
Take care.
I'd like to emphasize.
Uh huh.
It's pretty simple math.
We are expecting 40% growth through 2023, and how do we get to that we began the year at 101000 barrels of oil or gas equivalent and we'll end the year at over 140000 barrels of oil or gas equivalent.
Per day.
In addition.
We have added significantly 98 million barrels of oil.
Gas equivalent.
Since the end of last year. So for the first six months of this where we are now it's 98 million barrels, which is a far bear indicate of our performance and our outlook.
There are one or 2% difference.
And production expected.
In the third quarter now the races.
Just to clarify further and put things into context.
I wanted to talk about the production.
And.
What.
You are probably not aware of that.
That production Deere first is really related primarily to three different answer this.
First is we are upgrading.
<unk> advanced facilities to make them.
More efficient.
We've had just shut in.
Those facilities, which is approximately 1500 barrels of oil or gas equivalent.
Second we've had to shut in our state line production due to offset fracs.
The other operators are joining ness, which accounts for 1100 50 barrels of oil or gas equivalent and third the name of their core tail.
I was forced to be shut in because of the midstream company had a forced to make sure there was a fire.
And so we all.
Got it yet and we had no control over that and that was 850 barrels. So total is <unk>.
3500 barrels a day, but again in my view, it's far more significant we're adding 98 million barrels of oil or gas equivalent there.
Then having 3500 barrels.
Yes.
That were shut in that made up about 1% difference.
And the production rates.
Going into the third quarter.
The outlook is very strong.
And you can continue to see us add to production and then you look into next year.
Weird.
Growing more confident everyday that we can meet the mark that we setup there of 150000 barrels of oil or gas equivalent.
Ann.
So you know what.
You know when you look at real value.
It sounds kind of rights and that was kind of outlook and those kind of growth that we believe.
That makes the most difference and we hope you all take that into account in making your investment decisions.
The other thing is that.
Thank you have heard me say this before but our strategic plan for the year was to increase production.
And second is to reduce debt.
Third to reduce the cost of drilling and operations and we're doing that that's playing in the numbers that we presented to you.
Achieving that production setup.
Yeah.
Debt is down by $140 million significant amount.
During the short term that we've added.
Vance and finally that we've gotten the operating expenses down and the drilling costs appear to have peaked and will do better in the third quarter confidence than we did in the second quarter. So we think the outlook is very strong those are reasons for that.
Uh huh.
Brian if I left something out.
No John I think you did a good summary, there I will say that it's exciting to be able to do a $1 $6 billion acquisition. This year and still have our leverage ratio at one times or less and we expect that going forward that we will continue to have a leverage ratio of one times or less and we're excited about about 'twenty 'twenty four with 46 net wells in progress in the <unk>.
Exit rate as Joe said, we're growing more confident about that 150000 <unk> per day. The target we've set and we're excited to be able to hit that next year and it could be better.
Alright, and the other thing that I think that.
This should help give you comfort that we're truly doing better than expected not only the reserve adds but the fact that we're going to we expect in the second half of year to do as much with seven rigs as we did with eight which reflects that our drilling and completion crews are reducing days on well.
And becoming.
More efficient and then our production rates are not just staying up but they're actually growing so thats my case I'm not trying to be defensive but try to give you more information.
It's hard to put it in the news release, but sets. The question came up amongst some of your one to supply. This additional information and so just to repeat the full year production growth for 'twenty two to 'twenty three is 'twenty one per say at 24% for all.
And the 2023 exit rate represents a 40% production growth so I'll make that trumps.
Yeah.
Quarter three.
Projections.
And we do look at things on a more on a full year basis.
For the quarter.
I'd say most lack a football coach then pay that much attention to the first quarter score, but wants to know what that fourth quarter score is.
Olivia will jump into questions. Thank you.
Thank you, ladies and gentlemen to ask a question you want to press star one on your telephone and wait for your name to be announced ladies and gentlemen did the time constraints. We ask that you. Please limit yourself to one question and one follow up again, we ask that you. Please limit yourself to one question and a follow up and you all have had a chance to ask a question afterwards.
We would welcome additional questions from you. Please standby, while we compile the Q&A roster.
And first question.
Coming from the line of Scott.
Scott Hanold of RBC capital markets. Your line is open.
Thanks, Thanks for the color.
I'm just kind of curious now that you've got the advance assets in your hands for a good period of time, and there's probably still more to learn but specifically with those first the first tranche of 21 wells that you all are going to bring on.
I know you all are planning and due to a little bit stage, because you can't just obviously put a bunch of flush wells on one on ones, but could you give us some context in terms of how big the batches are when they come on does it like three to four wells a week and then you need another week before you kind of bring the next batch on is that.
Generally the process cadence of what you expect through August and in early September .
Hey, Scott This is Glenn Stetson EVP of production that's exactly right. So.
21, well batch.
And the way that it works in practice is well what really there are multiple pads, where there are four five and six wells per pad.
We'll commission that facility.
One facility for all 21 wells and the way that it will work in practice is that.
Well basically turn on a well every every couple three days.
And so starting in the Middle August it will really run through that.
At the end of September before all 21 wells are really kind of contributing it there.
Yeah.
In a meaningful way.
One thing that I did want to mention too.
What Joe commented on was when we took over these advanced property. They they really had a different setup.
They had effectively.
One facility per pad and so one of the efforts that we're conducting right now is to consolidate a number of those facilities at.
At the half Mesa properties in new Mexico.
We're consolidating from 14 facilities to five and then in West, Texas from five to one so.
By going by operating.
Six facilities instead of 19.
There are a lot of efficiencies that we gain by doing that and so while we have a temporary shut in.
Our deferred production excuse me.
What you what you get at the end of that is.
Fewer people, so lower supervision costs and lower Opex.
Just from simply the reduction in the number of facilities that we're operating so lots and lots of synergies on that front and then.
How do you say in Q3, we're really going to spend most of the second half of the quarter, bringing on all of those all of those new wells.
No I appreciate that color and then pivoting to maybe the commentary on 2024. It seems like you've got very strong and improving guidance on sort of the circa 150 target.
Can you can you give a little context, you obviously drop the rig that you had so it sounds like operations are.
Going well.
Can you achieve that.
$150 goal with those seven rigs or would you bring on an ace and any kind of view on cost savings as well so looking at 2024.
What kind of budget just at a high level are you thinking about.
Hey, Scott This is Chris Calvert, EVP and co Chief operating officer will address the operational components to your question I guess first.
Looking at the decisions surrounding growing from eight rigs to seven we looked at it.
It really in three or four things.
How's us to accomplish our goals set forth in 2023, when it comes to the number of tools that we will turn in line.
Secondly, obviously it provides us flexibility that gives us more optionality to reduce our debt third.
We feel like it's prudent to be a little bit more patient in this declining service cost environment before adding that rig and if we are able to accomplish those goals that I just mentioned, it's more prudent for us to be a little bit more patient with this eighth rig and all of that excuse me all three of those really set up for what we think is going to be a great 2024 now.
Budget Wise 2024, we really don't give much color until our February discussion.
But we are excited about the runway that we do have like I said, we are able to accomplish a lot of the goals that we set forward and a lot of that comes from the efficiencies that we do receive on the drilling completion and production side, reducing days on the drilling side, whether that's eliminating casing strings getting longer run times out of our bottom hole assemblies completion.
Greater utilization of simulcast remote simultaneous we set forward before your target of maybe 50% of our wells will be simulcast in the second quarter that number was actually 55% and we're looking to exceed 60% for the second half of this year. So I think there are a lot of efficiencies that play into being able to tell the same amount of wells that we have.
Projected with a seven rig case, and so I think.
For us it was a it was an easy decision now the timing of the eighth rig will obviously depend on a lot of certain things market conditions commodity price.
Our realized savings that we have seen via these efficiencies and via really kind of what we see as a peaked service cost environment and so we.
We give ourselves the option to be flexible with the addition of that eighth rig.
I appreciate the color. Thanks.
Thank you and our next question coming from the line of Neal Dingmann.
Of Joe Securities. Your line is open.
Good morning, Joe and team nice quarter, John I'll, just start out looking at that slide six obviously fantastic growth.
I know, it's too early for 'twenty, four but I'm just wondering Joe.
If you look at maybe just philosophically how do you guys think about sort of growth if I would look into 2014.
Im looking specifically at maybe like that second quarter guidance post advance.
Through like what fourth quarter, obviously, it's a nice trajectory and I'm just wondering.
No.
What Chris said around the eight rigs should we think about kind of growth still continue within 24, maybe maybe just how do we think about growth versus any sort of alternative shareholder return or what have you.
Thanks Neil.
In a real good question, there, where we talk about nearly every day is what is the strategic plan for 2024, we now will have seven rigs than what else. The optimizes. The plan, we know well.
The way, Tom and his group and Kevin in the half with quality and add quality prospects to drill we that will come we will get an eighth rig sooner than later.
In the year.
High likelihood hoffbrau ability to add that eighth rig the other factor is as you know we're doing brick by brick acquisitions all the time.
Last year, we did.
On a year.
Year before 250, and then last year 200 in six something like that so we're doing those all the time and so we're going to have that.
Formula where it's gonna be.
Primarily through the drill bit, but we hope to make selective acquisitions.
That in.
And in our App.
Add to the interest we have in certain properties as well as joining acreage. So we can go from a one mile to two miles or two miles to three miles.
And.
So that needs to be factored in and then as Chris said commodity price.
And again as he said wait a little bit because we felt maybe vendor.
Vendor process it.
<unk>.
Maybe there'll be a more favorable cost.
Environment, if we wait a little bit ended 2024, but the group is ready to go.
Get going at any time.
The conditions are.
Favre.
<unk>.
Do we have soon to go to eight rigs.
Look look at M&A acquisitions ways, either made or likely to make and then the third factor is making sure its profitable growth.
At that proverbial measured pace and then the last thing yes.
We are really focused on quality and interact positions in drilling and we're not trying to just get bigger we want to get better so that.
Our operating expenses get better in the law of averages.
<unk>, where we raise our average.
Reserve per well and.
All of that plays a factor we want.
One an emphasis on quality.
Rather than just getting bigger and tab.
It seems to be working out we think the teams have done a really good job getting this into this better rock with both the advanced and the <unk> acquisitions to go along with our leasing activities that John has.
As done in these.
Van and Jon on the on the land side of.
Okay.
Really.
Broaden in Sweden, the areas that we're in so I keep having that sort of SaaS.
It will be heavier on the getting the drilling rig.
As well as the acquisitions that we wanted to be opportunistic, but I hope. It gives you some idea of the calculus.
We're going through every day and by the third quarter report, we'll have a more definite planned for you Neil and if you'll kind of see as you know, we always love seeing you and other analyst and.
Angie.
Answering your questions.
No that makes a lot of sense you guys have been highly successful both organically.
Externally so look forward to more of that and then my second question just on slide nine Joe you. Obviously, you have a in the title slide.
His title very appropriately the synergistic midstream assets you all have but I'm just wondering maybe my question around those asset is are you able to continue are you able to start adding.
Notable amount of third party or maybe just talk about sort of plans for those now that you've folded in advance to the San Mateo and the Toronto Midstream.
Would love to hear what the guys are thinking sort of short term because again I think you've outlined the capex was lower I know thats shifted because of activity on that I'm thinking, though more of how should we think about EBITDA coming from that and maybe just either third party or proprietary activity from that thank you guys.
Well, that's a great that's a great question and cap.
I'll begin by saying the two assets we have their most overlooked one of them is San Mateo the midstream when we meet with people they look at production.
But I don't necessarily look to nudge it the midstream and that's an increasingly valuable asset the second thing I would like to give a shout out to <unk>.
Greg and Anton and others in our group.
Josh and Sean.
We are getting.
Much to our pleasure than what we had hoped to achieve as a lot of repeat business from our customers, who have been calling us and saying.
Saying they would like that.
To get to put more gas in our system.
And.
Which is what we hope to achieve and they like our service so.
I give them credit and yeah, I think they've done a really good job of making it all more profitable.
So.
That's in the second overlooked asset is in northwest, Louisiana, When we made the Chesapeake deal you remember we reserved all of the Cotton Valley Raj Powell and so that's starting.
That area has started in cotton valley, starting to get more drilling activity, making good wells. So we have.
According to our Netherland and Sewell reserve estimate a few years ago, two to 300 Bcf of reserves. There that we started eight gas prices stabilize and in an area. They will probably don't want to do that drill it when it's up and down but when they stabilize that's another alternative.
For us.
They go so.
On the midstream we plan to connect tailwind and San Mateo said wanted to thank our partner on the San Mateo five point, they've been a really good partner, we've enjoyed working with him.
And of course Ware.
We would like to keep expanding that relationship we havent gone so far to start meeting with people about.
Possibly it and neither gas plant, which we think will be needed to meet the overall production from that part of the basin.
We'd likely.
One of the first to get a gas plant.
And either up there in that northern Lea county, or add to our Black River plant. So.
There's a lot of opportunities, but we want to be.
Careful as Brian indicated to keep our leverage ratio down there to one or below and.
Things are going well.
Well, but we don't want to get greedy, we want to be more of the tortoise and the hare slowed but sure.
Okay.
Thanks, Joe.
Thanks Neil.
Come see us.
Well it will be up there too.
Thank you for your questions and our next question coming from the line of Kevin Mccarthy of Pickering Energy Partners. Your line is open.
Hey, good morning matter our team.
Joe you detailed in your press release, you progress on debt repayment, which I know the investors are pleased especially long term holders.
I Wonder if you can talk to how you're thinking about the long term capital allocation strategy and how youre thinking about balancing growth debt repayment and shareholder return over the long run given the current prices.
Okay.
Kevin that's a very good question and I wish I'd give you a specific answer but.
You know that the step it's a step by step process and the first step was to integrate advance and confirm.
Its values and its potential and how that might affect the the.
The rest of the equation.
The second thing is just meeting with our board, we got a great board a lot of expertise and <unk>.
There are.
And their active shareholders and once you know we like dividends.
I'm one of the largest shareholders as you know and I can tell you ally David vignettes, we all do we want to do it in a.
Responsible fashion.
And we'd like to work towards that achievement and being recognized as a candidate who steadily increases the other day and year after year, but to do it in a way that's financially responsible.
So we've raised it from.
A nickel a quarter to 10 cents.
And the last couple of years to <unk> and <unk>.
<unk>.
We mentioned at the annual meeting we're going to look at this at our third quarter Board meeting.
Say if prices are stable.
And how the.
Economy, and the outlook that was taken all of those factors again with wood.
We'd like to be able to raise it.
And it's probably more likely than not that we would hit fading stay this way, but don't want to guarantee or promise anything until the board Committee, there's a hull and look at our.
Our third quarter numbers and how the year will play out and then we will know how 'twenty 'twenty four is shaping up so.
There's going to be a balance there and.
And then on that on the capital allocation as I said, we tend to be more opportunistic and trying to set a fixed budget.
And when you have a fixed budget.
Thanks change and you don't want to be stuck to the budget, but to be able to take advantage of opportunities.
Advance is an example of that I got a call it Thanksgiving.
And I wasn't expecting that and said Hey are you interested in and we started working on it for men, which would've changed the plan. So.
We want to be nimble.
And opportunistic and.
But we also want to.
Reward our shareholders, who have been good to us.
And steadily raising the dividend, but also keep it.
The financial.
Assets strong.
And we have.
Our borrowing base with the buy.
Is it just a small fraction of our total assets and.
So we have more room on that if we should want it.
You know our bonds have been upgraded the original bonds. So we think we have good standing and when we had the last issue we were oversubscribed six times.
We take our standing in the market is good so we have the options and our team has really been coming up with good ideas. So.
Just like our chances and so does everybody else in and I'd like to point out that we adopted.
And then employee shareholder purchase plan and that we had.
Somewhere between 90, and 95% participation is that right Brian .
That's right when it started out so over 9% so the whole staff.
Is excited about this AD and excited about.
The outlook in there.
And then reward so.
I hope that's helpful to you I tend not to be somebody that does a fixed budget in our budgeting process.
Rather be opportunistic and nimble and move.
That.
The capital.
Where it can be.
Most helpful to Matador.
Brian or Tom do you have any comment on that.
This is Brian Willey, the Chief financial Officer, and just sort of very well I'd say.
We're in a unique and I think a great position, where we can grow production. While we also increased shareholder value and reduce the debt that we can do all three at the same time.
And as we look into the rest of this year and then into 2024, we talked about the increased production in 2024 and that will lead to of course increase cash flows, but we can then accelerated debt repayment and continue to make these.
Returns to shareholders and look for opportunities whether it be on the E&P side or the midstream side as Joe said and look for opportunities as we go forward and what would be the best divested from <unk> in the long term and that's really how we manage the business and so just like advance I think that deal was fantastic because they had a number of synergies and it had the midstream <unk>.
Oh, Gee with Pronto, which we're working on and we expect to bring on next year.
Recycling, where he views over 11 million barrels and recycling already from the advanced properties and we've used the dual fuel and the simulcast and been able to improve on the capital side and then.
Mentioned earlier by Glenn on the <unk> side as well so.
Acquisitions like that or are fantastic to be able to make them. So we'll continue to look for those type of special deals.
Tom.
Joe and Brian that's very well said I mean.
Key word is kind of that nimbleness and being opportunistic.
And that percolate, there's so many different parts of our of our business I think.
All of our production teams looking for ways to combine these commodities tank batteries is a very innovative example of how can you take something in its current form and make it even better.
I think that.
All of the long laterals that trades.
Everything we're doing to make these improvements I certainly think that the.
Horseshoe project debt.
Is it really kind of a key example of something that.
That didn't that didn't come from the executive team that came from the staff.
Came from from our drilling team and working very closely with our with our Max Com group to to run all the different torque and drag models and that's just one just one example.
Are things that we do every day here at Matador to be creative and nimble.
And so yes, I think I think that's part of our DNA.
And this is Glenn again, I might mentioned that if you rewind a year ago, even the pronto acquisition was.
Another opportunity that came up that.
We were able to we were kind of uniquely able to close on in a very short period of time and I think it made us the ideal candidate for those for those assets and this year was or excuse me. This last quarter was a very productive one for pronto, where they hooked up directly to 15 of Matadors operated wells.
Yes.
And we increased the throughput to that plant and we think that is.
It's going to be full by the end of the year, which is why we're looking at expanding so I think that again, it's just that that had.
Approach that Tom and Joe really.
And Brian I've talked about here are being.
Being able to execute on the opportunities as they come up.
Be flexible.
Okay.
Thanks for that answer and I like your chances too.
As a follow up regarding pronto any further color you can provide on your options and the timeline of building a new plant.
Yeah.
Yes.
Sorry. This is Glenn again, I would just say we highlighted in the release that this is something.
As I just mentioned, we think the plant.
Current plant is going to be full by the end of the year and so really I mean, there are plans to expand that system with a 200 million cubic feet a day plant and right now I mean, it's still.
In the planning phases.
And that's where we're at right now so we're going to I think refrain to add more than that today, but thats what.
That's the path we're on right now.
Thank you and as always I appreciate your answers.
Okay.
Yes. This is Gregg krug with.
EVP of marketing and midstream strategy.
Echo what Glen has said I mean.
We're looking forward to getting a.
New plan out there, we think that it lends itself really well to our expanding R. R.
Our drilled with our with our drilling program and also with the.
Availability of third party gas.
We think.
We think there's a really need out there for that and.
<unk> definitely shown shown up quite a bit here lately, especially.
With the with some of our with our competitors out there that we think that there's there's opportunities there to grow our third party businesses. So.
Thank you and our next question coming from the line of Zach Barr home of Jpmorgan. Your line is open.
[laughter].
Hey, guys. Thanks for taking my question I.
I guess first just on Capex, you took the capex budget down and reduced your guided D&C cost per foot.
1100 per foot.
Where were you on D&C cost per foot and <unk> and how do you expect that to trend in the back half of the year, just trying to get a sense of the magnitude of the cost deflation you are saying.
Yeah, Hey, Zach this is Chris Calvert, again, EVP and co CLO.
To answer your questions first you know.
In January we did a full year guide of 1124 feet for.
Per dollar spent per completed lateral feet. We have just guided that down to 1100, and so if you think back to the first quarter.
Our number was about $1014 per lateral foot and so we all knew and I think everybody kind of on your side of the coin too as well that the second quarter.
Similar to our absolute Capex spend in the second quarter was going to be a little bit of a high watermark for us and so the second quarter came in.
$1156 per foot and so obviously those are wells that are being turned online at kind of the peak of this cost service cost environment like Joe had said.
We're looking forward to is taking these capital efficiencies that we always speak to and then in quarters past. The story has been those capital efficiencies are going to be used to basically mitigate cost inflation I don't know the story for the second half of the year. So those are going to be working in tandem with this sort of more competitive service cost environment.
So I can say the increased utilization of simultaneous dual fuel those things will now be working in series. So to speak with this kind of a more competitive service cost environment. So looking forward to that $1100 per completed lateral foot. We do expect to realize some pretty immediate cost savings both on the complete.
<unk> side really immediately into the third quarter, and then on the drilling side as well going into the latter half of the year and then into 2024 and so we.
We are guiding that number down and that number comes from a combination of those capital efficiencies that we've spoken to and then also the more competitive service cost environment. So it is somewhat of a mix of both but once again our strategy here is control, what we can control and utilize.
Simultaneous dual fuel technologies drilling wells faster completing wells faster and that has really as it's always been kind of underpinned. These cost savings that we speak to.
One other thing Zack is that.
While we wanted to get cost down we wanted to do it.
Not by going to cheaper products.
But we want to keep up the quality, we like the vendors that we have there quality vendors with quality products. So you can be as you know the old signed Penny wise pound foolish.
If you just go into something that cheaper and.
Chris in them I think have done a very good job of balancing cost against quality to make sure that.
Our wells as well equipped with the best product possible.
Okay. That's great color just one quick follow up Joe you talked about three issues that would impact your <unk> production in your prepared remarks.
Although this use persisted the <unk> just trying to reconcile that 5800 barrels of oil a day reduction in the in the <unk> volume guidance.
Hi, Glenn.
Again EVP of production, yes, some of the shut ins at state line associated with offset Fracs will continue into Q4 and we've included those numbers when we're when we contemplated the exit rate at 143000 Boe. So.
It will still impact Q4, but and but we've included those those impacts yes. This is Brian .
Glenn is exactly right it.
It doesn't include the impacts but.
Going into Q4, the Stateline shut ins essentially about 2000 Boe per day as the impact and so we would have a higher exit rate of those.
Got it and it didn't happen so I think it's.
Really proud of the exit rate, we have and as we get those wells back on just as Joe said earlier. These are temporary shut ins the oil and gas is still there. So it's just a temporary shut in and we put it back on line and then are able to take advantage of those production from those wells. So we're excited about getting it back on the end of the fourth quarter and into next year.
The name of their core tail should be back on no problem.
The facilities will you'd be finished with them.
In Q3, yes, or yes, Lance nodding his head yes.
If not it will be up here at Christmas.
Yes.
Great. Thanks, guys really appreciate the color.
Thank you. Our next question coming from the line of Sebastian <unk> of Benchmark Company. Your line is open.
Thank you.
Hey, Joe a question.
On 24, so that you are comfortable with the guide 150.
Any thoughts on the oil cut.
If that's a number you can we can take kind of the <unk> number and run with or is maybe the advanced properties mature and gas plants come on.
Mike.
You know a heavier gas mix.
Well I think do you expect in say subject to whatever lay it adds to my remarks is that we expect to go out the year at about 60% and that will increase in 2024.
Somewhere between 60% to 64% Glen as Ed Yes, Joe.
You nailed it that's exactly right, we'll exit the year about 60, 40 split 60 oil and 40%, yes on a Boe basis.
One thing that could affect that we as we continue to.
Yeah.
To develop the advanced properties, we will get Wailea, but just like in Q2 of this year. This this quarter that we just reported on and there was some non op activity in the Haynesville, where we had some pretty hefty overrides and that's not really something that we can control the timing on that might.
Move.
Our gas volumes.
On a boe basis up or down a percent or two so.
Kind of subject to activity in the Haynesville that can change, but the 60 40 split a good a good.
Benchmark I think.
Got it yes, no I wouldn't turn away from gas.
Yeah as far as Oh, I think I. Appreciate your comments that you don't want to say more on the gas processing expansion, but just.
No.
Hypothetically.
Our plans of that scale, how much do they brought.
Say that again please.
Yes, how much less what's a clinic.
How much of the plants run.
200, 200, a day plant.
Well it depends on the size.
He had cost him mistake cost.
Lot of it depends on the size of the plant.
And whether it's for.
Regular gas or for Sarah gas and again some of it depends on the competitive environment. So it's very difficult I'd hesitate to say Sam.
Uh huh.
And in a reaction to some of that depending on what that cost is may influence, whether we take on a partner or not and because again, we want to protect the balance sheet, we want to reduce debt.
And while we'd like the plant.
We don't we're not trying to.
You had a monopoly on new plants out there in that area, we work with somebody else.
That was somehow make the proposition better so zach.
Zach App at this time, it would be really hard to.
So the exact number because designed can come at a number of different ways still so until we have a firm design.
It would be difficult, but when we do that would be we'd be happy to share. It again, I'd say the same thing kind of SaaS.
And there'll be a.
We can tell you where we are at that moment.
Alright, thank you.
Thank you.
Last question comes from the line of.
Neil Mariani of Rod.
Line is now open.
Yeah.
Yes, Hi, you guys, obviously talked about advanced production kind of being a little bit better than expected I was hoping maybe you could kind of quantify that I think you guys were around.
Around 24, 25450 barrels a day in the first quarter, where did that number kind of come out in second quarter, and maybe just talk about the trajectory of advance as we get into <unk> and <unk> were a little bit would be helpful.
Hey, Leo This is this is Tom I'll Center.
We've certainly been very happy with the with the advanced production. So.
So far it's done.
Remarkably well compared to our forecast and so.
I think we're just right in there within a few percent of.
What we had targeted 50% better. So overall, we're very happy with it I know the team is taking over those properties and has done a great job improving the production through some.
Yes, Pete replacements and some other things.
Things are things are moving along very well.
Okay. I also wanted to just ask a about sort of debt paydown.
Sounds like you guys, maybe pay down to add a little bit faster in the last handful of months than maybe expected.
Can you kind of talk about sort of when you can think you can get to getting that revolver sort of paid off I mean, it sounds like it's a pretty important golf you folks I know, obviously it will be dependent on commodity prices, but if we look at strip I mean, do you think thats something that can be pretty much fully pay off kind of by middle of next year, just looking for a rough estimate of when we can expect.
<unk> net to get paid off.
Yeah. Thanks, Leo This is Brian and you are right. It is an important goal for us and something that we are certainly focused on and it does depend on oil prices and the realized oil prices that we get and the other opportunities that we have of course, including building a new plant in any other E&P opportunities, we have going forward, but I think right now.
Pending on whether or not we get a partner on the plant you know if we get a partner I think that we'd be close to paying that off by the end of next year at current strip and that continues to be one of our goals as we go forward.
Okay. Thanks, guys.
Thanks say come see us.
Leo.
Yes.
No worries.
Thank you ladies and gentlemen, this ends the Q&A portion of this morning's conference call I would now like to turn the call back over to management for any closing remarks.
Thank you all of those are good questions. We appreciate the discussion.
It sounds like you all have done your homework.
And.
I hope that was helpful to you in your own planning.
Uh huh.
As you all can save from US we've had in my Chairman's remarks, we've had I think a remarkable run 36 quarters, where we've met or exceeded industry guidance.
And again.
If we had to do it all over again, we did pretty much like we did.
We did more of that.
We have advanced that gave us a headwind on production, but were down by one or 2%.
But the big number is look at the reserves we added in the first six months of the year and the reserves will add in the last six months and production is on a very strong path to grow.
And the costs are coming down, but that's coming down.
We.
We think our opportunities are increasing.
Like our position.
In the Delaware and we're one of the larger.
Kennedy's with and one of the larger acreage positions. So that's the acreage is going to be something that's going to keep on giving <unk> our head of GSI.
Just over and over again has examples of weather of where the Delaware has extended itself by adding new.
Producing horizons.
This six months so.
Where we're excited is as I hope you can tell and half.
The acreage to visit with you and we always feel somewhat limited.
Not able.
<unk> doesn't allow us to go in for all the detail that goes into our decisions, but if you could be here.
Ah.
Yeah.
And listen to us as we go in and you'd see that these these plans are thought out great board great exactly obtained great staff.
Yeah.
So far touch wood, we feel we got into the right answers and when its an opportunity presented itself. We've made the right decision whether to do it.
Not we hope that record at 26.
Consecutive quarters Thats nine years gets a southern trust and.
And confidence that we're on a good path when we outlined this and look.
<unk>.
You know one quarter's production look the full year and not just the full year look at are we adding reserves.
Proved reserves proved developed reserves at a favorable.
Pace and a favorable cost so.
That's kind of a summary of what we're trying to do.
Good people, but technology trying to take our as you heard from Chris trying to take full advantage.
Of the innovations in the new technology, and we are recycling on the environmental side, we didnt get any environmental questions.
Now, we're making we think some great strides.
And the environmental responsibility, including recycling water.
And having more and more of our production water and gas on the pipe.
That.
We're continuing improvements there.
And we're real pleased with that and the innovation of the horseshoe.
<unk> is going to add to the number of locations and we're drilling longer and longer laterals that have been.
Economic benefit so we think in all the areas that.
The team is making.
Good moves.
And.
We think this is going to be one of the best years, we've ever had and.
2024 is going to be even better so with that I'll.
Sign off but now that.
Max phone number.
Andy and Brian and that will always be available to you.
Ladies and gentlemen, thank you for your participation today. This concludes today's program you may now disconnect.
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