Q4 2023 Northern Oil and Gas Inc Earnings Call

Operator: Greetings and welcome to the NOG's fourth quarter and full year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the NN, Oh, Geez fourth quarter and full year 'twenty twenty-three earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone.

Operator: The question-and-answer session will follow the formal presentation. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Evelyn Inferna, Vice President, Investor Relations. Thank you. You may begin. Good

Pat if you would like to withdraw your question Press Star one again.

As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host Evelyn and Fernand <unk> Vice President Investor Relations. Thank you you may begin.

Good morning, welcome to <unk> fourth quarter and year end 2023 earnings conference call yesterday. After the close we released our financial results for the fourth quarter and full year.

Evelyn Inferna: Welcome to NOG's fourth quarter and year-end 2023 earnings conference call. Yesterday after the close, we released our financial results for the fourth quarter and full year. You can access our earnings release and presentation on our investor relations website at NOGinc.com. Our 4 and 10K will be filed with the FCC within the next several days.

You can access our earnings release and presentation on our Investor Relations website at N O G Inc. Dot com.

Our Form 10-K will be filed with the FCC within the next several days.

Evelyn Inferna: I'm joined this morning by our Chief Executive Officer, Nicco Grady, our President, Adam Derlam, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, Jim Evans. Our agenda for today's call is as follows. Nick will provide his remarks on the quarter and our recent accomplishments. Then Adam will give you an overview of operations and business development activities, and Chad will review our financial results and walk you through our 2024 guidance. After our prepared remarks, the team will be available to answer any questions, but before we begin, let me go over our safe harbor language.

I'm joined this morning by our Chief Executive Officer, Nick O'grady, Our President Adam <unk>, Our Chief Financial Officer, Chad Allen, Our Chief Technical Officer, Jim Evans, our agenda for today's call is as follows Nick will provide his remarks on the quarter and our recent accomplishments and Adam will give you an overview of operations.

<unk> and business development activities, and Chad will review, our financial results and walk through our 2020 for guidance.

After our prepared remarks, the team will be available to answer any questions, but before we begin let me go over our safe Harbor language. Please be advised that our remarks today, including the answers to your questions may include forward looking statements within the meaning of the private Securities Litigation Reform Act. These forward looking statements are.

Evelyn Inferna: Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward-looking statements. Those risks include, among others, matters that we've described in our earnings release, as well as our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I will turn the call over to Nick. Thank you, Evelyn.

Subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward looking statements.

Those risks include among others matters that we described in our earnings release as well as our filings with the SEC.

Our annual report on Form 10-K, and our quarterly reports on Form 10-Q, we disclaim any obligation to update these forward looking statements.

During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA adjusted net income and free cash flow reconciliations of these measures to the closest GAAP measures can be found in our earnings release with that I will turn the call over to Nick.

Thank you everyone welcome and good morning, everyone and thank you for your interest in our company.

Nick O'Grady: Welcome and good morning, everyone, and thank you for your interest in our company. I'll get right to it with four key points to start the year. Number one:

I'll get right to it with four key points to start the year.

Number one.

Nick O'Grady: Scoreboard. Execution, Delivering Growth, and Processing. On our second quarter call, I spoke about the importance of delivering growth and profitability year over year. I'd like to use that framework today to put the results from the fourth quarter into context. Our fourth quarter adjusted EBITDA was up 52% year-over-year, and our quarterly cash flow from operations excluding working capital was up 55% year-over-year. However, over this same period, our weighted average fully diluted share count was up about 17%, significantly less, reflecting the impact of our October offering, but not the impact of our fourth quarter bolt-on deal. We achieved outsized growth and profits despite a more challenging commodity backdrop than the prior year. Oil prices were down over 5%, and natural gas prices were down 52% versus the prior period a year ago.

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Execution delivering growth and profits.

On our second quarter call I spoke about the importance of delivering growth and profitability year over year.

I would like to use that framework today to put the results from the fourth quarter into context.

Our fourth quarter, adjusted EBITDA was up 52% year over year.

In our quarterly cash flow from operations, excluding working capital was up 55% year over year.

Over this same period, our weighted average fully diluted share count was up about 17% significantly less reflecting the impact from our October offering, but not the impact of our fourth quarter bolt on deals.

We achieved outsized growth in profits, despite a more challenging commodity backdrop from the prior year oil.

Oil prices were down over 5% in natural gas prices were down 52% versus the prior period a year ago.

Nick O'Grady: Even more impressive is the fact that our LQA debt ratio was 1.1 times this quarter, down about 17% versus the prior year. So, in summary, our leverage was down, and our per share profits were up markedly, even as commodity prices were down. The point I continue to make is that our company is focused on the same simple philosophy, finding ways to grow profits per share through the cycle and over time for our investors. We believe that is the path to driving sustainable share price outperformance. While oil and gas prices go through down periods that can and will affect our profits, again, it is our job to find ways to grow the business through such times. The scoreboard we share with you is something that keeps us honest.

Even more impressive is the fact that our <unk> debt ratio was one one times this quarter down about 17% versus the prior year.

So in summary, our leverage was down our per share profits up markedly even as commodity prices were down.

The point I continue to make is that our company is focused on the same simple philosophy finding.

Finding ways to grow profits per share through cycle and over time for our investors. We believe that is the path to driving sustainable share price outperformance.

Oil and gas prices go through down periods that can and will affect our profits again. It is our job to find ways to grow the business through such times.

Scoreboard, we share with you is something that keeps us honest being a cyclical business does not afford us a perfectly linear path and we will have our absolutely downs, but we are actively investing hedging and looking to drive consistent long term growth profits and cash returns.

Nick O'Grady: Being a cyclical business does not afford us a perfectly linear path, and we will have our ups and downs, but we are actively investing, hedging, and looking to drive consistent long-term growth in profits and cash returns. This has, and will drive dividend growth and share performance. I'm pleased to say, as Chad will highlight in a bit, that our guidance for 2024 reflects 20% production growth on a budget that is very similar to last year's. Look across the upstream sector, and you'll find very few companies offering that. Once again, we stand out, and I believe we have a lot more levers to pull, which brings me to my next point. Number two.

Has and will drive dividend growth and share performance I am pleased to say as Chad will highlight in a bit that our guidance for 2024 reflects 20% production growth on a budget that is very similar to last year's.

Across the upstream sector and you'll find very few companies offering.

Once again, we stand out and I believe we have a lot more levers to pull which brings me to my next point.

Number two.

Nick O'Grady: Be greedy when others are fearful. The fourth quarter was Ground Game 101, highlighted by what happens when people run out of money. We saw operators pull forward activity even as budgets were exhausted. We chose to turn the ship directly into the storm and take on some of the best returning small-scale acquisitions we've seen in some time, and these should help capital efficiency as we head into 2024 and beyond. We are diligently chipping away, one opportunity at a time, and Adam and his team continue to innovate with creative structures of every kind to solve for our operators' needs. This does mean we will spend money counter-cyclically at times, but spending money is what provides longer-term growth opportunities for our investors. Growth isn't always free.

Be greedy when others are fearful.

Fourth quarter was ground game 101 highlighted by what happens when people run out of money.

We saw operators pull forward activity, even as budgets were exhausted.

Ill turn the ship directly into the storm and take on some of the best returning small scale acquisitions, we've seen in some time.

And these should help capital efficiency as we head into 2024 and beyond.

We're diligently chipping away one opportunity at a time and Adam and his team continue to innovate with creative structures of every kind of solve for our operators needs.

Doesn't mean, we will spend money counter cyclically at times, but spending money is what provides longer term growth opportunities for our investors growth isn't free.

Nick O'Grady: As a non-operators, sometimes our capital commitments will accelerate and come sooner, and the timing of our projects can vary somewhat, as we saw in the fourth quarter, but it doesn't change the soundness of these investment decisions. As we track performance well through our look-back analysis and review our return parameters internally, we continue to see excellent results across the board. Number three, shareholder return. I typically leave this category for last, but I'm going to address it sooner this quarter, particularly as I've observed weaker relative and absolute performance for our equity out of the gate for the start of this year. We talk a lot at ENERGY about dynamic capital allocation, and we get asked about share repurchases and where they rank in the stack.

And as a non operator, sometimes our capital commitments will accelerate income sooner and the timing of our projects can vary somewhat as we saw in the fourth quarter, but it doesn't change the soundness of these investment decisions as we track well performance through our look back analysis and review our return parameters internally, we continue to see excellent results across the.

Ward.

Number three shareholder returns I typically lead this category for less but I'm going to address it sooner this quarter, particularly as I've observed weaker relative and absolute performance for our equity out of the gate for the start of this year.

We talk a lot of energy about dynamic capital allocation and we get asked about share repurchases and where they rank in the stack.

Nick O'Grady: As I have said before, and I'll say again, we try to seize opportunities and allocate capital accordingly. Our valuation has compressed in recent months, so in 2024, our stock may well be front and center in our capital allocation stack. We don't buy back stock with reckless abandon, only when flush with cash and when times are good and when our valuation is high. Instead, stock repurchases legitimately compete as a use of capital to maximize the long-term returns on the capital we employ, which by nature means focusing on the point of entry and being discerning about when we do so.

I've said before and I'll say again, we tried to seize on opportunities and allocate capital Accordingly, our evaluation has compressed in recent months. So in 2024, our stock may well be front and center in our capital allocation stack, we don't buy back stock with reckless abandon only one flushed with cash and when times are good.

And when our valuation is high.

Stock repurchases legitimately compete as a use of capital to maximize the long term returns on the capital, we employ which by nature. It means focusing on the point of entry and being discerning on when we do so you've.

Nick O'Grady: You've seen us be aggressive in repurchasing equity during times of value compression like in early 2022. We try to allocate capital efficiently and seize opportunities when the time is right. From this vantage point, it certainly seems as though this is the moment when the macro outlook has been more in flux, and commodities have been more range-bound and volatile, and our own value has compressed. If the market gives us lemons for the first time in a while, we're more than happy to make some lemonade. Number four, I have not yet begun to fight. Sailor John Paul Jones immortalized that defiant phrase during the American Revolutionary War when he was asked to surrender by the British in a naval battle.

<unk> seen us be aggressive in repurchasing equity during times of value compression like in early 2022.

We try to allocate capital efficiently and seize on the opportunity when the time is right.

From this vantage point it certainly seems as though this is the moment when the macro outlook has been more influx and commodities have been more range bound and volatile and our own value has compressed if the market gives us lemons for the first time in a while we're more than happy to make some lemonade.

Number four.

Have not yet begun to fight.

Sailor, John Paul Jones, Moralized that defiant phrase during the American Revolutionary War, when asked to surrender by the British and enable battle.

Nick O'Grady: My use of it here is meant to convey that while our team has grown our business tremendously over the past six years, you'd be mistaken if you think our growth story is over. Far from it. We've worked hard to claim the mantle of the non-operating partner of choice. Given the opportunities and landscape in front of us, I believe we can, with thoughtful execution, double the size of our company again, if not more, over the next five years. And this time, I believe we can do it more creatively. It's an enormous goal and will pose a tremendous challenge, but I believe the opportunity is there for us to take.

My use of adhere is meant to convey that while our team has grown our business tremendously over the past six years you'd be mistaken. If you think our growth story is over.

From it.

Worked hard to claim the mantle of the nonoperating partner of choice.

Given the opportunities in landscape in front of US I believe we can with thoughtful execution doubled the size of our company again, if not more over the next five years.

And this time I believe we can do it more accretively.

It's an enormous goal and will pose a tremendous challenge, but I believe the opportunity is there for the taking.

Nick O'Grady: We will stay humble at our roots as a small company, but we have great ambition to grow the business to the benefit of our stakeholders, and our board has incentivized us and aligned us with our investors to do so for the long term and to do it the right way. And done right, it will add tremendous per share value, grow dividends significantly, and drive market outperformance, all while continuing to lower business risk. It would be stating the obvious to point out that it's been an active time in the M&A sphere in oil and gas of late, as we've seen many mega merger transactions, as well as many private to public transactions in 2023.

We will stay humble to our route to a small company, but we have great ambitions to grow the business to the benefit of our stakeholders and our board has incentivize us and aligned us with our investors to do so for the long term and to do it the right way.

And done right it will add tremendous per share value grow dividends significantly and drive market outperformance, all while continuing to lower the business risk.

It would be stating the obvious to point out that it's been an active time in the M&A sphere in oil and gas of late as we've seen many mega merger transactions as well as many private to public transactions in 2023.

Nick O'Grady: The fallout from these megatransactions is likely to create even more opportunity for our company over time, providing both improved cost efficiencies on our properties and a broad variety of potential acquisitions as combined portfolios are rationalized. We're already seeing signs of significant cost benefits on our properties from some of these mergers. While I just spoke about our dedication and focus on shareholder returns, I also want to highlight that NOG's path to growth through acquisition also remains very, very strong. We are involved in as many, if not more, conversations today than at any point in my history at the company. And the quality of these counterparties is very different, as is the nature of these discussions.

The fallout from these mega transactions is likely to create even more opportunity for our company over time, providing both improved cost efficiencies on our properties and a broad variety of potential acquisitions as combined portfolios are rationalized, we're already seeing signs of significant cost benefits on our.

<unk> from some of these mergers.

I spoke about our dedication and focus on shareholder returns I also wanted to highlight that nrg's path to grow through acquisition also remains very very strong.

We are involved in as many if not more conversations today than at any point in my history of the company and the quality of these counterparties is very different as are the nature of these discussions that is largely because our company today has become de facto the only viable entity for complex solutions for our partners that is truly a.

Nick O'Grady: That is largely because our company today has become de facto the only viable entity for complex solutions for our partners that are truly of scale and commercial. We believe we have built a reputation as creative problem solvers. Our balance sheet is locked and loaded with capacity for deals in 2024. While we remain selective, I have no doubt there will be a myriad of opportunities in front of us this year. But it should go without saying that our main goal is to grow our business the right way. One of the first questions we always ask ourselves when we look at an opportunity is, will this make our company not just bigger, but better? We pass on a lot of things that would certainly make us a lot bigger, but we question whether they'll make us a better company. Asset quality, governance, if needed, value, operatorship, inventory, and commodity price resilience are all factors that go into driving these transactions. These questions have driven us to where we are today and will continue to drive us as we move forward.

Scale in commercial we believe we've built a reputation as creative problem solvers, our balance sheet is locked and loaded with capacity for deals in 2024, while we remain selective I have no doubt there will be a myriad of opportunities in front of us this year.

But it should go without saying that our main goal is to grow our business. The right way one of the first questions. We always ask ourselves when we look at an opportunity is will this make our company not just bigger but will it make it better.

Pass on a lot of things that would certainly make us bigger but.

But we question, whether it will make us a better company.

Asset quality governance, if needed value operator ship inventory and commodity price resilience are all factors that go into driving these transactions.

These questions have driven us to where we are today and we will continue to drive us as we move forward.

Adam Derlam: Adam will fill you in further on the deal front, but expect an active 2024. I'll close out, as I always do, by thanking the NOG engineering, land, BD, finance, and planning teams and everyone else on board, our investors and covering analysts for listening, and our operators and contractors for all the hard work they do in the field that actually creates what you see in NOG's results quarter after quarter. We enter 2024 ably positioned, with our strongest balance sheet, the highest level of liquidity, and the largest size and scale since our formation. And as always, our team is ready to pounce on opportunities to drive the best possible outcome for our investors, whether that's growth through our core business, through our organic assets, through M&A, or through share repurchases in our quest to deliver the optimal total return. That's because we're a company run by investors for investors. With that, I'll turn it over to Adam. Thanks, Nick.

Adam will fill you in further on the deal front, but expect an active 2024.

Those out as I always do by thanking the energy engineering land, BD finance and planning teams and everyone else onboard our investors and covering analysts for listening to our operators and contractors for all the hard work. They do in the field that actually creates what you see in <unk> results quarter after quarter.

We entered 2024 formidably positioned with our strongest balance sheet, the highest level of liquidity and largest size and scale since our formation.

As always our team is ready to pounce on the opportunities to drive the best possible outcome for our investors, whether that's growth through our ground game through our organic assets through M&A or through share repurchases and our quest to deliver the optimal total return.

That's because we're a company run by investors for investors with that I'll turn it over to Adam.

Thanks, Nick.

Adam Derlam: As usual, I'll kick things off with a review of our operational highlights and then turn to our business development efforts in the current M&A landscape. During the fourth quarter, we saw production increase to over 114,000 BOE per day driven by the closing of NOVO in the middle of Q3, as well as an acceleration of wells turned in line during the quarter. We turned in line 27.6 net wells, evenly split between the Williston and Permian, which included roughly half the net wells in process acquired through our ground gain in Q4.

Usual I'll kick things off with a review of our operational highlights and then turn to our business development efforts and the current M&A landscape.

During the fourth quarter production increased to over 114000 Boe per day, driven by the closing of Novo in the middle of Q3 as well as an acceleration of wells turned in line during the quarter.

We turned in line 27, six net wells evenly split between the Williston and Permian, which included roughly half the net wells in process required through our ground game in Q4.

Adam Derlam: While well performance has been in line with expectations, we have been encouraged by the outperformance of our Mascot assets, the new wells completed since closing Forge, and the New Mexico results from our NOVO assets. As we navigate the rest of the winter, we expect to see a typical seasonal deferral on IPs from Williston in the first quarter with a re-acceleration in completion activity as we move into the spring and summer. Overall, we expect a relatively balanced completion cadence in 2024 as activity is more heavily weighted towards the Permian, which accounts for about two-thirds of the estimated tilt. Our drilling program has remained consistent over the last three quarters as we spud an additional 20.8 net wells in Q4, with our organic acreage seeing continued focus from our operating partner.

While well performance has been in line with expectations. We have been encouraged by the outperformance of our mascot assets. The new wells completed since closing forge and the new Mexico results from our Novo assets.

As we navigate the rest of the winter, we expect to see a typical seasonal deferral on Ips for the Williston and the first quarter with the Reacceleration in completion activity as we move into the spring and summer.

Overall, we expect a relatively balanced completion cadence in 2024 as activity is more heavily weighted towards the Permian, which accounts for about two thirds of the estimated pills.

Our drilling program has remained consistent over the last three quarters as we spud an additional 28 net wells in Q4 with our organic acreage seeing continued focus from our operating partners.

Adam Derlam: Our Permian position pulled roughly 60 percent of the organic net well additions, and if we include the contribution from our ground game, we saw three-quarters of our activity come from the Delaware and Midland Basins. Our acquisitions over the past few years are driving growth in the Permian as locations are converted and we head into 2024. At the end of the year, the Permian wells in process were sitting at all-time highs of 35.7 net wells and now account for more than 50% of our total wells in process and over two-thirds of our oil-weighted wells in process. We expect this trend to continue as the Permian accounts for the majority of expected new drills in 2024. As our drilling program has remained consistent, so have our inbound well proposals. During the quarter, we evaluated over 180 AFEs with our Williston footprint, contributing over 100 proposals in every quarter of 2023. Our net well consent rate remained at over 95% in Q4.

Our Permian position pulled roughly 60% of the organic net well additions and if we include the contribution from our ground game, we saw three quarters of our activity come from the Delaware and Midland basins.

Our acquisitions over the past few years are driving growth in the Permian as locations are converted and we head into 2024.

At the end of the year the Permian wells in process, we're sitting at all time highs of 35 seven net wells.

And now account for more than 50% of our total wells in process and over two thirds of our oil weighted wells in process.

We expect this trend to continue as is.

The Permian accounts for the majority of expected new drills in 2024.

As our drilling program has remained consistent.

So have our inbound well proposals.

During the quarter, we evaluated over 180, <unk> with our Williston footprint contributing over 100 proposals in every quarter of 2023.

Our net well consent rate remained at over 95% in Q4. However, we continue to actively manage the portfolio by comparing what's in the market at a ground game level and what is being proposed.

Adam Derlam: However, we continue to actively manage the portfolio by comparing what's in the market at a ground game level and what is being proposed. For example, given the commodity market volatility, we non-consented approximately 16% of gross AFEs, which collectively accounted for just half a net well in Williston during the quarter. As certain operators have stepped out, we have redeployed that capital into our ground game at higher expected returns. This highlights our flexibility with capital allocation and our ability to quickly react to changing environments, in contrast to operators that have to stick with their drill schedule. With that said, our acreage footprint continues to produce some of the highest quality opportunities available, as our 2023 well proposals have expected rates of return north of 50% based on the current strip.

For example, given the commodity market volatility, we non consented approximately 16% of gross fees, which collectively accounted for just happened that well in the Williston during the quarter.

As certain operators have stepped out we have redeployed that capital into our ground game at higher expected returns.

This highlights our flexibility with capital allocation and our ability to quickly react to changing environments.

In contrast to operators that have to stick with their drill schedules.

With that said our acreage footprint continues to produce some of the highest quality opportunities available.

Our 2023, well proposals or expected rates of return north of 50% based on the current strip.

Adam Derlam: Looking ahead, we have seen cost reductions come through with our operating partners, yet we remain conservative with our budgeting process for 2024. Through 2023, costs were relatively flat. However, as of late, we have seen some of our larger operators coming in below their cost estimates from the original well-proposed. Notably, we have seen evidence from our planning sessions and recent AFDs of a potential 5 to 10% reduction in well costs related to our Mascot, Novo, and Forge properties. As gas prices remain under pressure, some drilling and completing resources may also be reallocated to our oily basins, where we could then expect some additional tailwinds. Shifting gears to business development in the M&A landscape, the fourth quarter capped off another banner year for NOG, both in our ground game and in larger M&A.

Looking ahead, we have seen cost reductions come through with our operating partners, Yes, we remain conservative with our budgeting process for 2024.

Through 2023, well costs were relatively flat power.

However, as of late we have seen some of our larger operators coming in below their cost estimates from original well proposals.

Notably we have seen evidence from our planning sessions and recent <unk>.

Of a potential 5% to 10% reduction in well costs related to our mascot Novo and forge properties.

As gas prices remained under pressure some drilling and completing resources may also be reallocated to our oily basins, where we could then expect some additional tailwind.

Shifting gears to business development and the M&A landscape the fourth quarter capped off another banner year for NRG, both on our ground game and in larger M&A.

Adam Derlam: As Nick alluded to earlier, we were able to take advantage of the dislocations we were seeing during the fourth quarter, executing on a number of short-cycle ground game acquisitions. While competitors' budgets were running dry, we were able to step in and deploy meaningful capital consistent with our return requirements. During the quarter, roughly half of the locations we closed on were also turned in line, which will contribute to our 2024 plans and growth profile. Our small ball focus was almost entirely in the Permian during the fourth quarter and caps off a record year for our ground game, where we picked up roughly 30 net wells and 2,500 net acres.

Okay.

As Nick alluded to earlier, we were able to take advantage of the dislocations, we were seeing during the fourth quarter executing on a number of short cycle ground game acquisitions.

While competitors budgets were running dry we were able to step in and deploy meaningful capital consistent with our return requirements.

During the quarter roughly half of the locations. We closed on we're also turned in line, which will contribute to our 2024 plans and growth profile.

Our small ball focus was almost entirely in the Permian during the fourth quarter and caps off a record year for our grounded where we picked up roughly 30 net wells and 2500 net acres.

Adam Derlam: While we buy non-op interest day in and day out, we've also used our co-buying structures, joint development programs, and acquired operated positions with our ground game to generate these results. During the quarter, we expanded our footprint as we signed and closed our Utica transaction. Similar to our approach in building scale in the Permian, we've elected to walk before we run, deploying a modest amount of capital in the core of a new play under some of the top operators. Since the Utica announcement, we've been inundated with additional opportunities, and we will methodically review each of those as we think about our footprint in Ohio and Appalachia in general. In January, we closed our previously announced non-operated package in Delaware, where we have significant overlap with our current position, and grossed up many of our working interests in New Mexico, with Neal Barnett as the operator on 80% of the position.

Well, we buy non op interest day in and day out. We've also used our co buying structures joint development programs and have acquired operated positions with our ground game to generate these results.

During the quarter, we expanded our footprint as we signed and closed our Utica transaction.

Similar to our approach and building scale in the Permian, we've elected to walk before we run deploying a modest amount of capital in the core of a new play under some of the top operators.

Since the Utica announcements, we've been inundated with additional opportunities and we will methodically review each of those as we think about our footprint in Ohio and Appalachia in general.

In January we closed our previously announced non operated package in the Delaware, where we have significant overlap with our current position and growth many of our working interest in new Mexico.

With newborn is the operator on 80% of the position.

Adam Derlam: We've aligned ourselves with one of the most cost efficient and active private operators in the basin, which should drive future growth for NOG. The scale that we've been able to achieve over the past few years has opened doors for us that were previously unavailable, and the creative structures that we've been able to implement have created mutually beneficial outcomes with alignment for both NOG and our operators. Given the ongoing consolidation in the industry, we have been engaging in more frequent and substantial conversations with our operators. To put the landscape in perspective, there are currently four to six billion dollars of assets that we are reviewing, both on and off market.

We've aligned ourselves with one of the most cost efficient and active private operators in the basin, which should drive future growth for NRG.

The scale that we've been able to achieve over the past few years has opened doors for us that were previously unavailable in the creative structures that we've been able to implement a creative mutually beneficial outcomes with alignment for both NRG and our operators.

Given the ongoing consolidation in the industry, we have been engaging in more frequent and substantial conversations with our operators.

To put the landscape in perspective, there are currently 4% to $6 billion of assets that we are reviewing both on and off market.

Adam Derlam: Even more than that, we've been in discussions with some of our large independent and SMIDTAP operators about how we can be helpful, whether they are pursuing assets or digesting recent acquisitions. As consolidation continues, we can provide capital to help rationalize combined portfolios, accelerate high-quality, longer-dated inventory, or facilitate debt-reduction initiatives through sales to NOG. These off-market transactions can be tailored-made for both parties and, with our growth in size and liquidity, could be as large or larger than any of our recent transactions. Simply put, the options to deploy capital on top-tier assets are in no way slowing down for NOG. Depending on the needs and wants of the operator, the solutions could include simple non-op portfolio cleanups.

Even more than that we've been in discussions with some of our large independents and smid cap operators about how we can be helpful. Whether they are pursuing assets or digesting recent acquisitions.

As consolidation continues we can provide capital to help rationalize combined portfolios accelerate high quality longer dated inventory or facilitate debt reduction initiatives through sales to NRG.

These off market transactions can be tailor made for both parties.

With our growth in size and liquidity could be as large or larger than any of our recent transactions simply.

Simply put the options to deploy capital on top tier assets as of Norway's slowing down for NRG.

Depending on the needs and wants of the operator the solutions could include simple non op portfolio cleanups.

Chad Allen: Joint Development Agreement, co-buying operated properties, minority interest carve-outs of operated positions, or any combination thereof. At NOG, we pride ourselves on finding win-win solutions through creativity and alignment. Our priority is not to chase growth for growth's sake but to remain returns-focused over the long term and do right by our stakeholders. With that, I'll turn it over to Chad. Thanks, Adam.

Joint development agreements.

<unk> operated properties.

The minority interest carve outs of operated positions or any combination thereof.

At NRG, we pride ourselves on finding win win solutions through creativity and alignment our priority is not to chase growth for growth's sake, but to remain returns focused over the long term.

Doing right by our stakeholders.

With that I'll turn it over to chip.

Thanks, Adam.

Chad Allen: I'll start by reviewing our fourth quarter results and provide additional color on the operating update we released on February 15th. Average daily production in the quarter was more than 114,000 BOE per day, up 12% compared to Q3 and up 45% compared to Q4 of 2022, marking another NOG record. However, the oil production mix of our total volumes was lower in the quarter at 60%, driven primarily by gas helper.

I'll start by reviewing our fourth quarter results and provide additional color on the operating update we released on February 15th.

Average daily production in the quarter was more than a 114000 Boe per day.

Up 12% compared to Q3 and up 45% compared to Q4 of 2022.

Market and other energy record.

Oil production mix of our total volumes was lower in the quarter at 60% driven primarily by gas outperformance.

Chad Allen: Adjusted EBIT in the quarter was $402 million, up 52% over the same period last year, while our full-year EBITDA was $1.4 billion, about 32% year-over-year. Pre-cash flow of approximately $104 million in the quarter was up 19% over the same period last year despite lower oil volumes. CapEx pull forward to fund accretive 2024 investments, as well as commodity price volatility and a widening oil differential. Adjusted EPS was $1.61 per diluted share.

Adjusted EBIT in the quarter was $402 million up.

52% over the same period last year, while our full year EBITDA was $1 4 billion.

About 32% year over year.

Free cash flow of approximately $104 million in the quarter was up 19% over the same period last year, despite lower oil volumes capex pull forward to fund accretive 2024 investments.

As well as commodity price volatility and widening oil differentials.

Adjusted EPS was $1 61 per diluted share.

Chad Allen: Oil realizations were wider as expected in Q4, with the increased production and other seasonal factors in the Willison driving wider overall prices; permeate differentials, particularly in the Delaware, were modestly wider. Natural gas realizations were 97% of benchmark prices for the fourth quarter, a bit better than we expected, given better winter NGL prices and in-season appellation differences. LOE came in at $9.70 per BOE, which was driven by a few

Oil realizations were wider as expected in Q4 with the increased production and other seasonal factors in the Williston driving wider overall pricing.

Permian differentials, particularly in the Delaware, we're modestly wider.

Natural gas realizations were 97% of benchmark prices for the fourth quarter a bit better than we expected.

Given better winter NGL prices and in season Appalachian differentials.

LOE came in at $9 70 per Boe.

It's driven by a few factors.

Chad Allen: We had highlighted in the third quarter that we expected more normalized work overs in the fourth quarter after a lighter quarter in the prior period. We also incurred approximately $4 million of firm transport expenses as a result of refining our accrual process based on historical data and whistle containments in our mascot project that had the effect of artificially inflating the per BOE number. As we reach mid-year 2024, we expect our LOE per BOE to trend down as production ramps up. On the CapEx front, we invested $260 million in drilling, development, and ground-gaining capital in the fourth quarter, with roughly two-thirds allocated to the Permian and one-third to the Willis-Ellis. This was as a result of having access to high-quality opportunities, success in the ground game, along with a pull forward of organic activity, which shifted more investment into the fourth quarter from 2024.

We had highlighted in the third quarter, we expected more normalized workovers in the fourth quarter after a lighter quarter in the prior period.

We also incurred approximately $4 million of firm transport expense as a result of refining our accrual process based off historical data.

And with some curtailments in our mascot project that had the effect of artificially inflating the per Boe numbers.

As we reach midyear 2024, we expect our LOE per Boe to trend down as production ramps.

On the Capex front, we invested $260 million in drilling development and ground getting capital in the fourth quarter with roughly two thirds allocated to the Permian and one third of the Williston.

As a result of having access to high quality opportunities success on the ground game, along with a pull forward of organic activity, who shifted more investment into the fourth quarter from 2024.

Chad Allen: Pull-forward activity is most apparent as we are seeing a 5-10% decline in the expected spud to sales development timeline. End of the year, with over a billion dollars of liquidity comprised of 8.2 million dollars cash on hand and 1.1 billion available on a revolver. Her net debt to LQA EBITDA was 1.15 times, and we expect that ratio to remain relatively flat throughout 2024.

The pull forward in activity is most apparent as we are seeing a 5% to 10% decline in expected spud to sales development timelines.

We ended the year with over $1 billion of liquidity comprised of $8 2 million cash on hand, and $1 $1 billion available on our revolver.

Our net debt to LTM EBITDA was 115 times and.

And we expect that ratio to remain relatively flat throughout 2024.

Chad Allen: I want to point out that we did build our working capital significantly in the fourth quarter and expect that trend to continue through the first quarter of the year and then begin to ease for the rest of the year as we convert the tremendous amount of capital that is currently in the ground into revenue-producing wealth. We have remained disciplined on the hedging front and have been adding significant oil and natural gas hedges for this year through 2026, given the increased commodity price volatility we've seen over the past several months. The oil portfolio consists of over 40% of collars in 2024, maintaining material upside exposure while providing a strong floor near $70 per barrel. With respect to shareholder returns in 2024, everything's on the table.

I want to point out that we did build our working capital significantly in the fourth quarter and expect that trend to continue through the first quarter of the year and then begin to ease for the rest of the year as we convert the tremendous amount of capital that is currently in the ground into revenue producing wells.

We have remained disciplined on the hedging front and have been adding significant oil and natural gas hedges for this year through 2026, given the increased commodity price volatility we've seen over the past several months.

The oil portfolio consists of over 40% collars in 2024, maintaining material upside exposure, while providing a strong florida near $70 per barrel.

With respect to shareholder returns in 2024 everything's on the table.

Chad Allen: As we have shared in the past, we adhere to a dynamic approach with the objective of achieving optimal returns for our shareholders, and while Nick alluded to potentially an active year for NOG, those activities may include share buybacks if there's a dislocation in our share price, and if returns are competitive with other alternatives, we are evaluating. Turning now to our 2024 guidance. We are guiding to 115,000 to 120,000 DOE per day and 70,000 to 73,000 barrels of oil per day.

As we've shared in the past, we adhere to a dynamic approach with the objective of achieving optimal returns for our shareholders and while Nick alluded to potentially an active year for NRG. Those activities may include share buybacks, if there's a dislocation in our share price and if returns are competitive with other alternatives we are evaluating.

Turning now to our 2024 guidance, we're guiding to 115 to 120000 BOE per day with 70 273000 barrels of oil per day.

Chad Allen: We will see typical seasonal declines in the Willows in the first quarter, exacerbated by some freeze-offs in January, but our production cadence will build throughout the year. We anticipate adding about 90 kills and 70 spuds, reflecting the midpoint of our guide, after a significant build on our DNC list in 2023. Conversion of IP wells in 2024 should materially help our capital efficiency as the DNC cadence returns to a more normalized level. This will bring some large amounts of working capital that we have drawn back on the balance sheet starting in the second quarter. On the CapEx front, the 2023 pull forward lowered our 2024 CapEx from our prior internal estimate, and so we are making the assumption that the pull forwards are likely to continue given the acceleration and pace of drilling that we're seeing across our core base. Our CapEx expectations for this year are in the $825 to $900 million range.

You will see typical seasonal declines in the Williston in the first quarter exacerbated by some freeze offs in January but our production cadence will build throughout the year.

We anticipate adding about 90 pills and 70 spuds, reflecting the midpoint of our guidance.

After a significant build in our D&C list in 2023 the.

The conversion of IP wells in 2024 should materially help our capital efficiency as the DNC cadence returns to more normalized levels.

This will bring some large amount of working capital.

We have drawn back on the balance sheet, starting in the second quarter.

On the Capex front for 2023 pull forward lowered our 2020 for Capex from our prior internal estimates.

So we are making the assumption that the pull forwards are likely to continue given the acceleration and pace of drilling that we're seeing across our core basins.

Our capex expectations. This year are in the $825 to $900 million range.

Chad Allen: This level of CapEx will be driven by ground game success, commodity price-driven activity levels throughout the year, and overall well costs, which, for the time being, are forecasted to stay flat despite recent evidence of savings and AFEs, particularly from our larger JV interest. We have significant capital on the ground right now and expect our larger ventures, specifically Mascot and Novo, to rent materially in the first half of the year. So the capital will be weighted first half at around 58 to 60 percent.

This level of Capex will be driven by ground game success commodity price driven activity levels throughout the year, and overall well costs, which for the time being our forecasted to stay flat. Despite recent evidence of savings in <unk>, particularly from our larger JV interests.

We have significant capital in the ground right now and expect our larger ventures, specifically mascot novo to ramp materially in the first half of the year. So the capital will be first half weighted around 58% to 60%.

Chad Allen: On the LOE side, our guidance is purposely wide at $9.25 to $10 per BOE. This is due to the inclusion of our firm transport charge on a quarterly basis, as well as the anticipated rent we just discussed. We expect LOE to start on the higher side before trending down throughout the year. I believe there will be room for improvement. We want to be conservative out of the gate.

On the low side of our guidance was purposely wide at $9 25 to $10 per Boe.

This was due to the inclusion of our firm transport charge on a quarterly basis as well as the anticipated rent we just discussed.

We expect LOE to start on the higher side before trending down throughout the year.

And believe there will be room for improvement.

We want to be conservative out of the gate.

Chad Allen: And with the firm transport charges being accrued for quarterly, our LOE expense runway will be less lumpy than in the last several years. On the cash G&A front, we've seen a modest kickdown in average cost per BOE driven by increased production volumes year over year, offset by some inflation in costs and services. On the pricing front, given the low overall price of natural gas, we expect lower gas realizations year over year, even as NGL prices have thus far been better than we expected due to seasonal demand for propane used for heating in the winter months. We would expect higher realizations of 85 to 90% in Q1, benefiting from winter NGL prices and differentials. However, we remain cautious based on the typical patterns for pricing as we enter the spring and summer.

And with the firm transport charges being accrued for a quarterly our LOE expense run rate will be less lumpy than in the last several years.

On the cash G&A front, we've seen a modest tick down in average cost per BOE driven by increased production volumes year over year offset by some inflation in costs in services.

On the pricing front, given the low overall price of natural gas, we expect lower gas realizations year over year, even as NGL prices have thus far been better than we expected due to seasonal demand for propane used for heating in the winter months.

We would expect higher realizations of 85% to 90% in Q1 benefiting from winter NGL prices and differentials. However, we remain cautious based on the typical patterns for pricing as we enter the spring and summer.

Chad Allen: If we were to see material curtailments from natural gas producers to benefit the overall NYMEX price in 2024, obviously, this could help guidance throughout the year. As a reminder, our two-stream reporting embeds transport costs and pricing instead of a separate G, P, and T line item, and the fixed costs that are absorbed make realizations go down when the absolute price is so low, to the extent gas prices rise materially, or if flat prices and NGLs stick around.

If we were to see material curtailments from natural gas producers to benefit the overall Nymex price in 2024, obviously this could help guidance throughout the year.

As a reminder, our two stream reporting and beds transport costs and pricing instead of a separate <unk> line item and the fixed costs that are absorbed make realizations go down when the absolute prices so low.

To the extent gas prices rise materially or a flat prices and NGL stick around.

Chad Allen: There is room for the upside, but for now, this is where we're starting. Thankfully, we are well hedged on the gas front, which offsets much of the weakness in the near term on the oil front, while we're guiding wider on differentials to start at $4 to $4.50. We will reevaluate this in the second half of the year. Williston volume growth has widened differentials materially over the past five months versus what we've enjoyed over most of 2023, but we believe the Canadian PMX pipeline may pull away some demand from Canadian crews as it comes online in the coming months. We will remain conservative until then, and this could lift pricing in the back half of the year. Overall, the Midland-Cushing differentials have been solid, so in Delaware, realized deducts are slightly wider.

There is room to the upside but for now this is where we're starting.

Thankfully, we are well hedged on the gas front, which offsets much of the weakness in the near term.

On the oil front, while we're guiding wider on differentials to start at $4 to $4 50.

We will reevaluate this in the second half of the year.

Williston volume growth has widened differentials materially over the past five months versus what we have enjoyed over most of 2023, but.

But we believe the Canadian Tms pipeline may pull away some demand from Canadian crude as it comes online in the coming months.

We will remain conservative until then.

But this could lift pricing in the back half of the year.

Overall, Midland Cushing differentials have been solid so on the Delaware realized ddos is slightly wider.

Chad Allen: I'd like to touch on some other items related to guidance. Our production taxes will be tracking an estimated 50 basis points higher in 2024, given the shift in production volumes towards the Permian, where production taxes are generally higher than our other base points, and our DD&A rate per BOE will also be higher in 2024, reflecting over a billion dollars of bolt-on and ground game acquisitions completed in 2023. This, of course, does not impact free cash flow as it's a non-cash item, but it does impact EPS and is provided to help with analyst modeling.

I'd like to touch on some other items related to guidance.

Our production taxes will be tracking an estimated 50 basis points higher in 2024, given the shift in production volumes towards the Permian, where production taxes are generally higher than our other basins.

Our DD&A rate per BOE will also be higher in 2024.

<unk> over $1 billion of bolt on in ground game acquisitions completed in 2023.

This of course does not impact free cash flow as it's a noncash item.

But it does impact EPS and is provided to help with analyst modeling.

Chad Allen: Before I turn the call over to the operator for our Q&A session, I'd like to provide an update on cash tax, given the volume of acquisitions and organic growth completed in 2023, and the balance of natural gas properties has grown by 1.9 billion year over year, which in turn impacts the magnitude of our tax cost to policing deductions, which reduces our taxable income. We are now anticipating becoming a cash taxpayer in 2025 with a potential tax expense of less than $5 million over the following two to three years, which is a significant reduction from our prior forecast. This is a material improvement for our shareholders, with the potential for over $150 million in additional free cash flow over the next several years. With over 20% growth in year-over-year production, a broad opportunity is set available in front of us, and we have a strong balance sheet.

Before I turn the call over to the operator for our Q&A session I'd like to provide an update on cash taxes.

Given the volume of acquisitions and organic growth completed in 2023.

Our oil and natural gas properties balance has grown by $1 $9 billion year over year.

Which in turn impacts the magnitude of our tax cost depletion deductions, which reduces our taxable income.

We are now anticipating becoming a cash taxpayer in 2025 with a potential tax expense of less than $5 million over the following two or three years, which is a significant reduction from our prior forecast.

This was a material improvement for our shareholders with potential of over $150 million in additional free cash flow over the next several years.

With over 20% growth in year over year production, a broad opportunity set available in front of us.

And a strong balance sheet.

Chad Allen: NOG is well positioned to execute in 2024 and beyond. With that, I'll turn the call back over to the operator for Q&A. Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Now, we'll go to our first question from Neil Dingman at Truett. Good morning, guys.

<unk> is well positioned to execute in 2024 and beyond.

With that I'll turn the call back over to the operator for Q&A.

Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

We will go to our first question from Neal Dingmann at Trs.

Good morning, guys. Thanks, so much.

Chad Allen: Thanks for your time. My question's really just on timing. Could you just go over, I guess, timing or cadence, that is? Can you talk about maybe just, you know, looking at what 4Q-CAPX..., you know, maybe why that doesn't translate into, you know, call it immediate production, maybe just talk about timing. Sure, sure. Morning Neil.

Hi.

This is really just on timing could you just go over I guess timing or cadence that is when you talk about maybe just looking what <unk> capex.

Maybe why that doesn't translate into call. It immediate production, maybe just talk about timing if you would.

Sure sure good morning, Neil.

Chad Allen: I definitely think I'm the one to answer this because, like a lot of site analysts, I'm not an accountant. I'm a former, you know, buy side analyst. And, you know, I can read a financial statement, but I don't understand the nuances of accrual accounting versus, you know, cash CapEx accounting. And, you know, I should be clear, a lot of operating companies like Diamondback or, you know, a lot of the operators follow cash CapEx, you know; we're an accrual CapEx company. And so that means we're going to account for our wells by well status and percentage of completion. And just to be clear, you know, 70% of the cost of a well is in the completion. So as the wells become more complete, the cost of a well we account for goes way up. So in the fourth quarter, as an example, we had, say, 30 wells that we budgeted to go from, say, 25% in the third quarter to go to 50% in the fourth quarter. And instead, they went from 75% to 90% complete.

I definitely think I'm the one to answer this because like a lot of the.

Buy and sell side analysts I'm not an accountant mafara.

Hi side analyst and.

I can read the financial statement, but the nuances of accrual accounting versus cash.

Cash Capex accounting.

It should be clear a lot of operated companies like a diamondback or in a lot of the operators follow cash Capex were an accrual Capex company.

And so that means we're going to account for our wells by well status and percentage of completion and just to be clear, 70% of the cost of the wells and the completion.

So as the wells become more complete the cost of a well we account for goes way up.

So in the fourth quarter as an example, we have say 30 wells that we budgeted to go from say, 25% in the third quarter to go to 50% in the fourth quarter and instead, they went to 75% to 90% complete that's a lot of capital.

Chad Allen: That's a lot of capital, and it doesn't necessarily translate into any incremental production in that quarter. It's just an accounting exercise. It's not any more capital over the long run. It's just you have to account for that capital in the given quarter.

And it doesn't necessarily translate into any incremental production in that quarter.

And it's just an accounting exercise, it's not any more capital over the long run. It's just you have to account for that capital in a given quarter.

Chad Allen: So it's not that we choose to overspend it. You just have to account for that in that period. So in Excel, you might think, well, why did you choose to spend that?

So it's not that we choose to out spend that you just have to account for that in that period. So an excel you might think well why did you choose to spend that and that's why we put this in our release, our til count didn't really change that much.

Chad Allen: And that's why we put this in our release. Our till count didn't really change that much. Now, the ground game spending that was elected, the $25 million. And we capitalized on that. And some of those did turn to sales towards the end of the quarter. But when they come online in December, they're obviously not going to contribute much.

Now the ground game spending that was elected the $25 million and we capitalize on that and some of those did turned to sales towards the end of the quarter.

But when they come online in December they are obviously not going to contribute much.

Chad Allen: They will help in Q1 somewhat, but, of course, seasonally, that's one of our slower quarters. If you look at the overall midpoint of our 24-guidance, you will see a partial benefit to the midpoint. Clearly, it's about a $25 million benefit from the pull forward from that sort of overrun. But the reason it's not the full sort of $50 million is because our assumptions are that the shorter spud to sales times that we've been seeing, on average, in our total portfolio, you're talking about a full 7% acceleration of spud to sales times, and we're assuming that that continues sort of in perpetuity. So that means that all of the capital in perpetuity is pulling forward. So you've got 2025 capital that we would have assumed is also coming into 2024.

They will help in Q1 somewhat but of course seasonally that's one of our slower quarters if.

If you look at the overall mid point of our 24 guidance you will see a partial benefit to the midpoint now clearly it's about a $25 million benefit from the pull forward.

But.

From that sort of overrun, but the reason it's not the full sort of $50 million is because our assumptions are that the shorter spud to sales times that we've been seeing on average than our total portfolio, you're talking about a full 7% acceleration of spud to sales times.

We're assuming that that continues sort of in perpetuity. So that means that all of the capital in perpetuity as pulling forward. So you've got 2025 capital that we would have assumed is also coming into 2024. So there is sort of a half cycle effect to that so.

Chad Allen: So there's sort of a half cycle effect to that. And I would also just say, for all the listeners out there, we have sort of a mock accrual model that we can make available for anyone that can walk through how a DNC list and a percentage of completion will actually drive CapEx versus the till list and model this better. So, if anyone would like to reach out to Evelyn, she'd be happy to walk them through it. What I can assure you is that, over time, these are just moments in time, and the overall spending won't change a ton over it. It's really just a function of timing.

I would also just say for all the listeners out there we have sort of a mock accrual model that we can make available for anyone with that can walk through how the DNC list and the percentage of completion will actually drive capex versus the <unk> and model. This better so if anyone would like to reach out to Evelyn she'd be happy to walk them through it what I can assure you is that over time. These are just moments.

In time, and the overall spending won't changed a ton over it it's really just a function of timing in the first fourth quarter. Our til cadence is right on track and we can't really control, how we account for well status. We can of course control our capital decisions.

Chad Allen: In the fourth quarter, our till cadence was right on track. But we can't really control how we account for well status. We can, of course, control our capital decisions. We made the decision to spend $25 million on the ground game because those were great economic decisions and relatively modest dollars, but the $50 million plus is not really incremental. The timing of the production cadence of this stuff, frankly, we're more focused on making sound investment decisions with our budget than the optics of the timing on a three month time horizon when on a 12 to 18 month time horizon, for the longer-term investors, it'll come out in a wash because the number of the wells are the same. The cost is roughly the same.

Made the decision to spend the $25 million on the ground game, because those were great economic decisions and relatively modest dollars, but the $50 million plus is not really incremental.

Timing of the production cadence of this stuff frankly, we're more focused on making sound investment decisions with our budget then the optics of the timing on a three month time horizon when on a 12 months to 18 months for the longer term investors that will come out in the wash.

Number of the wells at the same cost is roughly the same.

Chad Allen: The amount you're accounting for in a given quarter is different. That's about it; we're not sure. And also, you know, I just say we're not cherry picking single IRR plots. We did publish, in our earnings presentation, the cum of all our well plots year over year. And if you look at the data in aggregate, in our earnings presentation, 2023 was amongst our best well performance years in history. So, you know, optically, I recognize that it's a bit noisy, but it's just noise.

Mount Youre accounting for any given quarter is different that's about it.

We're not and also I would just say, we're not cherry picking single IRR well IRR plots, we did publish in our in our earnings presentation. The Cumulus all are well parts year over year and if you look at the data in aggregate and our earnings presentation 2023 was amongst our best well performance years in history. So.

Optically I recognize it's a bit noisy, but it's just noise and I want to reassure people I'm sympathetic because I don't like the optics of it any more than anyone else.

Chad Allen: And I want to reassure people, I'm sympathetic, because I don't like the optics of it any more than anyone else. And I can understand what you might draw the wrong conclusions, but they'd be the wrong conclusions, because the good performance is a testament to everything's going according to plan. You know, so over the long term, everything's going great. It does sound like that capital in the ground is going to really pay dividends, so I'm glad to hear about the timing. And then Mike, just a follow-up.

Can understand what you might draw the wrong conclusions, but that would be the wrong conclusions.

Because of the well performance is a testament to everything is going according to plan.

So over the long term.

Everything is going great.

So it does sound like that capital in the ground is going to really pay dividends.

I'm glad to hear about the timing and then just follow up could you just talk a little bit about the.

Adam Derlam: Could you just talk a little bit about opportunities that you and Adam are seeing out there right now? Permian versus Bakken, is it pretty split, or could you just talk about is there one region that you're seeing predominantly more potential? Hey Neil, this is Adam.

Opportunities that you are seeing out there right now for me in versus Bakken is it pretty split or could you just talk about is the one region that youre seeing predominantly more more.

Potential pathogen.

Hey, Neil this is Adam I would say that the opportunities that we're seeing right now are generally weighted towards the Permian.

Adam Derlam: I would say that the opportunities that we're seeing right now are generally weighted towards the Permian, and in the Permian, most of that's in the Delaware, so I don't think anything's necessarily changed. I think one emerging theme that we've seen kind of evolve has been around Appalachia and kind of the commodity price volatility there. You've obviously seen the pain ongoing for the last 12 to 18 months.

In the Permian most most of that's in the Delaware. So I don't think anything has necessarily changed.

One emerging theme that we've seen kind of evolve.

Has been around in Appalachia.

Commodity price.

Utility there you've obviously seen the pain ongoing for the last 12 months to 18 months some of those conversations are tabled.

Adam Derlam: Some of those conversations were tabled a couple of years ago or a year ago when you were seeing seven bucks in N, and now you're obviously on the inverse of that. And I think with things settling out and having some of these operators truly feel the pain, I think there's some ability for us to potentially capitalize there. But I think it's across the board in terms of the conversations that we're having. We're certainly seeing things in the Bakken that are interesting.

A couple of years ago, or a year ago, when you're seeing seven.

<unk> now.

Now you're obviously on the inverse of that.

Things settling out.

Having some of these operators truly feel a pain I think there is some <unk>.

The ability for us to potentially capitalized there.

But I think it's across the board in terms of the conversations that we're having we're certainly seeing things in the Bakken.

Adam Derlam: Looking at our deal tracker right now, I think we've executed about 10 NDAs. There are about 17 different immediate processes that are either in market or coming to market shortly, and so I think we'll obviously parse through that. A lot of that might just go immediately into the garbage, so I don't think we're necessarily changing our stripes in terms of underwriting or any of that, but I think you've got a few different dynamics that are going on that are interesting, especially on the consolidation front with operators and then having to kind of wrap their heads around their new assets and then potentially rationalizing those assets, whether or not those are core assets to them regardless of the economics. Yeah, I think there are bigger things that could move over time there, which does give us some excitement. I think it's, You know, we did hit record volumes in the fourth quarter. You know, it's been amazing how resilient, and it's frankly surprised even us how our Willis Vanessa just keeps growing.

Our interesting in looking at our deal tracker right now I think we've executed about 10 Mdas, there's about 17 different.

Immediate processes.

That are either in market or coming to market shortly and so I think we'll obviously a course through that lot of that might just go immediately into the garbage. So I don't think we're necessarily changing our stripes in terms of underwriting worthy of that but I think you've got a few different dynamics that are going on that are.

Cresting, especially on the consolidation front with operators.

And then having to kind of wrap their head around their new assets, and then potentially rationalizing those assets, whether or not those are core assets to them regardless of the economics.

The only thing I would add to that would be.

On the Williston front I think you are not seeing as much small scale activity, but I think there's the opportunity for bigger chunkier transactions over time I think there is there are bigger things that could move over time, there, which does give us some excitement I think it's.

We did hit record volumes in the fourth quarter, it's been amazing how resilient and it's frankly surprised even us how our Williston asset just keeps growing.

Adam Derlam: Both organically and, frankly, inorganically, we've continued to find ways to grow our footprint. You know, our small foray into Utica has been inundated with Utica opportunities, and we've actually, you know, even in the last month or two, we've probably gotten another half a dozen shopped to us. We've been building up our technical expertise, and we're evaluating it through those. We would view that, to Adam's point, as an extension of Appalachia. It is technically the Appalachian Basin, but that's clearly a distinct area.

Both organically and frankly Inorganically, we've continued to find ways to grow our footprint.

Our small foray into the Utica, we have been inundated with Unica.

Opportunities and we've actually even in the last month or two we've probably got another half a dozen shopped to us so.

We've been building up our technical expertise and are evaluating through those we would view that to Adam's point is an extension of Appalachia. It is technically the Appalachian basin, but thats.

Clearly a distinct play.

Adam Derlam: And obviously, Utica is a broader play in the sense that, you know, there's a dry gas, wet gas, and oil part of it, so it's a couple different plays in some ways. But just having planted our flag there to some degree, by doing so, we've suddenly found ourselves in another set of deal flow. Thanks, guys.

And obviously the Utica is a broader play in the sense that it is.

There is a dry gas wet gas and oil part of it. So it's a couple of different plays in some ways.

But just having plan there are flagged there to some degree.

By doing so we have suddenly found ourselves in.

On another set of deal flow.

Thanks, guys congrats.

Yes.

Jim Evans: We'll move to our next question from Charles Mead at Johnson Rice. Good morning Nick, good morning Adam, and Chad, and Nick. I want to go back to this question a little before we recap, actually, and I know you've already spent a lot of time on it, but I wanted to maybe take a slightly different tack. I think I understand the dynamic of, you know, the opportunity set with the ground games was looking good at year-end, and I think I understand the dynamic of your accrual accounting What I don't understand is the magnitude of it, particularly with respect to what you knew on November 1 when you reported 3Q. I'm wondering if there's something that I don't understand, like maybe what you call your ground game DNC, if what gets loaded into that line item is everything you've done in the ground game, year-to-date. I don't know, maybe you could just... address it from that angle.

We will move to our next question from Charles Meade of Johnson Rice.

Good morning, Nick Good morning Academy, and Chad and Nick I want to go back to this this question of the <unk> Capex and I know you've already spent a lot of time on it but.

But I wanted to maybe take a slightly different different angle.

I think I understand the dynamic of.

<unk>.

The opportunity set with the ground game was looking good at year end and I think I understand the dynamic of.

Of your accrual accounting, what I don't get is the magnitude of it particularly.

Particularly with respect to kind of what you knew on November one when you reported <unk> and so.

Maybe I'm wondering if there's something that I don't understand like maybe that debt.

What you call your ground game.

See if that debt gets loaded into that line item is everything you've done from the ground game.

Year to date May.

You can just just.

Address it from that angle.

Chad Allen: Well, Charles, I mean, as a non-operator, status updates come from the operators on delay. And so we're only as good as the information that is provided to us. Right. So oftentimes

Well, Charles I mean, as a non operator, well status updates come from the operators on delay and so we are only as good as the information that is provided to US right. So oftentimes it can.

Chad Allen: No, it can be. We can, we're provided with this stuff sometimes months after the fact, right? So we can be told that a well isn't even spud, and then you'll get a report that it's been completed. And so I don't have any answer beyond that. Same thing can be said with the ground game, right?

It can be.

We can were provided this stuff sometimes months on delay right. So we can be told that a well is.

It hasnt been even spud.

And then Youll get a report that has been completed.

And so I don't have any answer beyond that same thing can be said with the ground game right depending on the complexity and the due diligence that's going around that some of these deals get closed within weeks and some of them take months and then you get up into year end and there is different.

Chad Allen: Depending on the complexity and the due diligence that's going around, some of these deals can get closed within weeks, and some of them take months, and then you get up into year end, and there are different, you know, from a seller standpoint, different tax consequences, and so different levels of urgency there. And so we're trying to be as accommodating and commercial as we can without, you know, obviously sacrificing any of the protection, you know, from a due diligence standpoint, but these things ebb and flow on a real-time basis. So, if I understand it correctly, you've got both volatility and also, maybe, it would be fair to characterize this as out-of-period adjustment catch-ups? Charles, this is Chad.

From a seller standpoint different tax consequences, so different levels of urgency there and so we're trying to be as accommodating and commercial as we can without.

Obviously sacrificing any of the protection from a due diligence standpoint, but these things ebb and flow on a real time basis.

Got it so if I understand correctly, if you're you've got both volatility and also maybe would be fair to characterize it as long as as out of period adjustment catch ups.

Joe This is Chad I don't think its I don't think its necessarily out of period adjustments like we mentioned earlier, it's the pull forward I think look we had record D&C levels.

Chad Allen: I don't think it's necessarily out of period adjustments, like we mentioned earlier. It's the pull forward. I think, look, we had record DNC levels in Q3, and the timing of when those come off really depends on, like Nick mentioned, the well status and where it's at. I think, look, we went from a typical DNC list percentage of completion of 40% all the way up, excuse me, all the way up to, you know, just over 60%. So I think you're going to see that bill kind of ebbs and flows each quarter as we receive wealth status from Got it. Charles, maybe just to put it into perspective in terms of accrual accounting and operators collecting all of the service invoices and everything else, and they have to aggregate all of that and then bill it out to the various non-ops. And every operator does that at a different speed, right?

Q3, and the timing of when those come out come off really depends on like Nick mentioned, the wealth status and where it's at I think we'd look we went from a typical D&C list percentage of completion of 40% all the way up.

Give me all the way up to.

Just over 60%, so I think youre going to see that build in that kind of ebbs and flows each quarter as we as we received <unk> status from operators got it Charles maybe just to put it into perspective in terms of the accrual accounting and operators collecting all of the service invoices and everything else and they have to aggregate all of that.

Then bill it out to the various non ops and every operator does that at a different cadence right and so you have these accruals out there until we're confident that all of the costs.

Chad Allen: And so you have these accruals out there until we're confident that all of the costs that have been incurred from actuals have been appropriately billed. And so those accruals, depending on the operator, can hang out there for a few months, however long, you know, relative to the IP date, because we need to make sure that we've got the coverage that we need. Yeah, but at the end of the day, it doesn't really change the aggregate dollars. It's not like there are any more wells.

Haven't been incurred from actuals have been appropriately build and so those accruals depending on the operator can hang out there a.

A few months however, long.

Relative to the IP date, because we need to make sure that we've got the coverage that we need but at the end of the day. It doesn't really change the aggregate dollars not any more wells. It's just a factor of time looking at it on a three month basis.

Chad Allen: It's just a factor of time. You're looking at it on a three-month basis when you need to be looking at it on a 12th So what I can tell you is we're not electing to any more; we're not making any different capital decisions. We're electing to the same number of wells. We're electing, we're killing the same number of wells. It's just a matter of how much money is being spent. It's not a matter of these wells costing more or performing worse. It's a matter of truncating the amount of capital and when you're paying for it, when. I mean, optically, I'm not any happier about it than anybody else.

Looking at about 12.

So what I can tell you is we're not electing to anymore, we're not making any different capital decisions were electing to the same number of wells. We're liking what we're telling the same number of wells. It's just a matter of how much money is being spent it's not a matter of these wells costing more or performing worse, it's a matter of truncating the amount of <unk>.

Capital in one year accruing for it when I mean, optically I am not any happier about it than anybody else.

Chad Allen: Well, and it dovetails into 24, right? And what the projected well costs are. We've had some great conversations with our operators about what we're seeing in field estimates. And we alluded to as much, right? I think we expect five to 10% kind of underrun from these AFEs, but we're going to take these AFEs at face value. And depending on the operator, those AFEs might be, you know, three months old; they might be 12 months old, but we're not going to change our accounting practices based on what that mix looks like. Yeah. And I'll walk you through how that works, Charles.

Following a dovetails into 'twenty four right and what the projected well costs are we've had some great conversations with our operators and what we're seeing in field estimates and we alluded to as much right. I think we expect 5% to 10% kind of Underrun from these <unk>, but we're going to take these asp's at face value and depending on the operator those.

<unk> might be three months old they might be 12 months old, but we're not going to change our accounting practices based on what that mix looks like yes, and let me walk you through the worse Charles So, let's just say Midland Petro centers.

Chad Allen: So let's just say Midland Petro sent us an AFE, a gross AFE for $12 million, in November. So they sent us that, and we're accruing for that $12 million on a percentage of completion starting in November through the completion of that well, let's just say it's in April, and will continue. And then that accrual is held until probably, and then there's a period where it's held out until the final billing, which is probably at least 90 days after the well is sold.

Gross AFB for $12 million in November.

So they sent us that and were accruing for that $12 million on a percentage of completion starting in November through the completion of that well, let's just say it's in April and will continue and then that accrual is held until probably and then there is a period, where it's held out until the final billing, which is probably at least 90 days until after the well.

Is on sales and then if there is no more building after that that accrual falls out and its finalized.

Chad Allen: And then if there's no more billing after that, that accrual falls out, and it's finalized. We're getting field reports along the way that, well, maybe it's costing $10 million. Right. But so there's a $2 million savings, but only at some point later in 2024 will you see in our results that that reduction to capital. So there's a lot of conservatism built into this. If you're your typical cash operator, when they tell you, when they guide you, and they say, we're going to spend $12 million in this quarter, and then they actually spend 10, they're giving you the immediacy of that benefit. We're not.

We're getting field reports, along the way that that well, maybe it's costing $10 billion right, but so there is a $2 million savings, but only at some point later in 2024 will you see in our results that that reduction to the capital. So theres a lot of conservatism built into this if you are your typical cash <unk>.

Operator, when they tell you when they guide to you and they say, we're going to spend $12 million in this quarter and then they actually spend 10. They are giving you the immediacy of that benefit will not.

Chad Allen: And so what I would tell you is there's inherent conservatism in how we're doing this, but over time, you will see the benefits of that. And so while it obviously is the inverse, certainly in the fourth quarter, over time, I think you'll see it doesn't really change the outcome in the long run. And in some ways, I think throughout 2024 and certainly into next year, you will see the benefits of our accounting. And like I said, it will all come out in the long run. I got it.

And so what I would tell you there is inherent conservatism in how we're doing this but over time, you will see the benefits of those and so while it obviously is the inverse certainly in the fourth quarter over time, I think youll see it doesn't really change the outcome in the long run and in some ways I think throughout 2024 and certainly into next year, you will see the benefits of our.

Counting.

Like I said it will all come out in the wash.

Chad Allen: I thank you for all that added detail, and if I can transition away from accounting and more towards pictures, which I'm better at, I will very much appreciate it. I like pretty pictures.

Got it. Thank you for all that that added detail and if I can transition away from accounting.

More towards pictures.

It very much.

I like pretty pictures on slide 10.

Jim Evans: Slide 10. I appreciate that you guys put this gun barrel view of your mascot project on your mascot project. Short question, one bigger question. So the first question is, it doesn't look like the first question is, those yellow circles, I'm interpreting that as kind of completion batches, is that what it looks like, you know? Is that right? And then the second thing, I want to ask you guys something a little more open-ended. I really like this picture; it helps fill in the, you know, the dynamics for me, but what, I guess when you guys first looked at this, you know, I recognize it may be, much as a year ago, but what are the lessons there? What insights did you generate or what insights came to you? Yeah, hey Charles, this is Jim. Yeah, what you're looking at there, the kind of yellow amoebas, those are completion batches.

I appreciate that you guys put this this gun barrel view of your mascot.

Of your mascot project.

One.

Short question one bigger question. So the first question is it doesn't look at the first question is those yellow circles.

Interpreted that as kind of completion batches is what it looks like.

Is that right and then the second thing I wanted to ask you guys a little more open ended.

I really liked this fisher it helps fill in the.

The dynamics for me, but but what.

I guess when you guys first looked at this I recognize it may be.

As much as a year ago, but but what what are the lessons there.

Insights did you generate or what insights.

Insights came to you when you first looked at this.

Yeah, Hey, Charles this is Jim.

Yes, what you are looking at there.

Kind of the yellow neither of those are completion Bachelor So we'll do them in 234 wells at a time.

Jim Evans: So they'll do them in, you know, two, three, four wells at a time. And then what we're showing is, you know, you've got several rows where you need to shut wells in behind them, whether it's due to the drilling or cracking, you know, to protect yourself. So when we looked at this about a year ago, really all you saw here in terms of wells that were producing was the charger unit. And so the Mustang, Rebel, and Bulldog units were all undeveloped at that time.

And then what we're showing is <unk> got several roles, where you need to shut wells in behind it whether it's due to the drilling or fracking protect yourself.

So when we looked at this about a year ago really all you saw in here in terms of the wells that were producing was the charger unit. So the Mustang rebel and Bulldog units were all undeveloped at that time.

Jim Evans: Discussions around, you know, development time and completion with NPDC at that time were that we were going to do smaller batches. And so where you see the yellow dots, we'd maybe do three wells at a time, complete those wells, turn them on, go another six months, complete the next three to four wells. What we saw with the first batches was that we started to see some interference issues, some frack hits, because we were drilling and fracking all at the same time as we moved from west to east across this project. And so the decision was made, let's do bigger batches. And so what that did is it obviously caused delays.

Discussions around.

Development timing completion with.

Can you see at that time was that we're going to do smaller batches and so where you see the yellow dots with maybe two or three wells at a time.

Complete those wells turn them online go another six months to complete the next three to four wells, what we saw with the first batches that we started to see some interference issues. Some frac heads because we are drilling and fracking all the same time as we move from west to east across this project and so the decision was made by Steve bigger batches, and so what that data that.

Jim Evans: And when we thought, you know, the project was going to peak in terms of production, but what we're seeing is that because we're doing that, we're getting better well performance overall. The project is outperforming by five to 10% versus our original estimates. Obviously, there are delays, but we think in the long run, it's actually going to benefit from a return on investment, our overall project economics. And so what we're learning is that, obviously, things change over time.

We see causes delays in when we thought the.

The project was going to peak in terms of production.

We're seeing is that because we're doing that we're getting better well performance overall.

<unk> is outperforming by 5% to 10% versus our original estimates, obviously theres delays, but we think in the long run it's actually going to benefit from a return on investment IRR overall project economics, and so what we're learning is that obviously things changed over time and this is a big working interest projects, that's more impactful than our typical non op package.

Jim Evans: And this is a big working interest project, so it's more impactful than our typical non-op package would be. So our learning is just to make sure we're in full communication with the operator at all times and that we're all in agreement on how the development plan is going to go forward. And like I said, we're acceptable to the changes. Obviously, that hurts us from a guidance standpoint and trying to understand when these wells are going to be coming online. But overall, we're very happy with the project, and we're comfortable with how things have changed. And what you can see in this, Charles, is that you're pretty much almost all the way there, right?

B. So our learning is just make sure we're in full communication with the operator at all times and that we're all in agreement.

How the development plan is going to go forward and like I said.

We're accessible to the changes obviously that hurts us from a guidance standpoint, and trying to understand when these wells are going to coming online, but overall, we're very happy with the project and we're comfortable with how things have changed.

And what you can see in this Charles is that you're pretty much almost all the way there right youre down to your last at pretty much eight wells to be drilled.

Jim Evans: You're down to your last of pretty much eight wells to be drilled. Your frack schedule, you're really all... And what you can see is that where the Charger and Mustangs, which are really the ones that are remaining, you know, there, you're going to have fewer shut-ins on the back end. You're going to have to, in terms of you, you will have to shut some of it in when you go to frack those wells later on.

Your frac schedule Youre really.

And when you can see as well.

Where the charger in Mustang, which are really the ones that are remaining there youre going to have fewer shut ins on the backend youre going to have to in terms of <unk>. We will have to shut some men. When you go to Frac. Those wells later on but in the last waiver of shut ins, which youll be sort of towards the end of this year into 2025, it will be a reduced so the one thing I can tell you.

Jim Evans: But in the last wave of shut-ins, which will be sort of towards the end of this year and into 2025, it'll be reduced. So the one thing I can tell you about this project is that while it won't produce that peak rate that it would have, it will produce way more barrels and a much flatter production profile than it ever would have before. And so the total ROI on the project will be, you know, much superior to what it would have been originally. And we're obviously also saving because you're doing much more continuous drilling and fracking. We're saving a lot of money.

This project is it while it won't produce that peak rate that it would is it will produce it will accumulate more barrels and a much flatter production profile than it ever would have before and so the total IRI and the project will be soon.

Much more superior to what it would have been originally and we've obviously, we're also saving because you're doing much more continuous drilling and fracking, we're saving a lot of money I mean, thats still be to be determined until we finish the project and I think we want to be a bit tight lipped and conservative on that until we're done.

Nick O'Grady: I mean, that's still to be determined until we finish the project, and I think we want to be a bit tight-lipped and conservative on that until we're done. But I think we feel very confident at this point that it's gone swimmingly. And obviously, you know, it doesn't feel that way.

But I think we feel very confident at this point that it's gone swimmingly and obviously you have.

It doesn't feel that way, but the strip was about 70 Bucks. This year when we underwrote This program and obviously, we're in the mid to high 70 today. So we're earning higher returns than we would have otherwise underwritten.

Nick O'Grady: But the strip was about 70 bucks this year when we underwrote this program, and obviously, we're in the mid to high 70s today. So we're earning higher returns than we would otherwise have underwritten. Great detail, thank you. Yeah, we'll go next to Scott Hanold at RBC Capital Market. In your preferred comments, you mentioned wanting to, you know, creatively double a company in five years. Can you give us a sense of, you know, how you will achieve that?

Great detail. Thank you.

Yes.

We'll go next to Scott Hanold at RBC capital markets.

In your prepared comments, you mentioned about wanting to Accretively double the company in five years can you give us a sense of how.

Nick O'Grady: I mean, since you kind of came on, you first pivoted out of the Bakken into other basins. And, you know, obviously, your next significant move was doing JVs. What's next? Are there other basins you're looking at? Would you consider being an operator? Like, you know, how do you double a company from here? I'm curious, what's that wonderful music in the background that's going on.

How you achieve that.

Since you kind of came on your first pivot out of the Bakken into other basins and.

Obviously your next significant move was doing jv's.

What's next is there other basins youre looking at.

Would you consider being an operator like how do you double a company from here.

I am curious whats that wonderful music in the background.

Oh, sorry.

Operator: Oh, sorry. Lots of calls going on today. I think what you see is what you get. I think what I would tell you is, you know, we still see the same things. I think we still see a lot of the same stuff. We still see a lot of the regular way, you know, the ground game. Look, we did almost $300 million with the ground game. That was a record year.

[laughter].

Lots of calls going on today.

I think what you see usually you get I think what I would tell you is we still see the same.

I think we still see a lot of the same stuff, we still see a lot of regular way.

A ground game look we did almost $300 million of the ground game that was a record year I mean, I think we did.

Nick O'Grady: We did, you know, several thousand acres, which included over 30 locations, which is, you know, frankly, a monstrous record, and we're doing it in a different way. We're solving, we're doing it in, we've moved out of the sort of fractional small-scale stuff into much larger, we're solving major operator problems, and mostly dealing with our mega operators. Obviously, we have moved into the JVs, but that's more a function that we can actually do that they were dealing with private equity groups that were non-commercial in the past because they were the only ones that had that capital, and they'd much prefer to work with an actual, true oil and gas concern that's a permanent owner of the assets. And so we've really become the first oil and gas concern that can actually do that.

Several thousand acres over which included over 30 locations.

Which is.

Frankly, a monstrous record and we're doing it in a different way we're solving we're doing it in <unk>.

Moves out of the sort of fractional small scale stuff into much larger we're solving major operator problems and it's mostly dealing with our mega operators.

Obviously, we have moved into the JV, but thats more a function that we can actually do that they were they were dealing with private equity groups that were non commercial in the past because they were the only ones that have the capital and they would much prefer to work with an actual true oil and gas concerned thats, a permanent owner of the assets and so we've really become the first oil and gas concern that can actually do that.

Nick O'Grady: And so I do think that that will be an avenue that goes there. I think there are still, we know of a half a dozen regular way non-op transactions that are going to come to market, either on or off market, within the next year. And so obviously, we will be looking at those. But I can tell you, to Adam's point, you said we've signed 10 non-disclosure agreements this year. It just keeps coming. We continue to be contacted by people coming to see us saying, I have this problem, or I need to buy this, or I want to do this. Can you help us do this?

And so I do think that that will be an avenue that goes there.

There are still we know of a half a dozen.

<unk> non op transactions, they are going to come to market either on or off market.

In the next within this year and so obviously, we will be looking at those.

But I can tell you.

Data <unk> said, we signed 10 non disclosure agreements this year it just keeps coming.

We we continue to be contacted of people coming to see us, saying I have this problem or I need to buy this or I want to do this can you help us do this and we are trying to solve solutions, whether it be rationalize their assets, whether they have an asset that cannot be sold and they would like to sell a portion of it like what we did with Midland Petro Theyre all.

Nick O'Grady: And we are trying to find solutions, whether it be rationalizing their assets, whether they have an asset that cannot be sold, and they would like to sell a portion of it, like what we did with Midland Petro. There are all sorts of solutions that we're trying to provide. And with that, we can create the scale that I'm describing, but I am extremely confident that we can grow it and create a return for our investors. As for other basins, there are other great economic basins. There are certainly ones that I would very much like to avoid, but I think we can solve for the risks around them.

Sorts of solutions that we're trying to provide and with that we can create the scale that I am describing but I'm extremely confident that we can grow it and create a return for our investors.

As for other basins. There are other great economic basins are certainly ones that I would very much like to avoid.

But I think you can we can solve for the risks around them. We certainly have technical expertise we've looked at a handful of other basins that we would be interested in.

Nick O'Grady: We certainly have technical expertise. We've looked at a handful of other basins that we would be interested in. There are some that I think are going to be a challenge. I think there are some that we would, of course, for the right opportunity, go to. I think there are some that we would have to frankly create governance or other things to get around those risks. And I don't know, Adam, if you want to add to that.

There are some that I think are going to be a challenge I think there are some that we would of course should the right opportunity to go to I think there are some that we would have to frankly create governance or other things to get around those risks and I don't know I don't know if you want to add to that.

Adam Derlam: Yeah, I mean, I just feel like a broken record quarter after quarter, but it's the scale that we have now. It's the optionality and the deal structures and the blueprint that we've created. And then, frankly, it comes down to reputation and our ability to execute and our ability to be commercial. And so we've got more than we can shake a stick at in terms of the inbounds, and how can we solve a problem together.

Yes, I mean, I, just feel like a broken record quarter after quarter, but it's the <unk>.

Scale that we have now it's the optionality in the deal structures in the blueprint that we've created and then frankly it comes down to reputation and our ability to execute and our ability to be commercial and so we've got.

Lower than we can shake a stick at in terms of the inbounds and how can we solve the problem together and so those are the conversations that we're having.

Nick O'Grady: And so those are the conversations that we're having. And I've talked about the stuff that's in the market, and that's everything from the non-op packages to the drill code-like joint development agreements, as well as co-buying. But now you've got this different theme emerging with the operators merging and the rationalization coming in there. So you can add another arrow to the quiver in terms of how Northern can be helpful. And so if you've got all of those options and you've got the balance sheet, and you've got the reputation, then you can use all of those to your advantage in order to execute. Okay, I appreciate that color.

<unk>.

I've talked about the stuff that's in the market and Thats everything from the non op packages to the.

Drill co light joint development agreements as well as the co bi but now you've got this different themes emerging with the operators merging into rationalization coming in there and so you can add another arrow to the quiver in terms of how northern can be helpful. And so if you've got all of those options and you've got the balance sheet you've got the reputation.

You can use all of those your advantage in order to execute.

Okay I appreciate that color and my follow up question is on shareholder return.

Nick O'Grady: And my follow-up question is on shareholder return. You know, you mentioned that you'd be willing to kind of step in and fund the buybacks with market dislocations. Can you give us a sense of, like, how aggressive are you willing to get there?

You mentioned that you'd be willing to kind of step in and.

The buybacks with market dislocations.

Can you give us a sense of like how aggressive are you willing to get there and how do you think about intrinsic value I mean, it seems like you think the stock price is attractive today, but like.

Nick O'Grady: And, you know, how do you think about intrinsic value? I mean, it seems like you think the stock price is attractive today, but, you know, where is, can you get a sense of where is that sort of point where you really get aggressive, and how deep can you go? Yeah, I mean, I think that would I can't give away too much of our playbook, Scott.

Where is it can you give us a sense of where is that sort of point, where you really get aggressive and how deep can you go.

Yes, I mean, I think I can't give away too much of our playbook, Scott and obviously, it's a board decision we've been in discussions with the board we are watching.

Nick O'Grady: And, you know, obviously, it's a board decision. We've been in discussions with the board. We are watching, you know, and I would say, as an ex-hedge fund manager, we have fairly sophisticated internal modeling of this. And we try to use it, and we model it internally and compete, and compare it, and compete it versus generic M&A and all that stuff. When we run all of these things versus, you know, we effectively mock it against where that capital could go elsewhere, right? Because it is, you know, you have to sit there and say to yourself, if I spend this money today, where could it go elsewhere? But frankly, you know, As we look to the first quarter, this represents the worst relative performance we've seen in about three years, and we view it as relatively inexplicable, given the fact that our growth profile, as we saw this year, is one of the best in the space. Perhaps it's because, I mean, I can come up with a harebrained, long, short thesis of some sort or whatever, but regardless, that generally, like I said, life gives you lemons, you make lemonade, that creates opportunities for us, and that's how you allocate capital when you see that.

I'd say as an ex hedge fund manager, we have a fairly sophisticated internal modeling of this and we try to use it and we model it internally and compete and compare it and compete versus generic M&A and all that stuff when we run all of these things versus.

We effectively market against where that capital to go elsewhere.

Because it is you have to sit there and say to yourself if I spend this money today working to go elsewhere.

But frankly.

As we look to the first quarter. This represents.

The worst relative performance, we've seen in about three years.

View it as relatively inexplicable.

Given the fact that our growth profile as we look to this year is one of the best in the space.

Perhaps just because.

And then I can come up with <unk>.

Our brand long short thesis of some sort or whatever but regardless that generally like I said like UC elevens, you make eliminate that creates opportunities for us and Thats, how you allocate capital and when you see that so we'll be watching and if the opportunity presented we're ready to act we have.

Nick O'Grady: So we'll be watching, and if the opportunity presents itself, we're ready to act. We certainly have availability in our buyback authorization. We can always create more and go to the board if necessary. And so I think we have over $80 million available today. We can always ask for more if the board's willing, and that's a board-level decision. Thanks. We'll go next to John Freeman at Raymond G. Good morning, guys. We are here for every citizen of the Globe. Following up on the last comment there, where you said that you would consider looking at, I guess there's a handful of other basins that you have looked at or considered. I would assume that for you to do anything outside of the three basins that you're in, it would require a pretty substantial position. I mean, not something that you always sort of build into, right?

We certainly have availability in our buyback authorization, we can always create more and go to the board if necessary.

And so.

I think we have over $80 million today available we can always ask for more if the board's willing.

The board level decision.

Thanks.

Okay.

We will go next to John Freeman at Raymond James.

Good morning, guys.

Sure.

Following up on the last comment there where you said.

Consider looking at I guess Theres a handful of other basins that you have looked at or considered I would assume the theology do anything outside of our three basins at year end.

It would require a pretty substantial position I mean, not something the all in sort of build and <unk> gained enough scale.

Jim Evans: You need enough scale for it to be, you know, make sense to add a fourth kind of leg to the stool. Is that correct? Yeah, yeah, I think that's a fair point. I think there's a handful of different dynamics that kind of come into play, obviously, the land and the regulation around that and what that means, you know, for a non-operator. And then, you know, when you think about co-buying or buying down, you know, a minority interest in an operator's position, you're kind of linking arms with an operator that likely already has that expertise in that basin to the extent that, you know, we need to have two sets of eyes taking a look at things. And so I think that's an interesting dynamic in terms of taking a look outside of, you know, our own backyard I think there are some basins that would be a real challenge, John, but I think there are some basins that may have some risk associated with them that could be solved if you had the right opportunity, that might have the right rock, but have other risks associated with them that could be solved if you had the right operation. That makes sense.

For it to be it makes sense to add a fourth.

Kind of leg stool right correct.

Yes, yes, I think Thats, a fair point and I think there is a handful of different dynamics that kind of come into play obviously, the land and the regulation around that and what that means for non operator, and then when you think about co buying or buying down.

A minority interest in an operated position youre kind of linking arms with an operator likely already has that expertise.

In that basin to the extent that we.

We need to have two sets of eyes, taking a look at things and so I think thats an interesting dynamic in terms of taking a look outside of our own backyard in being able to link up with some of the best in class operators that we want to partner with.

But I think there are some basis that would be a real challenge challenge genre, I think theres. Some basins that may have some risk to them that could be solved if you had the right opportunity.

I have the right rock, but have other risks associated with them that can be solved if you had the right operating partner.

That makes sense.

Jim Evans: And then my final question, obviously, we spent a lot of time on the cool aspects of the CapEx. And it looks pretty clear that, you know, whether it's late this year or next year, that, you know, the cost improvements that you're seeing in some of those major properties, eventually, that'll, that'll show up. If I shift gears and think about the guidance as it relates to production, you've got a slide in there that shows the productivity y'all are seeing in the Permian and the Williston. And I think the Williston in particular was pretty surprising for me, just you know, you think of it as a mature one of the older base. It looks like, obviously, still early here, but the 24 results look like they're meaningfully outperforming.

And my follow up question, obviously, we've spent a lot of time on the <unk>.

Accrual aspects on the Capex and it looks pretty clear that whether it's late this year next year that the the cost improvements that youre seeing some of those major properties. Eventually that'll that'll show up if I shift gears and think about the guidance as it relates to production.

You've got a slide in there that shows the productivity you are seeing in the Permian and the Williston.

<unk> wealth in particular was pretty surprising for me just you think of it as a mature one of the older basins and now it looks like obviously still early here, but 24 results look like they are meaningfully outperforming is your guidance on production related to the Williston does it assume more like a 2023.

Jim Evans: Is your guidance on production related to the Williston? Does it assume more like a 2023-type well result? Yeah, hey John, this is Jim.

<unk> results.

Yeah, Hey, John this is Jim.

Jim Evans: You know, we always go into a year kind of assuming there's going to be some well performance degradation. Obviously, we've got about nine months of wells in the process. We already have a pretty good idea of what we think the performance of those wells will be, but we do always assume there's going to be some degradation.

Go into a year kind of assuming there's going to be some well performance degradation. Obviously, we've got about nine months.

Wells in process, we already have a pretty good idea of what we think.

So those wells will be but we do always assume there's going to be some degradation, but really that plays into R. R.

Jim Evans: But really, that plays into our portfolio management, right? As we're thinking about which wells we want to participate in, which operators we think are the best performers, and where we're going to target our activity levels. And so that's really how we kind of manage our activity and our well performance and make sure that, year over year, we're doing a good job of participating in the best wells. Obviously, you know, 2024 is off to a great start, but it's pretty early on. We'll keep an eye on that and see how it changes over time, but we're obviously very encouraged.

Our portfolio management right as we're thinking about which wells we want to participate in which operators. We think are the best performers, where we're going to target our activity levels and so that's really how we kind of manage.

Our activity and our well performance and make sure that year over year, we're doing a good job of participating in the basketball is obviously 'twenty 'twenty four is off to a great start.

Early on we will keep an eye on that and see how it changes overtime, but we're obviously very encouraged we're happy with the Permian 23, outperformed a little bit versus point to even as we move more into the Midland, which is less productive than the Delaware side. So we're very happy there as well and again in 2024 is off to a great start.

Nick O'Grady: You know, we're happy with the Permian 2023 outperformed a little bit versus 2022, even as we move more into the Midland, which is less productive than the Delaware side. So we're very happy there as well. And again, 2024 is off to a great start.

Overall, well performance has been as good or better than expected, but we will stay true to our roots and expect some some low degradation, which is what we built into our our guidance in our in our forecast so.

Nick O'Grady: So overall, well, performance has been as good or better than expected, but we'll stay, you know, true to our roots and expect some well degradation, which is what we build into our guidance and our forecast. So, you know, potentially some upside there, but we'll wait until we get more information as we go farther into the year. If you're looking for optimism from a non-operators, you're not going to get it. Maybe to give you a little different perspective, I think, from our PVP ads, from a Williston standpoint, it was generally concentrated with Continental, Marathon, and Swanson, so some of our best operators in 23. And if I'm looking at the DNC list, as well as some of the near-term, you know, AFVs, you've got a similar setup with Conoco and Swanson, you know, and Continental all kind of leading the pack in terms of, you know, what that makeup is. So I'm encouraged by where these guys are operating and how they're performing. Appreciate it, guys. Thanks a lot without even understanding it.

Essentially some upside there but.

We'll wait until we get more information as we go further into the year, if youre looking for optimism from our non operator, youre not going to get it John.

Maybe to give you a little different perspective, I think from our PDP adds from the Williston standpoint, it was generally concentrated or continental marathon in slots and so some of our best operators in 'twenty three if I'm looking at.

D&C list as well as some of the near term.

You've got a similar setup with conoco and slawson.

Continental all kind of leading the pack in terms of.

What the makeup is.

Encouraged by where these guys are operating and how they're performing.

I appreciate it guys. Thanks a lot.

It's done.

Our next question comes from Phillips Johnston at capital one.

Hey, guys. Thanks, Chad.

Some pretty good color on <unk> in your prepared remarks.

You mentioned the run rate should start to fall in mid 'twenty four as production ramps and obviously you've got the ft charges tapering off by the middle of next year. So I'm wondering where we might be by Q4 and as you look out into 'twenty five.

Nick O'Grady: Our next question comes from Phillips Johnston at Capital One. Hey guys, thanks. Chad, you gave some pretty good color on LOE in your prepared remarks.

Chad Allen: You mentioned the run rate should start to fall in the mid-24 as production ramps up. Obviously, you've got the FT charges tapering off by the middle of next year. So, wondering where we might be by Q4, and as you look out into 25, would $9 a barrel be a good placeholder for our models, or would you? spirits to something above that or below that.

$9, a barrel would be a good placeholder for our models or would you.

<unk> to something above that or below that.

Yes, I mean, I think I think that sounds in the ballpark fill up like I mentioned, we're going to be we're going to be running a little hot as we kind of catch up the FTE charge, we will only have instead of a year to accrue for we only have six months, so that'll be a little bit heavier in the first quarter, but yes.

Chad Allen: Yeah, I mean, I think that that sounds about right, Phillips. Yeah, like I mentioned, we're going to be running a little hot as we kind of catch up on the FT charge. We only have, instead of a year to accrue, we only have six months.

As I mentioned, we will trend down.

Probably towards the bottom end of our guidance range, maybe even a little bit lower as we as we close out the back half of the year.

Chad Allen: So that'll be a little bit heavier in the first quarter. But yeah, then, as I mentioned, we will trend down, probably towards the bottom end of our guidance range, maybe even a little bit lower as we close out the back half. Okay, sounds good. And then maybe just a question for Adam.

Okay. It sounds good and then maybe just a question for Adam.

It looks like the plan involves 70 net spuds and 90 turn in lines can you talk about maybe what's driving that 20, well gap and what that might mean for the trajectory of production and capital efficiency into 2025.

Adam Derlam: It looks like the plan involves 70 net spuds and a 90 turn in line. Can you talk about maybe what's driving that 20 well gap and what that might mean for trajectory of production and capital efficiency into 2025? Area, you've got obviously the Midland Petro project, you know, kind of finishing up that's a 40% working interest. So you've got a concentration there.

You've got obviously, the Midland Petro project.

Kind of finishing up.

We're 40% working interests or you've got a concentration there and then.

Well as we proceed throughout the year, we're going to be getting these well proposals.

Coming in the door and so what that looks like and so.

Thanks.

It will depend on obviously, the working interest mix as well as kind of the cadence and activity levels.

Adam Derlam: And then, you know, well, as we proceed throughout the year, we're going to be getting these well proposals coming in the door. And so, what that looks like. And so I think it'll depend on obviously that working interest mix as well as kind of the cadence and activity levels of the Permian as well as the Bakken. So I think it's a function of both NOVO and some of the other larger transactions that we have and, you know, where that activity level is concentrated. We're having these conversations on a quarterly basis with our operating partners and so that can, I mean, Phyll Owing Organic. Truck Corps and affiliated stakeholder groups, presenting the mayoral development camera for today's meeting.

It's kind of a Permian as well as the Bakken.

So I think it's a function of both novo.

And some of the other larger transactions that we are.

Where that activity levels concentrated we're having these conversations on a quarterly basis with our operating partners and so that can change.

So it was fun for our normal course, our D&C lycian, usually roughly equate to about.

Omar Til count.

Yes.

We've been building organically.

Organically so over time.

About half and Thats, partly why im.

Elevated.

It masks some of the capital efficiency of the business and so that's why you will see our capital efficiency markedly improve and if you go back to say 2021, where our D&C list was declining you would see material improvements to free cash flow yield and other things and that's because you're running a leaner D&C list and so it's more just a normalization.

Nick O'Grady: Thank you, Mr. Wheeler. Council is now able to start the meeting. We are a moment from a moment ago. As always, I really welcome your kindness and your patience. If you're still not here, that's too late.

Of it so I wouldn't make the assumption that at least a material declines or something like that it's just more of a normalization of the D&C list because obviously, we've been going through for I mean think about it last quarter. Our production grew at 53, our oil production from 5300 barrels and not all of that was just novo that a lot of that was organic so you've been seeing volume growth material rates.

Operator: We've got more by the house. Fire. He's located it.

Operator: So it masks some of the capital efficiency of the business. And so that's why you will see our capital efficiency markedly improving. If you go back to say 2021, where our DNC list was declining, you would see, you know, material improvements to free cash flow yield and other things. And that's because you were running a leaner DNC list.

Youre, just really flattening out of that growth production effectively as you as you exit the year to some degree.

Chad Allen: And so it's more just a normalization of it. So I wouldn't make the assumption that it leads to material declines or something like that. It's just more of a normalization of the DNC list.

Sounds good guys. Thank you.

Yes.

We'll move next to Jonathan Schaffer at Northland capital markets.

Chad Allen: Because obviously, we've been going through, I mean, think about it last quarter. Our production grew by 53, our oil production grew by 5,300 barrels, and not all of that was just NOVO. A lot of that was organic. So you've been seeing volume growth in material, right? So you're, you're just really flattening out that growth production effectively as you exit the year to some degree. Sounds good, guys. Thank you.

Hey, guys. Thanks for taking the questions.

So.

First I want to talk about the reserves.

<unk>.

Out of the reservoir engineer My first job out of college side might be biased on this but I do think you.

You can make a lot of you can drive a lot of meaningful conclusions or pulled out some insights terminated.

If you know how to make some adjustments because obviously.

There are there are a lot of adjustments to make in order to set a real a true economic reality, but so.

The PV 10 was $5 billion, which is almost exactly in line with where youre trading in terms of enterprise value.

Operator: Yep. We'll move next to Donovan Schaffer at Northland Capital Markets. Hey guys, thanks for taking the question. So first, I want to talk about the reserve. I was a reservoir engineer in my first job out of college, so I might be a bit biased on this.

And last one on FCC pricing basis, and that can cause crazy distortions.

This time around it does at least in my view look like the SEC pricing happens in outlet to crazy and be kind of sort of close to what we could expect going forward.

Operator: But I do think you can make a lot of— you can draw a lot of meaningful conclusions and pull out some insights from Richard's reports if you know how to make some adjustments because obviously, there are a lot of adjustments to make in order to show a true sort of economic reality. But so, the PV10 was $5 billion, which is almost exactly in line with what you're trading in terms of enterprise value. And, you know, that's on an SEC pricing basis, and that can cause crazy distortions. You know, this time around, it does, at least, in my view, look like the SEC pricing happens to not look too crazy and be, you know, kind of sort of close to what we could expect going forward. But there are a lot of other things for where you are right now, where the reserve works may not be accurate and need more adjustments. So one is the Utica and Delaware acquisitions. I don't think those would be included.

But there are a lot of other things.

Or where you are right now as a company where the reserve.

Be accurate and need more adjustments or one is Utica in Delaware acquisitions, I don't think those would be.

Included so if you can confirm that.

I don't know, we don't we don't really book Puds in our.

As a non op, we don't book or put right. So we have unlike an operator and you're an operator can book a full pud bookings for five years.

How many puds that we booked.

We generally book about two two and a half years of activity right as a non operator, we still need to show that we're converting more than 20% of our pods every single year.

And the projects that we've been doing the novo forwards we have a more definitive drill schedule. So we can book more buds there, but on your typical typical non op, where the operators are providing us with their actual girls schedules, it's hard for us to show that high level of confidence that certain locations will get filled over the next five years now we're obviously going.

Jim Evans: So if you can confirm that. Donovan, we don't we don't really book putts in our, as a non-op, we don't book our putts, right? So we have, unlike an operator in your, an operator can book a full putt booking for five years. How many putts do we book in there? We generally book about two to two and a half years of activity.

You have the activity that.

So as last year, almost 80 net sales, but we can book those specific locations because we need to make sure that we're converting those locations. So we have a lot more locations than what we're booking in our reserves. So it's a very conservative reserve set that youre seeing there.

Jim Evans: Right. As a non-operator, we still need to show that we're converting more than 20 percent of our putts every single year. And so in the project that we've been doing, you know, the Novo and Forge, we have a more definitive drill schedule, so we can book more putts there. But on your typical non-op, where the operators aren't providing us with their actual drill schedules, it's hard for us to show that high level of confidence that certain locations will get drilled over the next five years. Now, we're obviously going to have the activity that, you know, as we showed last year, almost 80 net tills. But we can't book those specific locations because we need to make sure that we're converting those locations.

Right and then another thing is just.

All right.

This is coming from my recollection of how things work. So I'm looking for what your thoughts are on kind of the relative impact of this does that.

Other thing about how the way you have to do it with the SEC.

The pricing gets locked in on a historical basis and so like in this case that the current reserve report that you just put out.

The numbers to share.

Youre kind of stuck with the current commodity price.

2020 through commodity prices.

And then they do the same thing on D&C prices or D&C costs, the D&C costs falling commodity prices on kind of a lag basis like you are only just now.

Jim Evans: So we have a lot more locations than what we're booking in our reserves. And so it's a very conservative reserve set that you're seeing there. Right, and then another thing is just, this is coming from kind of my recollection of how things work, so I'm looking for what your thoughts are on kind of the relative impact of this, is that, you know, the other thing about how the way you have to do it with the SEC, the pricing gets locked in on a historical basis, and so like in this case with the current reserve report that you just put out, or the numbers you just shared, you know, you're kind of stuck with the current commodity price, the 2023 commodity prices, and then they do the same thing on DNC prices, or you know, DNC costs, but DNC costs follow commodity prices on kind of a lagged basis, like you're only just now, you know, it sounds like the more material decline in DNC costs, you're kind of only just now starting to see that, yet you're sort of, you know, locked in at a level of DNC costs that honestly may have been more reflective of commodity prices in 2022, right, so that also kind of creates, like am I right in that, am I remembering that correctly? Yeah, you're correct there, right, we have to use trailing 12 month prices.

It sounds like the more material decline in D&C costs, Youre kind of only just now starting to see that yet youre sort of.

Locked in at a level of D&C costs that honestly may have been more reflective of commodity prices in 2022 right.

Alright so.

So that also kind of creates.

Am I right in that am I remembering that correctly.

Yes, you are correct there right we have to use trailing 12 month prices. So thats locked in we have to hold that constant going forward simply for LLE and so if you think about where we were last year SEC prices were in the mid Ninety's now we're in the high high <unk>. So that has an impact on our reserves and we lose a lot of reserves just cutting off the tail and those reserves that we had to replace those about 30 million barrels that we lost.

Just due to pricing.

Then also on the well cost because we're not an operator, we look back at historical Aes that we've gotten over the last year, which is more of an $80 $90 price environment and that's what we have baked in going forward versus an operator, they can model their current cost going forward because they have the A&P is to have the actual well costs to model that so.

Again, we're being kind of double conservative there because we're holding lower price from a commodity standpoint, but then you have to use higher well costs are low and what were kind of expecting on a go forward basis.

Yes, okay. Okay.

Alright, and then moving on.

Jim Evans: So that's locked in; we have to hold that constant going forward, simply for LLE. And so if you think about where we were last year, SEC prices were in the mid 90s; now we're in the high 70s.

I may have some more follow ups on that afterwards, but for now the other one.

Quick modeling question with Q1 with the freeze in the Williston in Q1.

Jim Evans: So that has an impact on our reserves, you know; we lose a lot of reserves, just cutting off the tail end of those reserves that we had replaced. It was about 30 million barrels that we lost just due to pricing. And then also on the well cost, because we're not an operator, we look back at historical AFEs that we got over the last year, which is more of an $80, $90 kind of price environment. And that's what we have to bake in going forward, versus an operator who can model their current costs going forward because they have the AFEs; they have the actual well costs to model that. So we're, again, being kind of double conservative there because we're holding a lower price from a commodity standpoint, but then we have to use higher well costs and higher LLE than what we're kind of expecting on a go forward basis.

Having an impact on production there.

Is that going to have an impact on the oil mix.

When I kind of triangulate that with full year guidance is that something where we can see oil mix come down a bit or higher like in a way that would materially material at all I'm just trying to think I want to avoid a situation where somebody just models.

A slight production dip in Q1, but you end up underestimating the impact because of it.

Is more weighted towards oil.

Change in the oil mix or something and then does that mean Q Q2, Q3, Q4, you could have a higher oil mix and what isn't necessarily in the guidance for the full year.

I mean, I think I would ask.

Yes.

Our guidance standpoint, we feel pretty confident in the numbers that we put out there we put out both total production and oil.

Jim Evans: Yeah, okay, um, Alright, and then moving on, I may have some more follow-ups on that afterwards, but for now, the other one, just as a quick modeling question on Q1, with the freeze and Williston in Q1 having an impact on production there. Is that going to have an impact on the oil mix? You know, when I kind of triangulate that with full year guidance, is that something where we could see oil mix come down a bit or higher, like in a way that would be material at all? I'm just trying to think; I want to avoid a situation where somebody just models the flight production dip in Q1, but you end up underestimating the impact because it is more weighted towards oil or there's a change in the oil mix or something.

So you can kind of infer an annual.

Oil cut there yes in Q1 most of the shut ins were in the Williston, which has a higher oil cut so you could potentially see lower oil cut in Q1, and then it rise as we go throughout the year and obviously, our Midland Petro project is a very high oil cut.

That will also improve your oil cut throughout the year, there and I don't think yes, I mean.

I don't think because I mean I.

I don't think its going to be.

Materially I don't think its going to be material. Because there were also some mild curtailments in the Permian as well so I don't I mean.

On the margin I don't think its going to be.

You are talking about a 10 point difference between seven point difference between the Permian and the rest of our oil basins. So I don't think it's going to be.

Jim Evans: And then does that mean in Q2, Q3, Q4, you could have a higher oil mix than what is necessarily in the guidance for the full year? I mean, I think I would from a guidance standpoint. We feel pretty confident in the numbers that we put out there. We put out both total production and oil. So you can kind of infer an annual oil cut there. Yes, in Q1, most of the shut-ins were in Williston, which is a higher oil cut.

Yes.

Massive in any material way.

We will move to our next question from Paul Diamond City.

Good morning, Thanks for taking my call.

Quick ones.

Talking about some outperformance on forward can you just talk a bit more about that.

He hasnt seen that as an established trend or against what youre expecting out of that this year.

Yeah. Thanks, Paul This is Jim Yes, we're seeing the same thing Youll vital announced yesterday, they're seeing about 30% to 35% outperformance on the new wells versus kind of the legacy <unk> assets were seeing something similar versus what we underwrote. It is around 30% outperformance I think it's around optimization on spacing and completion design.

Jim Evans: So you could potentially see lower oil cuts in Q1 and then it rise as we go throughout the year. And obviously, our Midland Petro project is a very high oil cut. And so that will also improve your oil cuts throughout the year there. But I don't think I mean, I don't think it's going to. I don't think it's going to be, you know, material.

Production uptime on artificial lift that is now baked into our go forward plan.

Jim Evans: I don't think it's going to be material because there were also some mild curtailments in the Permian as well. So I don't I mean, on the margin, none of that. I don't think it's... You know, you're talking about a 10-point difference between, or 7-point difference between the Permian and the rest of our oil basin, so I don't think it's kind of We'll move to our next question from Paul Diamond at Citi. Good morning.

We're still modeling based on what we originally underwrote the acquisition. So we do see potential upside there.

As we as we continue to go throughout the year, we think we'll see that.

We will adjust as we get more and more data typically we like to see a six to nine months.

Of history before we feel confident in adjusting our assumptions, but so far we're very encouraged with what we're seeing out there.

And they are also just.

One of their main initiatives when they bought the asset it was really to work on the <unk> itself was really to work on lowering cost of the actual will be on the existing assets.

Jim Evans: Thanks for taking my call. Just a couple of quick ones. Talk about some of the performance on Forge and just talk a bit more about that. You know, if you guys have seen that as an established trend or, I guess, what you're expecting out of that this year. Yeah, Paul. This is Jim.

Good job.

Okay.

Okay.

Got it understood.

So a quick follow up you guys talked about having a lot of conversations with the small and mid cap operators, we talked about scale being similar to prior deals just dig down a bit more than that.

Jim Evans: Yeah, we're seeing the same thing. You know, Vital announced yesterday that they're seeing about 30 to 35% outperformance on the new wells versus kind of the legacy forge assets. We're seeing, you know, something similar versus what we underwrote. It's around 30% outperformance. I think it's around, you know, optimization on spacing, completion design, you know, production uptime on artificial lift.

They are a pretty wide range to that scale youre seeing or is $1 pretty much locked in similar to mascot forge novo things of that sort where can we go with smaller a bit larger.

Sam.

Just in terms of the partners.

Our deals.

Yes.

I will do the marketing.

I think a lot of that a lot of the stuff from the Mega transactions, we have a lot of conversations.

Jim Evans: That is not baked into our going forward plan. You know, we're still modeling based on what we originally underwrote for the acquisition. So we do see potential upside there. As we continue to go throughout the year, we think we'll see that, and we'll adjust as we get more data. Typically, we like to see six to nine months of history before we feel confident in adjusting our assumptions.

Just at the large certainly we have a lot of interest from small scale people as well because they always need money just like everybody else, but I think in terms of the asset rationalization. We're also seeing the conversations are very large and mid cap and upper mid cap companies as well. So I think it runs the gamut I think what I would tell you from our perspective.

Jim Evans: But so far, we're very encouraged with what we're seeing out there. Yeah. And they've also just done, you know, one of their main initiatives when they bought the asset was really to work on, and themselves, really work on lowering the costs of the actual oil assets. And I think they've done a good job putting that up.

And I'd, rather let Adam talk about this in me as that.

From our perspective.

It's not a it's not a one not one one size fits all our methodology is going to change depending on what type of counterparty. It is meaning that we're going to adjust our.

Nick O'Grady: Got it, understood. And just a quick follow up. You talked about having a lot of conversations with the small and mid-capital operators. You talked about your scale being similar to prior deals. Just dig down a bit more on that. Is there a pretty wide range on that scale you're seeing? Or is it all pretty much locked in, you know, similar to, you know, Mascot, Forge, Novo, things of that sort?

Structure based on what type of part of it is probably going to become more.

The spirit of it depending on who we're dealing with.

And just to put it in perspective in terms of deal size and partners I mean on a ground game level. We're doing this on a unit by unit basis. We've also got for example, private equity groups that are just raised capital that are looking to.

Adam Derlam: Or could we go a bit smaller, a bit larger? What do you guys say? We need to just discover the partners. We're deal driving.

Participate.

The $100 million to $200 million.

Nick O'Grady: I mean, I think a lot of the stuff, you know, from the megatransactions; we have a lot of conversations with the largest of the large. Certainly, we have a lot of interest from small scale people as well, because they always need money just like everybody else. But I think in terms of asset rationalization, we're also seeing conversations from very large and mid-cap and upper mid-cap companies as well. So I think it runs the gamut. I think what I would tell you from our perspective, and I'd rather let Adam talk about this than I do, is that, from our perspective, it's not a one-size-fits-all. Our methodology is going to change depending on what type of counterparty it is, meaning that we're going to adjust our structure based on what type of party it is. It's probably going to become more mean-spirited depending on who we're dealing with. That's right.

Transaction size levels that are looking for a partner so that they can use some of our dry powder for development on a go forward basis, and then you've got obviously the ones that we prosecuted last year.

That work.

<unk> larger than that so it runs it runs the gamut Nick with Sam.

Understood. Thank.

Thanks for your time and now we are there.

We'll go next to John Abbott at Bank of America.

Hey, good morning, and thank you for taking our questions sticky.

Sticking with the $4 billion to $6 billion of opportunities that youre seeing out there.

And you look at the balance sheet, you look at your share price.

What are your thoughts on potentially financing transactions at this point in time.

Yes.

John we raised $290 million last fall.

For a reason which was that we felt that we saw a great opportunity in front of us and we wanted to be prepared to act and we've got over $1 billion of liquidity.

Adam Derlam: And just to, I guess, put it in perspective in terms of deal size and partners, at a ground game level, we're doing this on a unit-by-unit basis. We've also got, for example, private equity groups that have just raised capital that are looking to participate in both the $100 million to $200 million transaction size levels and are looking for a partner so that they can use some of their dry powder for development on a go-forward basis. And then you've got, obviously, the ones that we prosecuted last year that were significantly larger than that. So it runs the gamut, like Nick was saying. understood. Thanks for your time, and I'll be there.

With all of the transactions that have happened I think something like 10% of the revolvers have been recalled across the board.

Chad is the most popular.

Girl at the prompt right now he is has banks begging him to take money.

And so we certainly have.

Capital available to us I don't think Thats the case for everybody, but I think for scaled companies like ourselves the ability to raise additional capital as there certainly so my point being that I think we have the capacity on balance sheet too for upwards of $1 billion, so without raising any additional capital and I think that satiate as quite quite.

Nick O'Grady: We'll go next to John Abbott at Bank of America. Hey, good morning, and thank you for taking our question. Thinking with the four to six billion dollars of opportunities that you're seeing out there, and you look at the balance sheet, you look at your share price, I mean, what are your thoughts on potentially financing transactions at this point in time? Yeah, I mean, John, we raised $290 million last fall for a reason, which was that we felt that we saw a great opportunity in front of us. And we wanted to be prepared to act. We've got over a billion dollars of liquidity. Frankly, with all of the transactions that have happened, I think something like 10% of the revolvers have been recalled across the board. Chad is the most popular girl at the prompt right now.

Usually for the time being obviously beyond that we'll see but as you do those.

We haven't really done much more than a $1 billion in the year. So I think we're in pretty good shape for 2024.

Very very helpful and I mean, there was a lot of conversations earlier on accrual accounting, but I guess the real question here is.

Looking beyond the noise as you sort of think about the exit rate for this year.

No nothing necessarily specific where do you kind of see the exit rate for 2024 in terms of production.

Yes.

Non operator.

Jim Evansville stab me with a large knife.

Sorry about that because.

Nick O'Grady: He is, has banks begging him to take money, and so we certainly have capital available to us. I don't think that's the case for everybody, but I think for scaled companies like ourselves, the ability to raise additional capital is certainly there. So my point is that I think we have the capacity on the balance sheet for upwards of a billion dollars without raising any additional capital. And I think that would satiate us quite easily for the time being.

We just talked about how the timing can vary vary and the truth is that if if we see acceleration of projects and we see everything come on early in the third quarter, we will produce a lot more barrels in our guidance will be raised for the year and so if we see our production peak in the third quarter that would be a great thing.

So theoretically we'd see peak production in the third quarter and year quote unquote exit rate would be lower of course, we would find ways to redeploy capital and exit higher soybean I'd be hesitant to see that but I would say as we described in our release. We obviously believe we will be we will be down modestly in the first quarter, we would expect a material <unk>.

Nick O'Grady: Obviously, beyond that, we'll see. But as you do those, and we haven't really done much more than a billion dollars in the year, so I think we're in pretty good shape for 2020. Very, very helpful, and I mean there were a lot of conversations earlier about cruel counting. But I guess the real question here is, you know, looking beyond the noise, what do you sort of think about the exit rate for this year? You know, nothing necessarily specific.

In the second quarter another jump in the third quarter and then.

A mild jump in the fourth quarter. So I think that I would just leave it at that for.

For now, but I would say that obviously based on our guidance said that is substantial and I am sorry to plan on that but February February but things can change.

Nick O'Grady: Where do you kind of see the exit rate for 2024 in terms of production? Yeah, I mean, as a non-operators, Jim Evans will stab me with a large knife if I talk about that because, you know, we just talked about how the timing can barely vary. And the truth is that if we see acceleration of projects and we see everything come on early in the third quarter, we'll produce a lot more barrels, and our guidance will be raised for the year. And so if we see our production peak in the third quarter, that would be a great thing. And so theoretically, we'd see peak production in the third quarter, and your quote unquote, exit rate would be lower. Of course, we would find ways to redeploy capital and exit higher. So I'd I'd be hesitant to see that.

So I'm, sorry, but as a non operator, that's just that's the best I can do for you, but I would say this that we're in the business to grow our company.

<unk>.

There is a reason in our business up there are great things about being an operator, a lot of great things.

But the timing of it.

As the part of it and honestly to the extent that it gets accelerated we're going to produce a lot more barrels this year.

So that's a good thing, but the exit rate is we're not a laundromat right. So this is something right.

It's not a machine the exit rate is sort of one of those things that people like to hang on to but it's really about it's not about a moment in time, it's about the number of barrels you produce over the life and so I'd just say this that.

Nick O'Grady: But I would say, as we described in our release, we obviously believe we'll be down modestly in the first quarter; we would expect a material jump in the second quarter, another jump in the third quarter, and then, you know, a mild jump in the fourth quarter. So I think, you know, that I would just leave it at that, for now. But I would say that, obviously, based on our guidance, that is substantial. And I'm sorry to punt on that. But it's February; it's February, but things can change and come out. Yeah, so I'm sorry.

We are in the business to grow the business over time, and I think that that's the most important thing.

Very helpful. Thank you for taking our questions.

And we'll take our final question from Noel Parks at Tuohy Brothers.

Okay.

Hi, good morning.

Just had a couple.

You know you talked a little earlier about you.

You can't really do one size fits all in terms of just how you look at different acquisitions, but.

Is it fair to assume that you're pretty agnostic between private.

Nick O'Grady: But as an operator, that's just the best I can do for you. But I would say this that we're in the business to grow our company. And, you know, there's a reason in our business. Look, there are great things about being an operator, a lot of great things. But the timing of it, we know is part of it. And honestly, to the extent that it gets accelerated, we're going to produce a lot more barrels this year.

Operated versus publicly traded operated.

Non op interest right now either for the ground game or firm.

Larger A&D.

I wouldn't say that I mean, I think it depends it depends on the quality of the operator, I mean, there are great privates, but I'd say.

The largest.

There are really large operators that are better I mean, I think it just it really goes operator specific there are really good operators and they are really bad operators that are big and small right Adam.

Nick O'Grady: So that's a good thing. But you know, the exit rate is, we're not a laundromat, right? So this is something, right, that it's not a machine. The exit rate is sort of one of those things that people like to hang on to. But it's really about, it's not about a moment in time, it's about the number of barrels you produce over the life of the plant

Thank you need to differentiate what private meetings are you talking about private equity are you talking about true private.

Those business models are run very very differently you've.

<unk> got one that's preventing an asset one that has had and will continue to have it for very very long time, and so theyre viewpoint on short term or long term basis could be very very different I mean, you've earned as a private company and it's one of the finest operators in the world.

Nick O'Grady: And so I just say this, that we are in the business to grow the business over time. And I think that's the most important thing. Very helpful.

Nick O'Grady: Thank you for taking our questions. Yeah. And we'll take our final question from Noel Parks at Tui Brothers. Hi, good morning. I just had a couple.

And I can think of many private equity backed operators that are.

Renting the asset and looking to flip it.

I would say typically we're looking at people who have a similar view as us in terms of the long term, but that's not to say that there arent great private equity operators that are out there as well that would be willing to partner with absolutely.

You know, you talked a little earlier about how you can't really do one size fits all in terms of just how you look at different acquisitions. But is it fair to say that you're pretty agnostic between privately operated versus publicly traded, operated, non-op interest right now, either for the ground game or for larger aims? I wouldn't say that. I mean, I think it depends.

Oh, great well, thanks for the clarification and.

I guess.

I was wondering a bit.

Talking about the Williston and we.

We have seen a deal there the first one maybe in quite a while of any size and.

It depends on the quality of the operator. I mean, there are great privates, but it's a, you know, the largest. There are really large operators that are bad. I mean, I think it's just, it's operator specific. There are really good operators, and there are really bad operators that are big and small, right Adam? Yeah, I don't think you need to differentiate what private means. Are you talking about private equity? Are you talking about true privacy, right?

Just wondering have not paid a lot of attention to the state of.

Sort of a land management out there.

Leases some of those leases probably.

15 years old or if not longer at this point, so I just wonder.

You know you've been there so long are things pretty cleaned up there or is there still still stuff to do just in terms of I don't know.

And those business models are run very, very differently. You know, you've got one that's renting an asset, one that's had it and will continue to have it for a very, very long time. And so their viewpoint on a short-term or long-term basis could be very, very different. Yeah, I mean, Uburn is a private company, and it's one of the finest operators.

Neglected books are.

Absent non op positions that you can still.

So it's pretty block, it's pretty blocked up no, but there are still.

There are still things to do I mean, it's just going to be more about people. When they are ready. There are things that are owned that when people are ready to sell will be sold but I don't think it's like the wild west where theres lots of open land ready to be sold is that fair Adam Yes, I think thats.

You know, and I can think of many private equity-backed operators that are, you know, renting the asset and looking to flip it Yeah, I would say typically we're looking at people who have a similar view as us in terms of the long term. But that doesn't mean that there aren't great private equity operators that are out there as well that we'd be willing to partner with. Oh, great. Well, thanks for the clarification. I guess I was wondering a bit, talking about Williford, and we have seen a deal there, the first one, maybe in quite a while, of any size. I'm just wondering, I have not paid a lot of attention to the state of land management out there, some of those leases are probably 15 years old, if not longer at this point.

The other thing that I would add to that is just the evolution of the completion methodology right you've seen a lot of operators.

We'll refine those techniques and step out.

The rate of return and the economics on some of those projects that you wouldn't even look at.

Two three years ago are things that are certainly viable now and then that changes the landscape from a land standpoint. So you can do some of the blocking and tackling in terms of picking up some white space acreage and bringing an appropriate operators as Gino we're going to do a good job.

So I just wonder, you know, you've been there so long; are things pretty cleaned up there, or is there still stuff to do just in terms of neglected books or, you know, you know, absent non-op positions that you can still, you know, still use? It's pretty blocked. It's pretty blocked up, Noel, but there are still things to do. I mean, you know, it's just going to be more about people when they're ready. There are things that are owned that, when people are ready to sell, will be sold, but I don't think it's like the Wild West, where there's lots of open land ready to be sold. Is that fair, Adam?

As a non operator.

We're not beholden to one particular area right. So we can get in to the core day in and day out and continue to grow so if our working interest as we get.

100, <unk> a quarter.

As we did in 2023, so there's always wood to chop.

This is a different dynamic.

And that concludes the question and answer session I would now like to turn the conference over to Nick O'grady for closing remarks.

Thanks, everyone for joining us today, we will see on the next one I appreciate your time.

This is the way.

And this concludes today's conference call. Thank you for your participation you may now disconnect.

Yeah, I think that's fair. The other thing that I would add to that is just the evolution of the completion methodology, right? You've seen a lot of operators refine those techniques and step out. So the rate of return and the economics on some of those projects that you wouldn't even look at, you know, two, three years ago are things that are certainly viable now.

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Yes.

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And then that changes the landscape from a land standpoint. So you can do some of the blocking and tackling in terms of picking up some white space acreage and bringing in appropriate operators that, you know, are going to do a good job. And as a non-operators, you know, we're not beholden to one particular area, right? So we can get into the core day in and day out and continue to gross up our working interest as we get, you know, 100 AFEs a quarter like we did in 2023. So there's always wood to chop. It's just a different dynamic.

Okay.

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And that concludes the question and answer session. I would like to turn the conference over to Nick O'Grady for closing remarks. Thank you everyone for joining us today. We'll see you on the next one. Appreciate your time, is the way. And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Okay.

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Okay.

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