Q4 2023 Vital Energy Inc Earnings Call

Speaker Change: [music].

Operator: Good day, ladies and gentlemen, and welcome to Vital Energy, Inc.'s fourth quarter and full year 2023 earnings conference call. My name is Desiree, and I will be your operator for today. At this time, all participants are in listen-only mode.

Good day, ladies and gentlemen, and welcome to vital Energy, Inc. Fourth quarter and full year 'twenty 'twenty earnings Conference call. My name is Deseret and I will be your operator for today.

Deseret: This time, all participants are in listen only mode.

Ronald L. Hagood: We will be conducting a question and answer session after the financial and operations report. As a reminder, this conference is being recorded for replay purposes. It is now my pleasure to introduce Mr. Ron Hagood, Vice President, Investor Relations. You may proceed. Thank you. Good morning.

Deseret: We will be conducting a question and answer session. After the financial and operations report.

Deseret: As a reminder, this conference is being recorded for replay purposes.

Deseret: It is now my pleasure to introduce Mr. Ron Hagood, Vice President Investor Relations you May proceed Sir.

Ronald L. Hagood: Thank you and good morning, joining me today are adjacent packet President and Chief Executive Officer, Brian Lumberman, Executive Vice President Chief Financial Officer.

Ronald L. Hagood: Joining me today are Jason Paget, President and Chief Executive Officer, Brian Limmerman, Executive Vice President, Chief Financial Officer, Katie Hill, Senior Vice President, and Chief Operating Officer, as well as additional members of our management team. During today's call, we'll be making forward-looking statements. These statements, including those describing our beliefs, goals, expectations, forecasts, and assumptions, are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ from these forward-looking statements for a variety of reasons, many of which are beyond our control.

Ronald L. Hagood: Haiti Hill, Senior Vice President and Chief operating officer, as well as additional members of our management team.

Ronald L. Hagood: During today's call, we'll be making forward looking statements. These statements, including those describing our beliefs goals expectations forecast and assumptions are intended to be covered by the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Ronald L. Hagood: Our actual results may differ from these forward looking statements for a variety of reasons many of which are beyond our control.

Ronald L. Hagood: In addition, we'll be making reference to non-GAAP financial measures. Reconciliations to gap financial measures are included in the press release and presentation we issued yesterday. The press release and presentation can be accessed on our website at www.vitalenergy.com. Now I'll turn the call over to Jason Poggett, President and Chief Executive Officer. Thank you, Ron, and thank you for joining us this morning.

Ronald L. Hagood: <unk> will be making reference to non-GAAP financial measures reconciliations to GAAP financial measures are included in the press release and presentation, we issued yesterday.

Ronald L. Hagood: Press release and presentation can be accessed on our website at www dot vital energy Dot com.

Ronald L. Hagood: Now I'll turn the call over to Jason Pigott, President and Chief Executive Officer.

Mikell Jason Pigott: Thank you Ron and thank you for joining us this morning.

Jason Paget: 2023 was a great year for Vital Energy as we drove change on multiple fronts. Throughout the year, we executed on our strategy to build shareholder value, expand our development portfolio, generate free cash flow, and strengthen our balance. In 2023, we achieved record production of 96,600 barrels of oil equivalent per day and oil production of 46,300 barrels per day, an increase of 17% and 22% respectively versus full year 2022 at lower than anticipated capital costs. In 12 months, we increased our oil production by approximately 60%, for a full year 2023 net income of $695.1 million, adjusted net income of $325 million and cash flows from operating activities of over $811 million, closed six accretive Permian Basin acquisitions for $1.6 billion in cash and stock, adding approximately 88,000 net acres and 465 gross oil-weighted locations, 280 of which were announced with the acquisitions, increasing inventory of oil-weighted development locations to more than 10 years at current activity levels, an increase of 85% compared to the beginning of the year.

Mikell Jason Pigott: 2023 was a great year for vital energy as we drove change on multiple fronts.

Mikell Jason Pigott: Throughout the year, we executed on our strategy to build shareholder value expand our development portfolio generate free cash flow and strengthen our balance sheet.

Mikell Jason Pigott: In 2023, we achieved record production of 96600 barrels of oil equivalent per day and oil production of 46300 barrels per day, an increase of 17% and 22% respectively versus full year, 2022, and lower than anticipated capital costs.

Mikell Jason Pigott: 12 months, we increased our oil production by approximately 60%.

Mikell Jason Pigott: For the full year 2023, net income of $695 $1 billion adjusted net income of $325 million in cash flows from operating activities of over $811 million.

Mikell Jason Pigott: Close six accretive Permian Basin acquisition for $1 6 billion in cash and stock, adding approximately 88000 net acres and 465 gross oil weighted locations 280 of which were announced with the acquisitions increasing inventory of oil weighted development locations.

Mikell Jason Pigott: So more than 10 years at current activity levels, and an increase of 85% compared to the beginning of the year.

Jason Paget: We exited 2023 with a net debt to consolidated EBITDAX ratio of 1.09 times, which was 8% lower than the prior year end. We reported reduced Scope 1 greenhouse gas emissions intensity and methane emissions intensity of 38% and 65%, respectively, as of year-end 2022. Additionally, we were the first Permian operator to receive the third-party TrustWell certification for responsible operations, placing Vital Energy in the top quartile of U.S. onshore operators.

Mikell Jason Pigott: We exited 2023, but net debt to consolidated EBITDAX ratio of 1.09 times, which was 8% lower than the prior year end.

Mikell Jason Pigott: For a reduced scope, one greenhouse gas emissions intensity and methane emissions intensity of 38% and 65% respectively as of year end 2022.

Mikell Jason Pigott: Additionally, we were the first Permian operator to receive the third party trust well certification for responsible operations, placing vital energy in the top quartile of the U S onshore operators.

Jason Paget: Our strategic shift to focus on entry into the Delaware Basin and expansion into the Southern Midland Basin is paying off, and the transition process is going extremely well. We are drilling wells faster, well costs are cheaper, and they are more productive than originally anticipated. Socially, we are transferring knowledge and technology across both basins, making us a stronger operator, setting us up for more record-breaking activity in 2024. Turning to 2024, we are entering the year in a position of strength as a result of our work to extend our bond maturities, reduce the amount drawn on the RBL, and reduce our total leverage. We are pleased to confirm our prior guidance adjusted for the recently announced working interest additions of capital investment between $750 million and $850 million with oil production guidance of 55,000 to 59,000 barrels of oil per day and total production of 116.5 to 121.5 barrels of oil equivalent per day. We plan to generate more than $350 million of adjusted free cash flow at current prices, and our cash flow projections are supported by a strong hedge book, focus on further paying down debt I will now turn the call over to Katie to provide an operational update. Thank you, Jason.

Mikell Jason Pigott: Our strategic shift to focus on entry into the Delaware Basin.

Mikell Jason Pigott: In the southern Midland Basin is paying off and the transition process is going extremely well we are drilling wells faster well costs are cheaper and they are more productive than originally anticipated.

Mikell Jason Pigott: Actually we are transferring knowledge and technology across both basins, making us a stronger operator, setting us up for more record breaking activity in 2024.

Mikell Jason Pigott: Turning to 2024, we're entering the year in a position of strength as a result of our work to extend our bond maturities.

Mikell Jason Pigott: <unk> the amount drawn on the RVO and reduce our total leverage.

Mikell Jason Pigott: Pleased to confirm our prior guidance adjusted for the recently announced working interest additions of capital investment between $750 million and $850 million with oil production guidance of 55000 to 59000 barrels of oil per day, and total production of $116 five to 120.

Mikell Jason Pigott: One 5000 barrels of oil equivalent per day.

Mikell Jason Pigott: And to generate more than $350 million of adjusted free cash flow at current prices and our cash flow projections are supported by a strong hedge book.

Mikell Jason Pigott: Focus on further paying down debt and reducing our leverage ratio to less than 1.0 times throughout the year.

Mikell Jason Pigott: Strategically in 2024, we maintained focus on our core principles.

Mikell Jason Pigott: Generating free cash flow, reducing debt and leverage expanding our development portfolio advancing sustainability and integrating digital solutions I will now turn the call over to Katie to provide an operational update.

Katie: Thank you Jason.

Katie Hill: Operationally, we had an extremely successful 2023. We consistently exceeded production expectations throughout the year, delivered capital investments below plan, successfully integrated six asset acquisitions, and established a core operating position in the Delaware Basin. Our team has extensive experience onboarding new assets and optimizing development plans, as we've successfully demonstrated in our Howard County position over the past two years. As we gained experience with the asset, we refined spacing design, completion techniques, and production methods. The bulk of our 2023 development was in Howard County, and the results showcase the success of this integration and optimization process. Newell and Howard regularly exceeded production expectations, and we continue to drive execution efficiency. In the fourth quarter, we set company records in drilling, delivering a 10,000-foot lateral in six and a half days and a record-setting 7,716 drill feet in a day. They also set records in completion during the fourth quarter for daily pumping hours, stages per day, and average transition times on a pad.

Katie: Recently, we had an extremely successful 2023, we consistently exceeded production expectations throughout the year delivered capital investments below plan.

Katie: Lastly, integrated fixed asset acquisition and established a core operating position in the Delaware Basin.

Katie: Our team has extensive experience onboarding, new asset and optimizing development plan as we successfully demonstrated in our Howard County position over the past few years.

We've gained experience with the asset we refined spacing design completion technique and production method.

Katie: The bulk of our 2023 development wells in Howard County, and the results showcase the success of this integration and optimization process.

Katie: New wells in Howard regularly exceeded production expectations, and we continue to drive execution efficiencies.

Katie: In the fourth quarter, we set company records in drilling delivering a 10000 foot lateral in six and a half days and a record setting 7716 drove eat in a day.

Katie: We also set records in completions during the fourth quarter for daily pumping our stages per day and average transition times on a pad.

Katie Hill: Production processes brought on high-value production from wells earlier than projected, as we optimized pump sizes to dewater wells more quickly after drill-out and to better recover from offset fracking. Our fourth-corner oil production, driven by outperformance in Howard County and our recently integrated assets in Upton County, exceeded the midpoint of our guidance range by 7%, or 3,700 barrels per day. Two-thirds of the beat was driven by new wells delivering above expectations. Another driver of our 2023 results has been the optimization of our base production. Last year, while brought online prior to January 1st, it exceeded production expectations by 10%. This was accomplished through both process improvement and the continued application of optimization technology.

Katie: Production processes brought on high value production from well earlier than modeled as we optimize quantify those to dewater wells more quickly after drill out and to better recover from off that bracket.

Katie: Our fourth quarter oil production driven by outperformance in Howard County, and our recently integrated assets in Upton County exceeded the midpoint of our guidance range by 7% or 3700 barrels per day.

Katie: Two thirds of the beat was driven by new well delivering above expectation.

Katie: Well they drive all of our 2023 results has been the optimization of our base production last year wells brought online prior to January 1st exceeded production expectations by 10%.

Katie: This is accomplished through both.

Katie: This improvement and the continued application of optimization technologies. The end result has been faster and more targeted response times and increased mechanical run times across the field.

Katie Hill: The end result has been faster and more targeted response times and increased mechanical run times across the facility. This operating model has proved to be scalable, and we are improving results through integration of the driftwood and forage acquisitions that we closed on in early 2023. Production from new wells on the asset is exceeding expectations by 10% on legacy driftwood and 33% on legacy forage acreage. We are early in the process of optimizing base operations on the properties but are already exceeding production expectations on the legacy forage asset by 4%. We have also reduced well costs in the Delaware Basin by 12% versus what was assumed at the time of close through improved cycle time, supply chain optimization, and well redesign.

Katie: This operating model has proved to be scalable and we are improving results through integration of the drug trend towards acquisitions that we closed on in early 2023.

Katie: <unk> from new album, the Alpha is exceeding expectations by 10% on legacy Driftwood and 33% on legacy acreage. We are early in the process of optimizing based operations on the properties that are already exceeding production expectations on a legacy asset by 4%.

Katie: We've also reduced well costs in the Delaware basin by 12% versus what was assumed at the time of close.

Katie: Cycle time supply chain optimization and while redesign.

Katie Hill: They're delivering wells more quickly, for less capital, and with higher productivity than expected at acquisition. These results have been built into our forward-looking forecast and reflect continued year-over-year improvement. When we onboard these assets, our teams are evaluating geologic data, cost assumptions, and production results from our asset and from offset operators. Based on this work, we have organically added another 185 high-return wells to the 280 originally included in our acquisition assumptions. In the Midland Basin, we added 65 sprayberry and wolf camp locations in Upton County through detailed technical evaluation that incorporated offset operator results and, importantly, a robust data set acquired from a vertical well we drilled on our acreage that collected high-quality geologic data.

Katie: We're delivering wells more quickly for less capital and with higher productivity than expected acquisition. These results have been built into our forward looking forecast to reflect continued year over year improvement.

Katie: We are onboarding app with our teams are evaluating geologic data cost assumptions and production results from our asset and from offset operators based on this work we have organically added another 185 high return wells to the 280 originally included in our acquisition assumptions.

Katie: In the Midland Basin, we added 65 sprayberry in Wolfcamp locations in Upton County through detailed technical evaluation, they incorporated offset operator results and importantly, a robust data set required from a vertical well we drilled on our acreage that collected high quality geologic data.

Katie Hill: In the Delaware Basin, we added 120 wells and core development horizons across the position based on results from our recently completed wells and the improved economics from reducing well cost 12% since we began operating in the area. In 2024, we remain focused on organically adding low-cost inventory through additional technical work and through increased opportunities to bolt-on acreage adjacent to our leasehold. Our capitally efficient development plan optimizes activity between the Midland and Delaware basins.

Katie: In the Delaware Basin, we added 120 wells and core development horizons across our position based on results from our recently completed wells and the improved economics are reducing well cost 12% since we began operating in the area.

Katie: In 2024, we remain focused on organically, adding low cost inventory through additional clinical work and through increased opportunities to bolt on acreage adjacent to our leasehold.

Katie: Our capital efficient development plan optimize activity between the Midland and Delaware Basin.

Katie Hill: This quarter, we are bringing online several Delaware packages and a 20-well Western Glasscock package. Production data from our recently turned-in-line Delaware wells continues to support our development plan. On the Midland Basin Western Glasscock package, drilling and completion operations have gone very well.

Katie: This quarter, we are bringing online federal Delaware packages, and a 20, well western Glasscock package.

Katie: Please production data from our recently turned in line for a while it continues to support our development plan on.

Katie: On the Midland Basin, Western Glasscock package drilling and completion operations have gone very well and five wells are currently flowing back.

Brian Singer: And five wells are currently flowing back. Pressure on these wells is promising, and the package is already producing 3,000 gross barrels per day. Clients, the remainder of the package will be brought online over the next four to six weeks with peak oil planned for the middle of the second quarter. I'll now turn the call over to Brian for a financial update. Thank you, Katie.

Katie: These wells are promising and the package is already producing 3000 gross barrels per day.

Katie: Plans for the remainder of the package will be brought online over the next four to six weeks with peak oil plan for the middle of the second quarter.

Katie: Now I'll turn the call over to Brian for a financial update.

Brian Singer: Thank you Katie.

Brian Singer: During the fourth quarter, we closed three previously announced Permian acquisitions and an additional transaction to increase working interest on a portion of the acquired property. A thoughtful approach to financing these transactions has significantly strengthened our capital structure. Recently, our bonds were upgraded by Moody's, and our bond yields have improved by around 175 basis points. The 2024 budget is designed to generate substantial free cash flow while growing full-year average production versus fourth quarter 2023 volume. Cash flow is expected to build throughout the year, with capital being highest in the first quarter and then coming down throughout the year. The capital progression is driven by first quarter activity being on higher working interest wells, and as more activity moves to the Delaware Basin, the average working interest will decrease, resulting in lower quarterly capital spend. We're focused on further strengthening our balance sheet, and we plan to utilize free cash flow to reduce absolute debt and achieve our year-end 2024 target debt ratio of 1.0 times. That reduction will be focused on our credit facility, and we expect the balance to be zero in the third quarter of the year.

Brian: Fourth quarter, we closed three previously announced Permian acquisitions, and an additional transaction to increase working interest on a portion of the acquired properties. Our thoughtful approach to financing. These transactions have significantly strengthened our capital structure recently, our bonds were upgraded by Moody's and our bond yields have improved by around 100.

Brian: 75 basis points.

Brian: 2020 for budget is designed to generate substantial free cash flow, while growing full year average production versus fourth quarter of 2023 volumes.

Brian: Cash flow is expected to build throughout the year with capital being highest in the first quarter and then coming down throughout the year. The capital progression is driven by first quarter activity being on higher working interest wells and as more activity moves to the Delaware basin. The average working interest will lower resulting in lower quarterly capital spend.

Brian: We are focused on further strengthening our balance sheet and we plan to utilize free cash flow to reduce absolute debt and achieve our year end 2024 target debt ratio of 1.0 times.

Brian: That reduction will be focused on our credit facility and we expect the balance to be zero in the third quarter of the year. We believe we can achieve substantial benefits from utilizing free cash flow to reduce leverage including lower future interest expense.

Jason Paget: We believe we can achieve substantial benefits from utilizing free cash flow to reduce leverage, including lower future interest rates. In early February, we announced a second transaction to acquire additional working capital on some of our recently acquired Permian property. Due to the shares issued in this transaction, our NOL carry forwards will likely be subject to 382 limitations. However, importantly, we have been managing our utilization of intangible drilling credits and estimate that, at current prices and projected activity levels, we will not pay federal cash taxes for at least the next three years.

Brian: In early February we announced a second transaction to acquire additional working interest.

Brian: Some of our recently acquired Permian properties.

Brian: Due to the shares issued in this transaction, our NOL carry forwards will likely be subject to three two limitations.

Brian: Importantly, we have been managing our utilization of intangible drilling credits and estimate that at current pricing and projected activity levels, we will not pay federal cash taxes for at least the next three years.

Jason Paget: I will now turn the call back over to Jason for closing comments. Hey, Brian, to close, I want to reiterate that Vital Energy is a much different company today than we were a year ago. We are much stronger, and this would not have been possible without the talented team we have behind us.

Brian: I will now turn the call back over to Jason for closing comments.

Mikell Jason Pigott: Hey, Brian to close I want to reiterate that vital energy is much different company today than we were a year ago. We are much stronger and this would not have been possible without the talented team we have behind us.

Operator: Operator, I will now turn the call over to questions. Thank you. The floor is now open to your questions. To ask a question this time, please press star then the number one on your telephone keypad.

Speaker Change: Operator, I will now turn the call over for questions.

Speaker Change: Thank you.

Speaker Change: There is now open for your question to ask a question. This time. Please press Star then the number one on your telephone keypad.

Operator: Please pause for just a moment to compile the Q&A roster. Your first question comes from the line of Neal Dingman with TruViz Securities. Your line is open. Good morning, Ellen.

Speaker Change: Well pause for just a moment to compile the Q&A roster.

Speaker Change: Okay.

Speaker Change: Your first question comes from the line of Neal Dingmann mutually Securities. Your line is open.

Neal Dingman: Nice quarter. You know, in case my first question, maybe both of them are going to be around maybe slides nine and eight. First, maybe some of you and Katie said that on both of these, could you maybe start on slide nine?

Neal Dingmann: Hi, good morning nice quarter.

Neal Dingmann: Just my first question, maybe both of them are going to be around maybe slide nine eight.

Neal Dingmann: First maybe something that <unk> said that on both of these could you let me start on slide nine.

Neal Dingman: I like where you talk about the successful integration of the properties. And I'm just wondering, now that you've done that, when you look at both now the mixture of the rent recently added Delaware, as well as the Midland Basin. I mean, has that changed?

Neal Dingmann: Like where you show about the successful integration of the properties and I'm. Just wondering now that you've done that when you look at both now the mixture of the recently added Delaware as well as the Midland Basin.

Katie Hill: I know you've got the four rig focus this year. Could you maybe talk about how you plan to attack that now that, you know, you've got all the assets sort of working together? Sure. Good morning, Neal. This is Katie.

Speaker Change: That changed I know you've got the four well for rig focus this year could you maybe talk about how you plan to attack that now that you've got all the assets sort of working together.

Speaker Change: Sure. Good morning, this is Katy.

Katie Hill: Throughout the year, this year, we're planning to run, like you said, a four-rig program, and we're continuing with our strategy, of course, of drilling our best wells next. So, as we think about the capital allocation throughout the year, we'll shift a little bit more heavily into Delaware in the second half. There are some really good opportunities as we've closed on the assets and integrated them. We've been able to optimize the plan this year, and we're excited to get some capital deployed in that area. As we think about moving into 2025, there's still some really great investment opportunities in the Midlands, so we'll continue with that mix of the Midland-Delaware basin and try to optimize across the two assets throughout the next couple years.

Katy: Throughout the year. This airplane around like you said, a four rig program and we're continuing with our strategy of parts of drilling our best Wells <unk> as we think about the capital allocation throughout the year will shift a little bit more heavily into the Delaware in the second half there are some really good opportunity as we've as we've closed on the assets and integrated them, we've been able to optimize the plan this year end.

Neal Dingman: I think there's additionally quite a bit of opportunity in the Delaware that we've built into the plan around our production optimization work. As you mentioned on slide nine, you can see that we've outperformed on base production assumptions early in the driftwood and forage assets in early 2023. And as we think about deploying that technology and base optimization work across the three assets we closed in the second half of the year, that'll continue to support the 2024 plan and the projections that we have out there. So, I think there are a lot of really good opportunities for us across the team. Great, great details.

Kyle Coldiron: And then just a follow-up, actually, at slide 7 or 8, where you talked about the additional zones and then you showed the sort of cost reductions. I'm just wondering, something you had mentioned, when you now tackle, I guess, what do you all view as sort of the optimal project or optimal pad size? It seems like even being a smaller operator, you all have been able to step that up and capture some efficiencies. So, again, I guess when I'm looking at these two, I'm just wondering, like, when you co-develop now, what kind of projects are optimal and, you know, what makes the most sense for you all. I'm Neil. This is Kyle Coldiron.

Katy: So I'm just wondering like when you co develop now you know how big it projects are optimal and you know you think makes the most sense for you all.

Speaker Change: This is kind of cold iron. So I think the answer really depends on the area and and kind of this that day that you have so if you look at our western Glasscock package that we have coming online right now.

Kyle Coldiron: So I think the answer really depends on the area and kind of the stat pay that you have. If you look at our Western Glasgow package that we have coming online right now, essentially, that's kind of two very large pads where we've drilled those 20 wells. And one of the great benefits of that was that we were basically able to park our, you know, Halliburton frack through there and complete 10 of those wells without ever having to move the fleet. So just the efficiency really skyrockets from those big pads. As we move over to the Delaware side, we tend to drill a little bit smaller pads, kind of in the three to five type of range. Ultimately, a lot of that has to do with just our well spacing assumptions over there and what targets we're hitting. But I think in answer to your question, it depends on the area.

Speaker Change: Essentially that's kind of two very large ads.

Speaker Change: <unk>, where we drove those 20 wells and one of the great benefits of that was that we were basically able to <unk> halliburton frat through there.

Speaker Change: And complete 10 of those wells without ever having to move the fleet. So just the efficiency really skyrockets from those big pads as.

Speaker Change: As we move over to the Delaware side, we tend to drill a little bit smaller pads kind of in the three to five.

Speaker Change: Type of range ultimately a lot of that has to do with just our walls facing assumptions over there and what targets. We're hitting so I think you're adding to your to your question. It depends on the area, but across the board. We are you know a continuous improvement culture on our operations team and we've been able to drive both drilling and completion costs down across both based.

Zach Farham: But across the board, we have, you know, a continuous improvement culture on our operations team, and we've been able to drive both drilling and completion costs down across both basins, I think, as you can see in the materials that we shared today.

Speaker Change: <unk> I think as you can see the materials that we sure today.

Speaker Change: Makes sense, thanks for the details great job yes.

Speaker Change: Yeah.

Speaker Change: Alright next question comes from the line.

Speaker Change: <unk> Your line is open.

Speaker Change: Good morning, Thank you for taking my question.

Jason Paget: Great job, guys. Yeah. Our next question comes from the line of Zach Farham with J.P. Morgan. Your line is open. Good morning.

Speaker Change: I guess <unk> first can you talk a little bit about the inventory additions in the Delaware in the Midland It seems pretty clear you added two additional zones based on some some industry activity around you, but could you detail exactly what you added in the Delaware and and kind of how that fits into the program going forward.

Jason Paget: Thanks for taking my question. I guess, first, can you talk a little bit about the inventory additions in the Delaware? In the Midland, it seems pretty clear you added two additional zones based on some industry activity around you. But can you detail exactly what you added in the Delaware and kind of how that fits into the program going forward? Yeah, good morning, Jason.

Speaker Change: Yeah, Good morning, Dallas, Texas, and I'll I'll take a stab and then I'll hand, it over to Kyle I mean, one of the things that we've done repeatedly is AD inventory after we've completed acquisitions.

Jason Paget: I'll take a stab and then I'll hand it over to Kyle. One of the things that we've done repeatedly is add inventory after we've completed an acquisition. You saw it in Howard County when we added the middle sprayberry.

Kyle: Saw it in Howard County, when we added the middle Sprayberry.

Jason Paget: In Western Glasscock, we added Wolf Camp D, and that's a zone that's being completed today on those large pads we've got out there. So, as you mentioned, again, we've added Lower Sprayberry and Wolf Camp A, and Southern Midland. We took core data that indicated to us these zones would be good, and then we had offset operators that brought those online and confirmed what we saw in the geology.

Kyle: And western Glasscock, we added the Wolfcamp D and that's a zone that's being completed today on this large past we've got out there.

Kyle: So as you mentioned again, we've added lower sprayberry, Wolfcamp, a and Howard <unk>, sorry, Southern Midland We took core data that should indicated to us do sounds would be good and then we have all set operators.

Kyle: Brought those online and confirm but we saw on the geology, we would we would develop them a little bit differently than somebody offsets what they they lined wells on top of each other where we would stagger them. So we think there are some upside even to those results that you can see out there.

Jason Paget: We would develop them a little bit differently than some of the offsets, where they line wells on top of each other where we would stagger them, so we think there's some upside even to those results that you can see out there. We go to Delaware, that's driven by costs, and when you reduce well costs from $12 million to $10.5 million, that improves the economics of every well in the field. When your production performance is 33% higher, that improves the economics of every well out there, so it's, again, improving total returns across all those areas. And I think the other thing, too, is that we've got other zones that we're going to be testing this year. We've got the Wolf Camp C, which we're going to be testing. It's coming online today in western Glasscock.

Kyle: We go to Delaware, that's driven by costs.

Kyle: When you've produced well costs from 12 million to 10, and a half that improves economics of every well in the field. When your production performance is 33 per cent higher that improves economics of every well out there. So it's again improving total returns.

Kyle: Across all those areas and I think the other thing too is I mean, we we've got other zones that we're gonna be testing this year.

Kyle: We've got the Wolfcamp C, which were gonna be test is coming online today in western Glasscock, that's a totally new zone for us that could add future inventory at future earnings call. So we're putting a full court press on testing multiple zones across both the Midland in Delaware to I can continue to increase inventory over.

Jason Paget: That's a totally new zone for us that could add future inventory or future earnings calls. So we're putting a full core press on testing multiple zones across both the Midland and Delaware to, again, continue to increase inventory over time. And I'll turn it over to Kyle now.

Kyle: Time, I don't turn it over to Kyle now I can tell it give you a little more details on what they're doing on the operational front to create these efficiencies in outperformance yes.

Kyle Coldiron: He can give you a little more details on what they're doing on the operational front to create these efficiencies and outperform. Yeah, so back to your question on the Delaware side, specifically, the intervals or the inventory that we added were across our second bone, third bone, Wolf Camp A, and Wolf Camp B, which are our core development horizons. So, these aren't new horizons or anything that we haven't previously disclosed, but as Jason said it well, ultimately, the improved economics of a million and a half off of your well cost improves all of the inventory and ultimately just provides a lot more opportunity to develop. Also, the well performance has been outstanding. So far, as you can see, both from the time curve and the IPS that we've highlighted here from our recent packages that we've turned in line, productivity has been fantastic, and so it just gives us a lot of confidence that we can go and develop across those benches there on the Delaware side. Thanks; I appreciate the color there.

Kyle: Yeah, So back to your to your question on the Delaware side specifically.

Kyle: The the intervals or the inventory that we added was across our second bone bare bones wolfcamp. They will can be which are our core development horizons. So these aren't new horizons or anything that that we haven't frequently previously disclosed, but as Jason instead, it well ultimately the improved economics of a million and a half off with your wall cost <unk>.

Kyle: <unk> all of the inventory and ultimately just provides a lot more opportunity to develop also the wall performance has been outstanding so far as you can see both from the vacuum time curve.

Kyle: And the I P that we've highlighted here that from a recent packages that we turn in line low productivity has has been fantastic and so it just gives US you know a lot of confidence that we can go in and developed process finches, there on the Delaware side.

Speaker Change: Thanks, I appreciate the color there I guess about follow up just on on M&a's, specifically I mean, you've done a number of deals in 2023, but just talking about these organic inventory additions I mean, that's two plus years of inventory how do you think about.

Jason Paget: I guess my follow-up question just on M&A specifically, I mean, y'all have done a number of deals in 2023. But just talking about these organic inventory additions, I mean, that's two plus years of inventory. How do you think about M&A versus organic additions at this point? You know, where does this kind of M&A sit in your mind going forward? Another great question.

Speaker Change: <unk> M&A versus organic conditions at this point you know, we're we're just kind of M&A set in.

Speaker Change: In your mind going forward.

Speaker Change: Yeah. Another great question I think we did amazing work in twenty-three to continue our transformation as a company.

Jason Paget: I think we did amazing work in 23 to continue our transformation as a company. We talked a lot last year about this transition to small ball, which was performing a series of smaller transactions that weren't as competitive when, again, the larger peers were bidding on things. And it was wildly successful for us.

Speaker Change: And.

Speaker Change: We've talked a lot last year about this transition to small ball, which was performing a series of smaller transactions that weren't as competitive when that up again. The larger appears were bidding on things and it was it was wildly successful for US again. It was we completed I can.

Jason Paget: Again, it was, we completed again, almost a billion six, or over a billion six in transactions. In 24, we're switching a little bit more to the money ball, which is, let's spend less testing new zones and get wells, not for free, but almost for free. As you think about adding 185 wells in total last year with the acquisitions again, we brought on 485 wells, and if you divide that by a rate of 80 wells per year, we added six years of inventory last year alone. And so we're in really good shape.

Speaker Change: I, almost 1 billion six inter Arab over a billion six in transactions.

Speaker Change: And 24, we're switching a little bit more to the money ball, which is let's let's spend less testing new zones.

Speaker Change: And get wells not for free but almost for free as you think about adding 185 wells.

Speaker Change: In total last year with the acquisitions again, we brought.

Speaker Change: <unk> 485 wells and if you divide that by a rate of 80 wells per year. We added six years of inventory last year alone and so we're in really good shape and as I mentioned, we're going to be testing. Some of these new zones. So I think we can get outsized well additions with less cost.

Jason Paget: And as I mentioned, we're going to be testing some of these new zones. So I think we can get outsized well additions with less cost. However, we will still be active in the market. There are deals out there today.

Speaker Change: However, we will still be active in the market there's deals out there today, there's gonna be deals in the future and I would say the bar has been raised for us any deals that we look at will need to.

Jason Paget: There's going to be deals in the future, but I would say the bar has been raised for us. Any deals that we look at will need to be accretive to us, and inventory will need to jump the inventory that we've added this year. So I'd say we're still going to look at it.

Speaker Change: Be accretive to us and inventory will need to jump the inventory that we've added this year. So I'd say, we're still gonna look at it I mean, there's gonna could be great opportunities with an oxy or a diamond back they're looking to our endeavor former endeavor properties that are adjacent to us and can make a lot of sense.

Jason Paget: I mean, there's going to be great opportunities with Anoxi or Diamondback that are looking to, or Endeavor, former Endeavor properties that are adjacent to us and can make a lot of sense as those come to the market. So we're going to continue to be active and look at creating scale, but I'd say for us, the bar is raised on the type of things that we'll look at in 2024. Great, thanks for taking my question. The next question comes from the line of Team ResMed with KeyBank Capital Markets. Your line is, Good morning, folks. Thanks for taking my question. This may be best for Katie.

Speaker Change: Those come to the market. So we're going to continue to be active in and look at creating scale, but I'd say for us. The bar is raised on but the type of things that will look at in 2024.

Speaker Change: Great. Thanks for taking my questions.

Speaker Change: Next question comes from the line of skin rash, Ma'am Keybanc capital market <unk> Okay.

Skin Rash: Good morning folks. Thanks for taking my question Uhm, just may be best for Katie.

Katie Hill: I know you all, you're pretty vocal about what you're doing on the technology side to optimize base production, and you gave an update on what's happening at Driftwood and Forge. I was wondering if you could give an update on kind of how things stand with the recently acquired assets and maybe, you know, when you would get that fully implemented into sort of your, you know, your cloud system, you know, what the timeline for that would be. Thanks. Sure. Good morning, Tim.

Skin Rash: I know you all you know we're pretty vocal about what you're doing on the technology side to optimize based production and you gave it up update on what's.

Speaker Change: What's happening at that your foot and forge.

Katie: Wonder if you've given update on kind of how things stand with their recently acquired assets.

Skin Rash: And maybe you know when you will get that fully implemented into sort of ear.

Speaker Change: Your cloud system, you know what the timeline for that would be it. Thanks.

Speaker Change: Check in mind 10, I think we would consider that technology implementation to typically come in phases I think at this stage. We're really excited about the progress we've made on our early twenty-three acquisition. So drift away the southern Midland based on assets are effectively fully integrated into our operating platform. We've taken some really strong.

Katie Hill: So, I think we would consider the technology implementation to typically come in phases. I think at this stage, we're really excited about the progress we've made on our early 23 acquisitions. So, Driftwood, the Southern Midland Basin assets are effectively fully integrated into our operating platform.

Katie Hill: We've taken some really strong steps on that first Delaware asset, Forge, as you mentioned. When we think about the three assets that were in the second half of the year, I think we've been successful at deploying our operating platform from a people standpoint, so really good work from the team on applying some of the technical learnings that we've seen in the Midland with specialized focus on either compression uptime, on ESP and artificial lift optimization, and then on really great support for flowback and new wells, which you see in our results from the second What we're working on today is the deployment of the hardware and the structures that will allow us to then apply the AI and machine learning work that we've been focused on for the last couple of years.

Speaker Change: That's on that first Delaware asked that in for it like you mentioned, let me think about the three out that that were in the second half of the year I think we've been successful at applying are operating.

Speaker Change: Operating platform from from people standpoint, they're really good work from the team on applying some of the technical learning that we've seen in the Midlands with specialized focus on either compression uptime on E. S. P. N artificial left optimization and then I'm really great. The low back in new <unk> that you see in our results from the second half of the year.

Speaker Change: We're working on today is the the appointment of the hardware and the and the structure that will allow for US to then apply that AI machine learning work that we've been focused on for the last couple of years I think that's a really a fall 2024 effort to get the system stood up and actually started to deploy that that aip's. That's late in the year. This year.

Katie Hill: I think that's really a full 2024 effort to get the system stood up and actually start to deploy that AI piece that's late in the year this year. We do assume continued success because we've seen such great work in the Midland across a variety of wells. So, those are lifted from ESPs, from gas lifts, so different artificial lift types, different GORs.

Speaker Change: We do assume continued success, because we've seen such great work and the Midland across a variety of well so well that are lifted from <unk> from Catholics that different official website different G. O R. As we've seen really successful implementation of AI and we assume success on the Delaware as well if it's built into our forward looking plan.

Katie Hill: We've seen really successful implementations of AI, and we assume success in Delaware as well. So, it's built into our forward-looking plan, but we expect it to take most of 2024 to get there. Okay, thanks for the caller. And then, as my follow-up, you know, I'm looking at your deck on slides 6 and 11 and just trying to kind of understand the pace of activity. Obviously, you're sort of working down some ducks with that Glasscock pad this year. I'm just trying to understand the Delaware activity, 40 spuds, 20 turn-in lines. Is this just a timing issue with the calendar year?

Speaker Change: We expect it to take Mr 2024, I get there.

Speaker Change: Okay, Thanks for that and the <unk> the color.

Speaker Change: And then my follow up you know I'm looking at your desk on slide six and 11, and just trying to kind of understand at the pace of activity.

Speaker Change: Obviously, you sort of working down some ducks with would that Glasscock had <unk>.

Speaker Change: <unk> I'm, just trying to understand that the Delaware activity 40, Spuds 20, turning lines.

Speaker Change: Is this just a timing issue with the calendar year are you looking to kind of build more of a little bit of a backlog at duxford steady state operations trying to understand how it should take about Delaware.

Kyle Coldiron: Are you looking to kind of build more of a little bit of a backlog of ducks for steady state operations? Trying to understand how we should think about Delaware, you know, the pace of activity there over the next couple of years. Thank you. Hi, this is Kyle again.

Speaker Change: You know the the pace of activity there over the next couple of years. Thank you.

Speaker Change: Oh. This is Kyle again, so I think you're you're right. It's just the ultimately the completion cruise lag drilling.

Kyle Coldiron: So I think you're right. It's just that, ultimately, completion crews lag behind the drilling rigs. And so when you look at the back half of 24, you know, almost 100% of our drilling activity is allocated to the Delaware Basin. But then, ultimately, as you move into 25, you'll be bringing those wells online, and you'll see a heavy allocation of completion crews and the turn of lines following those drilling rigs. Thank you. The next question comes from the line of Paul Diamond with Citi. Thank you. Good morning.

Kyle: Drilling rigs instead of when you look at the back out 24.

Kyle: You have almost 100 per cent of our drilling activity is allocated to the Delaware basin, but then ultimately as you move into 25, you'll be bringing those walls online and you'll see a heavy allocation of completions active.

Kyle: Activity there there the Delaware side. So I think you hit it on the head that it's ultimately just a lag of the of the completion cruise in the turn of the lines following does drilling legs.

Speaker Change: Okay. Thank you.

Speaker Change: Next question.

Fall Diamond: <unk> comes from the line of fall Diamond, which city. Your line is open.

Fall Diamond: Thank you good morning, I'll be taking my call just a quick question on on your head you structure.

Brian Singer: Thanks for taking my call. Just a quick question on your hedging structure. As you guys progress more towards your kind of debt targets and increasing scale, how do you anticipate that evolving over time? Do you hold it at the kind of currently high level, or is that something you expect to trail down? And, I guess, what time frame?

Fall Diamond: Progress more towards your telling you that targets increasing scale, how do you anticipate that evolving over time, you guys hold of the kind of currently high level or is that something you expected trail down in what time frame.

Speaker Change: Oh good question I don't think that our hedging strategy will be too much different than the past.

Brian Singer: I don't think that our hedging strategy will be too much different from the past. We see 25 moving up into that $75 range. I think we would continue to layer on some additional hedges there. If you were to model our company at $75 flat versus the strip, those outcomes are very different. At $75, we pay down debt more quickly.

Speaker Change: Let me see 25, moving up into that 75 dollar range I think we would continue to layer on some additional hedges. There you know if you were to model our company at 75 dollar flat versus the strip. Those outcomes are are very different $75, we pay down debt more quickly we improve that you can.

Brian Singer: We improve the economics of our capital investments, so I think you would see us as a better company. $75 creeps into $25, starting to put on some hedges.

Speaker Change: Omics of our capital investment so I I think you would see us.

Speaker Change: $75 creeps into twenty-five starting to put on some hedges we tend to be 75 ish per cent hedged out year in the future. So we're in good shape for right now and we can kind of watch prices, but for US. We think of 75 dollar and hire this company is very different than we are today and.

Brian Singer: We tend to be 75-ish percent hedged out a year in the future. So we're in good shape for right now, and we can kind of watch prices. But for us, we think of $75 and higher.

Paul Diamond: This company is very different than we are today, and we would start to put some of those on. You see that we've got some already in place for one to 25, first half of 25, already. So that's a good number for us that, again, accelerates our return of cash to shareholder program and improves the economics of our wealth. Understand. Thank you.

Speaker Change: We would start to put some of those on you see that we've got some already in place for one to 25 or so first half of 25.

Speaker Change: Alrighty. So that's a good number for is it again accelerates our return of cash to shareholder program and improves economics of our wealth.

Speaker Change: [noise] understood. Thank you and just a quick follow up on some guy that you guys talking about 1.7 cruise through the year and a lot of that seems to kind of turn on back optionality in queue for I guess kind.

Brian Singer: And just a quick follow-up: in guidance, you guys talk about 1.7 crews through the year, and a lot of that seems to kind of turn on that optionality in Q4. I guess, kind of dig into that a little bit. What do you guys see as really driving that decision? Is it purely on just timing and cadence?

Speaker Change: Tried to get into that a little bit what do you guys see is really driving.

Speaker Change: That decision is purely on just timing a cadence or could there could well outperform it's really drive that to be held back and just how do you guys think about.

Brian Singer: Or could well-out performance really drive that to be held back? I guess, how do you guys think about the ultimate decision on that cadence? Yeah, this is the activity level we've had in place for a while. And a lot of that is driven by, again, a desire to use free cash flow to pay down debt. What I would say is it also is one of the reasons we put bans on the capital range.

Speaker Change: Your ultimate decision on the kids.

Speaker Change: Yeah. This is activity level, we've had in place for awhile a lot of that is driven by a desire to use free cash flow to pay down debt. What I would say is it also is one of the reasons, we put bands on the capital range Uhm, we prefer to operations steady.

Brian Singer: We prefer to operate. It's steady, but it is, it's February, and we have got a lot of time left in the year. So if you see outperformance on production or higher prices, or we continue to reduce capital to fund that program, those are all factors that would play into us maybe keeping that second group going for the final quarter of the year. But we're just kind of, it's early in the year, and we'll kind of give updates as the year progresses. Understood. Thanks for your time over there. Our next question comes from the line of Gregg Brody with Bank of America. Your line is open.

Speaker Change: Steady, but it is it's February and we got a lot of time left in the year. So if you see outperformance on production or higher prices or we continue to reduce capital to fund that program. Those are all factors that would play into us maybe keeping that second group got one for the the final quarter of the year, but we're just.

Speaker Change: It's early in the year and will will kind of give updates as the year progresses.

Speaker Change: [noise] understood quite some time I lived there.

Speaker Change: Okay.

Speaker Change: Our next question comes from the line of <unk> Bank of America. Your line is open.

Gregg Brody: Good morning, guys. Just two questions for you. The first one, could you talk a little bit about operating costs, which sort of LOE has been trending up? You gave quarterly guidance for 1Q. Should we expect that to stay around there, or should we expect that to change in any direction? Good morning, Gregg. This is Katie.

Speaker Change: Good morning, guys.

Speaker Change: Just two questions for you. The first one could you talk a little bit about.

Speaker Change: Operating costs.

Speaker Change: <unk> been running up his quarterly guidance for one two should we expect that to stay around there was or or should we just had that to change in any direction.

Katie Hill: <unk>, we expect right now that <unk> stay roughly spots, where we exited the year I think that's a fair representation of the first half of the year.

Katie Hill: We expect right now that LOE and Q1 to stay roughly flat to where we exited the year. I think that's a fair representation of the first half of the year. Overall, as we bring on some of these new wells in Q2 and Q3, we see a lot of water volume coming on. The high productivity and outperformance are bringing high water volumes and then disposal costs with it.

Brian Singer: All as we bring on somebody's new wells and keeps you in Q3, we see a lot of water volume coming on add the Thai productivity and outperformance spraying high water volumes, and then <unk> with an X.

Katie Hill: So, expect that our operating costs to be fairly flat through the beginning of the year with where we are today. And then, so that that implies the additional water, it will be a little higher in the second half. I think we'll be fairly flat to where we are today through Q2-Q3. And then after that, potentially trending down, or are we well? How should we think about that? Sure, so I think we have an opportunity as we're continuing to onboard and optimize these assets. You know, I think we found some really good cost savings already from where we were in mid-2023 on the newly closed Delaware assets. I think we would expect to stay relatively flat for the full year 24 average and are continuing to try to work those costs down as we get assets fully onboarded.

Zach Farham: That are operating costs.

Katie Hill: Barely hear through the beginning of the year with where we are today [noise].

Speaker Change: And then so that that implies additional water <unk> and the second half of it will be a little higher.

Katie Hill: I I think that'll be fairly spots of where we are today through through you.

Jason Paget: 2223.

Speaker Change: Got it.

Katie Hill: And then after that potentially turning down or is it.

Katie Hill: Well.

How should be thinking about that.

Katie Hill: So I think we have opportunity is where continuing on board and optimize you that that I.

Katie Hill: I think we found some really great cost savings alrighty from where we were in May of 2023 on the on the newly closed Delaware assets I think.

Katie Hill: We would expect to stay relatively flat or that full year 24 average and are continuing to try to work those cough down as we get off that's why I'm, Oregon.

Katie Hill: And you made some comments about paying down debt, and that's the focus right now, and obviously, M&A is still part of the equation. I know I'm the debt guy asking this, but I'm curious, when do you think about returning cash to shareholders in terms of dividends or buybacks? How does that fit into how you're thinking about things this year? Yeah, this is Brian.

Katie Hill: Great.

Speaker Change: And you made that you've made some comments about paying down debt. That's a focus right now and obviously I mean, I still part of the equation.

Katie Hill:

Brian Singer: What is it.

Brian Singer: And the that Guy asking this but I'm curious what did you think about returning cash to shareholders.

Brian Singer: And in terms of dividends or or buybacks like how does that fit in time, you were thinking about things this year.

Katie Hill: Yeah. This is Brian you know I think we've been pretty consistent and how is the message in the past and I don't think we're really going to change here we.

Brian Singer: You know, I think we've been pretty consistent in how we've messaged in the past, and I don't think we're really going to change here. We would like to see our trailing net debt to EBITDA, not on a forward-looking basis, get below one times. And, you know, we have a good chance of that happening later this year, you know, towards the end of the year. And I think we'll have a serious discussion about, you know, a dividend policy, and what that would look like at that point. You know, it'll be important to see what the commodity price environment looks like in the future. We want to be very careful about putting a policy in place that can be sustained through cycles.

Brian Singer: We would like to see our.

Brian Singer: [noise] thrilling.

Brian Singer: <unk> not on a forward looking get get below one times and you know we have a good line of sight of that happening later this year towards the end of the year and I think we'll have the serious discussion about a dividend policy what that would look like at that point.

Brian Singer: It'll be it'll be important to see what the the commodity price environment is looking forward would we want to be very careful about putting a policy in place that can be sustained and.

Brian Singer: So, you know, we're watching what others are doing, the successes and maybe some of the not-so-successes, and when we get to the point below that one-time leverage, we'll put something in place that's very well thought out. And then what about just the share of our program utilized here? The share buyback program obviously is more flexible than the dividend policy, so you know, when we get below one times with the free cash flow generation, that's definitely something we would look at. Guys, thank you for your time. And we do have our last question comes from the line of Derrick Whitfield with Stifle. Your line is, Thanks. Good morning all and congrats on a solid year-end update. Thanks, Eric.

Brian Singer: Through cycles, so we're watching what others are doing.

Derrick Whitfield: The successes and maybe some of the.

Derrick Whitfield: Not so successes and when we when we get to the point below that one times leverage will will will put something in place it's very.

Derrick Whitfield: Very well thought out.

Derrick Whitfield: What about <unk> and a share buyback program.

Derrick Whitfield: Utilize here.

Derrick Whitfield: Sure I bet the share buyback program, obviously is more flexible than the dividend policy Ah dividend policy. So when we get below one times with the free cash flow generation that that's definitely something we would look at.

Derrick Whitfield: Alright, Thank you for the time.

Derrick Whitfield: Thank you.

Derrick Whitfield: And we do have our last question comes from the line of Tammy Smith sandwiched iPhone per line or something.

Derrick Whitfield: Thanks, Good morning on congrats on a solid year an update.

Brian Singer: <unk>.

Derrick Whitfield: For my first question, I wanted to lean in on the inventory additions in the Midland Basin. Based on your subsurface work, would it be safe to assume these locations are competitive with underwritten inventory and could be developed without material depletion concerns? Yeah, this is Kyle.

Derrick Whitfield: For my first question I wanted to lean in on the inventory addition to the Midland Basin.

Derrick Whitfield: Based on your sub surface work would it be safe to assume these locations are competitive with underwritten inventory and could be developed without material depletion concerns.

Derrick Whitfield: Yeah, they're just so.

Derrick Whitfield: So, yes, I think you're right that it is uhm competitive with our core underwritten inventory kind of in the 50 dollar breakeven range.

Kyle Coldiron: So yes, I think you're right that it is competitive with our core underwritten inventory kind of in the $50 breakeven range. When you look at the, you know, the vertical separation there across the lower Sprayberry, Wolf Camp A, and Wolf Camp B, you've got about 350 feet between the lower Sprayberry and Wolf Camp A, and then another 350 feet between Wolf Camp A and the upper B target that we developed. The other thing that we do is we always kind of go in and wine rack that development, and ultimately, what we've seen is that that helps prevent, you know, vertical interference that can occur. So that's a part of our development strategy as well. And we are, you know, we've underwritten these locations, coming out, you know, coming out with that today.

Kyle Coldiron: When you look at the.

Kyle Coldiron: The vertical separation there across the lower Sprayberry will campaign Wolfcamp, you've got about 350 C.

Kyle Coldiron: Doing the lower flavor and will campaign and another 350 feet between the a and the and the upper be target that we develop.

Kyle Coldiron: The other thing that we do is we always kind of go in and wine rack that development and ultimately what we've seen is that that helps prevent.

Kyle Coldiron: Vertical interference.

Kyle Coldiron: That can occur so that's a part of our development strategy as well and we are you know we've we've underwritten these locations.

Kyle Coldiron: Coming out you know come out with that today, and then we're putting our dollars to work.

Kyle Coldiron: And then we're putting our dollars to work in that area this year. And we're going to do a co-development of the Lower Sprayberry A and the B there, terrific, and either for you or Katie, it's clear that you guys are coming out of the gate really strong in Delaware. Could you speak to what, in your view, is driving well performance versus the historical results and the composition of the units you're bringing online by a. And I'm really speaking to more of the recent turning lines; we just have a good baseline comparison.

Kyle Coldiron: In that area this year and we're gonna do a code development of the lower sprayberry, a and to be there.

Kyle Coldiron: Terrific in either for you or Katie clear.

Kyle Coldiron: Clear you guys are.

Kyle Coldiron: Coming out of the gate really strong I'm in Delaware could you speak to what in your view is driving well performance versus used a local results and the composition of the units you're bringing online by edible.

Kyle Coldiron: And I'm really speaking to more of the reset attorney in lines, just we have a good baseline comparison.

Speaker Change: Yeah. So we're you know as we as we've taken over these assets.

Kyle Coldiron: Yeah, so we're, you know, as we've taken over these assets. Some of these wells we've completed; they were drilled by previous operators, and we've completed them. Others we've drilled and completed. And so ultimately, I think there are kind of two things that are contributing to the stellar well performance that we've seen. One is our frac design. We put a high-intensity, tight cluster spacing, high-profit loading completion design on these wells, and we think that that certainly contributes. But we also pair that with a spacing design, a well spacing design that we think is optimal for the area. What we've seen over time is that operators have overdrilled or kind of too tightly spaced wells, and you've seen a lot of operators moving to a wider spacing solution. Fortunately, we underwrote a 4 well protection solution from the very beginning.

Kyle Coldiron: Some of these wells we've completed they were drilled by a previous operators and we've completed others, we drilled and completed and so ultimately I think there's kind of two things that are contributing to the stellar wall performance that we've seen one is our our frat design, we put a high intensity tight cluster facing.

Kyle Coldiron: Hi profit loading completion design on these wells and we think that that certainly contributes but we also pair that with a spacing design wall space and design that we think is optimal for the area. What we've seen over time does that operators have.

Kyle Coldiron: Overdraw, they're kind of too tightly spaced wells and you've seen a lot of operators moving to a wider spacing solution.

Kyle Coldiron: Fortunately, we underwrote a a four wall protection solution from the very beginning and I think you can see that the wall results that we're seeing are supportive of that as being the you know the right path.

Kyle Coldiron: And I think you can see that the results that we're seeing are supportive of that as being the, you know, the right path. Perfect. One last question, if I could, maybe for Jason.

Kyle Coldiron: Perfect and one last if I could maybe for Jason wanted to ask if you could speak to the a and the environment and the permanent president. The recent flurry of bills. We are seeing are signing me increasing the amount of.

Jason Paget: I wanted to ask if you could speak to the A&D environment and the permitting at present. The recent flurry of bills we are seeing are increasing amounts and value to inventory. But how do you guys look at the market and the opportunities that are Yeah, as I mentioned, we will, we're continuing to evaluate if there are things on the market today. There are things that are coming. Again, you've got your Diamondbacks and Knoxies that have announced they would potentially do divestitures.

Jason Paget: Value to inventory, but how do you guys look at the market and the opportunities that are ahead of you.

Jason Paget: Yeah Uh huh.

Jason Paget: Mentioned that we will we're continuing to evaluate it there are things on the market today, there's things that are coming again, you've got your diamond backs and knoxy that have announced they would potentially do divestitures. So.

Jason Paget: So we're watching some of those come and waiting for those to come to the market as well. I think we're going to continue to be very selective. And again, inventory that would be part of these.

Jason Paget: So we're watching some of those come like waiting for those to come to the market as well I think we're gonna just gonna continue to be a.

Jason Paget: Very selective and like an N Vito inventory that would be part of these again will need to jump ahead of the inventory or we've added today and the things we expect to add later in the year. So we're just gonna be much more.

Jason Paget: Again, we'll need to jump ahead of the inventory we've added today and the things we expect to add later in the year. So we're just going to be, again, much more... We're one of the few mid-caps remaining that's out there trying to buy and aggregate these assets. So there's less competition for us in some of these areas, so I think that's also exciting for us, because when the competition's high, you just get a bit higher. So I think everything is, again, happening in the macro environment is actually good for Vital Energy. But again, we've proven here that we can add, again, 185 wells at a very low cost just because of our technical work. And it wouldn't have been possible to add these wells today if we hadn't done the work we did in 2023.

Jason Paget: Elective.

Jason Paget: Again, you are seeing large companies are getting together and we're one of the few mid caps remaining that's out there trying to buy an aggregate. These asset so there's less less competition for us in some of these areas. So I think that's also exciting for us.

Jason Paget: Because when the competitions hi, How're you can just get it up to a higher level. So I think everything is I can happen in the macro environment is actually good for vital energy, but again, we we've proven here that we can add I got 185 wells at a very low cost just because of our technical work and that this wouldn't have been <unk>.

Jason Paget: Possible to add these wells today, if we hadn't done the work we did in 2023. So I think we're just again in a in a great shape, Brian esteem done a good job of having our balance sheet and position that if we want to do something we can but it's not we don't have to do anything in 2023, because we've got new stuff coming out.

Jason Paget: So I think we're just, again, in great shape. Brian and his team have done a good job of having our balance sheet in a position that if we want to do something, we can, but it's not... We don't have to do anything in 2023 because we've, again, got new stuff coming on and ahead of us. So we're excited about where we sit today for a great update. Thanks. Thank you. There are no further questions at this time. Mr. Hagood, I turn the call back over to you. Thank you for your interest in Vital Energy. This concludes today's call. Have a great morning. This concludes today's conference call. You may now disconnect. Thanks for watching!

Jason Paget: <unk> and ahead of us so where it works out about where we sent to that.

Speaker Change: Terrific, great update and thanks for your time.

Jason Paget: Sure.

Speaker Change: There are no further questions at this time Mister hated attend the call back <unk>.

Jason Paget: Thank you for your interest and vital energy <unk> todays call have a great morning.

Jason Paget: This concludes today's conference call you may now disconnect.

Jason Paget: [music].