Q1 2024 SilverBow Resources Inc Earnings Call

Good day and welcome to the silver by Resources' first quarter 'twenty to 'twenty four earnings conference call.

Operator: Good day, and welcome to the Silver Bow Resources First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star 1 again. We ask that you limit your questions to one and one follow-up so we are able to take as many questions as possible. For operator assistance throughout the call, please press star zero.

Operator: After the Speakers' remarks, there will be a question and answer session.

Operator: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Operator: If you would like to withdraw your question. Please press star one again.

Operator: We ask that you limit your questions to one and one follow up so we are able to take as many questions as possible.

Operator: So all purchases to throughout the call. Please press star zero, and finally I would like to advise all participants. This call is being recorded thank you.

Operator: And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Geoff Magids, Vice President of Finance and Investor Relations, to begin the conference. Geoff, over to you.

Jeff Magids: I'd now like to welcome Jeff Nuggets, Vice President Finance and Investor Relations to begin the conference Jeff over to you.

Jeff Magids: Thanks, operator, and good morning, everyone welcome to our first quarter 'twenty 'twenty four conference call.

Jeff Magids: Thanks, operator. And good morning, everyone.

Jeff Magids: Welcome to our first quarter 2024 conference call. With me on the call today are Sean Woolverton, our CEO; Steve Adam, our COO; and Chris Abundis, our CFO.

Jeff Magids: With me on the call today are Sean Woolverton, our CEO.

Jeff Magids: Steve Adam our C O O and Christopher <unk>, our CFO.

Jeff Magids: Yesterday, we posted a new presentation on our website, and we'll refer to it during this call. Please note that we may make references to certain non-GAAP financial measures which are reconciled to their closest GAAP measure in the earnings press release. Our discussion today may include four forward-looking statements, which are subject to risks and uncertainties, many of which are beyond our control. These risks and uncertainties are described more fully in our documents on file with the SEC, which are also available on our website.

Jeff Magids: Yesterday, we posted a new presentation to our website and will for it to it during this call.

Jeff Magids: Please note that we may make references to certain non-GAAP financial measures, which are reconciled to their closest GAAP measure in the earnings press release.

Jeff Magids: Our discussion today may include forward looking statements, which are subject to risks and uncertainties many of which are beyond our control.

Jeff Magids: These risks and uncertainties are described more fully in our documents on file with the S. E C, which are also available on our website.

Jeff Magids: As a reminder, please limit your time during Q&A to one question one follow up this will allow us to get more of your questions in this morning.

Jeff Magids: As a reminder, please limit your time during Q&A to one question and one follow-up. This will allow us to get more of your questions in this morning. With that, I will now turn the call over to Sean.

Jeff Magids: With that I will now turn the call over to Sean.

Jeff Magids: Yeah.

Sean C. Woolverton: Good morning, everyone. As you can see from our results, SilverBow is off to a very strong start in 2024. We continue to prove the merits of our long-term business strategy and build on our effective track record of creating value for shareholders. Our call today will cover three primary topics. First, our year-to-day results, which are ahead of plan early this year. We optimized our 2024 operating plans, capitalizing on our diversified portfolio to reduce investments in dry gas and focus on our profitable liquids development. Our goal was to maximize free cash flow and rapidly strengthen our balance sheet. Our plan is working.

Sean: Good morning, everyone.

Sean C. Woolverton: As you can see from our results Silver Bowl is off to a very strong start in 2024.

Sean C. Woolverton: We continue to prove the merits of our long term business strategy.

Sean C. Woolverton: And build on our effective track record of creating value for shareholders.

Sean C. Woolverton: Our call today will cover three primary topics.

Sean C. Woolverton: First our year to date results.

Sean C. Woolverton: You are ahead of plan.

Sean C. Woolverton: Early this year, we optimized our 2024 operating plans capitalizing on our diversified portfolio to reduce investments in dry gas and focus on our profitable liquids development.

Sean C. Woolverton: Our goal was to maximize free cash flow and rapidly strengthen our balance sheet.

Sean C. Woolverton: Our plan is working.

Sean C. Woolverton: Today, we are raising our full year free cash flow estimate and lowering our year end leverage ratio target to 1.25 times.

Sean C. Woolverton: Today, we are raising our full-year free cash flow estimate and lowering our year-end leverage ratio target to 1.25 times. More importantly, we now have a line of sight to reach our target of one times leverage next year. Second, we continue to see capital efficiency gains across our operations, delivering some significant operational achievements over the last few months, which we see as sustainable. Finally, we continue to strengthen our portfolio and recently completed the final stage of a multi-year effort to assemble a 25,000 acre position in the liquids window of the Eagle Firm. And we did this without any new capital. This is one of the last contiguous undeveloped areas of scale in the Basin.

Sean C. Woolverton: More importantly, we now have line of sight to reach our target of one times leverage next year.

Sean C. Woolverton: Second we continue to see capital efficiency gains across our operations.

Sean C. Woolverton: Delivering some significant operational achievements over the last few months, which we see as sustainable.

Sean C. Woolverton: Finally, we continue to strengthen our portfolio and recently completed the final stage of a multiyear effort to assemble a 25000 acre position in the liquids window of the Eagle Ford.

Sean C. Woolverton: And we did this with no new capital.

Sean C. Woolverton: This is one of the last contiguous undeveloped areas of scale in the basin.

Sean C. Woolverton: And we are excited about the high margin liquids exposure it adds to our portfolio.

Sean C. Woolverton: Listen we are executing very well and its apparent that our focus is squarely on running the company and adding value for our owners.

Sean C. Woolverton: And we are excited about the high-margin liquids exposure it adds to our portfolio. Listen, we are executing very well, and it's apparent that our focus is squarely on running the company and adding value for our owners. I recognize there are likely questions related to our ongoing proxy contest, but I do not want to distract from our good news today.

Sean C. Woolverton: I recognize that there are likely questions were related to our ongoing proxy contest.

Sean C. Woolverton: But I do not want to.

Sean C. Woolverton: Distract from our good news today.

Sean C. Woolverton: Okay.

Sean C. Woolverton: Before Q&A, I will make a few points about the governance changes we are proposing and remind you how important your vote is at our upcoming annual meeting. Let's get started with a look at the first quarter. We beat across the board this quarter. All the results are covered in our materials, but I will briefly hit the highlights.

Speaker Change: Before Q&A I will make a few points about the governance changes we are proposing and remind you how important your boat is at our upcoming annual meeting.

Sean C. Woolverton: Let's get started with a look at the first quarter.

Sean C. Woolverton: We beat across the board this quarter.

Sean C. Woolverton: All the results are covered in our materials.

Sean C. Woolverton: But I will briefly hit the highlights.

Sean C. Woolverton: We generated $56 million in free cash flow.

Sean C. Woolverton: We generated $56 million in free cash, much higher than expected in our original forecast, primarily due to continued gains in capital efficiencies and strong production and product prices. We are seeing strong well productivity from our recent pad developments and the success of our REFRAC program. This has provided us with even more confidence in our forecast. Today, we increased our expectations for full-year 2024 production, as well as our outlook for free cash flow. Importantly, capital investments in the quarter were lower than planned.

Sean C. Woolverton: Much higher than expected in our original forecast.

Sean C. Woolverton: Primarily due to continued gains in capital efficiencies and strong production and product pricing.

Sean C. Woolverton: We are seeing strong well productivity from a recent pad development and the success of our re Frac program.

Sean C. Woolverton: This has provided us with even more confidence in our forecast.

Sean C. Woolverton: We increased our expectations for full year 2020 for production.

Sean C. Woolverton: As well as our outlook for free cash flow.

Sean C. Woolverton: Importantly.

Sean C. Woolverton: Capital investments in the quarter were lower than planned.

Sean C. Woolverton: And our team continues to exercise capital discipline while finding creative and safe ways to lower cash, operating costs, and enhance margins. Put it another way, our expectations for full-year capital investments are unchanged. We are offsetting faster cycle times with continued capital efficiency gains. As I have shared previously, our commitment to strengthening our balance sheet is unwavering, and Strong Production and Higher Free Cash Flow have allowed for rapid debt repayment since closing the South Texas acquisition. We have repaid $178 million in absolute debt.

Sean C. Woolverton: And our team continues to exercise capital discipline, while finding creative and safe ways to lower cash operating costs and enhance margins.

Sean C. Woolverton: Our expectations for full year capital investments are unchanged.

Sean C. Woolverton: Said another way, we are offsetting faster cycle times with continued capital efficiency gains.

Sean C. Woolverton: As I have shared previously our commitment to strengthening our balance sheet is unwavering.

Sean C. Woolverton: Strong production and higher fee free cash flow have allowed for rapid debt repayment.

Sean C. Woolverton: Since closing the South Texas acquisition, we have repaid $178 million in absolute debt.

Sean C. Woolverton: This represents a 15% debt paydown in just five months. Overall, our leverage ratio has recovered to the same level it was prior to the South Texas acquisition. This is further proof that we are following through when we say strengthening our balance sheet is a top priority. We expect to exit the year at approximately 1.25 times and to reach our goal of less than one times leverage in 2025. Turning our attention to our operational performance, there are three achievements I would like to highlight. First,

Sean C. Woolverton: This represents a 15% debt paydown in just five months.

Sean C. Woolverton: Overall, our leverage ratio has recovered to the same level. It was prior to the South Texas acquisition.

Sean C. Woolverton: This is further proof that we are following through when we say strengthening our balance sheet is a top priority.

Sean C. Woolverton: We expect to exit the year at approximately 1.25 times and to reach our goal of less than one times leverage in 2025.

Sean C. Woolverton: Turning our attention to our operational performance there are three achievements I would like to highlight.

Sean C. Woolverton: First we have known for some time that re fracs had the potential to provide considerable upside value to us across our asset base as many of our legacy wells were completed with less than optimal completions when compared to today's standards.

Sean C. Woolverton: We have known for some time that refracts have the potential to provide considerable upside value to us across our asset base, as many of our legacy wells were completed with less than optimal completions when compared to today's standards. We initiated our REFRAC program this quarter, and the initial results clearly show that re-stimulating existing wells with larger jobs and tighter cluster spacing can materially enhance well productivity. In our deck, we have a slide summarizing our results. Key takeaway: these wells reach payout in less than 10 months.

Sean C. Woolverton: We initiated a re frac program this quarter and the initial results clearly show that re stimulating existing wells with larger jobs and tighter cluster spacing can materially enhanced well productivity.

Sean C. Woolverton: In our deck, we have a slide summarizing our results.

Sean C. Woolverton: Key takeaway these wells reached payout in less than 10 months.

Sean C. Woolverton: We have more than 100 re frac opportunities across our portfolio and we are moving additional refresh into this year's program.

Sean C. Woolverton: We have more than 100 REFRAC opportunities across our portfolio, and we are moving additional REFRAC into this year's program. We see our REFRAC program as a capital-efficient way to maximize volumes while providing flexibility in a time of strong oil prices. Next, we recently drilled our first horseshoe well in the Austin Chalk. The well had a lateral length of nearly 9,000 feet and was drilled in place of two less than optimal shorter laterals.

Sean C. Woolverton: We see our re Frac program as a capital efficient way to maximize volumes, while providing flexibility in a time of strong oil prices.

Sean C. Woolverton: Next we recently drilled our first horseshoe well in the Austin chalk.

Sean C. Woolverton: The well reduced total DNC costs by 25% and improved cycle times by 15% when compared to drilling two wells. Now that we have proven our ability to drill horseshoe wells, we can use this advanced technology across our asset base to enhance returns and capture incremental resources. We have identified more than 30 additional horseshoe wells to unlock value on what would have been stranded acreage. Third, let's talk about some recent success with our South Texas acquisition.

Sean C. Woolverton: The well had a lateral length of nearly 9000 feet and was drilled in place of two less than optimal shorter laterals.

Sean C. Woolverton: The well reduced total D&C costs by 25% and improved cycle times by 15% when compared to drilling two wells.

Sean C. Woolverton: Now that we have proven our ability to drill horseshoe wells. We can use this advanced technology across our asset base to enhance returns and capture incremental resource.

Sean C. Woolverton: We have identified more than 30 additional horseshoe wells to unlock value on what would have been stranded acreage.

Sean C. Woolverton: Yes.

Sean C. Woolverton: Third let's talk about some recent success on our South Texas acquisition.

Sean C. Woolverton: Please take a look at slide 12.

Sean C. Woolverton: Please take a look at slide 12, where we show just how far we are outperforming the previous operator. We are completing a 10-well pad to develop 4 stacked horizons and expect to have initial production late this quarter. In just a few short months, our enhancements have decreased gross drilling costs, drilling days, and costs per foot across the Upper Eagleford, Lower Eagleford, and Austin Shocks.

Sean C. Woolverton: Where we show just how far we are outperforming the previous operator.

Sean C. Woolverton: We are completing a 10 well pad to develop four stacked horizons and expect to have initial production late this quarter.

Sean C. Woolverton: And just a few short months are enhancements have decreased gross drilling cost drilling days and cost per foot across the upper Eagle Ford lower Eagle Ford and Austin chalk.

Sean C. Woolverton: Early results here combined with what we've delivered on previous acquisitions further demonstrate assets are better than silver both hands.

Sean C. Woolverton: Early results here, combined with what we've delivered on previous acquisitions, further demonstrate assets are better in SilverBow's hands and clearly show the operational excellence and capital efficiency our team can bring to an asset. Let's now shift gears and talk about how our strategy is creating value through acquisitions as we build a scale and durable portfolio. Our latest accomplishment is a three-year effort encompassing contributions from our technical, business development, and land team.

Sean C. Woolverton: Clearly show the operational excellence and capital efficiency, our team can bring to an asset.

Sean C. Woolverton: Let's now shift gears to talk about how our strategy is creating value through acquisitions as we build the scale and durable portfolio.

Sean C. Woolverton: Our latest the Costco Schmidt is a three year effort encompassing contributions from our technical business development and land teams.

Sean C. Woolverton: Through a series of transactions, culminating in a recent land trade.

Sean C. Woolverton: Through a series of transactions culminating in a recent land trade, we have assembled a contiguous 25,000 acre position across LaSalle and McMillan counties in the liquids window of the Eagle. Our subsurface team specifically targeted this area because of its high rock quality and a lack of modern day completion. In addition, many of the legacy wells were drilled out of zone.

Sean C. Woolverton: We have assembled a contiguous 25000 acre position across Lasalle and Mcmullen counties in the liquids window of the Eagle Ford.

Sean C. Woolverton: Our subsurface team specifically targeted this area because of its high rock quality and a lack of modern day completions.

Sean C. Woolverton: In addition, many of the legacy wells were drilled out of zone.

Sean C. Woolverton: Importantly over the last 12 months, we brought online six wells in the area, which have delivered rates of return greater than 100% with productivity far exceeding our expected type curve.

Sean C. Woolverton: Importantly, over the last 12 months, we brought six wells online in the area which have delivered rates of return greater than 100% with productivity far exceeding our expected type. With an estimated 150 long lateral locations to develop in the area, we see this as a powerful liquids lever to pull in our diversified portfolio. Before we go to Q&A, let me address our upcoming annual meeting and the importance of your vote. I firmly believe today's results speak for themselves.

Sean C. Woolverton: With an estimated 150 long lateral locations to develop in the area. We see this as a powerful liquids lever to pull and our diversified portfolio.

Sean C. Woolverton: Before we go to Q&A, let me address our upcoming annual meeting and the importance of your vote.

Sean C. Woolverton: I firmly believe today's results speak for themselves.

Sean C. Woolverton: Our strategy to create value is working.

Sean C. Woolverton: Our strategy to create value is working. Furthermore, we are proposing governance changes that we feel are in the interest of shareholders. We are asking for your vote to declassify our board, adopt a majority voting standard, and eliminate supermajority vote requirements. We will continue to strengthen our board through ongoing refreshment. Recently, we appointed Lee Jordan as the new highly qualified director with a demonstrated track record in international and domestic LNG markets, including Natural Gas Trading, Business Development, and most recently as Chief Diversity Officer at Chevron.

Sean C. Woolverton: Furthermore, we are proposing governance changes that we feel are in the interest of shareholders.

Sean C. Woolverton: We are asking for your vote to declassify, our board adopt a majority.

Sean C. Woolverton: Majority voting standards and eliminate supermajority vote requirements.

Sean C. Woolverton: We continue to strengthen our board through ongoing refreshment.

Sean C. Woolverton: Recently, we appointed lead Jordan as a new highly qualified director with a demonstrated track record in international and domestic LNG markets.

Sean C. Woolverton: Natural gas trading business development, and most recently as chief diversity officer at Chevron.

Sean C. Woolverton: Lee is an excellent addition to our board and represents the fourth new director to join our board since January 2023.

Sean C. Woolverton: Lee is an excellent addition to our board and represents the fourth new director to join our board since January 2023. Through multiple communications with you over the past few weeks, we've clearly laid out our extensive engagement with Kimmeridge over the last two plus years. There is more than enough material for you to review.

Sean C. Woolverton: Through multiple communications with you over the past few weeks.

Sean C. Woolverton: We've clearly laid out our extensive engagement with Cambridge over the last two plus years.

Sean C. Woolverton: There is more than enough material for you to review.

Sean C. Woolverton: But make no mistake there in game is to force a very dilutive transaction with Cambridge, Texas gas.

Sean C. Woolverton: But make no mistake; their end game is to force a very dilutive transaction with Kimmerich, Texas Gas. I would encourage you to take the time to read through our materials and get educated on the facts. A vote for our skilled board and new governance enhancements is a vote for truth and transparency. We welcome a dialogue with any shareholder. Please reach out. Vote with the board. That's four on the white proxy card.

Sean C. Woolverton: I would encourage you to take the time to read through our materials and get educated on the facts.

Sean C. Woolverton: A vote for you.

Sean C. Woolverton: Vote for our skilled board and new governance enhancements is a vote for truth and transparency.

Sean C. Woolverton: We welcome the dialogue with any shareholder.

Sean C. Woolverton: Please reach out.

Sean C. Woolverton: Vote with the board.

Sean C. Woolverton: That's for on the White proxy card.

Sean C. Woolverton: In closing I.

Sean C. Woolverton: In closing, I am proud of our team and their relentless pursuit of safely executing our strategy of establishing Silver Bow as the operator of choice in South Texas. We sit in an enviable position today. We have scale and durability, built through a history of doing smart transactions, and we have demonstrated our ability to unlock significant value through acquisition. Our assets provide us with flexibility in how we allocate capital today to deliver strong results.

Sean C. Woolverton: I am proud of our team in.

Sean C. Woolverton: And their relentless pursuit of safely executing our strategy and establishing <unk> as the operator of choice in South Texas.

Sean C. Woolverton: We sit in an enviable position today.

Sean C. Woolverton: We have scalable scale and durability.

Sean C. Woolverton: Built through a history of doing smart transactions and haven't have demonstrated our ability to unlock significant value behind acquisitions.

Sean C. Woolverton: Our assets provide us with flexibility in how we allocate capital today to deliver strong results.

Sean C. Woolverton: We are not reliant on near-term acquisitions to enhance our capital structure. With our increased outlook for free cash flow, we now expect to achieve our leverage target of less than one times in 2025. Most importantly, we are executing a business plan that is proven to create value, and we are confident that we will close the significant value gap we see in our equity today. We look forward to reporting on our progress as we continue to focus on creating value for all Silverboats shareholders. Operator, we are now ready to address questions.

Sean C. Woolverton: We are not reliant on near term acquisitions to enhance our inventory.

Sean C. Woolverton: Our capital structure is strong and getting stronger.

Sean C. Woolverton: With our increased outlook for free cash flow, we now expect to achieve our leverage target of less than one times in 2025.

Sean C. Woolverton: Most importantly, we are executing our business plan that is proven to create value and we are confident that we will close the significant value gap, we see in our equity today.

Sean C. Woolverton: We look forward to reporting on our progress as we continue to focus on creating.

Sean C. Woolverton: Value for all silver both shareholders.

Speaker Change: Operator, we are now ready to address questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad and that we ask you limit your questions to one and one follow up so we're able to take as many questions as possible.

Operator: At this time, I would like to remind everyone that in order to ask a question, please press star followed by the number one on your telephone keypad and that we ask you to limit your questions to one and one follow-up so we are able to take as many questions as possible. And your first question comes to the line of Tim Rezvan from Keybunk. Your line is open.

Timothy A. Rezvan: And your first question comes from the line of Tim <unk> from Keybanc. Your line is open.

Operator: Okay.

Timothy A. Rezvan: Good morning, folks. Thanks for taking my question. I'll stick with Ops here. So, my first question, you know, the trade you did to core up that LaSalle and McMullen acreage; you talked about 10 to 12 additional wells planned for this year. Are those wells you're not drilling elsewhere? I'm just trying to understand how this trade, you know, maybe changed your, you know, drilling plans for the year. And then it's just a follow-up. Was there any production that came with that trade that impacted the production guide for the year? Thanks. Yeah.

Timothy A. Rezvan: Good morning folks thanks for taking my question.

Timothy A. Rezvan: I'll stick with ops here. So my first question the trade you did kind.

Timothy A. Rezvan: Kind of core up that Lasalle and Mcmullen acreage.

Timothy A. Rezvan: You talked about 10 to 12 additional wells planned for this year are those wells youre not drilling elsewhere I'm just trying to understand how this trade maybe changed your.

Timothy A. Rezvan: Drilling plans for the year and then just a follow up was there any production that came with that trade that impacted the production guide for the year. Thanks.

Timothy A. Rezvan: Yes.

Sean C. Woolverton: Hey, Tim. I appreciate the question. And yeah, we're really excited about it. You know, in terms of production, I think there was about 500 MCF a day that was divested in the trade. And then the rest of it was all on acreage would tell you that, you know, this is a great example of how you have a larger portfolio, and you can take advantage of it to unlock value. For this block in its entirety, we paid no dollars to acquire 150 locations.

Speaker Change: Hey, Tim I appreciate the question and Yeah, we're really excited about it.

Sean C. Woolverton: In terms of production.

Sean C. Woolverton: There was about 500 Mcf a day that was divested.

Sean C. Woolverton: In the trade.

Sean C. Woolverton: And then the rest of it was all on acreage.

Sean C. Woolverton: I would tell you that.

Sean C. Woolverton: This is a great example of how you have a larger portfolio and you can take advantage of it to unlock value. This block in its entirety, we paid no dollars to acquire.

Sean C. Woolverton: 150 locations.

Sean C. Woolverton: In terms of activity, what we're really excited about the two wells we drilled last year and the four wells we brought on this year, and those four wells this year are actually responsible for some of the upward tick that we put into our production guidance. What we're doing is reallocating capital from other parts of the capital plan to this area, so it's not additive to the capital plan.

Sean C. Woolverton: In terms of activity.

Sean C. Woolverton: What we're really excited about is the two wells, we drilled last year. The four wells we brought on this year and those four wells this year actually responsible for some of the.

Sean C. Woolverton: Upward tick that we put into our production guidance.

Sean C. Woolverton: What we're doing is reallocating capital from other parts of the capital plan.

Sean C. Woolverton: To this area so it's not additive to the capital plan.

Sean C. Woolverton: It gives us more optionality to shift capital to higher rate of return projects.

Speaker Change: Okay. Okay. So those wells, they're wells youre not drilling elsewhere this year correct.

Timothy A. Rezvan: Okay, okay, so there's wells there, wells you're not drilling elsewhere, it's here. Correct. Okay. Okay.

Timothy A. Rezvan: I appreciate that. Yes, we look forward to the updates there. Then a follow-up either for you or for Chris on hedges. You know, the company's striking the balance sheet. You're on the cusp of getting kind of leverage on that one-time goal, and I know that there are potential options with the high-yield market out there. And, you know, farther down the line, you think about cash returns. I thought we might see you all layering in some more hedges, you know, with this trip having kind of moved like it did. So how do you think about, you know, hedging as we kind of get closer to the finish line on the deleveraging initiative?

Speaker Change: Okay I appreciate that yes, we look forward to the updates there.

Timothy A. Rezvan: Follow up either either for you or for Chris.

Timothy A. Rezvan: On hedges the company's shrinking the balance sheet you are on the cusp of getting kind of leverage to that one times goal.

Timothy A. Rezvan: And I know that there's potential options with the high yield market out there.

Timothy A. Rezvan: And farther down the line you think about cash returns I thought we would've might see you all layer layering in some more hedges.

Timothy A. Rezvan: This trip, having kind of moves like you'd like it did so how do you think about hedging.

Timothy A. Rezvan: As you kind of get closer to the finish line on the deleveraging initiatives.

Christopher M. Abundis: Yes, no, no, I appreciate it. You know, during the quarter and since the last time we spoke to everyone, we did layer on some incremental hedges, topping off some oil this year at, you know, in the second half of the year when it was above 80 and then putting some hedges on it at 25. We're, you know, essentially 75% hedged for 24, and we're about 75% of that gas, 67% of it oil.

Speaker Change: Yes, no no I appreciate it.

Christopher M. Abundis: <unk>.

Christopher M. Abundis: During the quarter.

Christopher M. Abundis: Since the last time, we spoke to everyone. We did layer on some incremental hedges at topping off some oil this year.

Christopher M. Abundis: In the second half of the year when it was above 80.

Christopher M. Abundis: Then putting some hedges on in 'twenty five.

Christopher M. Abundis: We're essentially 75% hedged for 'twenty four.

Christopher M. Abundis: And we're about.

Christopher M. Abundis: With 75% of that gas, 67% of oil and then next year, we have a pretty strong hedge book as well.

Christopher M. Abundis: And then next year, we have a pretty strong hedge book as well. Consistent with what we've done in the past, as we start to move closer to 25, we'll be opportunistic to start layering in more hedges as the plan for 25 becomes more clear. And typically, by the time, like we are this year, by the time we get into the drilling program for 2025, I'm sure we'll be at two-thirds hedged or higher.

Christopher M. Abundis: Consistent with what we've done in the past as we start to move closer towards 25%.

Christopher M. Abundis: We'll be opportunistic to start layering in more hedges as the plan for 'twenty five becomes more clear.

Christopher M. Abundis: And typically by the time line.

Christopher M. Abundis: Where we're at this year by the time, we get into the drilling program for 2025 I'm sure we'll be at two thirds hedged are higher.

Christopher M. Abundis: <unk>.

Christopher M. Abundis: You know, I think your point, and it's one that as we de-lever the balance sheet, we'll start to have more flexibility and not be, you know, hedging as much. But for now, we're committed to a pretty conservative hedge program. I think you raise a good point in terms of the accelerated debt paydown giving us optionality. One of the things we did with our second lien is we have an amortization structure to it, so we're able to pay some of that second lien down throughout the year, which will essentially move debt to our cheaper cost of debt in the RBL.

Christopher M. Abundis: I think to your point and it's one that as we delever the balance sheet, we will start to have more flexibility.

Christopher M. Abundis: The hedging as much but for now we're committed to a pretty <unk>.

Christopher M. Abundis: Conservative Conservative hedge program.

Christopher M. Abundis: Thank you raise a good point in terms of the accelerated debt paydown, giving us optionality.

Christopher M. Abundis: One of the things we did with our secondly is we have an amortization.

Christopher M. Abundis: Structure to it so we're able to pay some of that absolute second lien down throughout the year, which will.

Christopher M. Abundis: Essentially moved that to our cheaper cost of debt in the RV L. But it also allows us to think about starting to explore the high yield market.

Christopher M. Abundis: But it also allows us to think about starting to explore the high-yield market. And where we are as a company with the transactions that we did last year with the South Texas acquisition, it really positioned us from a size and scale standpoint, a commodity mix, and a balance sheet that puts us in a good position to access the public market. So obviously, that market's hot, and it's something that we're keeping a close eye on as we go forward.

Timothy A. Rezvan: Okay, I appreciate those comments. If I could sneak one last one in,

Christopher M. Abundis: Where we're at as a company who are with the transactions that we did last year with the South Texas acquisition really positioned us from a size and scale standpoint, our commodity mix and our balance sheet.

Timothy A. Rezvan: It puts us in a good position to access the public markets. So obviously that market is hot and it's something that we're keeping a close eye on.

Speaker Change: As we go forward.

Speaker Change: Okay I appreciate those comments if I could sneak one last one in you gave some you can.

Timothy A. Rezvan: You gave some comments on the refracts here. To be blunt, refracts have been sort of a mixed bag for the industry over the last sort of 8 to 10 years. The comments generally you hear from Shale are that you get a stout initial rate and then massive decline. You talked about ten month paybacks. What gives you confidence in that? And can you talk about just what the cost is for these refrac

Timothy A. Rezvan: Gave some comments on the re fracs here.

Timothy A. Rezvan: To be blunt refracts had been sort of a mixed bag for the industry over.

Timothy A. Rezvan: Over the last sort of eight to 10 years and.

Timothy A. Rezvan: The comments generally hear from shale is that you get a stout initial rate and then massive decline.

Timothy A. Rezvan: You talked about 10 months paybacks, what gives you confidence on that and can you talk about what the cost is for these refracts and Thats all I have thank you.

Sean C. Woolverton: And that's all I have. Thank you. Yes, thanks, Tim.

Speaker Change: Thanks, Tim.

Timothy A. Rezvan: You know, your comment around refracts historically and mentioning 8 to 10 years. In my 35 years in the business, I've seen probably 2 or 3 generations of refracts come and go, and to your point exactly. Oftentimes, you'll see production ramp up and then come right back down. I would tell you that we've been probably a little cautious in jumping into refracts.

Speaker Change: Your comment around re Fracs historically mentioned of eight to 10 years in my 35 years in the business I've seen probably two or three generations of re re fracs come and go in to your point exactly.

Timothy A. Rezvan: Oftentimes, you'll you'll see production ramp and then come right back down.

Timothy A. Rezvan: Would tell you that we've been probably a little cautious in jumping into re fracs, we watched a number of the larger operators in the basin perform them Conoco's had a very aggressive program Devin I know has been out talking to the market.

Sean C. Woolverton: We watched a number of the large operators in the basin perform them. Conoco's had a very aggressive program. Devin, I know, has been out talking to the market about the refracts in the Eagleford over the last couple of years.

Sean C. Woolverton: About the re fracs over in the Eagle Ford over the last couple of years. So we did our first two learned a lot from what those operators have done.

Operator: So we did our first two, and learned a lot from what those operators did. Essentially, we're going back in, cementing in a brand new liner and starting over in terms of the completion. Why we have confidence is we've got long-term production from other operators that have done it over the last couple of years using similar techniques there that they used on ours. And then, we've got 60 plus days, 45 to 60 days of production thus far.

Operator: Essentially we're going back in cementing and a brand new liner.

Operator: And starting over in terms of the completion why.

Operator: Why we have confidence is we've got the long term production from other operators that have done it over the last couple of years using similar techniques there.

Operator: That they used on ours and then we've got 60 plus days 45 to 60 days of production thus far in production and is actually holding fairly steady one of the things that we are doing is right from the start hitting it with artificial lift to make sure that we don't have that fall off I think a mistake many op.

Operator: Production is actually holding fairly steady. One of the things that we are doing is, right from the start, hitting it with artificial lift to make sure that we don't have that fall off. I think a mistake many operators make is they implement the capital program and then let the well fall off. So we're being very proactive on lift. Thank you. Operator, we'll take our next question.

Operator: Raters make as they implement the capital program and then let the fall the <unk>.

Operator: I'll fall off so we're being very proactive on lift.

Speaker Change: Thank you.

Speaker Change: Operator, we'll take our next question.

Charles Meade: Your next question comes to the line of Charles Meade of Johnson Rice. Your line is open.

Operator: Your next question comes from the line of Charles Meade of Johnson Rice. Your line is open.

Charles Meade: Okay.

Charles Meade: Good morning, Sean, to you and the whole Silvero team there. I wonder if we could go back to this slide nine, and you've talked quite a bit about assembling this position, but I want to talk about the well designs, so that graph you have on the upper right, and I recognize it's early days, but that's a huge uplift in productivity, so the question is, can you talk about what the deltas are of these four wells that you're graphing there with respect to, targeting, you know, either between, you know, different zones or even inside a zone and, and in different approaches to the to the completion.

Charles Meade: Good morning, Sean to you and the wholesale ROE team there.

Charles Meade: I Wonder if we could go back to the slide nine and you you've talked quite.

Charles Meade: Quite a bit about assembling this position, but I wouldn't but I wanted to talk about the the well designs. So that that graph you have on the on the upper right and I recognize it's early days, but that's a huge uplift in productivity. So the question is can you talk about what the deltas are of these four wells that Youre graphing.

Charles Meade: There with respect to <unk>.

Charles Meade: Targeting you either between different zones, or even inside of zone and.

Charles Meade: And different approaches to the.

Charles Meade: Through the completion design.

Speaker Change: Yeah, Yeah, you bet. This is an area that saw activity.

Sean C. Woolverton: Yeah, yeah, you bet. This is an area that saw, you know, activity dating probably in that 2010-2014 timeframe. Part of the position was owned by Pioneer back then. The trade that we did was controlled by a large operator that hadn't done much in the area for quite a bit of time, and then the other position was a smaller operator.

Sean C. Woolverton: <unk>, probably in that 2010 2014 timeframe.

Sean C. Woolverton: Part of the position was owned by pioneer back then.

Sean C. Woolverton: The trade that we did was controlled by a larger operator that hasn't done much in the area for quite a bit of time.

Sean C. Woolverton: And then the other position was a smaller operator.

Charles Meade: You know, just to clarify on that, we put the position together through two acquisitions, again, paid nothing for the inventory, and then the last piece was a trade. Historically, from a drilling perspective, laterals were shorter, as you really saw during that time frame. And most of the time... Wells were probably drilled in zones anywhere from about 50 to 75 percent. When we do our look-backs on the drilling, we're probably in zone 98% plus, so that's a big part of it, keeping the bit and the wellbore in what's the highest quality rock.

Sean C. Woolverton: Just to clarify on it we put the positioned together through two acquisitions again paid nothing for for the inventory and then the last piece was a trade.

Charles Meade: Historically from a drilling perspective lateral shorter as you really saw during that timeframe and most of the time.

Charles Meade: Wells were probably drilled in zone anywhere from about 50% to 75%.

Charles Meade: When we do our look back on the drilling we're probably in zone, 98% plus so that's a big part of it is keeping the debate in the Wellbore in what's the most high quality rock from a completion standpoint, we almost can look at the re fracs numbers that we provide on slide 10.

Charles Meade: From a completion standpoint, you can almost look at the refracts numbers that we provide on slide 10 to get a sense of how these wells were originally fracked. Many of them had cluster spacing of 50 to 100 feet in pretty big, significant stage spacing and had prop intensities probably in the 1,200 pounds per foot or less. So that's what led us into the area. One thing that we're doing is we've actually started our third and fourth reef rack for the year, and those two happen to fall on this block of anchorage. So it kind of speaks to how we kind of keyed in.

Sean C. Woolverton: Got it. And then my second, my second, I'm sorry. Were you done there, Sean?

Charles Meade: How these wells were originally frac many of them.

Speaker Change: Ed cluster spacing, a 50 to 100 feet.

Sean: And pretty big significant stage spacing.

Sean: And had proppant intensity is probably in the 200 pounds per foot or less.

Sean: So that's what led us into the area.

Sean: One thing that we're doing is we've actually started our third and fourth re frac and then for the year and those two happen to fall on this block of acreage so.

Speaker Change: It kind of speaks to how we kind of keyed in here.

Speaker Change: Got it and then my second my second I'm, sorry, but were you done there Sean.

Charles Meade: I am. Yeah. Okay, good.

Sean: I am yes.

Speaker Change: Okay, Great question up.

Charles Meade: But yeah, my second question is about this Proxify you have with Cameron. From the outside looking in, one of the obvious things that has worked and continues to work in the E&P space right now is increased scale. Increased scale, there's lower financing costs, there's more investors who can look at you. There are a number of things that are benefits to increased scale. That's one of the most obvious potential benefits of a combination with Kimmerer's Texas Gas, but what are the, what's on the other side of the seesaw that makes this, you know, not an attractive product? Non-attractive prospect for

Speaker Change: My second question is about the you know the this proxy fight you have with Cambridge.

Charles Meade: From the outside looking in.

Charles Meade: One of the.

Charles Meade: One of the obvious things that has worked and kind of continues to work.

Charles Meade: In the E&P space right. Now is is increased scale and that your increased scale.

Charles Meade: Theres lower financing costs Theres more investors that you can look at you.

Charles Meade: A number of things that are benefits to increase scale and that's one of the most kind of obvious.

Charles Meade: Potential benefits of our combination with Kimberly, Texas gas, but.

Charles Meade: What are the.

Charles Meade: What is what's on the other side of the seesaw that makes this.

Charles Meade: Not a unattractive.

Charles Meade: Hum.

Charles Meade: Not an attractive prospect for silver ROE in it and its shareholders in your eyes.

Speaker Change: Yeah No no appreciate the question.

Sean C. Woolverton: Yes, no, I'll start with, hey, listen, after probably two plus years of discussions with Kimmerich and through analysis with our financial and legal advisors, looking at this would have been the third time we've engaged with them, we're confident that the deal they proposed was not a good deal for our shareholders. It was clear they significantly underestimated the value of Silverboe and simultaneously substantially over-evaluated their value on KTG.

Speaker Change: Maybe I'll start.

Sean C. Woolverton: Hey, listen after probably two plus years of discussions with Cambridge in and through analysis with our financial and legal advisors.

Sean C. Woolverton: Looking at this would've been the third time, we've engaged with them. We're confident that the deal. They proposed was not a good deal for our shareholders.

Sean C. Woolverton: It was clear they significantly underestimated the value of silver bow and simultaneously.

Sean C. Woolverton: Substantially over.

Sean C. Woolverton: <unk> at their fair value on Atg.

Sean C. Woolverton: What I'd say is we.

Sean C. Woolverton: What I'd say is, you know, we've repeatedly demonstrated our willingness to discuss potential combinations with any and all parties. And, you know, I think we have a compelling path to accelerate our value recognition for the benefit of all of our shareholders. You know, I mentioned this in my comments, we have an enviable asset base in the Basin. In this Basin, we agree with you, we're big believers in its scale, and this Basin is rapidly consolidating.

Sean C. Woolverton: <unk> demonstrated our willingness to discuss potential combinations with any and all parties and I think we have a compelling path to accelerate our value recognition for the benefit of all of our shareholders.

Sean C. Woolverton: I mentioned this in my comments, we have an enviable asset base.

Sean C. Woolverton: Pace in the basin in this basin.

Sean C. Woolverton: We agree with you we're big believers as scale in this basin is rapidly consolidating.

Sean C. Woolverton: We regularly entertain discussions with interested parties. And I'm not going to discuss any specific discussions, but I can tell you that our board understands its fiduciary duties to do what's in the best interest of all of our shareholders, and our board and management's interests are aligned with shareholders. So I'll kind of say that maybe I'll, maybe I'll continue on a little bit.

Sean C. Woolverton: We regularly entertain discussions with interested parties.

Sean C. Woolverton: And I'm not going to discuss any specific discussions, but I can tell you that our board understands its fiduciary duties to do what's best and what's in the best interest of all of our shareholders.

Sean C. Woolverton: And our board and management's interest they're aligned with shareholders.

Sean C. Woolverton: So I'll kind of say that maybe I'll, maybe I'll continue on a little bit we are firm believers in the merits of consolidation in the market is rewarding companies like you said that have the key ingredients to deliver sustainable value through all cycles.

Sean C. Woolverton: You know, we are firm believers in the merits of consolidation, and the market is rewarding companies, like you said, that have the key ingredients to deliver sustainable value through all cycles. And we've kind of outlined what we have and what we present in terms of that opportunity. The scale we have, the asset quality, the free cash flow generation, you know, in our last two quarters, we've demonstrated the significant free cash flow that this asset base generates.

Sean C. Woolverton: And we've kind of outlined what we have and what we present in terms of that opportunity. The scale, we have the asset quality the free cash flow generation.

Sean C. Woolverton: Last two quarters, we've demonstrated the significant free cash flow that this asset base has and we have a balance sheet that I think would work well in any combination.

Sean C. Woolverton: And we have a balance sheet that I think would work well in any combination. So we feel like today we check nearly all the boxes to earn a premium valuation. Listen, we've really transformed our asset base and demonstrated our ability to capture value-adding deals to create the scale I mentioned. And at the same time, we're executing capital discipline to ensure we generate free cash flow. We're committed to having less than a 75% reinvestment rate in order to maintain that strong balance sheet. So I guess I'll just say, in short, I think we have the right strategy and we'll continue to evaluate, and I'll say this loud and clear, any and all paths to deliver value for our shareholders.

Sean C. Woolverton: So we feel like today, we check nearly all of the boxes to earn a premium valuation.

Sean C. Woolverton: Listen, we've really transformed our asset base in distress that demonstrated our ability to capture value adding deals to <unk>.

Sean C. Woolverton: Create the scale I mentioned.

Sean C. Woolverton: And at the same time, we're executing capital discipline to ensure we generate free cash flow, we're committed to have in less than a 75% reinvestment rate in order to maintain net debt.

Sean C. Woolverton: <unk> strong balance sheet. So I guess I'll just say in short I think we have the right strategy and we will continue to evaluate and I'll say this loud and clear any and all past to deliver value for our shareholders.

Speaker Change: Got it that's helpful elaboration. Thank you Sean Thank you.

Charles Meade: That's a helpful elaboration. Thank you, Sean. Thank you.

Leo Mariani: Your next question comes from the line of Leo Mariani from Roth MKM. Your line is open.

Charles Meade: Yes.

Charles Meade: Your next question comes from the line of Leo Mariani.

Leo Mariani: Ralph.

Leo Mariani: Ma'am your line is open.

Leo Mariani: Okay.

Leo Mariani: Yeah, Hi, I was hoping you could maybe just.

Leo Mariani: Yeah, hi. I was hoping you could maybe just, you know, elaborate a little bit on sort of the plan to close the value gap. Obviously, you just kind of spoke about scale being important and critical in the sector and that you're open to the right types of consolidation. But, you know, apart from sort of consolidating, you know, with another entity, what do you kind of see as kind of the pivotal thing?

Leo Mariani: Elaborate a little bit on sort of the the plan to close the value gap. Obviously, you just kind of spoke about scale.

Leo Mariani: Being important and critical in this sector and that you are open to the right types of consolidation but.

Leo Mariani: Apart from sort of consolidating with another entity.

Leo Mariani: Are you kind of see as kind of the pivotal things the company can do to try to close the value gap in its shares here.

Sean C. Woolverton: Yeah, no, I appreciate that question, Leo. You know, scale is definitely a criterion that investors are looking for. We feel like the transactions that we've done over the last two years have put us at a new level of scale, and obviously, it has attracted interest in the company for that reason. But it's important to also have a demonstrated inventory of high-quality locations, and for us, even adding to that high rate of return refracts now, so, you know, purchasers are looking for deep inventory, and public investors are as well. They want to see scale, that you have a run rate over a long period of time.

Speaker Change: Yes, no I appreciate that question Leo scales definitely criteria.

Sean C. Woolverton: Criteria that investors are looking for we feel like the transactions that we've done over the last two years have put us into a new level of scale and obviously it has attracted interest in the company for that reason, but it's important to also have a demonstrated inventory of high quality.

Sean C. Woolverton: Drilling locations and for us, even adding to that high rate of return re fracs now so.

Sean C. Woolverton: Purchasers are looking for.

Sean C. Woolverton: Deep inventory.

Sean C. Woolverton: And public investors are as well and they want to see scale that you have run rate over a long period of time.

Sean C. Woolverton: I think we're showing that I think are low margins or low cost platform is another ingredient that investors are looking for so where do we go now I think we were very disciplined in how we've grown to this scale.

Sean C. Woolverton: I think we're showing that. I think our low margins and our low-cost platform is another ingredient that investors are looking for. So where do we go now?

Sean C. Woolverton: I think it's, you know, we're very disciplined in how we've grown to this scale. We primarily leveraged, you know, debt to do that. And we're now aggressively showing the cash flow capabilities of the company in paying down that debt rapidly. And when I say we use debt, you know, we've really never been over 1.5 times leverage over the last couple of years. And we've taken the company from 2.5 times leverage at the start of all these acquisitions.

Sean C. Woolverton: We primarily leveraged.

Sean C. Woolverton: Debt to do that and we're now aggressively showing the cash flow capabilities of the company and paying down that debt rapidly and when I say, we use that we've really never been over one five times leverage over the last couple of years and we've taken the company from two five times Levered.

Sean C. Woolverton: At the start of all of these acquisitions. So I think what the market wants to see is demonstration on the scale.

Sean C. Woolverton: So I think what the market wants to see is a demonstration of the scale. You know, this quarter was a record EBITDA quarter. So at $200 million for the quarter, we now have a run rate of $800 million annually. We're, you know, paying down debt quickly; we're on track to get to one time where, just with no rewriting in the market, just our conversion of debt to equity should start to attract investors. And, you know, I think we have other levers to pull in front of us; our cost of capital; I think the scale of the company, we can start to look at cheaper forms of capital.

Sean C. Woolverton: Quarter was a record EBITDA quarter, so at $200 million for the quarter. We now have a run rate of $800 million annual.

Sean C. Woolverton: We're paying down debt quickly we're on track to get to one times.

Sean C. Woolverton: Net.

Sean C. Woolverton: With no re rating in the market just our conversion of debt.

Sean C. Woolverton: The equity should start to attracting investors.

Sean C. Woolverton: And I think we have other levers to pull in front of us our cost of capital.

Sean C. Woolverton: I think the scale of the company, we can start to look at cheaper forms of cost of capital and then.

Sean C. Woolverton: And last but not least, the ingredient that, you know, we're going to look at as we get the balance sheet below one times is a shareholder return program. We think we have put all that together, and we think that investors should really be looking at the company and looking at some of our peers and see the upside here.

Sean C. Woolverton: Last but not least the agreement that we're going to look at as we get the balance sheet below one times as a shareholder return program.

Sean C. Woolverton: We think we put all that together and we think that.

Sean C. Woolverton: People should investors should really be looking at the company and looking at some of our peers and see the upside here.

Speaker Change: Okay now that's helpful for sure.

Leo Mariani: Okay, I know that's helpful for sure. And I guess I was hoping you could also maybe just discuss in a little bit more detail the confidence of the company to kind of come out and raise the production guidance after kind of only, you know, one quarter here with kind of three quarters to left in the year. Can you maybe just talk about the key things that are allowing you to raise the guidance this year?

Leo Mariani: And I guess I was hoping you could also maybe just.

Leo Mariani: Discuss in a little bit more detail on.

Leo Mariani: The confidence of the company to kind of come out in and raised the production guidance after kind of on the one quarter here with kind of three quarters to labs on the year can you maybe just talk about the key things that are allowing you to raise the guidance this year.

Speaker Change: Yes, it's something that it's always a great position to be in right. It's the base is performing well we have a very active team that's ensuring that.

Sean C. Woolverton: Yeah, it's something that it's always a great position to be in, right? The base is performing well. We have a very active team that's ensuring that we're, you know, minimizing the decline of the base. So that's where it starts.

Sean C. Woolverton: We're minimizing the decline of the base. So that's where it starts and then it's looking at the capital program.

Sean C. Woolverton: And then it's looking at the capital program. And, you know, we think we put a series of slides in the deck, and maybe I'll reference a couple of them. But, you know, we continue to drill and complete faster. Slide 13 is a great demonstration of that.

Sean C. Woolverton: And we think we've put a series of slides in the deck and maybe I'll reference a couple of them, but we continue to drill and complete faster slide 13 is a great demonstration of that and I'll tell you, where we're just really crushing it is on the completion side. Our completion team is now probably good.

Sean C. Woolverton: And I'll tell you where we're really crushing it is on the completion side. Our completion team is now probably getting 80, 75 to 80% efficiencies, meaning that we're pumping 18 to 19 hours a day. So that accelerated time frame to bring wells on brings more production into the year. But like I mentioned in my comments, it's also at a lower cost because of those efficiencies.

Sean C. Woolverton: 80%, 75% to 80% efficiencies.

Sean C. Woolverton: Meaning that we're pumping 18% to 19 hours a day.

Sean C. Woolverton: So that accelerated timeframe to bring wells on it brings more production into the year, but like I mentioned in my comments. It's also at a lower cost because of those efficiencies. So it just gives us more capital to work with so.

Sean C. Woolverton: So it just gives us more capital to work with. So the base, capital efficiency, then performance. You know, we've got a couple slides, slides 19 and 17 in the slide deck that show wells that we've brought on this year that are significantly exceeding, you know, our historical well performance, or I shouldn't say our historical well performance, but operators that positions we've acquired from other operators. We point out the production, and we've already talked a little bit about it on the block, the 25,000 acre block.

Sean C. Woolverton: Base capital efficiency, then well performance.

Sean C. Woolverton: We've got a couple of slides slide 19 in 2017.

Sean C. Woolverton: In the slide deck that show wells that we've brought on this year that are significantly exceeding.

Sean C. Woolverton: Our historical well performance or I shouldn't say, our historical well performance, but operators that positions we have acquired from other operators.

Sean C. Woolverton: We point out the production, we've already talked a little bit about it on the block.

Sean C. Woolverton: 25000 acre block.

Sean C. Woolverton: We're way outperforming there. Those wells, you know, through April now have just really exceeded expectations. In our central oil area that we acquired from Sundance, we've had great performance. That's shown on slide 17. And in the eastern extension, that was a great deal we did where we put Teal, a private operator, together with a position from Conoco to consolidate that block. We call it the eastern extension.

Sean C. Woolverton: We are way outperforming there those wells.

Sean C. Woolverton: Through April now of just really exceeded expectations in.

Sean C. Woolverton: Our central Oriel area that we acquired from Sundance, We've had great performance that's shown on slide 17.

Sean C. Woolverton: And in the eastern extension that was a great deal, we did where we put tier.

Sean C. Woolverton: Teal private operator, together with the positioning from conoco to consolidate that block we call it eastern extension.

Sean C. Woolverton: We brought in some great wells there, and you can see how we're outperforming historical performance. So base, capital, well performance, we throw in refracts. And we have, you know, capital savings that we're demonstrating from the capital program that are going to allow us to put more refracts into the year. We think we'll probably do eight to ten of those a year. And we'll do more of them as capital becomes, you know, available.

Sean C. Woolverton: We brought on some great wells, there and you can see how we're outperforming historical performance so base capital.

Sean C. Woolverton: Well performance, we throw in re fracs.

Sean C. Woolverton: And we have capital savings that we're demonstrating from the capital program that are going to allow us to put more re fracs into the year. We think we'll probably do eight to 10 of those a year so well.

Sean C. Woolverton: We will do more of them as capital becomes available.

Sean C. Woolverton: Available if the team continues to save capital quarter quarter over quarter that will free us up.

Sean C. Woolverton: If the team continues to save capital quarter over quarter, that'll free us up. And I'll, you know, just say we'll remain committed, though, to only a 75 percent reinvestment. So, a lot of detail there, but hopefully it gives you how we view our line of sight and confidence in the forecast.

Sean C. Woolverton: Just say, we will remain committed though to only a 75% reinvestment rate. So a lot of detail there, but hopefully it gives you that.

Sean C. Woolverton: It's how we view our line of sight and confidence on the forecast.

Leo Mariani: Yeah, that's very helpful for sure. And then, just on governance, you spoke to that in terms of some...

Speaker Change: Yes, that's very helpful for sure and then just on governance, yet you spoke to that in terms of some of the changes that youre, making or at least you're planning to make here.

Leo Mariani: It's kind of the teams current thinking on the the poison pill in place.

Sean C. Woolverton: You know, the poison pill is something that hopefully, you know, through all the information that's been put out there, gives investors some clarity on why it's there. We've got a shareholder that is trying to really force an asset onto our shareholders that they're, you know, have significant value destruction around. So We were, you know, I've been asked this question quite a bit over the last couple of years.

Leo Mariani: The poison pill is something that hopefully.

Sean C. Woolverton: Through all the information that's been put out there.

Sean C. Woolverton: It gives investors some clarity on why it's there.

Sean C. Woolverton: Got a shareholder that is trying to really force.

Sean C. Woolverton: Fat.

Sean C. Woolverton: And asset onto our shareholders that have significant value destruction around.

Sean C. Woolverton: So we were.

Sean C. Woolverton: I've been asked this question quite a bit over the last couple of years. This proxy fight has allowed a lot of the hopefully information around why it's out there get to give clarity to to shareholders at.

Sean C. Woolverton: This proxy fight has allowed a lot of the, hopefully, information around why it's out there to give clarity to shareholders. It continues to be, you know, something I guess I'll say: the board will always evaluate what's in the best interest for our shareholders. And we'll continue to do that.

Sean C. Woolverton: I'll probably close by saying the poison pill is due to expire the day after our upcoming share. You know, what we've heard from the activist investor is that the poison pills are in place to keep management entrenched, and that we wouldn't do a deal around them. It's been the exact opposite.

Sean C. Woolverton: It continues to be something well I guess I'll say the board will always evaluate what's in.

Sean C. Woolverton: And best interest for our shareholders.

Sean C. Woolverton: And.

Sean C. Woolverton: We'll continue to do that.

Sean C. Woolverton: Probably close with saying the poison bill it pill is due to expire the day after our upcoming shareholder meeting.

Sean C. Woolverton: Yes.

Speaker Change: Okay I'll throw in one more on.

Sean C. Woolverton: On that front.

Sean C. Woolverton: <unk>.

Sean C. Woolverton: What we've heard from.

Sean C. Woolverton: The activist Investor.

Sean C. Woolverton: Is that the poison pill in place to keep management entrenched and that we wouldn't do a deal around it.

Leo Mariani: With the pill in place, we negotiated a deal, went almost to the finish line with that activist investor, and they didn't close. So I think that's proof that the pill isn't restricting management or the board from doing a deal. In fact, it brought a deal to the table. So maybe I'll close with that. Thanks for all the color. Yeah. Appreciate that.

Sean C. Woolverton: Ben the exact opposite with the pill in place we negotiated a deal.

Leo Mariani: When almost to the finish line with that Actavis investor and they didn't close so I think that's proof that the appeal isn't restricting management our board from a doing a deal in fact that brought in brought a deal to the table. So maybe I'll close with that.

Speaker Change: Thanks for all the color.

Speaker Change: Yes, I appreciate the question.

Leo Mariani: Your next question comes from the line of Kevin Mccarthy from Pickering Energy Partners. Your line is open.

Kevin McCurdy: Your next question comes from the line of Kevin McCurdy from Pickering Energy Partners. Your line is open.

Kevin McCurdy: Hey, good morning.

Kevin McCurdy: Hey, good morning. Just looking at the 2Q guide, it looks like oil production is kind of flattish after growing significantly in the first quarter, and then the full year guide implies more growth.

Kevin McCurdy: Just looking at the <unk> guide it looks like oil production is kind of flattish after growing significantly in the first quarter and then the full year guide implies more growth just kind of curious how that activity plays into that trajectory and is there any effect from the activity restrictions on the Chesapeake acreage.

Speaker Change: Hey, Kevin Good morning, Let me maybe walk you through some of it.

Kevin McCurdy: Just kind of curious how to do it.

Sean C. Woolverton: Hey, Kevin, good morning. Yeah, let me maybe walk you through some of it.

Kevin McCurdy: We came into the quarter brought on a third rig in the early part of the first quarter.

Sean C. Woolverton: You know, we came into the quarter, brought on a third rig in the early part of the first quarter, and brought on, I think, what was it? Jeff, 12 wells in the quarter. But in February, we moved two of the rigs onto a 10-well pad on the Chesapeake asset. So, as you might expect, the till turn for the second quarter is lower as we complete that 10-well pad. So for the second quarter, we're anticipating 7 tills for the quarter. So 2Q will be the lowest. We're moving in and starting to frack that 10-well pad as we speak. If you think about that, these are long laterals.

Sean C. Woolverton: <unk> brought on.

Sean C. Woolverton: I think what's it's Jeff 12 wells in the quarter.

Sean C. Woolverton: But in February we moved two of the rigs onto a 10 well pad on the Chesapeake asset.

Sean C. Woolverton: So as you might expect.

Sean C. Woolverton: The til turn for second quarter.

Sean C. Woolverton: Is lower as we complete that 10, well pads so for the second quarter, we're anticipating bringing on.

Sean C. Woolverton: Seven.

Sean C. Woolverton: Sales for the quarter, so <unk> will be the low.

Sean C. Woolverton: We're moving in and starting to Frac that 10, well pad as we speak.

Sean C. Woolverton: If you think about that these are long laterals, we have well over 500 stages network in a frac there so.

Sean C. Woolverton: We have well over 500 stages that we're going to frack there. So, you know, with all the frack efficiencies, the team will probably exceed expectations again. And right now, we're scheduled to bring that pad on late in 2Q, but maybe we can, you know, with efficiencies, pull it up a little bit. But 2Q will definitely be kind of the low in tills, and then 3Q will ramp as 4Q kind of flattens out.

Sean C. Woolverton: With all of the Frac efficiencies.

Sean C. Woolverton: Team will probably exceed expectations again in <unk>.

Sean C. Woolverton: Now we are scheduled to bring that Pat on latent TQ, but maybe we can deal with efficiencies pull it up a little bit, but <unk> will definitely be kind of the low until <unk> and then <unk> will ramp is 40 kind of flattens out.

Sean C. Woolverton: We will drop down to two rigs in the second half of the year. So that's why you start to see four key kind of flat.

Sean C. Woolverton: We will drop down to 2 rigs in the second half of the year, so that's why you start to see 4Q kind of flatten and layer out. The only thing we have to pull back on, and I mentioned it in the question from Leo, is we have some reef fracks that we could do more of those if we want to, if we have CAPEX that becomes available.

Sean C. Woolverton: <unk> layer out.

Sean C. Woolverton: The only lever we have to pull and I mentioned it done on the question from Leo is we have some re fracs that we could.

Sean C. Woolverton: Could do more of those if we want to if we have capex that becomes available.

Speaker Change: Great and.

Kevin McCurdy: Great. And there's obviously a lot of attention around the shareholder vote, and you've been pretty clear about your views on the valuation of the KTG asset. Just kind of curious, I mean, you kind of touched on this in your view on M&A and the other transactions you've done, but

Kevin McCurdy: There's obviously a lot of attention around the shareholder vote and you've been pretty clear about your views on the valuation of the K T G at KCG asset.

Kevin McCurdy: Just kind of curious I mean, you've kind of touched on this on your view on M&A and the other transactions you've done but.

Kevin McCurdy: What kind of scale do you foresee being able to add from M&A just.

Kevin McCurdy: Instead of the KCG asset.

Speaker Change: Thank you.

Sean C. Woolverton: You know, I probably won't speak to any specific layer or maybe target there, but I would tell you that I think everyone knows this. We've been the most aggressive acquirer in the basin with eight deals done over the last couple years. And there's still plenty to do. So, as you look at consolidation in the basin, you know, I think there are plenty of opportunities. Deals must look like. We've been very vocal about our criteria. It needs to have industrial logic.

Speaker Change: I, probably won't speak to any specific layer.

Sean C. Woolverton: Layer or maybe target there would tell you that and I think everyone knows who knows this.

Sean C. Woolverton: We have been.

Sean C. Woolverton: Most aggressive acquire in in the basin with eight deals done over the last couple of years.

Sean C. Woolverton: And there is still plenty to do so.

Sean C. Woolverton: As you look at consolidation in the basin.

Sean C. Woolverton: I think there is plenty of opportunities, we're very diligent around what those.

Sean C. Woolverton: Deals must look like we've been very vocal around our criteria it needs to have industrial logic.

Sean C. Woolverton: It needs to, you know, deepen our inventory and compete for capital immediately. One of the things that we struggled with with the KTG proposal is that we haven't been drilling gas down in Webb County for the past two years. It just doesn't compete for capital in a 250 world. In fact, I think KTG may be one of the only companies down there drilling. Others have all pulled their rigs out.

Sean C. Woolverton: It needs to deepen our inventory and compete for capital immediately one of the things that we struggled with with the <unk> proposal is we haven't been drilling gas down in Webb County are limited amounts for the past two years. It just doesn't compete for capital and a $250 world.

Sean C. Woolverton: In fact.

Sean C. Woolverton: I think <unk> may be one of the only companies down there drilling others have all pulled the rigs out so.

Sean C. Woolverton: So, deals have to have inventory that competes for capital, and it has to be accretive to our shareholders. So those are the type of deals we're looking for. And what I'll tell you is, hey, we recognize that scale is important for either the public investor or for companies looking to do acquisitions. And we're open to, you know, consolidating; we're, you know, open to be a buyer and open to be a seller. So I think that Eagleford has a great, great future in front of it. As other basins get consolidated, this one should be the next basin up and running.

Sean C. Woolverton: You'll have to have inventory that competes for capital and it has to be accretive to our shareholders.

Kevin McCurdy: Great, thank you for the answers.

Kevin McCurdy: Those are the type of deals we're looking for.

Kevin McCurdy: And what I'll tell you is hey, we recognize that scale is important for either the public investor or for companies looking to act to do acquisitions.

Kevin McCurdy: And we're open to consolidate we're open to the buyer and open to be a seller. So.

Kevin McCurdy: Thank the Eagle Ford has a great great future in front of it as other basins get consolidated this one should be the next basin up in horizon.

Speaker Change: Great. Thank you for the answer is yes.

Kevin McCurdy: Yes.

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

Paul Diamond: Your next question comes to the line of Paul Diamond from Citi. Your line is open.

Paul Diamond: Good morning, all. Thanks for taking my call. Just a quick one I want to touch on slide 13. In the operational plan for the rest of the year, how much, I guess, further improvement in some of these metrics are you all expecting? Or is it a kind of runway from here?

Paul Diamond: Hi, Good morning, Thanks for taking my call just a quick one I wanted to touch on slide 13.

Paul Diamond: The operational plan for the rest of the year, how much of I guess further improvement. Some of these metrics are you all expecting or is it a.

Paul Diamond: Kind of run rate from here.

Sean C. Woolverton: Good question, Paul. You know, I keep thinking that, hey, can you get any more efficient? We're down to trying to find, you know, five, ten minute slots. So, when you're fracking 20 hours a day, you do have time where you have to fuel engines back up and run tools in the hole. We're getting down to where, boy, can you get more efficient?

Paul Diamond: Okay.

Speaker Change: Good question Paul.

Sean C. Woolverton: I keep it.

Sean C. Woolverton: Thinking that hey, can you get any more efficient.

Sean C. Woolverton: On the completion side.

Sean C. Woolverton: We're down to trying to find 510 minutes slop, so when you're fracking.

Sean C. Woolverton: 20 hours a day you do have time, where you have to fuel engine back up and run tool in the hole.

Sean C. Woolverton: We're getting down to where Boyd kidney get more efficient and I will tell you all that the completion efficiency, we haven't changed our our design in terms of going to smaller stage design.

Sean C. Woolverton: And I'll tell you, all that completion efficiency, we haven't changed our design in terms of going to smaller stage designs. In fact, we're, you know, continuing to enhance it. So, completions, the team always surprises.

Sean C. Woolverton: We are continuing to enhance it so.

Sean C. Woolverton: Completions.

Sean C. Woolverton: Team always surprises drilling I think with the scale that we have we continue to get.

Sean C. Woolverton: Drilling, I think, you know, with the scale that we have, we continue to get, you know, the balance sheet, the inventory allows us to do larger pads that generate some efficiency from a drilling standpoint, just being on larger pads. We still think that the optimal for us right now is in that four to six well range, but there could be efficiencies there. And then having, you know, just, again, the opportunity to go to different, oh. You know, inventory, be it gas or oil, we can always, and we've proven to be very effective at allocating capital to the right returns. So, that's kind of my thoughts.

Sean C. Woolverton: Largely the balance sheet, the inventory allows us to do larger pads.

Sean C. Woolverton: Generate some efficiency from a drilling standpoint, just being on larger pads, we still think probably optimal for US right now is in that four to six wells.

Sean C. Woolverton: The range, but there could be efficiencies there and then having just again the opportunity to go to different.

Sean C. Woolverton: Oh.

Sean C. Woolverton: Inventory be it gas or oil, we can always and we've proven that to be very effective on allocating capital to the right returns.

Sean C. Woolverton: One area that we could add some efficiency gains on is, you know, just leveraging the existing infrastructure scale that we have. A lot of the assets that we've acquired have infrastructure already there, and we're going back in over the top of them. We're doing that, you know, significantly where we're drilling Austin shock wells over the top of Eagleford. So, that adds some, you know, cycle time efficiencies where you don't have to go back in and build pads, rows, and put in new pipes. So, yeah, maybe a combination of a lot of things. It's getting harder and harder, but we'll keep on grinding.

Sean C. Woolverton: So there is kind of my thoughts one area that we could add some efficiency gains on is just leveraging the existing infrastructure scale that we have a lot of the assets that we've acquired had infrastructure already there and we're going back in over the top of them, we're doing that significantly.

Sean C. Woolverton: Where we're drilling Austin chalk wells over the top of Eagle Ford So that add some cycle time efficiencies, where you don't have to go back in and build pads roads and put in new pipe. So.

Sean C. Woolverton: Maybe a combination of a lot of things.

Sean C. Woolverton: It's getting harder and harder, but we will keep on grinding unit.

Speaker Change: Understood. Thanks for the clarity and just one quick follow up on the re frac opportunity.

Paul Diamond: And just one quick follow-up on the refreq opportunity. 100 plus potential targets. How should we think about the economics of those on a struggling rate basis? Should we expect or are you expecting a similar kind of decreased cluster spacing, profit intensities, like how homogenous is that opportunity versus a well by well kind of what works best?

Paul Diamond: Plus potential potential targets, how should we think about the economics of those Mr run rate basis should we expect or are you expecting similar.

Speaker Change: Kind of.

Paul Diamond: Decreased cluster spacing proppant intensity use like how our margin as that opportunity versus a well by well.

Paul Diamond: It works best.

Speaker Change: Yes, no great question.

Sean C. Woolverton: Yeah, no, great question. You know, obviously, we've done two thus far; we've looked at other operators to see how their wells perform to kind of put out a consistent performance. We'll see if we can prove that up, but we're seeing pretty high performance from well to well. You do run into risks around mechanical issues going back into wells, but in talking with other operators, they're seeing a high percentage there. So, I think it's probably 75, 80% plus in terms of mechanical as well as overall performance.

Sean C. Woolverton: Obviously, we've done two thus far we've looked at other operators to see how their wells perform to to kind of put a.

Sean C. Woolverton: Risk percentage on.

Sean C. Woolverton: Consistent performance.

Sean C. Woolverton: We'll see if we can prove that up but we're seeing a pretty high.

Sean C. Woolverton: Performance.

Sean C. Woolverton: From well to well.

Sean C. Woolverton: You do run into risks around mechanical issues going back into wells, but in talking with other operators.

Sean C. Woolverton: Theyre seeing high percentage there. So I think it's probably 75%, 80% plus in terms of mechanical as well as well performance.

Paul Diamond: I'd tell you the hundred inventory, the hundred refracts we've identified. We've looked thus far mainly at our oil assets. We've yet to look at our gas assets. And what's really good, and I'll keep on saying this, is all these refracts are on assets that we've acquired. The one that we really need to tear into is the Chesapeake asset. Those, you know, areas, a big chunk of those wells were done in the, you know, 12 to 16. And what's always great when you do acquisitions is when you unlock even more value in them than what you paid for.

Sean C. Woolverton: I would tell you the 100 inventory.

Paul Diamond: The 100.

Paul Diamond: Refracts, we've identified we've looked thus far mainly on our oil.

Paul Diamond: The assets, we've yet to look at our gas assets.

Paul Diamond: And what's really good didn't keep on.

Paul Diamond: Saying this is all these re fracs.

Paul Diamond: On assets that we've acquired.

Paul Diamond: The one that we really need to tear into is the Chesapeake asset.

Paul Diamond: <unk> areas, a big chunk of those wells were done in the 12 to 16 range kind of where they were just going in and.

Paul Diamond: Doing the same design again, and again and again, so we're really excited about pulling the onion back there some more in.

Paul Diamond: And whats always great. When you do acquisitions is when you unlock even more value on them than what you paid for.

Speaker Change: Understood. Thanks for the clarity.

Sean C. Woolverton: Understood. Thanks for the clarification. Yeah, thanks.

Paul Diamond: Yeah, thanks, Paul. I appreciate it. Have a good day.

Speaker Change: Yes, Thanks, Paul I appreciate you have a good day.

Paul Diamond: Yeah.

Speaker Change: As a reminder, if you wish to ask a question. Please press star one.

Paul Diamond: And your next question comes from the line of Jonathan Shaver of Northland Capital. Your line is open.

Donovan Due Schafer: Hey guys, thanks for taking the questions and congratulations on the quarter. I have to admit, I feel like I'm going a little crazy here and pulling my hair out, so I know you don't want to dwell on the Kimmeridge stuff too much, but... You know, and this is my own view. But, you know, they don't seem to be like particularly good actors with respect to sincerely having an interest in the rest of shareholders beyond their own 12% ownership.

Speaker Change: Hey, guys. Thanks for taking the questions.

Donovan Due Schafer: Congratulations on the quarter.

Donovan Due Schafer: Hudson I feel like.

Donovan Due Schafer: Going a little crazy here in pulling my hair out so.

Donovan Due Schafer: You don't want to dwell on the Cambridge stuff too much.

Donovan Due Schafer: And this is my own view.

Donovan Due Schafer: But they don't seem to be like particularly the good actors with respect to sincerely having interest for the rest of the shareholders.

Donovan Due Schafer: Beyond their own 12% ownership.

Donovan Due Schafer: You know, you put out a detailed chronicle of all of the interactions that you've had with them, you know, with dates and, you know, kind of like a journal or a log, if you will, and you've shared that, you know, I think that was part of a response letter you issued at one point, and that was included as like an appendix, and I think all of that was filed to the SEC, so, you know, my impression is that is the type of thing that you would not put out there publicly if you weren't prepared to back it in a court of law and, you know, provide that evidence, emails, whatever, and so forth, and, you know, they haven't come at you with like a defamation lawsuit or something like that, so it doesn't appear to be the case that they can test it, and that chronicle on its own seems pretty damning in my view in terms of, you know, at least, in terms of evidence, or at least, you know, just generally indications that these guys are not really people you, a lot of us would necessarily want to do business with. So my question is, am I right on that, that chronicle that you put out in that appendix, is that something that you guys would stand behind, you know, hypothetically in a court of law? Because, you know, in my view, that's kind of all you would need, to make your point here, but could you answer that?

Donovan Due Schafer: You put out a detailed chronicle of all of the interactions that you've had with them dates.

Donovan Due Schafer: Kind of like a journal or log if you will and.

Donovan Due Schafer: And you've shared that I think I was part of our response letter issued at one point.

Donovan Due Schafer: And that was included as an appendix and I think all of that was filed with the SEC. So.

Donovan Due Schafer: My impression is that is the type of thing that you would not put out there publicly if you weren't prepared to back yet in a court of law and provide that evidence in ALS, whatever and so forth and they havent come at you with like a defamation lawsuit or something like that so it doesn't appear to be the case.

Donovan Due Schafer: They can test and that chronicle on its own seems pretty damming in my view in terms of.

Donovan Due Schafer: At least.

Donovan Due Schafer: Yeah in terms of evidence or at least just generally indications that these guys are not really people.

Donovan Due Schafer: A lot of us would necessarily want to do business with so my question is am I right on that that Chronicle that you put out in that appendix is that something that you guys and stand behind hypothetically in a court of law.

Donovan Due Schafer: In my view, that's kind of all you would need to make your point here.

Speaker Change: But just could you could you answer that.

Speaker Change: Yes, yes.

Sean C. Woolverton: Yeah, yeah, no, appreciate your thoughts and thoughts there. You know, a core value for our company is to, you know, really work with all stakeholders, from our employees, our, you know, service providers that we partner with, our mineral owners, and our shareholders. And I would tell you something that we really pride ourselves on, and we received this feedback, is that hey, we're an honest and transparent company. And we view that as how you do

Speaker Change: I appreciate your thoughts thoughts there.

Sean C. Woolverton: A core value for our company is to.

Sean C. Woolverton: Really work with all stakeholders.

Sean C. Woolverton: Our employees are.

Sean C. Woolverton: <unk>.

Sean C. Woolverton: Service providers that we partner with our mineral owners and our shareholders.

Sean C. Woolverton: I would tell you it's something that we really pride ourselves on and we have received this feedback is hey, we're honest and transparent.

Sean C. Woolverton: Company and we view that is how you do business and it's really driven a lot of our success. So.

Sean C. Woolverton: Our focus is we want to stay really driven around adding value and engaging with all stakeholders and good faith and we can stand on that and we think we can that's the way to deal with this type of situation.

Sean C. Woolverton: And it's really driven a lot of our success. So, you know, our focus is we want to stay really driven around adding value and engaging with all stakeholders in good faith. And that's, you know; we can stand on that. And we think we can. That's the way to deal with this type of situation. You know, stay focused on what you do and what you believe, and the results will speak for themselves. We think this quarter should more than demonstrate to investors the strength of the company. So I appreciate that question and comment.

Sean C. Woolverton: Stay focused on what you do and what you believe and the results will speak for themselves.

Sean C. Woolverton: We think this quarter should more than demonstrate to investors the strength of the company. So.

Sean C. Woolverton: That that.

Sean C. Woolverton: Question and comments.

Sean C. Woolverton: Okay, and then turning to scale. So I do appreciate the point with respect to scale and so I'm not couponing or discounting.

Donovan Due Schafer: Okay, and then turning to scale. So I do appreciate the point with respect to scale, and so I'm not pooh-poohing or discounting that.

Donovan Due Schafer: But it is it's not a it's not a it's not a perfect straight line and linear relationship right like you hit these sort of.

Donovan Due Schafer: But it's not a perfect straight line in a linear relationship, right? You hit these sort of step changes or inflection points where, if you're so small, you can't even keep a rig running on a continuous basis. So then, like the first threshold is hitting that point. And then, hypothetically, someday, maybe there's a threshold where a company is so big it can validate or justify itself. Moving upstream, or I mean downstream, and having a refinery or something like that, you know, these big step changes, but it's not this continuous linear thing. And here we have, you said your own words, the completion team's really crushing it.

Donovan Due Schafer: Step changes or inflection points, where.

Donovan Due Schafer: As you are so small you can't even keep a rig.

Donovan Due Schafer: Running on a continuous basis or and so then the first threshold is sitting at that point and then yeah.

Donovan Due Schafer: Hypothetically someday, maybe there's like a threshold where a company is so big it can.

Donovan Due Schafer: Validate or justified.

Donovan Due Schafer: So it sounds like you've got the scale for bargaining, you know, to get fantastic crews and teams and to keep them in your basin and to keep them busy, all these good things. And so, you know, yeah, like a 10x scale benefit, like if you were acquired by Exxon or Mobil or something, yeah, they can squeeze other things out of it. But is there, is there anything I'm missing in terms of, is there some scale benefit, like an uptick, that would just be sort of right around the corner that, you know, if you guys were only 50% bigger, whatever size you'd get with someone like Kimmeridge, like, there's just some, you know,

Donovan Due Schafer: Moving upstream and downstream and having a refinery or something like this.

Donovan Due Schafer: These big step changes, but it's not this continuous linear thing in here. We've got you said your own words, the completion teams really crushing it so it sounds like you've got the.

Donovan Due Schafer: Scale for bargaining to get fantastic crews and teams and to keep them in your base and then to keep them busy all these good things and so.

Donovan Due Schafer: Yes, like a 10 X scale benefit like if you were acquired by an exxonmobil or something yes. They can squeeze other things out of it but is there is there anything I'm missing in terms of is there some scale benefits like in <unk>.

Donovan Due Schafer: Uptick that would just be sort of right around the corner that you guys were only.

Donovan Due Schafer: 50% bigger whatever size, you would get with someone like him Reg lag. So there is some.

Donovan Due Schafer: <unk>.

Donovan Due Schafer: Genuinely thing that would be unlocked by that or is it at this size and scale going from one increment to the next as it really makes such a difference.

Sean C. Woolverton: No, no, great, great question. You know, I think it's the old argument of, is, you know, do you just scale for the sake of scale? And I think that's a dangerous approach to pursue. You know, a company has to be very thoughtful and diligent around doing transactions. You don't want to do transactions that are, you know, destructive to your balance sheet. We've said all along that, hey, if we do a deal and we use leverage to do it, we'll have leverage of around 1.5 times, and we'll only go to that level if you show a clear line of sight of bringing that leverage down. And that's what we did with the Chesapeake transaction. We, you know, got to 1.6 for maybe 30 days, and within a quarter, we brought it down two clicks.

Speaker Change: No no great great question.

Sean C. Woolverton: I think it is the old argument.

Sean C. Woolverton: Do you just scale for the sake of scale and I think that's a dangerous approach to pursue.

Sean C. Woolverton: Our company has to be very thoughtful and diligent around doing transactions you don't want to do transactions that are destructive to your your balance sheet.

Sean C. Woolverton: We've said all along that Hey, if we do a deal and we use leverage to do it we will have a leverage in at around one five times and will only go to that level if you.

Sean C. Woolverton: So clear line of sight of bringing that leverage down and Thats, what we did with the Chesapeake transaction, we got to one six for maybe 30 days.

Sean C. Woolverton: So you've got to think about, hey, the way you do scaling is important. You've got to protect the balance sheet for locations. We look at some of the deals that are out there and some that have been proposed, and people are wanting, you know, two to four million dollars a location, or people are paying two to four million dollars a location for wells that you won't drill for, you know, six, seven, eight years as you're waiting for higher commodity prices. That's just destructive to a balance sheet to do that. So we've never paid for locations, which we think is imperative when you scale.

Sean C. Woolverton: And within a quarter brought it down to.

Sean C. Woolverton: Two clicks. So you got to think about PE.

Sean C. Woolverton: Hey, you do scaling is important you got to protect the balance sheet, it's got to bring.

Sean C. Woolverton: You don't want to pay what we've really loved about our deals as we don't pay for.

Sean C. Woolverton: Yes.

Sean C. Woolverton: FERC locations, we look at some of the deals that are out there and some that have been proposed and people are wanting you know $2 million to $4 million of location.

Sean C. Woolverton: Our people are paying $2 million to $4 million of location for wells that you won't drill for.

Sean C. Woolverton: 678 years as you're waiting for higher commodity prices, that's just destructive to our balance sheet to do that so we've never paid for locations, which we think is imperative when you scale.

Sean C. Woolverton: And it just has to improve margins and reduce costs. So those are the criteria that we have. I think if you do the right scaling, to your point, it starts to see that uplift. And there's a clear trend that investors want scale and or bigger companies looking to acquire one at scale. But the criteria I took through on an acquisition, really successful companies employ that same thought process. So listen, we're going to continue to stay focused. We continue to, you know, be open to scale and big cheerleaders for scaling in Eagleford, and we think Silver Bowl will play an active role in that as we move forward.

Sean C. Woolverton: And it just has to improve margins and reduce costs. So those are the criteria that we have.

Sean C. Woolverton: I think if you do the right scaling to your point it starts to see that uplift and there's a clear trend that investors want scale <unk>.

Sean C. Woolverton: <unk> bigger companies looking to acquire one scale, but the criteria I took through on an acquisition.

Sean C. Woolverton: Really successful companies employ that same same thought process. So.

Sean C. Woolverton: Listen we're going to continue to stay focused we continue to.

Sean C. Woolverton: Two.

Sean C. Woolverton: Be opened to scale and big cheerleaders are scaling in the Eagle Ford and we think silver Bowl will play an active role in that as we move forward.

Speaker Change: Okay, and then if I can squeeze just one more question and it's a round the idea of the notion of sort of valuation gap I'd say.

Donovan Due Schafer: Okay, and then if I can squeeze just one more question in, it's around the idea of the notion of a valuation gap as a point of focus. So, you know, with public markets and the way the stocks are valued, there are sort of the things you can control and the things that you can't control. And, you know, I've seen, and I think a lot of us on this call have all seen cases in the past where focusing on quote unquote, closing the evaluation gap, as a point of focus, turned out to be the wrong thing; maybe something could be done about optics.

Donovan Due Schafer: A point of focus so.

Donovan Due Schafer: With public markets and the way the stocks are valued there are sort of the things you can control and the things that you can't control.

Donovan Due Schafer: The whiting acquisition of Kodiak or mergers with Kodiak comes to mind. I mean, that was, as far as I can tell, just so that they could say, hey, we are the largest producer in the Bakken. So they could leapfrog Continental and just get that, like, almost literally just for a headline because they were at a discount to Continental. And so I was like, look, if we get the headline that says we're the biggest Bakken producer, we're gonna get that multiple. That was a disaster.

Donovan Due Schafer: And I've.

Speaker Change: I've seen it.

Donovan Due Schafer: A lot of us on this call we've all seen cases in the past where.

Donovan Due Schafer: Focusing on the quote unquote closing a valuation gap.

Donovan Due Schafer: As a point of focus.

Donovan Due Schafer: Turned out to be the wrong thing, maybe something could be done for optics.

Donovan Due Schafer: The widening acquisition of Kodiak or merger with Kodiak comes to mind, I mean, not that was <unk>.

Donovan Due Schafer: As I can tell.

Donovan Due Schafer: Just so that they can say hey, we are the largest producer in the Bakken So they could leapfrog continental and just get that like almost almost literally just for a headline because they were at a discount to continental and sounds like look if we get the headline that says are the biggest Bakken producer, we're going to get that multiple.

Donovan Due Schafer: That was a disaster so.

Donovan Due Schafer: The question is.

Donovan Due Schafer: As in.

Donovan Due Schafer: So my question is, you know, and the depressed valuation that is tied to gas prices being so low right now, and you got the hedging and everything, which is great. But the Eagleford of all basins is somewhere that is just such a beast and can really shine. I mean, just the raw quantity of energy that can come out of these wells, that only gets economically reflected when gas prices are better. You know, that's like a, there's a sleeping giant component there.

Donovan Due Schafer: The depressed valuation that has high gas prices are so low right now and you got the hedging and everything which is great, but the Eagle Ford of all basins. The Eagle Ford is somewhere that as such.

Donovan Due Schafer: East and can really shine I mean, just the raw quantity of energy that can come out of these wells.

Donovan Due Schafer: That only gets economically reflected when gas prices are better.

Donovan Due Schafer: Theres, a sleeping giant component there and so but you don't have control right.

Donovan Due Schafer: And so, but you don't have control, right? Like, you know, these valuation things and all that might change or just come around when natural gas prices come back. And so the question is... Is it even right or fair, do you think, honestly, sort of in your heart of hearts as a CEO? Maybe this is a sensitive question, but is it? Is it even right or fair? And let's say, is it fair to long-term shareholders to shareholders who are looking past just a couple quarters? Is it fair to them? to be thinking about the like quote unquote valuation gap right now at this moment in time.

Donovan Due Schafer: These valuation things and all that might change or just come around when.

Donovan Due Schafer: Natural gas prices come back and so the question is.

Donovan Due Schafer: Is it even do you think honestly sort of in your heart of Hearts.

Donovan Due Schafer: And maybe this is a sensitive question, but is it is it even right or fair and let's say is it fair to long term shareholders to shareholders, who are looking past just a couple of quarters is it fair to them.

Donovan Due Schafer: To be thinking about like quote unquote valuation gap right now at this moment in time.

Speaker Change: Yes, yes, I think thats, what a lot of investors are looking for a REIT debt.

Sean C. Woolverton: Yeah, yeah, I think that's what a lot of investors are looking for, right, that opportunity to invest in equity, a company that has a clear long-term strategy to add value. We talked through on today's call some of the key metrics of getting there and attracting more investors to the stock. I think, you know, Silverboe is on that cusp.

Sean C. Woolverton: Opportunity to invest in equity a company that has clear long term strategy to add value.

Sean C. Woolverton: We talked through on today's call some of the key metrics of getting there.

Sean C. Woolverton: And attracting more investors to the stock I think silver bow.

Sean C. Woolverton: Is on that cusp or on a totally totally trajectory, we have a ton of momentum.

Sean C. Woolverton: We're on a totally different trajectory. We have a ton of momentum behind us. I think you raise an excellent point, though, short-term investors, investors that, you know, focus on 30-day type numbers, 60-day type numbers, and how things trade over a short period of time. You know, they're probably not seeing the bigger picture. We like to point out, hey, what have we shown in value creation over the long term?

Sean C. Woolverton: Hind us.

Sean C. Woolverton: I think you raise an excellent point, though.

Sean C. Woolverton: Short term investors investors that focus on 30 day type number 60 day.

Sean C. Woolverton: Type numbers and how things trade over a short period of time.

Sean C. Woolverton: They are probably not seeing the bigger picture, we like to point to hey, what have we shown in value creation over the long term.

Sean C. Woolverton: You know, on slide five of our presentation, we lay out what our one-year return is relative to our peers, our three-year return, our five-year return. And that's what long-term investors recognize: hey, if you're building the right company, putting the right assets in place, having the right people to execute on those assets, and a real strong financial position, investors will come and recognize that value.

Sean C. Woolverton: On slide five of our presentation, we lay out what our one year return is relative to.

Sean C. Woolverton: Our peers are three year return, our five year return and that's what long term investors recognize is hey, if youre doing building the right company, putting the right assets in place having the right people to execute on those assets in a real strong financial position investors will come and recognize that value. So.

Sean C. Woolverton: So that's where we're focused on. And maybe I'll close and just say that, hey, Silverbow is the largest public fear play operator in Eagleford. And so attention on the Eagleford, we really want it. You know, some of what, you know, probably what we're doing right now is drawing attention to it. That's great. Any further combinations that we do will even make a bigger pure public pure play Eagleford if we choose to go that route. So anyway, I appreciate all your questions, Donovan.

Sean C. Woolverton: That's where we're focused on and maybe ill close and just say that hey, any silver both the largest public pure play operator in the Eagle Ford and so attention on the Eagle Ford, we really want it.

Sean C. Woolverton: Some of what.

Sean C. Woolverton: Probably what we're doing right now is a drawing attention to it that's great.

Sean C. Woolverton: Any further combinations that we do will even make it.

Sean C. Woolverton: Bigger pure public pure play Eagle Ford.

Sean C. Woolverton: If we chose to go that route so anyway I appreciate.

Speaker Change: Great all your questions Donovan.

Sean C. Woolverton: Okay.

Speaker Change: There are no further questions at this time I would like to hand, the call back over to Sean.

Operator: There are no further questions at this time, so I'd like to hand the call back over to Sean. Thank you.

Operator: Yes.

Sean C. Woolverton: Thank you, Gavin. I appreciate everyone's interest in the company. Hopefully, you'll take away from this call that the company had a really great quarter, and we have a ton of momentum. And we look forward to sharing more information with you. And, like I said in my comment, we're always available. Please reach out if you have any questions that you'd like for us to address.

Sean: Thank you Kevin.

Sean C. Woolverton: Appreciate everyone's interest in the company.

Sean C. Woolverton: Hopefully you'll take away from this call that the company had a really great quarter, and we have a ton of momentum and we look forward to sharing more information with you and like I said in my comments. We're always available. Please reach out if you have any questions that you would like for us to address.

Sean C. Woolverton: I appreciate it.

Speaker Change: Thanks, guys.

Operator: That does conclude our conference for today. Thank you for participating, and may we now all disconnect.

Speaker Change: That does conclude our conference for today. Thank you for participating you may now disconnect.

Operator: Okay.

Operator: [music].

Operator: Sure.

Operator: [music].