Q1 2024 Kimbell Royalty Partners LP Earnings Call

Greetings and welcome to Kimberly Clark She partners first quarter earnings Conference call.

Operator: Greetings and welcome to Kimbell Royalty Partners' First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Rick Black, and Mr. Relations. Thank you, Mr. Black. You may.

Operator: At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on the telephone keypad. As a reminder, this conference is being with the contract. It is not my pleasure to introduce your home.

Operator: Mr. Rick Black Investor Relations. Thank you Mr. Black you may begin.

Operator: Yeah.

Rick Black: Thank you operator, and good morning, everyone welcome to the Campbell royalty Partners Conference call to review financial and operational results for the first quarter 2024 ended March 31 2020 for this call is also being webcast and can be accessed through the audio link on the events and presentations page of the IR section.

Rick Black: Thank you, operator. And good morning, everyone.

Speaker Change: Our Kimball RP dot com.

Rick Black: Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the first quarter of 2024 ended March 31, 2024. This call is also being webcast, and it can be accessed through the audio link on the events and presentations page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, which is May 2, 2024, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.

Speaker Change: Information recorded on this call speaks only as of today, which is may 2nd.

Rick Black: 2024, so please be advised that any time sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.

Rick Black: I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are considered forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call, which, by their nature, are uncertain and outside of the company's control. However, actual results may differ materially.

Rick Black: I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are considered forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Rick Black: We will be making forward looking statements as part of today's call, which by their nature are uncertain and outside of the company's control.

Rick Black: Actual results may differ materially please refer to today's earnings press release for our disclosure on forward looking statements.

Rick Black: Please refer to today's earnings press release for our disclosure on forward-looking statements. These factors, as well as other risks and uncertainties, are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the Nearest Gap measures can be found at the end of today's earnings release. Kimbell assumes no obligation to publicly update or revise any forward-looking statement. I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners Chairman and Chief Executive Officer. Bob?

Robert Davis Ravnaas: These factors as well as other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission.

Robert Davis Ravnaas: But we will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution reconciliations to the nearest GAAP measures can be found at the end of today's earnings release Kimball assumes no obligation to publicly update or revise any forward looking statements.

Robert Davis Ravnaas: I would now like to turn the call over to Bob Ravenous, Kimball royalty partners, Chairman and Chief Executive Officer Bob.

Robert Davis Ravnaas: Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call this morning. With me today are several members of our senior management, including Davis Ravnaas, our President and Chief Financial Officer, Matt Daly, our Chief Operating Officer, and Blaine Rheinsberger, our Controller. We had another excellent quarter. Following on the operational momentum from 2023, we achieved several new quarterly records in terms of daily production, revenue, and EBITDA. Strong organic run rate production growth this quarter exceeded the midpoint of guidance, and we exited the quarter with a near record number of rigs drilling on our acreage.

Robert Davis Ravnaas: Thank you Rick and good morning, everyone. We appreciate you joining us on the call. This morning.

Robert Davis Ravnaas: In addition, our line-of-sight wells continue to be well above the number needed to maintain flat production, giving us confidence in the resilience of our production as we progress through 2024. Today we are also very pleased to announce a 49 cent distribution per common unit, a 14% increase compared to last quarter. We are proud of the Kimbell track record of delivering value to our unit holders in the form of quarterly cash distributions.

Robert Davis Ravnaas: Furthermore, we expect that approximately 79% of this distribution will be considered a return of capital and not subject to dividend taxes, further enhancing the after-tax return to our common unit holders. As we look forward in 2024 and beyond, we remain bullish on the U.S. oil and natural gas industry, our role as a leading consolidator in the sector, and the prospects for Kimbell to generate long-term unit holder value. I'll now turn the call over to David. Thanks, Bob.

Robert Davis Ravnaas: With me today are several members of our senior management team, including Davis, Ravenous, our President and Chief Financial Officer, Matt Daley, Our Chief operating officer, and Blaine Ryan's Berger our controller.

David: We had another excellent quarter.

David: Following on the operational momentum from 'twenty to 'twenty three we achieved several new quarterly records in terms of daily production revenue and EBITDA.

David: <unk> organic run rate production growth this quarter exceeded the midpoint of guidance and we actually exited the quarter with a near record number of rigs drilling on our acreage. In addition, our line of sight wells continued to be well above the number needed to maintain flat production, giving us confidence in the resilience of our production as we pre.

David: <unk> through 'twenty 'twenty four.

David: Today, we were also very pleased to announce a 49 cent distribution per common unit, a 14% increase compared to last quarter. We are proud of the Kimball track record of delivering value to our unit holders in the form of quarterly cash distributions. Furthermore, we expect that approximately 79% of this distribute.

David: <unk> will be considered return of capital and not subject to dividend taxes further enhancing the after tax return to our common unitholders.

David: As we look forward in 'twenty 'twenty, four and beyond we remain bullish on the U S oil and natural gas industry, our role as a leading consolidator in the sector and the prospects for Kimball to generate long term unitholder value I'll now turn the call over to Davis.

Robert Davis Ravnaas: Thanks, Bob, and good morning, everyone. We had another great quarter here at Kimbell as we built upon our 2023 success by delivering another strong quarter of new records for daily production, revenue, and EBITDA. I'll start by reviewing our financial results from the quarter, beginning with oil, natural gas, and NGL revenues, which totaled $87.5 million, an increase of 4.2% compared to the fourth quarter. This marks the highest quarterly revenue in our

David: Thanks, Bob and good morning, everyone. We had another great quarter here at Kimball as we built upon our 'twenty to 'twenty three success by delivering another strong quarter of new record for daily production revenue and EBITDA.

Robert Davis Ravnaas: I'll start by reviewing our financial results from the quarter, beginning with oil natural gas and NGL revenues, which totaled $87 5 million an increase of four 2% compared to the fourth quarter. This marks the highest quarterly revenue in our history.

Robert Davis Ravnaas: In the first quarter, we had run rate production of 24,678 BOE per day, which reflected 1.4% organic growth from Q4 2023 or 5.6% organic growth on an annualized basis. We exited the corner with 98 rigs actively drilling on our acreage, which represents approximately 16.3% market share of all land rigs drilling in the continental United States.

Robert Davis Ravnaas: In the first quarter, we had run rate production of 24678 Boe per day.

Robert Davis Ravnaas: Which reflected 1.4% organic growth from Q4, 2023, or five 6% organic growth on an annualized basis.

Robert Davis Ravnaas: We exited the quarter with 98 rigs actively drilling on our acreage, which represents approximately 16.3% market share of all land rigs drilling in the continental United States.

Robert Davis Ravnaas: On the expense side, first quarter general and administrative expenses were $9.4 million, $5.8 million of which was cash G&A expense or $2.57 per BOE. Unit-based compensation in the first quarter, which is a non cash G&A expense, was $3.7 million or $1.64 per BOE.

Robert Davis Ravnaas: On the expense side first quarter general and administrative expenses were $9 4 million.

Robert Davis Ravnaas: $5 8 million of which was cash G&A expense or $2.57 per Boe.

Robert Davis Ravnaas: Unit based compensation in the first quarter, which is a noncash G&A expense was $3 7 million or $1.64 per Boe.

Robert Davis Ravnaas: Net income in the first quarter was approximately $9 3 million.

Robert Davis Ravnaas: Net income in the first quarter was approximately $9.3 million, and net income attributable to common units was approximately 3.2 million, or four cents per common unit. Total first quarter consolidated adjusted EBITDA was a record at $74.1 million, and was up approximately 7.4% from the previous quarter. You will find a reconciliation of both consolidated adjusted EBITDA and cash available for distribution at the end of our news release. As Bob mentioned, today we announced a cash distribution of 49 cents per common unit for the first quarter.

Robert Davis Ravnaas: And net income attributable to common units was approximately $3 2 million or four cents per common unit.

Robert Davis Ravnaas: Total first quarter consolidated adjusted EBITDA was a record at $74 1 million.

Robert Davis Ravnaas: And without the approximately seven 4% from last quarter.

Robert Davis Ravnaas: You will find a reconciliation of those consolidated adjusted EBITDA and cash available for distribution at the end of our news release.

Robert Davis Ravnaas: As Bob mentioned today, we announced a cash distribution of 49 cents per common unit for the first quarter.

Robert Davis Ravnaas: This represents a cash distribution payment to common unit holders that equates to 75% of cash available for distribution, and the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimbell's Secured Revolving Credit Facility.

Robert Davis Ravnaas: This represents a cash distribution payment to common unit holders that equates to 75% of cash available for distribution and the remaining 25% will be used to pay down a portion of the outstanding borrowings under our Kimball secured revolving credit facility.

Robert Davis Ravnaas: Moving now to our balance sheet and liquidity. At March 31, 2024, we had approximately $285.4 million in debt outstanding under our Secured Revolving Credit Facility. We continue to maintain a conservative balance sheet with net debt to trailing 12 month consolidated adjusted EBITDA of one time. Additionally, we had approximately $264.6 million in undrawn capacity under the secured revolving credit facility as of March 31, 2024.

Robert Davis Ravnaas: Moving now to our balance sheet and liquidity.

Robert Davis Ravnaas: At March 31, 2024, we had approximately $285 4 million.

Robert Davis Ravnaas: Debt outstanding under our secured revolving credit facility.

Robert Davis Ravnaas: We continue to maintain a conservative balance sheet with net debt to trailing 12 month consolidated adjusted EBITDA of one times.

Robert Davis Ravnaas: We had approximately $264 6 million and undrawn capacity under the secured revolving credit facility as of March 31 2024.

Robert Davis Ravnaas: We remain very comfortable with our strong financial position, the support of our expanding bank syndicate, and our financial flexibility. Today, we are also affirming our 2024 guidance, which includes daily production at its midpoint of 24,000 BOE per day. As a reminder, our full guidance outlook was provided in the Q4 2023 earnings press release.

Robert Davis Ravnaas: We remain very comfortable with our strong financial position the support of our expanding bank syndicate at our financial flexibility.

Robert Davis Ravnaas: Yeah.

Robert Davis Ravnaas: Today, we are also affirming our 2024 guidance, which includes daily production at its midpoint of 24000 Boe per day.

Robert Davis Ravnaas: As a reminder, our full guidance outlook was provided in our Q4 2023 earnings press release.

Robert Davis Ravnaas: We feel confident about the prospects for continued robust development, given the number of rigs actively drilling on our acreage, as well as the operator commentary we're hearing around their expected development activity in 2024, especially in the Permian. We continue to believe that industry trends, overall demand for energy, and positive operator sentiment represent a positive outlook for royalties and mineral space, and Kimbell specifically. We are pleased with our start to 2024, and we are focused on a long-term horizon for continued growth and opportunities to enhance unit holder value.

Robert Davis Ravnaas: We feel confident about the prospects for continued robust development given the number of rigs actively drilling on our acreage as it as well as the operator commentary we're hearing around their expected development activity in 2020 for especially in the Permian.

Robert Davis Ravnaas: We continue to believe that industry trends overall demand for energy and positive operator sentiment represent a positive outlook for the royalties the mineral space.

Robert Davis Ravnaas: Kimball specifically.

Robert Davis Ravnaas: We are pleased with our start to 'twenty 'twenty four and we are focused on a long term horizon for continued growth and opportunities to enhance unitholder value.

Robert Davis Ravnaas: We are proud of our hard work, dedicated, and talented team here at Kimbell, and we greatly appreciate their continued contributions to driving growth and enhancing the value of our organization for all stakeholders. In addition, we work with some of the best financial advisors and institutions in the business. And we greatly appreciate these partnerships that contribute to the company's success. With that, Operator, we are now ready for questions.

Robert Davis Ravnaas: We are proud of our hard work dedicated and talented team here at Campbell and we greatly appreciate their continued contributions to driving growth and enhancing the value of the organization for all stakeholders.

Robert Davis Ravnaas: In addition, we worked with some of the best financial advisors and institutions in the business.

Robert Davis Ravnaas: And we greatly appreciate these partnerships that contribute to the company's success with that operator, we are now ready for questions.

Speaker Change: Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question... You may first start to if you would like to remove your questions from the... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. The first question comes from the line of Nate Pendleton. Stiefel, please go ahead.

Speaker Change: We will now be conducting a question and answer session.

Operator: If you would like to ask a question. Please press star one on your telephone keypad.

Nathaniel David Pendleton: Tone will indicate your line is in the question queue.

Operator: Start to if you would like to remove your questions from the queue.

Nathaniel David Pendleton: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east one moment, please pull for questions.

Nathaniel David Pendleton: Our first question comes from the line of neat.

Nathaniel David Pendleton: With Stifel. Please go ahead.

Nathaniel David Pendleton: Good morning, and congrats on the strong quarter.

Nate Pendleton: Good morning, and congratulations on the strong quarter. Thank you. Good morning. My first question is on the M&A market, and specifically, in what basins and at what potential deal size are you seeing the best opportunities?

Nathaniel David Pendleton: Good morning.

Nathaniel David Pendleton: My first question I wanted to get your perspective on the M&A market and specifically in what basins and at what potential deal size are you seeing the best opportunities.

Robert Davis Ravnaas: Yeah, thanks for the question. A relatively muted start to the year on the M&A front. And I just to directly answer your question, most of the opportunities that are out there that are of scale are in the Permian. So, I wouldn't be surprised to see a couple of larger deals, you know, let's call them 100 million dollars plus deals consummated over the balance of the remaining year in the Permian. But so far, it's been a relatively slow start; I'm not entirely sure why that's the case.

Nathaniel David Pendleton: Yeah. Thanks for the question relatively muted start to the year on the M&A front.

Robert Davis Ravnaas: And I just to directly answer your question most of the opportunities that are out there that are of scale are in the Permian.

Robert Davis Ravnaas: So wouldn't be surprised to see a couple of larger deals you know, let's call. It a $100 million plus deals consummated in the you know over the balance of the remaining year in the Permian, but so far it's been a relatively slow start are not entirely sure why that's the case you know some years there are more robust than others last year was with a large one for us.

Robert Davis Ravnaas: Some years are more robust than others. Last year was a large one for us. This one, so far, for ourselves and our peers, appears to be relatively muted, but things change quickly. Sometimes some of the private equity portfolio companies see an opportunity to exit in a window to exit, and decide to rush quickly.

Robert Davis Ravnaas: This one so far for ourselves and our peers appears to be relatively muted.

Robert Davis Ravnaas: But things things change quickly, sometimes some of the private equity portfolio companies.

Robert Davis Ravnaas: So it could change, but so far, relatively muted, and of the opportunities that we are seeing, they tend to be permeated by focus.

Robert Davis Ravnaas: See an opportunity to exit in a window to exit decided to rush quickly. So it could change, but so far relatively muted and other opportunities that we are seeing they tend to be a Permian focus.

Robert Davis Ravnaas: Got it thanks for the color and for my follow up looking into your activity metrics. It appears in rig activity on your mid Con assets remains quite strong can you provide any color as to what you're seeing on the ground in the basin.

Robert Davis Ravnaas: Got it. Thanks for the color. And for my follow-up, looking into your activity metrics, it appears rig activity on your mid-con assets remains quite strong. Can you provide any color as to what you're seeing on the ground in the basin?

Robert Davis Ravnaas: Yeah, good question. We love our mid-con position, the majority of which we acquired through LongPoint. And I think that's a basin that you'll continue to see kind of surprising activity levels, but more robust than I think people expect going forward. The basin really got beat down over the last several years, you know, tremendously out of favor. There was a lot of negative PR over, you know, just some strange occurrences that happened in that basin at the corporate level. But there was great wealth.

Speaker Change: Yeah. Good question, we as you know we love our mid con position that the majority of which we acquired through long point and I think that's a base and that you'll continue to see kind of surprising activity levels are more robust than I think people expect going forward the base and really got beat down over the last several.

Robert Davis Ravnaas: Years tremendously out of favor there was a lot of negative PR over you just some some strange occurrences that happened in that they sit at the corporate level.

Robert Davis Ravnaas: And I think you'll see, you know, positive contributions from increased, improved differentials. There's great takeaway capacity there. There are operators there that continue to drive efficiencies into play. I'll pause there. Anything, anything that you'd like to add to that, Matt, or anyone else? Yeah, I mean, I just like the fact

Robert Davis Ravnaas: But great wells and I think you'll see positive contributions from increased improved differentials. There's great takeaway capacity. There are there's operators there that they continue to drive efficiencies in the play.

Speaker Change: I'll pause there I mean anything in anything that you'd like to add to that Matt or anyone else. Yeah. I mean, I just like the fact, you know we had expected the haynesville rigs went down between.

Matthew S. Daly: Yeah, I mean, I just like the fact that we had, you know, expected the Haynesville rigs to go down between Q4 and Q1. We know we've heard all the companies talking about cutting back on CapEx in that basin. So we were expecting that, but it was interesting that MidCon actually grew pretty dramatically, like you said, from 17 rigs to 23 rigs between Q4 and Q1, and so more, you know, offset that nicely.

Matthew S. Daly: Q4, and Q1 are we you know we've heard all the all the companies talking about cutting back on Capex in that basin. So we're expecting that but that are interesting in the mid con actually grew pretty dramatically like you said from 17 rigs to 23 rigs between Q4, and Q1 and so are more than offset that nicely. So overall.

Matthew S. Daly: So overall, the rig count for the company stayed flat at 98 rigs between Q4 and Q1, a very, very high level of activity near an all-time record for us. So this kind of shows the benefits of having this diversified model where you have maybe one slowdown in, say, Hainesville, but then the MidCon steps up where it takes over for that. Totally agree.

Matthew S. Daly: Rig count for the company stayed flat at 98 rigs between Q4, and Q1 are very very high level of activity near an all time record for us. So just kind of shows the benefits of having a diversified model, where you have maybe won't slow down and see the haynesville, but the the mid con steps up as where it takes over for that.

Speaker Change: No no I agree.

Matthew S. Daly: Absolutely.

Nate Pendleton: Absolutely. Well, I'll pass it back. Thanks for taking my questions.

Speaker Change: I'll pass it back thanks for taking my questions. Thank you.

Nate Pendleton: Thank you next question comes from the line of Chocolate Nomura with Raymond James. Please go ahead.

Operator: Thank you. The next question comes from the line of Trafford Lamar with Raymond James.

Trafford Lamar: Hey guys, thanks for taking my questions. Maybe the first one, kind of a follow-up on the M&A topic. You mentioned some potential opportunities in the Permian. Given kind of the opposite nature of the forward curves for oil and gas, can you kind of talk about maybe what you're seeing on a bid-ask spread level for oily versus gassy assets?

Trafford Lamar: Hey, guys. Thanks for taking my questions. The first one yeah. Thanks, Yeah, maybe the first one kind of a follow up on M&A you know in any topic, you mentioned some potential opportunities in the Permian.

Trafford Lamar: Given kind of the opposite nature of the forward to oil and gas you don't kind of talk about maybe what you're seeing on a bid out spread level for oily versions gassy assets.

Robert Davis Ravnaas: Yeah, that's a great question. We haven't seen, you know, candidly, not a lot of gas assets of scale come to market recently. I think that that's driven by a few different factors. One, a lot of the larger Haynesville players have exited in recent years. We picked up our big Haynesville position back in 2018.

Speaker Change: Yeah. That's that's a great question, one that we haven't seen it candidly not a lot of gas assets of scale have come to market recently I think that that's driven by a few different factors one a lot of the larger haynesville players have exited in recent years, we picked up are our big Haynesville position.

Robert Davis Ravnaas: Back in 2018, there's been a few other folks that are sold in the last few years.

Robert Davis Ravnaas: There's been a few other folks that have sold in the last few years. Appalachia, from a minerals perspective, has been challenging. A lot of very small interests that have to be aggregated over smaller acreage footprints. So we just haven't seen as many high quality, large mineral packages in the Appalachian Basin.

Robert Davis Ravnaas: Happily show from our minerals perspective has been challenging a lot of very small interest that has to be aggregated over smaller.

Robert Davis Ravnaas: Over smaller acreage footprints. So we just haven't seen as many high quality large mineral packages and and the.

Robert Davis Ravnaas: In the Appalachian Basin.

Robert Davis Ravnaas: I wouldn't say that on the oil front, what you're asking is actually a really good nuanced question, because you'll see deal without a backward dated curve that can be very attractive on an accretion accretion basis for for cash flow over the next couple of years, but then on a on a NAV basis. If you really are.

Robert Davis Ravnaas: I would say that on the oil front, what you're asking is actually a really good nuanced question, because you'll see deals on a backward curve that can be very attractive on an accretion basis for cash flow over the next couple of years. But then on a NAV basis, if you really are running things on strip, which is what we do, it can be more challenging to do NAV accretive deals. So that's creating some disparity, I think, between lower multiples on initial cash flow from the bid perspective than perhaps the ask, if that makes sense. And so I think that is a little bit of a challenge.

Robert Davis Ravnaas: Our running things that are on the strip, which is what we deal it can be more challenging to do in a V accretive deal. So that's creating some disparity I think between you know lower multiples on initial cash flow from the the bid perspective than perhaps the ask if that makes it.

Robert Davis Ravnaas: And so I think that is a little bit of a challenge, but I you know what I think sellers sellers are sophisticated they're looking at the same numbers. We are I do think deals will continue to get done that make both sides happy so nothing that we're terribly concerned about in terms of.

Robert Davis Ravnaas: But look, I think sellers are sophisticated. They're looking at the same numbers we are. I do think deals will continue to get done that make both sides happy, so nothing that we're terribly concerned about in terms of too wide of a bid-ask spread. Just on the M&A front, just so far this year, there hasn't been a whole lot that's come to market yet. But again, the M&A environment ebbs and flows, so nothing that we're, you know, terribly concerned about.

Robert Davis Ravnaas: Too wide of a bid ask spread I'm.

Robert Davis Ravnaas: Just on the M&A Friday, just so far this year. It just hasn't there just hasn't been a whole lot that's come to market yet, but again these the.

Robert Davis Ravnaas: The M&A environment ebbs and flows so nothing that we're terribly concerned about.

Trafford Lamar: Got it. I appreciate the color on that, Davis.

Speaker Change: Got it appreciate the color on that David and then maybe on that you know.

Trafford Lamar: And then maybe on, you know, I was looking at, obviously it was addressed in the prior question on MidCon activity, the increase from 4Q to 1Q. And also, you know, I want to ask about Hainesville. I noticed, you know, a slight production increase in 1Q, given how, you know, activity has fallen off the cliff there given prices. Did that come as a surprise to y'all, or was that more of a factor in kind of the second half 23

Trafford Lamar: I was looking at obviously if it was addressed in the prior question on mid Con activity of the increase for Q2, <unk> and also I wanted to ask on the Haynesville I noticed you know slight production increase and in <unk>, given how you know activity.

Trafford Lamar: It's fallen off a cliff there given prices did that did not come as a.

Trafford Lamar: It surprised you or was that more of a factor of kind of second half 'twenty through activity coming online.

Blaine Rheinsberger: Yeah, so for details on Haynesville activity, Blaine, do you have anything to add to that or Matt? Yeah, I do.

Speaker Change: Yeah, so for detail on the Haynesville activity Blaine do you have anything to add to that or Matt Yeah. I do so so haynesville, you're correct haynesville grew quarter over quarter, a 3% organically and you know the Permian grew 5% quarter over quarter organically, but back to the Haynesville again, we we were expecting a slow down there and we are hearing.

Blaine Rheinsberger: So Haynesville, you're correct, Haynesville grew quarter over quarter, 3% organically, and you know, the Permian grew 5% quarter over quarter organically, but back to Haynesville. Again, we were expecting a slowdown there. And we are hearing about the capex drop offs in Haynesville, but we, you know, we had growth quarter over quarter, it was mainly due to We had three high-interest Chesapeake wells that came online in Red River Parish.

Blaine Rheinsberger: The capex drop offs in the Haynesville, but we know we have the growth quarter over quarter. It was mainly due to.

Blaine Rheinsberger: We had three high interest Chesapeake wells that came online in Red River parish. You know these are these are huge wells and theyre going to have an impact on it on us, but I would say in Blaine unless you have other color. That's really the primary driver there, but yes. We were we were happy to see that in but certainly what we're hearing in the market you know it wouldn't be surprised if over time, the haynesville starts to slow a bit.

Blaine Rheinsberger: You know, these are huge wells. They're going to have an impact on it, on us. But I would say, and Blaine, unless you have other color, that's really the primary driver there. But yes, we were happy to see that. And but, you know, certainly what we're hearing in the market, wouldn't be surprised if, over time, the hazel starts to slow a bit.

Blaine Rheinsberger: Yeah, No I completely agree Matt that's yeah that was it was it was somewhat surprising to have those come on but yeah. We're we're we're happy for them. So.

Blaine Rheinsberger: Yeah.

Trafford Lamar: Perfect. Well, thank you guys for the color and congrats on a great quarter. Thank you very much.

Speaker Change: Perfect well. Thank you guys for the color and congrats on a great quarter.

Operator: Thank you very much for your time. I appreciate it.

Speaker Change: For your time appreciate it.

Restaurant: Thank you next question comes from the line of restaurant with Keybanc capital markets. Please go ahead.

Operator: Thank you. The next question comes from the line of Tim Rezvan with KeyBank Capital Marketing. Please go ahead.

Timothy A. Rezvan: Good morning folks. Thank you for taking my questions. Good morning.

Timothy A. Rezvan: Good morning, folks. Thank you for taking my questions. Yeah, good morning. I want to start on slide 14.

Timothy A. Rezvan: But I want to start on slide 14, you know you're showing that the ducks and permits you know I know these tend to ebb and flow it's down a bit.

Timothy A. Rezvan: You know, you've shown that the ducks and permits, you know, I know these tend to ebb and flow. It's down a bit from last year. And you're hearing, you know, the recount is, you know, biased, probably going to be moving down from here. So just kind of curious, now that you're four months into the year, you left production guidance unchanged, but are trends and activity levels sort of in line with your expectations coming into the year?

Timothy A. Rezvan: From last year, and you're hearing you know the rig count as you know biased probably going to be moving down from here. So just kind of curious now that your four months ended year, you left production guidance unchanged, but.

Timothy A. Rezvan: Our trends and activity levels sort of in line with your expectations coming into the year.

Robert Davis Ravnaas: Tim, this is Davis. I'd say yes. This quarter, you know, was a little bit above the midpoint of our guidance, which was nice to see. I think that the outlook for activity remains the same as when we entered the year, just to answer that question succinctly and directly. We haven't seen evidence of a dramatic slowdown. We have enough near-term catalysts in terms of ducks and permits that we feel very confident in the 12-month forecast. Hopefully, we're conservative on it as well, which we have a long history of being.

Timothy A. Rezvan: Yeah, Tim This is Davis I'd say, yes, this quarter, a little bit above the midpoint of our guidance, which was nice to see I I I I think that the outlook for activity remains remains the same as when we entered the year just to answer that question succinctly indirectly we haven't seen evidence of.

Robert Davis Ravnaas: The dramatic slowdown that we have enough near term catalyst in terms of ducks in primates, where we we keep that we feel very confident in the 12 month forecast hopefully we're conservative on it as well, which we have a long history of being but nothing that alarms us yeah.

Robert Davis Ravnaas: But nothing that alarms us yet. I mean, honestly, I guess in a more nuanced way, I'd say that we've been a little bit surprised, just kind of building on Matt and Blaine's comments in the Haynesville. We've been a little bit surprised by how robust activity in the Haynesville has been and how resilient it's been. So that's just been a little bit counterintuitive, just given what's happened to spot gas prices. So I'd say, on the balance, feel good about the next 12 months.

Robert Davis Ravnaas: Honestly I guess.

Robert Davis Ravnaas: Nuanced way I'd say that we've been a little bit surprised just kind of building on Madden blames comments in the Haynesville, we've got a little bit surprised by how robust activity in the haynesville as Ben and how resilient. It has been so that that's just been a little bit counterintuitive, just given what's happened to spot gas prices. So I'd say on the balance feel good.

Robert Davis Ravnaas: About next 12 months wouldn't be surprised if we outperformed a little bit here and there just given the conservative view that we tend to have with our guidance, but yeah. I'd say nothing has really changed in terms of the data. We have received over the last four months relative to when we started putting together guidance and then in the fourth.

Robert Davis Ravnaas: I wouldn't be surprised if we outperformed a little bit here and there, just given the conservative view that we tend to have with our guidance. But yeah, I'd say nothing has really changed in terms of the data we've received over the last four months relative to when we started putting together guidance in the fourth quarter.

Robert Davis Ravnaas: Warner.

Robert Davis Ravnaas: Okay.

Robert Davis Ravnaas: Helpful.

Speaker Change: Okay, and then just as a follow up just some housekeeping.

Timothy A. Rezvan: Okay. Sorry, and then just as a follow-up, just some housekeeping, you kept the guide for 24,000 a year production. Just to be clear, that's run rate production, not the total that reflected the adjustment. Correct. runway production.

Timothy A. Rezvan: You kept the guide for 24000, a year got production just to be clear that's run rate production not the total that reflected the adjustment.

Timothy A. Rezvan: Correct run rate production.

Robert Davis Ravnaas: Yeah. Okay. Okay. Perfect. Of course. Thank you, Tim.

Speaker Change: Yeah, Okay. Okay perfect. Thank you.

Speaker Change: Of course, thank you Tim.

Robert Davis Ravnaas: Yeah.

Robert Davis Ravnaas: Thank you next question comes from the line of Neal Dingmann.

Operator: Thank you. The next question comes from the line of Neal Dingmann with True Securities. Please go ahead.

Neal David Dingmann: Please go ahead.

Operator: Hey, this is Julian Broche on for Neil just have two questions for you guys.

Julian Brechet: Hey, this is Julian Brechet on behalf of Neal. I just have two questions for you guys. On terms of the cash distribution, is there anything that would cause you to vary from your 75% payout level? And then, kind of the second one is on hedges. You know, are you comfortable riding out these recent moves? Are you looking to lock in more cash flows and maybe stabilize the payout?

Julian Brechet: In terms of the cash distribution is there anything that would cause you to the varied from your of that 75% payout level and then kind of second one is on hedges you know we're comfortable riding out. These recent moves are you looking to lock in more cash flows maybe stabilize the payout. Thank.

Speaker Change: Thank you.

Robert Davis Ravnaas: Yeah, short answer the question. We don't we don't anticipate any changes to the 75% payout ratio and no material changes to our hedging program. Matt, any color that you'd like to add to that, though? Yeah.

Speaker Change: Yeah short answer the question, we don't we don't anticipate any changes to the 75% payout ratio and no material changes to.

Robert Davis Ravnaas: Our hedging program, Matt any color that you'd like to add to that though.

Matthew S. Daly: Yeah, I mean, on the hedging program, I'm not sure people have noticed this, but we are, you know, we're hedged out for two years, roughly 20% of our oil and natural gas production. And if you look at some of the prices we have, you know, oil hedges, you're looking at this year between 75 and 83. And then for natural gas, we have 383 to 419.

Matt: Yeah, I mean on the hedging program I'm not sure people have noticed this but we are you know we're hedged out for two years, roughly 20% of our oil and natural gas production and if you look at some of the prices. We have you know or oil hedges are you looking at for this year between 75 and 83 in there for natural gas. We have 383 to 419, so we're able to have a roughly.

Matthew S. Daly: So we're able to have roughly, you know, a nice realized gain in Q1 in terms of hedging gains. And if you look at the beyond in 2025, we have, you know, natural gas hedges between 368 and 432 at MCF. So we're hedging into that contiguous curve right now in natural gas, about 20%. And you know, that's the percentage we do. We've run enough stress tests to see if that percentage of hedging, if you were to have a dramatic drop in commodity prices, we'd be well protected in terms of our cabinets, but also provide, you know, 80% unhedged production in some cases.

Matthew S. Daly: A nice realized gain in Q1 in terms of hedging gains and if you look into beyond 2025, we have.

Matthew S. Daly: Natural gas hedges between $3 68, and $4 32, an mcf. So we're we're hedging into that can take a curve right now in natural gas about 20% and.

Matthew S. Daly: So we can enjoy any run on commodity prices. So I think there's no change in the hedging policy. It worked extremely well during COVID. And I think we're well set up right now for the next couple years as well.

Matthew S. Daly: That's that's the percentage we do we've rounded up stress test to see what that percentage of hedging. If you were to have a dramatic drop in commodity prices, we would be well protected in terms of our covenants. But also provides you know 80% unhedged production in case of it. So we can enjoy any any run in commodity prices. So I think theres no change in the hedging policy. It work extremely well during Covid and I think we're well set up right now.

Matthew S. Daly: In the next couple of years as well.

Matthew S. Daly: Yeah.

Julian Brechet: Got it. Thank you. And I can maybe go back to the M&A on another question. Are you guys seeing any interesting opportunities outside the Permian?

Speaker Change: Got it thank you and I can just maybe go back to the M&A on another question are you guys seeing any interesting opportunities outside the Permian.

Robert Davis Ravnaas: Outside of the Permian, yeah, great question; nothing material is coming to mind right now. The larger opportunities that we're seeing are Permian focused. We would obviously be very interested in, you know, as you know, we have a history of buying in every basin. We'd be, you know, very interested in buying outside of the Permian as well, but nothing near term that's of scale outside of the Permian that we're focused on at this moment. Got it. Thank you very much.

Julian Brechet: Got it. Thank you. Very helpful. Thank you.

Robert Davis Ravnaas: Outside of the Permian Yeah, great Great question.

Julian Brechet: Nothing material is coming to mind right now are the larger opportunities that you see that we're seeing our Permian focused we would obviously be very interested in you know as you know.

Julian Brechet: We have a history of buying in every basin, we'd be very interested in buying outside of the Permian as well, but nothing near term that the scale outside of the Permian than ER than we're focused on at this moment.

Julian Brechet: Got it thank you very helpful.

Julian Brechet: Yeah.

Julian Brechet: Thank you.

Operator: Thank you. A reminder to all the participants that you may press star and 1 to ask a question. There are no further questions at this time. I would like to turn the floor over to the management for closing comments.

Julian Brechet: Reminder, to all the participants that do my best thought and wanted to ask a question.

Operator: Yeah.

Operator: There are no further questions at this time I would like to turn the floor over to the management for closing comments.

Robert Davis Ravnaas: Yes, thank you. We thank you all for joining us this morning, and we look forward to speaking with you again next quarter. This completes today's call.

Speaker Change: Yes. Thank you we thank you all for joining us this morning.

Speaker Change: And we look forward to speaking with you again next quarter. This completes today's call.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Operator: Thank you. This concludes today's study conference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Okay.

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