Q1 2024 PHX Minerals Inc Earnings Call

Operator: Good morning, and thank you for attending today's PHX Minerals March 31st, 2024 Quarter End Earnings Conference Call. At this time, all lines will be muted during the presentation of the call, with an opportunity for a Q&A session at the end. As a reminder, this call is being recorded. I would now like to turn the call over to Stephen Lee with FNKIR. Please go ahead.

Good morning, and thank you for attending today's PHX minerals March 31st 2024 quarter earnings Conference call.

Stephen Lee: This time all lines will be muted during the presentation of the call with an opportunity for Q&A session.

Stephen Lee: As a reminder, this call is being recorded I would now like to turn the call over to Steven Li with F. N. K IR. Please go ahead Sir.

Stephen Lee: Thank you, Operator, and thank you for joining us today to discuss PHX Minerals' March 31st, 2024 quarterly results. Joining us on the call today are Chad Stephens, President and Chief Executive Officer, Rob D'Amico, Executive Vice President and Chief Financial Officer, and Danielle Mezo, Vice President of Engineering.

Stephen Lee: Thank you operator, and thank you for joining us today to discuss PHX minerals March 31st 2020 for quarterly results.

Stephen Lee: Joining us on the call today are Chad Stephens, President and Chief Executive Officer.

Speaker Change: <unk> Nikko Executive Vice President and Chief Financial Officer, and Daniel Meso, Vice President of Engineering.

Stephen Lee: Our earnings press release that was issued yesterday. After the close is also posted on <unk> Investor Relations website.

Stephen Lee: The earnings press release that was issued yesterday after the close is also posted on PHX's Investor Relations website. Before I turn the call over to Chad, I want to remind everyone that during today's call, including the Q&A session, management may make four forward-looking statements regarding expected revenue, earnings, future plans, opportunities, and other expectations of the company. These estimates and other forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those expressed or implied on the call.

Stephen Lee: Before I turn the call over to Chad I'll remind everyone that during today's call, including the Q&A session management may make forward looking statements regarding expected revenue.

Stephen Lee: What's your plans opportunities and other expectations of the company. These estimates and other forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those expressed or implied on the call.

Stephen Lee: These risks are detailed in PHS Minerals' most recent annual report on Form 10-K, as it may be amended or supplemented by subsequent quarterly reports on Form 10-Q or other reports filed with the Securities and Exchange Commission. The statements made during this call are based upon information known to PHX as of today, May 9, 2024, and the company does not intend to update these forelooking statements, whether as a result of new information, future events, or otherwise, unless required by law. With that, I would like to turn the call over to Chad Stephens, PHX Chief Executive Officer. Chad?

Stephen Lee: These risks are detailed in pediatric minerals. Most recent annual report on Form 10-K, as such maybe amended or supplemented by subsequent quarterly reports on Form 10-Q, or other reports filed with the Securities and Exchange Commission they.

Chad L. Stephens: The statements made during this call are based upon information known to PHA as of today May nine 2024, and the company does not intend to update these forward looking statements whether as a result of new information future use.

Chad L. Stephens: Vans or otherwise unless required by law.

Stephen Lee: That I'd like to turn the call over to Chad Stephens ph ex Chief Executive Officer Chad.

Chad L. Stephens: Thanks, Stephen, and thanks to all of you on this call for participating in PHX's March 31st, 2024 quarter end earnings conference call. We appreciate your interest in the company. In spite of a 40% drop in natural gas prices from a year ago, PHX reported steady, positive, adjusted EBITDA and cash flow, while operators are curtailing their existing production and deferring bringing new wells to sales due to low gas prices. PHX's year-over-year and sequential quarter royalty volumes were down slightly. With prices and volumes lower, our year-over-year EBITDA was down materially.

Chad L. Stephens: Thanks, Steven and thanks to all of you on this call for participating in P. E checks as March 31, 2020 for quarter end earnings Conference call. We appreciate your interest in the company.

Chad L. Stephens: However, our EBITDA compared to the prior sequential quarter was up slightly and reflects our solid hedging program built to protect our financial plan. This allowed us to service our dividend, reduce debt, and close on a modest amount of acquisitions, approximately $1.1 million, $2 million, and $1.5 million, respectively.

Chad L. Stephens: Ralph will discuss leverage in a moment, but I would like to point out that our banks recently reaffirmed our borrowing base at the same $50 million and extended the maturity. This does highlight the quality of our assets. As our existing production depletes our existing PDP reserve base, we backfill that bucket through our well conversions, which are our undeveloped drilling locations that include a reserve category of probable and possible. Danielle will walk you through these conversions in a moment.

Chad L. Stephens: In spite of a 40% drop in natural gas prices from a year ago PHX reported steady positive adjusted EBITDA and cash flow while operators are curtailing their existing production and deferring, bringing new wells to sales due to low gas prices P.

Chad L. Stephens: E checks as year over year and sequential quarter royalty volumes were down slightly.

Chad L. Stephens: With prices and volumes lower our year over year EBITDA was down materially.

Chad L. Stephens: However, our EBITDA compared to the prior sequential quarter was up slightly and reflects our solid hedging program built to protect our financial plan.

Chad L. Stephens: This allowed us to service, our dividend reduced debt and close on a modest amount of acquisitions approximately $1 1 million.

Chad L. Stephens: 2 million and $1 5 million respectively.

Chad L. Stephens: Ralph will discuss leverage in a moment, but I would like to point out that our banks recently reaffirmed our borrowing base at the same 50 million <unk>.

Chad L. Stephens: And extended the maturity.

Chad L. Stephens: This does highlight the quality of our assets.

Chad L. Stephens: As our existing production depletes, our existing PDP reserve base, we backfill that bucket through our well convergence, which is our undeveloped drilling locations that includes a reserve category of probable impossible.

Chad L. Stephens: Danielle will walk you through the these conversions in a moment.

Chad L. Stephens: Looking to the future, the significant positive macro events in play are, one, the operator activity in our core areas continues to maintain a consistent number of conversions of these undrilled locations to producing at actual PHX historical levels. And two, the natural gas supply demand macro is improving. The U.S. domestic natural gas supply is down from a December 2023 high of approximately 102 BCF per day to current volumes of around 96 BCF per day and dropping.

Chad L. Stephens: Looking to the future the significant positive macro events in play are one the operator activity in our core areas continues to maintain a consistent number of conversions of these andrill locations to producing at actual PHX historical levels.

Chad L. Stephens: And to the natural gas supply demand macro is improving.

Chad L. Stephens: The U S domestic natural gas supplies down from a December 2023 high of approximately 102 Bcf per day.

Chad L. Stephens: Current volumes of around 96 Bcf per day and dropping.

Chad L. Stephens: Also, the natural gas demand narrative continues to build positive sentiment from, A, anticipated completion of U.S. domestic LNG export facilities beginning in 2025, which we have discussed on prior calls, B, new LNG export facilities under construction or nearing FID on the Pacific Coast of Mexico that anticipates an additional 7 BCF of natural gas demand by 2027 and 2028, an increase in power demand of approximately 30% by the year 2030 from AI and growing data centers that should increase natural Each of these items alone should be adequate to balance the current oversupply macro and bring our current natural gas storage inventory number to equilibrium.

Chad L. Stephens: Also the natural gas demand narrative continues to build positive sentiment from a anticipated completion of U S. Domestic LNG export facilities, beginning in 2025, which we have discussed on prior calls the new LNG export facilities under construction.

Chad L. Stephens: Or nearing F. I D on the Pacific Coast of Mexico that anticipates, an additional seven bcf of natural gas demand by 2027 and 2028.

Chad L. Stephens: See increase in power demand of approximately 30% by the year 'twenty 30 from AI and growing data centers that should increase natural gas demand materially Andy.

Chad L. Stephens: N D. Freeport LNG facility is back up and 100% in service after several months of being down.

Chad L. Stephens: Each of these items stand alone should be adequate to balance the current oversupply macro and bring our current natural gas storage inventory number to equilibrium.

Chad L. Stephens: Collectively, these could create an undersupply and move normalized prices up dramatically from their current lows. Under most of these projections, a more stable and higher price environment is needed to encourage more drilling to deliver increased volumes to serve the increased demand. Under any conservative increase in demand I lay out, the old paradigm feast or famine commodity price cycle could disappear. The need for a less volatile, more predictable price forecast will help provide for the supply necessary to meet the robust growing demand.

Chad L. Stephens: Collectively these could create an under supply and moved normalized prices up dramatically from their current lows.

Chad L. Stephens: Under most of these projections are more stabilized at a higher price environment is needed to encourage more drilling to deliver increased volumes to serve the increased demand.

Chad L. Stephens: Under any conservative increase in demand I lay out.

Chad L. Stephens: The old paradigm feast or famine commodity price cycle could disappear the.

Chad L. Stephens: The need for a less volatile more predictable price forecast will help provide for the supply necessary to meet the robust growing demand.

Chad L. Stephens: I believe this is setting PHX up for solid increases in royalty volumes and cash flow in 2025 and beyond. At this point, I'd like to turn the call over to Danielle to provide a quick operational overview and then to Ralph to discuss the financials.

Chad L. Stephens: This is setting PHX up for solid increases in royalty volumes and cash flow in 2025 and beyond.

Chad L. Stephens: At this point I'd like to turn the call over to Danielle to provide a quick operational overview and then they're out to discuss the financials.

Danielle D. Mezo: Thanks, Chad. And good morning to everyone participating in the call. For our quarter ended March 31, 2024, total corporate production decreased 6% from the quarter ended December 31, 2023. Royalty production for the quarter decreased 5% compared to the prior sequential quarter to 1,857 MMCFE. The volume decrease during the quarter is primarily associated with Hainesville producers' decision to delay bringing wells online due to low natural gas prices. It is important to note that, as a mineral holder, we do not control timing of well development, so there can be some volatility on a quarter-to-quarter basis, and volumes associated with our business model are better evaluated on a rolling 12-month basis.

Danielle: Thanks, Chad and good morning to everyone participating on the call for our quarter ended March 31, 2024 total corporate production decreased 6% from the quarter ended December 31, 2023 royalty production for the quarter decreased 5% compared to the prior sequential quarter to 1857.

Danielle D. Mezo: And then the Cfe the volume decrease during the quarter is primarily associated with Haynesville producers decision to delay, bringing wells online due to low natural gas pricing. It is important to note that as a mineral holder, we do not control timing on well development. So there can be some volatility on a quarter to quarter basis and volumes associated with our business model.

Danielle D. Mezo: Better evaluated on a rolling 12 month basis.

Danielle D. Mezo: We are also aware of certain new wells in which we have a significant royalty that were drilled and completed in December 2023, but the operator deferred bringing them to sales in January 2024 due to low gas prices. Had the wells initiated production in January, our year-over-year royalty growth would have reported a volume increase. We believe those particular wells are now online, and... Also, as discussed in previous recent quarters, our overall corporate volumes are down year over year due to the sale of material working interest assets in early 2023.

Danielle D. Mezo: We're also aware of certain new world in which we have a significant royalty interest that were drilled and completed in December 2023, but the operator deferred bringing to sales in January 2024, due to low gas prices had the wells initiated production in January or year over year royalty growth would have reported a volume increase we believe those.

Danielle D. Mezo: <unk> wells are now online and producing also as discussed in prior recent quarters. Our overall corporate volumes are down year over year due to the sales of material working interest asset in early 2023.

Danielle D. Mezo: Royalty volumes represented 88% of total production during our March 31, 2024. Eighty percent of our quarter's production volumes were natural gas, which aligns with our long-term position that natural gas is the key transition fuel for a sustainable energy future. Oil represented 11% of production volumes, and NGL represented 9%. During Q1 2024, third-party operators active on our mineral acreage converted 85 gross or 0.32 net wells-in-progress, or WIP, to producing wells, which is a significant increase compared to 46 gross or 0.098 net in the prior sequential quarter. The majority of the new wells brought online are located outside of the Hague.

Danielle D. Mezo: Royalty volumes represented 88% of total production during our March 31 2024.

Danielle D. Mezo: 80% of our quarter's production volumes, where natural gas, which aligns with our long term position that natural gas is the key transition fuel for a sustainable energy future.

Danielle D. Mezo: Oil represented 11% of production volumes and NGL represented 9% during.

Danielle D. Mezo: During Q1, 'twenty 'twenty four third party operators active on our mineral acreage converted 85 gross or three two net wells in progress or web to producing wells, which is a significant increase compared to 46 gross or 0.098 net in the prior sequential quarter. The majority of the new wells brought online are located outside of the.

Danielle D. Mezo: The haynesville, even though the number of conversions increased on a sequential quarter basis. These were lower rate wells compared to a typical new haynesville well this along with operator curtailment and new well deferrals as stated earlier explains the decrease in sequential royalty production volume had we seen the average number of new well Haynesville <unk>.

Danielle D. Mezo: Even though the number of conversions increased on a sequential quarter basis, these were lower rate wells compared to a typical new Haynesville well. This, along with operator curtailment and new well deferrals, as stated earlier, explains the decrease in sequential royalty production volume. Had we seen the average number of new well Haynesville conversions this quarter as we realized each of the last six quarters, we would have seen an increase in royalty production volume.

Danielle D. Mezo: This quarter as we realized each of the last six quarters, we would have seen an increase in royalty production volumes were very pleased with our well conversion rates, particularly given the challenging natural gas macro environment, which includes some operators deferring, bringing completed wells online until there is an improvement in natural gas prices.

Danielle D. Mezo: We are very pleased with our well conversion rates, particularly given the challenging natural gas macro environment, which includes some operators deferring bringing completed wells online until there is an improvement in natural gas prices. We also expect an increase in Haynesville locations converting to PDP in the second half of 2024 and full year 2025 as natural gas prices improve. At the same time, our inventory of wells in progress on our minerals, which includes ducts, wells being drilled, and permit files, remains strong with 230 gross or 1.099 net wells.

Danielle D. Mezo: We also expect an increase in haynesville locations converting to PDP in the second half of 2024 and full year 2025, as natural gas prices and true at the same time, our inventory of wells in progress on our Mariner old which includes DUC wells being drilled and permits filed remains strong with 230 gross or 1.0.

Danielle D. Mezo: Nine nine net wells the continued track record of well conversions and replenishment of the inventory of wells in progress or which reflects the high quality per for your portfolio of assets, we have assembled to provide steady sustainable future growth.

Danielle D. Mezo: The continued track record of well conversions and replenishment of the inventory of wells in progress, or WIPs, reflects the high-quality portfolio of assets we have assembled to provide steady, sustainable future growth. In addition to our WIPs, we regularly monitor third-party operator rig activities in our focus areas and observed 15 rigs present on PHX Mineral Acreage as of April 23, 2024. Additionally, we had 65 rigs active within 2.5 miles of PHX owners.

Danielle D. Mezo: In addition to our whips, we regularly monitor third party, operator rig activities and our focus areas and observed 15 rigs present on PHX mineral acreage as of April 23rd 2024. Additionally, we had 65 rigs active within two five miles of PHX ownership in summary, we continue to see steady develop.

Danielle D. Mezo: In summary, we continue to see steady development in both our legacy and recently acquired mineral assets, which should lead to annually increasing royalty volumes. Now I will turn the call over to Ralph to discuss finance. Thanks, Danielle.

Danielle D. Mezo: And both our legacy and recently acquired mineral assets, which should lead to annually increasing royalty volumes now I will turn the call to Ralph to discuss financials.

Ralph: Thanks, Danielle, and thank you to everyone for being on the call today. For our first fiscal quarter ended March 31st, 2024, natural gas, oil, and NGL sales revenues decreased 17% to $7.1 million compared to the prior sequential quarter due primarily to a decrease in production volumes of 6% and a decrease in realized prices of 12% on an MCFE basis to $3.35 from $3.81 in Q4 2023. Realized natural gas prices averaged for the first quarter of 24 were $2.10 per MCF compared to $2.53 in the fourth quarter of 23.

Ralph: Thanks, Danielle and thank you to everyone for being on the call today.

Ralph: Realized oil prices averaged $76.01, down 3% from the fourth quarter of 23, and NGL prices averaged $21.51, down 10% from the fourth quarter of 23. Realized hedge gains for the quarter were $1.67 million. Approximately 62% of our natural gas, 37% of our oil, and none of our NGL production volumes were hedged at average prices of $3.82 per MCF and $68.98 per barrel. Most of these hedge contracts were added over the course of the last 18 months.

Ralph: For our first fiscal quarter ended March 31, 2020 for natural gas oil and NGL sales revenues decreased 17% to $7 1 million compared to the prior to <unk>.

Ralph: Compared to the prior sequential quarter due primarily to a decrease in production volumes of 6% and a decrease in realized prices of 12% on an M. C. A fee basis to $3.35 from $3.81 in Q4 2023.

Ralph: Realized natural gas prices averaged for the first quarter of 24 or $2.10 per mcf compared to $2.53 in the fourth quarter of 'twenty three realized oil prices averaged $76.01 down 3% from the fourth quarter of 'twenty three in NGL.

Ralph: Prices averaged $21.51 down 10% from the fourth quarter of 'twenty three.

Ralph: Realized hedge gains for the quarter were 1.67 million approximately 62% of our natural gas, 37% of our oil and none of our NGL production volumes were hedged at average prices of $3.82 per Mcf and $68 98 per <unk>.

Ralph: Most of these hedge contracts were added over the course of the last 18 months, we continue to be consistent with our hedge program and believe it is doing what it was meant to do which is to protect our downside approximately 48% of our anticipated full year 2020 for natural gas production at the midpoint of our guidance has.

Ralph: We continue to be consistent with our hedge program and believe it is doing what it was meant to do, which is to protect our downside. Approximately 48% of our anticipated full-year 2024 natural gas production at the midpoint of our guidance has downside protection at approximately $3.34 per MCF. On the oil side, approximately 37% of our anticipated production at the midpoint of our guidance has downside protection at approximately $64.94 per barrel. We structure our natural gas hedges using both swaps and costless collars, which means that we also have upside exposure on certain volumes up to the $4-$5 range per MCF.

Ralph: Downside protection at approximately $3.34 per Mcf on the oil side, approximately 37% of our anticipated production at the midpoint of our guidance has downside protection at approximately $64.94 per barrel.

Ralph: We structure, our natural gas hedges using both swaps and Costless collars, which means that we also have upside exposure in certain volumes up to the $45 range per Mcf.

Ralph: Our current hedge position is available in our recently filed 10-Q. Transportation, Gathering, and Marketing decreased 11% on a sequential quarter basis to $843,000, primarily due to lower prices and lower volumes during the quarter. Production and ad valorem taxes decreased 14% on a sequential quarter-over-quarter basis to approximately $392,000 due to lower prices and lower production volumes. LOE associated with our legacy non-operated working interest wells increased 4% on a sequential quarter-over-quarter basis to $332,000, primarily due to higher work-over expenses on our liquid-prone wells in Oklahoma, which also means that in the coming quarters you should see Cash G&A was flat at approximately $2.6 million compared to the prior sequential quarter.

Ralph: Our current hedge position is available in our recently filed 10-Q.

Ralph: Transportation gathering and marketing decreased 11% on a sequential quarter basis to 843000.

Ralph: Primarily due to lower prices and lower volumes during the quarter.

Ralph: Production and AD valorem taxes decreased 14% on a sequential quarter over quarter basis to approximately 392000 due to lower prices and lower production volumes Louis.

Ralph: Associated with their legacy non operated working interest wells increased 4% on a sequential quarter over quarter basis to 332000, primarily due to higher workover expenses on our liquid prone wells in Oklahoma, which also means that in the coming quarters, you should see some even some.

Ralph: <unk> performance out of those wells.

Ralph: Cash G&A was flat at approximately $2 6 million compared to the prior sequential quarter. Our cash G&A is typically higher in the first and fourth calendar quarters of the year compared to the second and third calendar quarters of the year due to professional fees associated with items, such as our 10-K and our shareholder.

Ralph: Our cash G&A is typically higher in the first and fourth calendar quarters of the year compared to the second and third calendar quarters of the year due to professional fees associated with items such as our $10K marketing campaign and our shareholder meeting. Adjusted EBITDA was up to $4.6 million in our Q1 2024 quarter as compared to $4.5 million in Q4'23. The slight increase in EBITDA, despite lower production volumes and realized prices, is due to the high quality of our assets and the successful implementation of our hedging strategy. The net loss for the quarter was $200,000, or negative one penny per diluted share.

Ralph: Meeting.

Ralph: Adjusted EBITDA was up to $4 6 million in our Q1, 'twenty 'twenty four quarter as compared to $4 5 million in Q4 23.

Ralph: A slight increase in EBITDA, despite lower production volumes and realized prices is due to the high quality of our assets and the successful implementation of our hedging strategy net loss for the quarter was $200000 or negative one penny per diluted share.

Ralph: We had total debt of $30,750,000 as of March 31st, down $2 million from December 31st, 2023. And currently, our debt stands as of right now at about $29,750,000. Much like last year at this time when natural gas prices fell, our acquisition program has remained very disciplined, and if the deals in the marketplace don't generate our required rates of return, we will not chase those deals.

Ralph: We had total debt of $30 million 750000 as of March 31st down 2 million from December 31, 2023, and currently our debt stands as of as of right now at about 29.750 million much like last year at this time were natural gas.

Ralph: As rice itself. Our acquisition program has remained very disciplined and if the deals in the marketplace don't generate our required rates of return we will not chase those deals we're happy to continue to build liquidity and pay down debt our debt to trailing 12 month adjusted EBITDA was 1.58 times as of March.

Chad L. Stephens: We're happy to continue to build liquidity and pay down debt. Our debt to trailing 12-month adjusted EBITDA was 1.58 times as of March 31st, 2024. As we announced a few weeks ago during a regularly scheduled semiannual borrowing base redetermination, our bank group maintained our borrowing base flat at $50 million and extended the maturity of our loan from September 1st, 2025 to September 1st, 2028. I'd like to thank our bank group for their continued support. With that, I'd like to turn the call over to Chad for some final remarks.

Chad: <unk> 31, 24, as we announced a few weeks ago. During our regularly scheduled semi annual borrowing base Redetermination. Our bank group maintained our borrowing base flat at $50 million and extended the maturity of our alone from September 25 through September <unk> of 2028 I'd like.

Chad L. Stephens: To thank our bank group for their continued support with that I'd like to turn the call over to Chad for some final remarks.

Chad: Thank you Ralph.

Chad L. Stephens: We are very pleased with our achievements despite a challenging macro environment. The dramatic collapse in natural gas prices in early 2023 and lingering at historic lows currently have had a material impact on natural gas-focused EMPs development activity, especially in Haynesville and Marcellus. As a mineral owner, we will also be impacted by this. However, our business strategy is to acquire minerals in the core of our focus area with near-term development potential.

Chad: We are very pleased with our achievements despite a challenging macro environment.

Chad L. Stephens: The dramatic collapse collapse in natural gas prices in early 2023 and lingering at historic lows. Currently has had a material impact on natural gas focused e&ps development activities, especially in the Haynesville and Marcellus as a mineral owner, we will also be impacted by this.

Chad L. Stephens: However, our business strategy is to acquire minerals in the core of our focus area with near term development potential. This.

Chad L. Stephens: This can be seen by our continued steady well conversions that support our expected future royalty volume growth despite the various headwinds. To recap our progress and achievements, and at the risk of sounding a bit redundant from our last call, I want to emphasize that we have built a portfolio of high-quality assets, with improved cast margins over the last four years, a mineral interest in a deep inventory of an undeveloped drilling location, which supplies our well conversions and are categorized as probable reserves.

Chad L. Stephens: This can be seen by our continued steady well conversions that supports our expected future royalty volume growth despite the various headwinds.

Chad L. Stephens: To recap, our progress and achievements and at the risk of sounding a bit redundant from our last call I want to emphasize that we have built a portfolio of high quality assets with improved cash margins over the last four years.

Chad L. Stephens: A mineral interest and a deep inventory of undeveloped drilling locations.

Chad L. Stephens: Each supply are well conversions and are categorized as probable reserves.

Chad L. Stephens: This conversion rate, which Danielle discussed a moment ago, is explained in our IR slide presentation and will continue to drive increasing royalty volumes and cash flow over the next few years. As I did last quarter, I direct you to slide 7 of our newly posted IR presentation, which shows a total 2P, which is total approved and probable reserves; PV10 reserve value at the current NYMEX strip price is close to $300 million. This reserve value is validated by independent technical work performed by our outside third-party engineering firm, College of Les Miserables.

Chad L. Stephens: This conversion rate, which Daniel discussed a moment ago as explained in our IR slide presentation, and we will continue to drive increasing royalty volumes and collect cash flow over the next few years.

Chad L. Stephens: As I did last quarter I direct you to slide seven of our newly posted IR presentation. They reflect a total two P. Which is total proved and probable reserves PV 10 reserve value at current Nymex strip prices close to $300 million.

Chad L. Stephens: This reserve value is validated by the independent technical work performed by our outside third party engineering firm colleague LSP.

Chad L. Stephens: If natural gas prices return to a more normal mid-price cycle and are driven by the catalyst to which I earlier referred, that PV10 value reflected on slide 7 would be dramatically higher. We also show in the appendix of our IR presentation the timing of the new LNG export capacity from the Gulf Coast, which we continually emphasize. Once in service, this will help bring natural gas prices into that mid-price to upper range and, with increased operator activity, increase our royalty production volumes and cash flow.

Chad L. Stephens: If natural gas prices return to a more normal mid price cycle.

Chad L. Stephens: And driven by the catalyst, which I earlier referred that PV 10 value reflected on that slide seven would be dramatically higher.

Chad L. Stephens: We also show in the appendix of our IR presentation, and the timing of the new LNG export capacity from the Gulf Coast, which we continually emphasize once in service. This will help bring natural gas prices into that mid price to upper range and with increased operator activity increase our royalty production.

Chad L. Stephens: <unk> volumes and cash flow.

Chad L. Stephens: Since 2020 and today, we have spent approximately $130 million acquiring our current mineral position in the scoop. VHX's current enterprise value is roughly $145 to $150 million. The reserve value I mentioned earlier of at least $300 million is in comparison, we recognize the disconnect between these facts and our current stock price. We continually work every day searching for the best way to reward our shareholders and close this conundrum by increasing shareholder value. As always, I thank our employees and Board of Directors for their hard work. This concludes the prepared remarks portion of the call. Operator, please open up the queue for questions.

Chad L. Stephens: Since 2020 and to date, we have spent approximately 130 million acquiring our current mineral position in the scoop and haynesville.

Chad L. Stephens: <unk> current enterprise value is roughly a $145 million to $150 million of value. The reserve I mentioned earlier are at least 300 million is in comparison, we recognized the disconnect between these facts and our current stock price, we continually work everyday searching for the best way to reward.

Chad L. Stephens: Our shareholders and closed this conundrum by increasing shareholder value.

Chad L. Stephens: As always I, thank our employees and board of directors for their hard work.

Chad L. Stephens: This concludes the prepared remarks portion of the call operator, please open up the queue for questions.

Chad L. Stephens: Okay.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is busy. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Derrick Whitfield with Stiefel. Please proceed with your question.

Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone.

Operator: A confirmation tone will indicate your line is in a question you May press Star two if you would like to remove your question from the Q.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: Yeah.

Derrick Lee Whitfield: Our first question comes from the line of Derrick Wood.

Derrick Lee Whitfield: Would feel with Stifel. Please proceed with your question.

Derrick Lee Whitfield: Good morning, all, and thanks for your time. Hey, Derrick.

Derrick Lee Whitfield: Hi, good morning, all and thanks for your time.

Derrick Lee Whitfield: Hey, Derik.

Derrick Lee Whitfield: For my first question, I wanted to focus on your 2024 guidance, perhaps leaning in on Danielle's prepared comments. Do you help frame how you're thinking about cadence of production throughout the year based on your WIP and expected curtailments? And then, regarding curtailments more specifically, what's your sense of how material they are at present?

Derrick Lee Whitfield: For my first question I wanted to focus on your 2024 guidance, perhaps leaning in on Daniels prepared comments can you help frame, how you're thinking about cadence of production throughout the year based on your weapon expected curtailments and then regarding your comments more specifically, what's your sense on how material they are at present.

Derrick Lee Whitfield: Okay.

Ralph: Hey, Derrick, it's Ralph. You know, look, I think I think when we put out that guidance, you know, we had already seen the slowdown in the pace of development. So our guidance reflects that, you know, obviously, we think that there's going to be an increase in activity towards the end of the year. So it can be a little bit more biased towards the end of the second half of the year versus the first half of the year.

Ralph: Hey, Derek it's Ralph.

Ralph: I mean, I think I think when we put out that guidance you know we had already seen the slowdown in the pace of development. So our guidance reflects that obviously.

Ralph: You know, we think that theres going to be an increase in activity towards the end of the year. So it can be a little bit more biased towards the end of the second half of the year versus the first half of the year.

Chad L. Stephens: That having said that, you know, as we sit here and we look at the well conversion rate, you know, even for, you know, even since March 31st, right in the quarter that we just reported, you know, we continue to see strong activity, which, by the way, includes some Haynesville conversions, which, you know, I think some people would maybe not have assumed that they would happen, but they are happening, with some of the operators that So, you know, we continue to remain confident with the guidance that we have provided.

Ralph: That having said that.

Chad L. Stephens: As we sit here when we look at.

Chad L. Stephens: The well conversion rate you know even for you know even for even since March 31, right in the quarter that we just reported we continue to see strong activity, which by the way include some haynesville conversions, which you know I think some people would would would maybe not have assumed that they would happen, but they are happening.

Chad L. Stephens: With some of the operators that we have there. So we continue to remain confident with the guidance that we provided and obviously if the facts on the ground change we will we'll update everybody.

Chad L. Stephens: And obviously, if the facts on the ground change, we will update everybody on, you know, what revised guidance might be. But as we sit here right now, we continue to remain, we remain, we continue to feel good about the numbers that we put out.

Speaker Change: On you now.

Chad L. Stephens: On what.

Chad L. Stephens: Our revised guidance might be but as we sit here right. Now we continue to remain we remain we continue to feel good about the numbers that we put out.

Chad L. Stephens: Yeah, Derrick, this is Chad. Again, we closely follow the well conversions broken out as permits, wells being drilled, and wells waiting on completion. And you can go back six or eight quarters, and both on a gross and a net basis, you know, six quarters ago, it compares very similar to where we are today in those categories that I just mentioned. The big driver, or the...

Chad L. Stephens: Yeah Derrick this is Chad.

Chad L. Stephens: Again, we closely on a quarterly basis follow the well conversions broken out as permits wells being drilled and wells waiting on completion and you can go back six or eight quarters and both on a gross and a net basis.

Chad L. Stephens: Six quarters ago. It compares very similar to where we are today in those categories that I just mentioned.

Chad L. Stephens: The big driver or for the.

Chad L. Stephens: It's dependent upon the net interest in the actual well that's being completed. Painesville wells, big initial rates, big booming initial rates, and some of the wells we have interest in up in Oklahoma might not be quite as high as the initial rates, might not be quite as strong. But we are encouraged by some of the activity we're seeing in Springboard III, where we have some really high net interest in sections, and we're hopeful that the operator will get those wells drilled and completed by mid-Summer to go into the Fall and will positively impact, are multi-volumes, and we're optimistic that we'll be able to hit the mid-range of the guidance we've provided. So we watch it very closely and feel pretty good about the mid-point of guidance, and I will add.

Speaker Change: It's dependent upon the net interest in the actual well that's being completed Haynesville wells Big Big initial rates big booming initial rates in some of the wells.

Chad L. Stephens: We have interest in up in Oklahoma might might not be quite as the initial rates might not be quite as strong, but we are encouraged by some of the activity. We're seeing in the springboard three where we have some really high net interest in sections.

Chad L. Stephens: And we're hopeful that the operator will get those wells drilled completed by mid mid summer to going into the fall and will positively impact.

Chad L. Stephens: Our royalty volumes and we're optimistic that we'll be able to hit.

Chad L. Stephens: The mid range of the guidance, we provided so we watch it very closely and feel pretty good about mid point of guidance.

Danielle D. Mezo: And I will add to that, on top of the consistency of the conversion rates, we do see that the curtailments on our existing PDP have not been material thus far. It's mainly on the newer ducks and whips that we see a bit of delay.

Speaker Change: And I will add to that that on top of them.

Danielle D. Mezo: The consistency of the conversion rates, we do see that the curtailments on our existing PDP have not been material, thus far and its mainly on the newer ducks and whips that we see a bit of delay.

Derrick Lee Whitfield: Terrific. And what I might do is really pick up on your comments, Chad, regarding the value disconnect. You guys have made great progress. When you think about the conversion you've made, your production base from working interest to minerals, and you're continuing to grow the mineral space today, what, in your view, is the best way to address that value disconnect? Is it more of the same? Are there other things that you guys are contemplating?

Danielle D. Mezo: Terrific.

Derrick Lee Whitfield: One of them might you see really picking up on your comments Chad regarding the value disconnect. You guys have made great progress. When you think about the conversion you've done your production base from working interest and miserable to minerals and you're continuing to grow the mineral space today, what in your view is the best way to address that.

Derrick Lee Whitfield: You disconnect is it more of the same or are there other things that you guys are contemplating.

Chad L. Stephens: Well, we're kind of running on several parallel paths. Deal size, we would continue to right now as we talked about the first quarter capital allocation was between dividends, debt payment, and a few modest small deals, two, three, four, $500,000 sized deals. We're continuing to attempt to transact, but especially as Ralph alluded to in Haynesville, the bid-ask between the seller and the buyer is pretty far apart. The sellers want to sell them at a $6 strip, non-max strip. We can't.

Chad: Well, we're kind of running.

Chad L. Stephens: Several parallel paths.

Chad L. Stephens: The deal size, we will continue to right now as we talked about the first quarter capital allocation was between dividends debt payment in.

Chad L. Stephens: A few modest small deal so those.

Chad L. Stephens: 234, or $500000 sized deals we are continuing to attempt to transact, but especially as Ralph alluded to in the Haynesville.

Chad L. Stephens: The bid ask between the seller and Nevada buyer is pretty far apart is the sellers want to sell at a $6 strip Nymex strip.

Chad L. Stephens: We can't our economics don't work at that kind of strip strip price. So we've not been able to transact moving into the larger kind of the mid range deals the $2 five to five $6 million size deals that we did kind of year end 'twenty two going into 2023, we haven't been able to transact on any of those as the sellers have.

Chad L. Stephens: Our economics don't work at that kind of strip price, so we've not been able to transact. Moving into the larger, kind of the mid-range deals, the $2.5 to $5, $6 million size deals that we did kind of year-end, 22 going into 2023, we haven't been able to transact on any of those as the sellers have decided to just sit on the sidelines and wait for what I keep alluding to as the LNG export facilities driving improved pricing, and the sellers will be able to get a much better price for We're continuing. So those are two parallel paths we continue to watch and work on.

Chad L. Stephens: To to just sit on the sidelines and wait for what I keep alluding to is the LNG export facilities driving improved pricing and the sellers will be able to get.

Chad L. Stephens: Much better price for their assets. So those midsized deals $5 6 million, we've been unable to transact on where continue so those are two two parallel pads. We continue to watch them and work and then the final is we continue to talk to larger private entities larger private sellers.

Chad L. Stephens: And then the final thing is we continue to talk to larger private entities, larger private sellers, kind of in the $10 to $20 million, $25 million size range and potentially, and I say that, emphasize potentially using our equity to close on these larger-size deals that will ultimately improve. Our float, that's one of our, probably our limitations is our daily trading volume, but I think that takes care of itself. If natural gas prices improve and our EBITDA improves, our multiple expansion will improve, and our stock price will improve, and that'll kind of take care of itself a little bit.

Chad L. Stephens: <unk> kind of that $10 million to $20 million $25 million size range, and potentially and I'll say that.

Chad L. Stephens: Emphasize potentially using our equity.

Chad L. Stephens: To close on these larger sized deals that will ultimately improve our float or it's one of our probably our limitations as our daily trading volume, but I think that takes care of itself.

Chad L. Stephens: If natural gas prices improve and our EBITDA improves or multiple expansion will improve in our stock price will improve and that will kind of take care of itself, a little bit, but I would like to see a little bit more shares out there and better float daily trading volume and float.

Chad L. Stephens: But I would like to see a little bit more shares out there and a better float, daily trading volume float. So we'll try to find that right deal to improve the float, but I think some of that'll take care of itself if and when prices improve and our EBITDA and cash flow increase by way of that.

Chad L. Stephens: No.

Chad L. Stephens: We'll try to find that right yield improve the flows but I think some of that will take care of itself if and when <unk>.

Chad L. Stephens: Improving our EBITDA and cash flow increases by way of that but where else do you want to.

Ralph: Yeah, Derrick, and I think keep watching the, you know, it's interesting. I think none of the public companies really, since Continental went private, they don't necessarily talk about the springboard plays in the scoop. But, you know, we keep providing updates on that. And, and, you know, I wish more of the operators would talk about them. You know, it continues to be the operators that have, you know, they focus on the premium, but they have acreage in the Anadarko Basin.

Speaker Change: Yeah, Derik and I think keep watching.

Ralph: It's interesting I think none of the none to the public companies really since continental one private they don't necessarily talk about the springboard plays into scoop, but you know, we keep providing updates on that and I wish more of the operators would talk about them you know it continues to be that that.

Ralph: The operators that have.

Ralph: Focus on the Permian, but they have acreage in the Anadarko basin to continue to run rigs in the Anadarko basin and drill wells right and so.

Ralph: They continue to run rigs in the Anadarko Basin and drill wells, right? And so, you know, that to me tells me that it competes for capital inside of their portfolio. You just don't see it in the.., you know, in, in sort of how they communicate to the market, right. So we try to provide some of that. And I think if people keep looking at what we're, you know, our messaging on Springboard 3, and how, and how that's progressing along, you know, hopefully, just the public announcements that we make on the well conversions there and how high quality locations they are, they are, right, people start to pick up that there is more value on that undeveloped component, right, because, again, that Springboard 3 is 4,000 net royalty acres, the majority of which is undeveloped, but there is significant upside there, that I don't believe folks are assigning value to as we sit here right now.

Ralph: That to me tells me that it competes for capital inside of their portfolio you just don't see it.

Ralph: In the.

Ralph: In in sort of how they communicate to the market right. So we try to provide some of that and I think if people keep looking at what were.

Ralph: Our messaging on springboard, three and how and how that's progressing along.

Ralph: Hopefully just step public announcements that we make.

Ralph: On the well conversions, there and how high quality.

Ralph: What locations. They are they are right people start to pick up that there is more value on that and undeveloped component right because again that springboard threes 4000, net royalty acres of majority of of witches undeveloped, but there is significant upside there.

Ralph: That I don't believe folks are assigning value to as we sit here right now.

Chad L. Stephens: And we, Derrick, too, are going to further comment on your question around the disconnect. We want our shareholders to share in that value, that upside, and somewhere down the road, in the next 6, 12, 18 months, Springboard III will become more fully developed and flowing through our financials, which will benefit our shareholders through multiple expansion and increasing volumes of cash flow. So we want them to be patient and not bail on us too early because of the macro environment we're in right now. We have really high quality assets there in the Supreme Court three, and it will. It's going to ring the bell here at some point in the future.

Ralph: Derek.

Chad L. Stephens: And a further comment on your question around the disconnect we want our shareholders to.

Chad L. Stephens: To share in that value that upside and then somewhere down the road in the next 612 18 months springboard III will become more fully developed and flowing through our financials.

Chad L. Stephens: Which will benefit our shareholders.

Chad L. Stephens: The multiple expansion and increasing volumes and cash flow. So we want them to be patient.

Chad L. Stephens: Not not.

Chad L. Stephens: Honest too early because of the macro environment. We're in right now we have really high quality asset their springboard III and it's going to.

Chad L. Stephens: It's going to ring the bell here at some point in the future.

Derrick Lee Whitfield: makes complete sense, guys. And if I could ask maybe just one more, given the wider bid-ask spread that you're seeing right now in Hainesville... Perhaps could you speak to the competitive landscape you're seeing in Anadarko where maybe that's not as prevalent?

Speaker Change: Makes complete sense, guys and if I could ask maybe just one more given the wider bid ask spread that you're seeing right now in the haynesville.

Derrick Lee Whitfield: Perhaps could you speak to the competitive landscape you are seeing in the Anadarko, where maybe that's not as prevalent.

Ralph: I think, I mean, in terms of the acquisition marketplace, I mean, you know, Oklahoma, Indiana, and the Darko Basin continues to be pretty fragmented. You know, you've seen some larger deals in the 100 plus million dollar size transact, you know, over the last, you know, six months, right? And I would actually say, you know, I think I've mentioned this before in prior calls, if you took any of those acquisitions and applied the multiple at which they transacted to our metrics, you end up at a very different place from where we currently trade, which sort of just touches on the upside that Chad mentioned.

Derrick Lee Whitfield: I think I mean in terms of the acquisition marketplace I mean.

Ralph: Oklahoma in the Anadarko Basin continues to be pretty fragmented you know you've seen some larger deals in the 100 plus million dollar size transact you know over the last you know.

Ralph: Six months right in and I would actually say you know I think I've mentioned this before on prior calls if you took any of those acquisitions and applied the multiple at which they transact it to our metrics you ended up at a very different place from where we currently trade.

Ralph: Which is sort of just touches on the upside that Chad mentioned.

Ralph: But on the smaller transaction size smaller deal size at sort of our bread and butter I would say you know we continue to see.

Ralph: But on the smaller transaction size, you know, smaller deal size, that's sort of our bread and butter, I would say, you know, we continue to see, you know, we continue to see attractive deals. You know, they're, they're, the larger guy that the amount of capital chasing the smaller deals is not as large, right? And so, you know, we tend to be a bit of a bigger fish in a smaller pond, if that makes sense, compared to the Haynesville, where, you know, there is on any, on any normal day, there's a lot more competition, and we're a bit of a smaller fish in a bigger pond. But the pond's big enough where we can still have, you know, take our piece of it into Haynesville. That's how I would characterize it. Yeah.

Ralph: Continue to see attractive deals.

Ralph: You know, they're there the larger the.

Ralph: The amount of capital chasing the smaller deals is not as large right and so you know we tend to be.

Ralph: A bit of a bigger fish in a smaller pond, if that makes sense compared to the Haynesville, where you know there is on it any more on any normal day. There was a lot more competition and we're a bit of a smaller fish in a bigger pond, but the ponds big enough, where we can still have you know take.

Ralph: Take our piece of it and the Haynesville. It's that's how I would characterize it yes, and let me add to that so yeah. The haynesville is a much bigger sandbox, so to speak and lot more <unk>.

Chad L. Stephens: Yeah, and let me add to that. So yeah, Hainesville is a much bigger sandbox, so to speak, and a lot more running room, and more of a kind of homogeneous.

Speaker Change: Running room in more of a kind.

Speaker Change: Kind of homogenous.

Chad L. Stephens: Reservoir to understand, so you can move around that sandbox and get kind of similar economics and results when you're acquiring minerals, whereas Springboard III is much more targeted, and it speaks to our technical capabilities. And I'm proud of that, that we, early on, figured out Springboard III and were able to stake a flag in that asset. It's a pretty, again, targeted bullseye of a smaller sandbox, so to speak, and we were able to get in there early and assemble quite a nice little 4,000-acre position in that asset. So, two different ends of the spectrum, or opposite sides of the same coin, so to speak.

Speaker Change: Reservoir to understand so you can move around at sandbox and get kind of kind of similar economics and results. When you are acquiring minerals, whereas the springboard III is a much more targeted and it speaks to our technical capabilities and I'm proud of that that we early on figure it out.

Chad L. Stephens: The springboard three and we're able to stay.

Chad L. Stephens: Stake a flag in that asset, it's a pretty again targeted.

Chad L. Stephens: Bullseye.

Chad L. Stephens: Smaller sandbox, so to speak and we were able to get in there early and and Simba.

Chad L. Stephens: Symbol quite a nice little 4000 acre position.

Chad L. Stephens: <unk> position in that asset.

Chad L. Stephens: Two different opposite ends of the spectrum or.

Chad L. Stephens: Opposite sides of the same coin so to speak.

Chad L. Stephens: We were able to get in there early enough to have what will become a significant position in that small sandbox.

Chad L. Stephens: We're able to get in there early enough to.

Chad L. Stephens: Have a really what will become a significant position in that small sandbox.

Derrick Lee Whitfield: That's very helpful. Thanks for your time.

Speaker Change: That's very helpful. Thanks for your time.

Derrick Lee Whitfield: Yeah.

Operator: Thank you. Our next question comes from the line of Charles Meade with Johnson and Rice. Please proceed with your question.

Derrick Lee Whitfield: Thank you. Our next question comes from the line of Charles Meade with Johnson Rice. Please proceed with your question.

Charles Arthur Meade: Yes, good morning to Chad, Danielle, and Ralph. I want to ask a question about, I guess, you asking you guys to peer into your crystal ball for what might happen in Hainesville. You know, there have been a number of companies who said, well, you know, We're not going to turn in any wills until things get better, but we're not going to tell you the criteria for when things are better.

Charles Arthur Meade: Good morning.

Charles Arthur Meade: Daniela and Ralph I wanted to ask a question.

Charles Arthur Meade: Wanted to ask a question about <unk>.

Charles Arthur Meade: I guess you you're asking you guys got pier in your Crystal Crystal ball for for what might happen in the Haynesville.

Charles Arthur Meade: You know it there there've been a number of companies he said well you know.

Charles Arthur Meade: We're not going to turn into any wells until things get better, but we're not going to tell you.

Charles Arthur Meade: Our criteria for when things are better.

Charles Arthur Meade: And I'm just curious, you've got exposure to a lot of different operators, what are you observing as far as when companies are going to, are electing to, turn wells in line, and you know how that is different across operators, and then, with the next threshold, when do you think? You know, when do you think, or what price do you think? We need to see before... operators start increasing recount in the play. And I know that's a lot of speculation, but you guys have a really interesting vantage point in that regard.

Charles Arthur Meade: And I'm just curious if you're you've got exposure to a lot of different operators. What are what are you observing as far as when companies are going to.

Charles Arthur Meade: Are you or are electing to.

Charles Arthur Meade: [noise] turn wells in line.

Charles Arthur Meade: Is that different Cros operators and then with the next threshold when do you think.

Charles Arthur Meade: When do you think or what price do you think.

Charles Arthur Meade: We need to see before opera.

Charles Arthur Meade: Operator start increasing rig count in the play and I know that there's a lot of speculation, but you guys haven't really interesting vantage point in that regard.

Chad L. Stephens: Yeah, Charles, so we view the Haynesville by watching the operators and their drilling costs, drilling, and completion. The Haynesville is pretty economical for these operators based on what we're seeing in drilling completion costs. When you get up at a very high level, flyover level, it takes about 40 rigs to keep the growth volumes in Haynesville flat with those big volumes and steep declines. You need about 40 rigs constantly running to keep the volumes flat. Today we're at 34 rigs, so we know for sure in watching the gross volumes coming out of the Hainesville Basin. And we kind of, based on what we're seeing...

Speaker Change: Yeah, Charles So we view, the haynesville and watching the operators and their drilling costs drilling and completion costs.

Chad L. Stephens: Economic kind of $2 75 to $3 dollar ish type.

Chad L. Stephens: Gas prices the Haynesville is pretty economic for these operators based on what we're seeing in drilling and completion costs. When you when you get up kind of at a very.

Chad L. Stephens: Very high level flyover level it takes about 40 rigs.

Chad L. Stephens: To keep the gross volumes in the Haynesville flat with those big volumes and steep declines you need about 40 rigs.

Chad L. Stephens: Constantly running to keep the volumes flat today, we're at 34 rigs.

Chad L. Stephens: We know for sure and watching the gross volumes coming out of the Haynesville basin that the volumes are dropping.

Chad L. Stephens: And we kind of based on what we're seeing.

Chad L. Stephens: The volume, gross volumes will decline between 1.2 and 1.4 BCF a day in 2024, part of that overall U.S. domestic decline I was talking about at the start. It was, gross domestic production was 102; today it's 96. Part of that decline is coming from that Hainesville decline I just talked about. The ducts, the wells that have been drilled and uncompleted, had an inventory in March of around 280. Today, it's around, and it's below 200.

Chad L. Stephens: The volume growth volumes will decline between one two and one four Bcf a day in 2024 part of that overall U S. Domestic decline I was talking about at the start it was.

Chad L. Stephens: Domestic production was 102 today is 96 part of that declines coming from that that the Haynesville decline I just talked about the.

Chad L. Stephens: The ducks that the wells that have been drilled and uncompleted had an inventory in March of 'twenty three.

Chad L. Stephens: Around 280.

Chad L. Stephens: Today, it's around it's below 200.

Chad L. Stephens: That's an over 30% drop in the number of ducts, and it's really that duct supply that operators can turn to and start completing and driving volumes and increasing volumes. So, based on what we're seeing today in terms of the rate of wells being completed, we're seeing about a four-month inventory of ducts, but what we consider to be pretty low. So when you think about if gas, the strip price for 25 kind of stays where it is.

Chad L. Stephens: Over 30% drop in the number of deaths and it's really that DUC supply that the operators can turn to and start completing and drive volumes an increase in volumes.

Chad L. Stephens: It's about based on what we're seeing today in terms of the rate of wells being completed.

Chad L. Stephens: Seeing about a four month inventory of ducks.

Chad L. Stephens: But what we consider to be pretty low.

Chad L. Stephens: So when you think about it.

Chad L. Stephens: The strip price for 25 kind of stays where it is.

Chad L. Stephens: We see volumes in the Haynesville increasing in 2025 by a little over 2 bcf a day, 2 to 2.2, maybe 2.4 bcf a day, 26, and similar around 2 bcf a day, and in 2027 about a bcf a day. So somewhere 5, 5.5 bcf a day over the next three years, and Haynesville Production, which given our mineral ownership and where all this will happen, is going to obviously speak to our overall volume growth, multi-volume growth over those same next three years, which is again encouraging to us. So that gives you a macro view of how we view not only the basin but how it affects or impacts us.

Chad L. Stephens: We see volumes.

Chad L. Stephens: In the Haynesville increasing in 2025.

Chad L. Stephens: By over little over two Bcf a day two to two point to maybe two four Bcf a day 26 similar round two Bcf a day in 2027 about a bcf a day, so somewhere 555 Bcf a day over the next three years increase in Haynesville production, which.

Chad L. Stephens: Given our mineral ownership and where all this will happen is going to obviously speak to our overall volume growth royalty volume growth over those same next three years, which again is encouraging to us. So that gives you a macro of what how we view not only the basin, but how it affects your impacts us.

Charles Arthur Meade: Yeah, and Chad, it looks to me, or I shouldn't say it looks to me, based on history, I would expect private operators to be kind of quicker responders than public ones. Is that what you're seeing, or is that what you expect to see?

Speaker Change: Yeah Indeed.

Charles Arthur Meade: I mean, it looks to me or I shouldn't say it looks to me based on history I would expect a private operators to be kind of a quicker quicker responders than publix is is that is that what youre seeing or is that would you expect to see.

Chad L. Stephens: Yeah, but the I mean, the material All the material ownership has been kind of consolidated into a few. Aethon's got a ton of leasehold both in the Louisiana side and the Texas side, Athon, Comstock, down in Robertson County, the big, this new big Western Haynesville play with these big wells. They've consolidated their positions. Rock Cliff just sold to Tokyo Gas. They've got a big position. I just don't think that any of the remaining small private equity-owned companies are going to have any real impact or material impact on the overall gross volumes over the next two to three years.

Chad: Yeah, but I mean the material.

Chad L. Stephens: The material ownership has been kind of consolidated up into a few eight town's got.

Chad L. Stephens: A ton of.

Chad L. Stephens: Leasehold, both in the Louisiana side, and the Texas side.

Chad L. Stephens: Athos Comstock.

Chad L. Stephens: Down in the Robertson County, the Big this new big Western Haynesville play with these big wells, they've consolidated their positions rock Cliff just sell too.

Chad L. Stephens: So Tokyo gas.

Chad L. Stephens: Got a big position.

Chad L. Stephens: I just don't think that any of the remaining small private equity owned companies are going to have any real.

Chad L. Stephens: Impact or a material impact on the overall gross volumes over the next two to three years.

Chad L. Stephens: Unlike the Permian, there are still quite a few private equity groups out there that can drive volume growth, but I don't think private equity is going to, like it was, impact Haynesville gross volume.

Chad L. Stephens: <unk>.

Chad L. Stephens: Permian Theres still quite a few.

Chad L. Stephens: Private equity groups out there that can drive.

Chad L. Stephens: Volume growth out there, but I don't think the private equities are going up like they were going to impact the haynesville growth volumes.

Charles Arthur Meade: Got it, and then switching over to the scoop, it looks like from the outside looking in that there's pretty steady activity there, you know, and maybe there's a little, you know, maybe some of the big guys from pause that are coming back. Can you give us a sense of what's happening at the leading edge in the scoop? Are there any kind of smaller players who are who are you know? working around the edges, or are there people... Are there other people testing new zones, or you know, what's the kind of what's the latest leading edge that you're seeing in the scoop?

Chad L. Stephens: Got it and then switching over to the Scoop.

Charles Arthur Meade: It looks you from the outside looking in it but it looks like Theres pretty steady activity there and you know maybe theres a little you know maybe some of the big guys a pause that are coming back.

Charles Arthur Meade: Can you give us a sense of you know what what's happening at the leading edge in the Scoop are are there any are there any kind of smaller players who are who are you know.

Charles Arthur Meade: Working around the edges or are there people.

Charles Arthur Meade: Are there other people testing new zones, or you know what what's what's the kind of what's the latest leading edge that you have seen in the scoop.

Chad L. Stephens: Well, so, and you can.

Speaker Change: Well so.

Chad L. Stephens: Can.

Chad L. Stephens: You can look at our slide deck and see kind of this narrow fairway north to south between the stack, the merge, what we call the merge, and then the scoop that provides a real fairway where the development's going on. And it's still mainly the larger public, or what was public, Continental Marathon at Goldport that are running the rigs in the spine of this fairway that I'm talking about. There are a few small private equity guys. Camino is a small citizen.

Chad L. Stephens: You can look at our IR slide deck and see kind of this <unk>.

Chad L. Stephens: Harrow fairway north to south between the stack.

Chad L. Stephens: The merge when we called emerge and then the scoop.

Chad L. Stephens: That that provides.

Chad L. Stephens: <unk> provides a.

Chad L. Stephens: Fairway, where the developments going on and it's still mainly the larger <unk>.

Chad L. Stephens: Public or what was public continental.

Chad L. Stephens: Marathon Gulfport that are running the rigs in this in the spine of this fairway that I'm talking about there are a few small private equity guys Camino as small citizen.

Chad L. Stephens: 89 Energy bought the old Apache assets a few years ago, and they run a rig here or there. But again, given the leasehold position that Devon, EOG, Marathon, Continental, the leasehold position that they have in the core of that play, they're going to drive that development. Speaking to your question around the margins of the play, I don't think that the margins are going to really drive any overall material influence or impact on gross volumes out of that base.

Chad L. Stephens: 89 energy bought the old Apache assets, a few years ago.

Chad L. Stephens: <unk> run a rig here or there, but it's again, it's going to be given the leasehold position that Devon.

Chad L. Stephens: Oh Gee marathon continental.

Chad L. Stephens: Leasehold position that they have in the core of that play they're going to drive that that development speaking to your question around the margins of the play.

Chad L. Stephens: I don't think that the.

Chad L. Stephens: The margins are going to really drive any overall material influence or impact on gross volumes out of that basin. There is some when you look at Western Anadarko Basin.

Chad L. Stephens: There is some, when you look at the Western Anadarko Basin, out toward the Texas Panhandle, you see some development going on out there. EOG is kind of playing around out there, but there are a couple of small companies. MuBurn, which is a highly respected company, has been running several rigs out there in the western Anadarko Basin for quite some time. Crawley, and a couple other smaller private equity groups, are also playing out there. We've actually kind of looked out there at what we are trying to find about minerals out there.

Chad L. Stephens: Out towards the Texas Panhandle, you see some development going on out there eog's kind of playing around out there, but theres a couple of small companies Mewborn, which is a highly respected company has been run in several rigs out there in the western Anadarko basin for quite some time.

Chad L. Stephens: Hum.

Chad L. Stephens: Crawley couple of other smaller.

Chad L. Stephens: Private equity groups, there theyre playing out there.

Chad L. Stephens: We've actually kind of looked out there what the what we're trying to fund about minerals out there.

Chad L. Stephens: It's kind of a tough tough game out there. So we really haven't even been able to make any headway. There. So I still think this main fairway that we highlight in our Investor relations slide deck is going to be where the rig count capex as we're gonna be allocated in the spine and the main any sort of main volume increase is going to come from that.

Chad L. Stephens: And it's kind of a tough game out there, so we really haven't been able to make any headway there. So I still think this main fairway that we highlight in our investor relations slide deck is going to be where the rig count and capexes are going to be allocated in this spine. And any sort of major volume increase is going to come from that fairway.

Chad L. Stephens: That fairway.

Speaker Change: Thank you for that detail.

Operator: Thank you. Our next question comes from the line of Jeff Grampp with Alliance Global Partners. Please proceed with your questions, I was curious. We've seen... morning.

Chad L. Stephens: Thank you. Our next question comes from the line of Jeff Grant with Alliance Global Partners. Please proceed with your question.

Jeffrey Scott Grampp: Good morning, guys.

Jeffrey Scott Grampp: I was curious we've seen.

Jeffrey Scott Grampp: Morning. We've seen some operators, and I think Chad's speaker is pretty noteworthy in this, talking about basically completing wells and then just kind of hanging out till price improves. Do you guys have any visibility or estimates within your asset base as to the prevalence of that within kind of your wells and processes bucket?

Jeffrey Scott Grampp: Morning, we've seen some operators, having Chesapeake was pretty noteworthy in this talking about no basically completing wells and then just kind of hanging out tell a top price improves.

Jeffrey Scott Grampp: Do you guys have any visibility or are estimates within your asset base as to the prevalence of that within kind of your wells in process bucket.

Chad L. Stephens: I think Danielle, and I'll let her speak, but she basically stated what we know to date is that it doesn't appear on our assets that, obviously we're not under EQT, but the EQTs announced their deferrals up in the Marcellus, but Chesapeake has announced some deferrals of completing new wells but not existing production, and Danielle referred to that, I'll let her kind of comment too.

Speaker Change: Oh, I think Danielle and I'll, let her speak but she she basically stated what we know to date is that it doesn't appear on our assets that we're obviously, we're not under EQT, but to EQT has announced they're deferrals up in the Marcellus, but Chesapeake has announced some deferrals.

Chad L. Stephens: Of of.

Chad L. Stephens: Completing new wells, but not existing production, so danielle referred to that I'll, let her.

Danielle: Kind of kind of comment too yeah, I'll agree with Chad, we have not seen material deferrals on that side and we do see a slowdown we don't have a ton of wells under Chesapeake that are in that phase of development right now where their duct and just sitting at this point in time at least not with a material interest we do have wells under than at this time, we do seem to be under some of the more.

Danielle D. Mezo: Yeah, I'll agree with Chad. We have not seen any material deferrals on that side. We do see a slowdown. We don't have a ton of wells under Chesapeake that are in that phase of development right now where they're ducked and just sitting at this point in time, at least not with a material interest. We do have wells under them at this time. We do seem to be under some of the more private operators that are still moving forward with turning their wells on.

Danielle D. Mezo: But operators that are still moving forward with turning their wells on they've already drilled them they've already completed them and from everything that we can tell they intend to turn them on here in the near future. So at this time it hasn't really been a material at the wells just setting once completed.

Danielle D. Mezo: They've already drilled them. They've already completed them, and from everything that we can tell, they intend to turn them on here in the near future. So at this time, it hasn't really been a matter of the wells just sitting once.

Ralph: And Jeff, it's Ralph. One more thing. I mean, we continue to see, to the extent that the wells have converted, right? I mean, we, you know, we continue to see new permits filed and new rigs moving to locations on our acreage or adjacent to our acreage, even in the Haynesville. So, it's sort of an interesting dynamic where, when you hear on a macro level about the play, obviously, we're not immune to it, but it appears that, you know, that the quality of our acreage is sort of showing through here, relative to what you hear about basin-wide commentary.

Danielle D. Mezo: And Jeff It's Ralph on one more thing I mean, we continue to see to the extent that the wells have converted right. I mean, we you know we continue to see new permits filed and new rigs moving to location on our acreage or a date or adjacent to our acreage even in the haynesville. So it's sort of an interesting dynamic where.

Ralph: When you hear on a macro level about the play obviously, we're not immune to it but it appears that you know that the quality of our acreage is sort of showing through here relative to what you hear about basin wide commentary.

Jeffrey Scott Grampp: Got it. That's helpful. And for my follow-up on the acquisition side of things, I know you guys certainly were not expecting, you know, 2024 to be, you know, super active from an acquisition side, given prices and bid asks and everything that we've already talked about on the call. Looking back, do you think Q1 is kind of...

Speaker Change: Got it that's helpful and for my follow up on the acquisition side of things I know you guys certainly were not expecting 2024 to be.

Jeffrey Scott Grampp: Super active from an acquisition side given prices in bid ask and everything that we've already talked about on the call.

Jeffrey Scott Grampp: Yeah.

Jeffrey Scott Grampp: Looking back do you think Q1 is kind of <unk>.

Jeffrey Scott Grampp: Consistent with what you would have expected coming into the year from kind of a capital deployment perspective would you characterize it.

Jeffrey Scott Grampp: Better worse or I guess, just kind of wondering what you guys are thinking as far as a reasonable amount of of acquisitions, all things considered on a macro standpoint.

Ralph: I mean, look, I mean, last year, if you look at last year, and you're looking at your gas prices, right, that they dropped pretty materially, you know, was it about the same time, maybe it was late February, early March, where they had a big drop, and it stayed down for some period of time, obviously not to the level of this year's drop. But if you look at how we behaved last year, that's a pretty good guide to how we're behaving this year, right? I mean, we're not going to chase deals for the sake of chasing deals. We're going to be conservative.

Jeffrey Scott Grampp: I mean look I mean, I think last year. If you look at last year and you look at natural gas prices right.

Ralph: They had a they.

Ralph: They dropped pretty materially and it was at about the same time that maybe it was late February early March.

Ralph: Where they had a big drop and it stayed down for you know for some period of time, obviously not to the level of of this year's drop but if you look at how we behaved the last year, that's a pretty good that's a pretty good.

Ralph: Yeah. It's it's it's a pretty good guide to how we're behaving this year right I mean, it's we're not going to chase deals.

Ralph: For the sake of chasing deals, we're gonna be conservative organ.

Ralph: We're going to, you know, build cash, pay down debt, you know, improve liquidity. And when the market improves, we'll go, you know, we can go back into the market. And that's the beauty of the minerals business.

Ralph: You know build cash pay down debt.

Ralph: You know improved liquidity and when the market improves.

Ralph: We'll go you know we can go back into the market and that's the beauty of the minerals business you can flex down reflects up with your cash flow, whether it's on the acquisition side or or debt repayment or whatever it may be.

Ralph: You can flex down or flex up with your cash flow, whether it's on the acquisition side or debt repayment or whatever it may be, a lot faster than if you're a working interest business that has, you know, capital requirements that they don't necessarily have the ability to either, you know, defer or do on short notice, right? So, you know, second quarter is probably going to be the same. If you look at last year's second quarter, it was relatively slow on the acquisition front.

Ralph: A lot faster than if you're all working interest business that has you know capital requirements.

Ralph: That they don't necessarily have the ability to either defer or what do on short notice right. So you know second quarter is probably going to be the same. If you look at last year's second quarter was relatively slow on the acquisition front, we build liquidity and we got we go from there and then we you know last year then in September we.

Ralph: We built liquidity and, you know, we got, we went from there, and then we, you know, last year then in September, we did a really nice acquisition into Haynesville that is already paying dividends for us. And so if the same happens again, no guarantees, right? We've got to find that deal again. You know, that's something that we would look at. But you can look at last year's behavior and how we're behaving this year, and you can draw a pretty good correlation.

Ralph: He did a really nice acquisition.

Ralph: In the Haynesville that.

Ralph: You know are already paying dividends for us.

Ralph: And so if the same happens again no guarantees right. We've got to find that deal again you know that's you know that's that's something that we would look at but you can look at last year's behavior in how we're behaving this year end and you can draw a pretty a pretty good correlation.

Jeffrey Scott Grampp: All right, that's helpful. Thanks, Ralph. I appreciate it.

Speaker Change: Alright Thats helpful. Thanks, Rob appreciate it.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Donovan Schafer with Northland Capital Markets. Please proceed with your question.

Jeffrey Scott Grampp: Our next question comes from the line of Jonathan Stanford with Northern Capital markets. Please proceed with your question.

Donovan Due Schafer: Hey guys, thanks for taking the questions. So, first I just want to clarify, when a well is drilled and when it's a duct drilled and uncompleted, or alternatively when it's drilled and also completed, but just hasn't been turned in line and has just sort of shut in, where do those get classified? Does that get classified as in progress? Even though it's technically completed, doesn't it go into converted until it's turned in line? Or how does that work from a classification standpoint?

Donovan Due Schafer: Hey, guys. Thanks for taking the question.

Danielle D. Mezo: Yes, that would be correct. Until we truly see that it is producing and online with the first production date, that will be considered a work in progress.

Donovan Due Schafer: First I just wanted to clarify when.

Danielle D. Mezo: Well as you know.

Danielle D. Mezo: <unk> drilled and when it's a DUC drilled and uncompleted.

Danielle D. Mezo: Or alternatively also when its drilled and also completed that just hasnt been turned in line and it was just sort of shut in.

Danielle D. Mezo: Where do those get classified does that get classified as in progress and even though it's technically completed doesn't go into converted until it's turned in line or how does that work from a classification standpoint.

Danielle D. Mezo: Yes that would be correct until we truly see them.

Danielle D. Mezo: And online with the first production date that will be considered a well in progress.

Donovan Due Schafer: Okay, great. And then, talking about these decks, and particularly, I would say, I mean, especially, I would say the ones that have been fully completed and shut in. Is it fair to say, you know, would you expect that that dynamic would create a more accelerated increase in production once things turn around? Because without that, right, so even if it was just ducts or there were no ducts, you'd need the drilling crews and equipment plus the completion equipment to go through their process, which takes some measure of.

Danielle D. Mezo: Okay, Great and then sue.

Donovan Due Schafer: Talking about these ducks, and particularly I would say I mean, especially I would say the ones that have been fully completed and shut in.

Donovan Due Schafer: Is it fair to say you know would you expect.

Donovan Due Schafer: Does that that dynamic would create like a.

Donovan Due Schafer: A more accelerated increase in production once things turn around because like without that right. So even if it was just ducks or there are no ducks, you know you'd need the drilling crews and equipment plus the completion equipment to go through their process, which takes some measure of time and then with docs.

Donovan Due Schafer: And then with ducks, you don't need to worry about the rig, but you still need a completion crew. So if it's fully completed, and there's really nothing to be waiting on, and it's ready to just kind of turn the valve, and that's the barrier between going from, you know, in progress to converted, then does that, does it follow? I mean, like, does my logic hold that there could really be a kind of step up in a more significant way? Or are there reasons to be more cautious?

Donovan Due Schafer: Don't need to worry about the rig, but you still need a completion crew if it's fully completed and theres really nothing to be we're eating on and it's ready to just kind of turn the valve and thats the barrier between going from you know and progress to converted.

Donovan Due Schafer: Then does that does it follow I mean like is my logic is the logic holds that there could really be like a kind of a step up.

Donovan Due Schafer: And then a more significant way or are there reasons to be more cautious on that.

Donovan Due Schafer: Yeah.

Chad L. Stephens: Donovan, the way I answer that question is going back to some of the stats I was reviewing with Charles. So the overall year-over-year from March to March of 2024... The ducks had declined by 30% to down to about a four month average worth of ducks, the rate at which a duck can be completed in terms of sales, all those 200 ducks could be burnt off and put on sale in four months. Will that will happen?

Donovan Due Schafer: Donovan the way I answer that question is going back to some of the stats I was reviewing with.

Chad L. Stephens: Charles his question.

Chad L. Stephens: The overall year over year from March to March 24, the.

Chad L. Stephens: Ducks have declined by 30% to down to about a four month <unk>.

Chad L. Stephens: Average work.

Chad L. Stephens: Of ducks, the rate at which a DUC can be completed and turned to sales could all of those 200 docs could be burned off and put put to sales in four months.

Chad L. Stephens: That will that will that happen.

Chad L. Stephens: You know, at current gas prices, we don't know the logic or the behavior of these operators that operate these 200 ducts that are sitting there in inventory. To your question, the 200, we don't know whether those are actually, they're categorized as ducts, but we don't know if they are sitting there waiting to be completed. Are they, is there a frack crew sitting there on the well site about to frack the

Chad L. Stephens: At current gas prices, we don't know the logic or the behavior of these operators that operate. These 200 docs that are that are sitting there in inventory.

Chad L. Stephens: But.

Chad L. Stephens: To your question. The 200, we don't know whether those are actually they are categorized as docs, but we don't know if they are sitting there waiting to be completed.

Chad L. Stephens: Is there a frac crew sitting there on the well site about to Frac the well.

Chad L. Stephens: Have they been completed and are waiting to hook the line up to sales? Has the pipeline actually been connected to the wellhead, and they're waiting to just turn it on? We don't, it's hard for us to determine that detail of intelligence out there on the ground, so to speak, but we don't think that if all four months were done in one month, that all 200 ducts were... You know, maybe the supply would go up for a couple of months, but the decline would...

Chad L. Stephens: Have they been completed and waiting to hook. The book the lineup to sales as the pipeline actually been connected to the wellhead and they're waiting to just turn the.

Chad L. Stephens: It's it's hard for us to determine.

Chad L. Stephens: That detail of intelligence.

Chad L. Stephens: Out there on the ground so to speak but.

Chad L. Stephens: We don't think that if all four.

Chad L. Stephens: If all four months were done in one month, but all 200 docs.

Chad L. Stephens: You know maybe the supply wood.

Chad L. Stephens: Would go up for a couple of months, but the decline would.

Chad L. Stephens: The decline would probably burn off a lot of that instantaneous production, and again, I just say that at a normal rate of converting the ducts to producing in 2025, we see a two to two-and-a-half BCF increase from the Haynesville as gas prices improve. So that speaks to what we think will happen with these ducts and a normal rig rate of 35 to 40 rigs.

Chad L. Stephens: The decline would probably burn off a lot of that instantaneous production and again I'll, just say that as a normal rate of converting the ducks to producing in 2025, we see a two to two and a half Bcf increase from from the Haynesville as gas prices improve so that that speaks to.

Chad L. Stephens: What we think will happen with these ducks and normal rig rate of 35 to 40 rigs.

Donovan Due Schafer: Okay, thanks, that's helpful. And then, turning to Springboard 3 and the kind of activities in that area on your acreage, can you just remind us what the production mix is there versus the corporate average? I know, you know, philosophically and strategically, you guys are concentrated on natural gas, but, you know, all is equal, oil prices and NGLs potentially would be beneficial in some ways, so is there something, is there any movement in that direction at all, or are these all pretty dry gas?

Speaker Change: Okay. Thanks, that's helpful.

Donovan Due Schafer: And then turning to the springboard three.

Donovan Due Schafer: And kind of activities in that area on your acreage can you just remind us what the production mix is there versus the corporate average I know philosophically and strategically you guys are concentrated on natural gas, but all else equal oil prices and Ngls essentially are.

Donovan Due Schafer: Would would be beneficial in some ways. So is there something is there a movement in that direction at all or are these all going to dry gas.

Danielle D. Mezo: So for the springboard, the mix is fairly easy.

Speaker Change: So for the springboard. The next is fairly even between oil Ngls and gas you know a third a third a third rapidly.

Ralph: Yeah, keep in mind that there are some operators that, um, in the springboard area and also in other parts of the Anadarko Basin, that when they pay their mineral holders for NGLs, they don't actually pay on a rich gas content, right? So you may get, so if it's 1,400 BTU gas, you're gonna, on your check stub, you're going to see zero NGLs, but you're going to see the gas volumes multiplied by whatever the price is times 1.4 versus times 1, right?

Danielle D. Mezo: Keep in mind that there are some operators that that.

Ralph: And the springboard and also in other parts of the the Anadarko basin that when they pay their mineral holders for Ngls They don't actually.

Ralph: Pay on our rich gas content rights or you may get so if it's 1400 btu gas you're going to on your checks stop youre going to see zero, Ngls, which youre going to see the gas volumes multiplied by whatever the prices times, one four versus time times one right. So you see a mixture of you know.

Ralph: So you see a mixture of, not just the volumes, but in some cases, the way you report it is, you don't count the NGL volumes, but you count better pricing on the gas because of the way that these operators pay you, which is common and happens to, you know, they treat everybody the same.

Ralph: Not just the volumes, but in some cases right. The way you reported is you don't count the NGL volumes, which account better pricing on the gas because of the way that these operators pay you.

Speaker Change: Sure Tom.

Ralph: They treat everybody the same right. So it's not it's not nuanced to us they treat every mineral holder the same way.

Donovan Due Schafer: And you're saying it has to do with the way it's treated sort of from a, I don't know, accounting or billing or Invoicing, or billing, whatever type situation, but it's not reflective of are they or are they not doing in-jail extraction, like they may be doing in-jail extraction, but they're just not. Transcripts provided by Transcription Outsourcing, LLC.

Ralph: And yes, youre, saying it has to do with the way its treated sort of from a I don't know accounting or billing or.

Donovan Due Schafer: Invoicing billing whatever type situation.

Donovan Due Schafer: But not it's not reflective of are there are they not doing NGL extraction like they may be doing and Doug extractions, but they're just not.

Donovan Due Schafer: Transmitting information that way, it's instead, sorry back into that.

Speaker Change: Scalar right. Okay. So then my last question if I can just get one more and it was just.

Chad L. Stephens: We talk a lot about the LNG capacity and other infrastructure changes taking place that should be bullish for natural gas. I guess, but there's not a lot; it doesn't come up too often with questions about MGL like infrastructure. And so I'm just kind of curious. When natural gas prices are so low, all else equal, you know, and in particular, if oil prices are doing all right, then that can motivate more NGL extraction, you know, or ethane rejection, or not doing ethane rejection.

Donovan Due Schafer: We talk a lot about the LNG capacity and other infrastructure.

Chad L. Stephens: The changes taking place that should be bullish for natural gas.

Chad L. Stephens: I guess, but there's not a lot it doesn't come up too much questions about N G O like infrastructure and so I'm just kind of curious.

Chad L. Stephens: With when natural gas prices are so low all else equal you know and then particularly if oil prices are doing it right then that can motivate more NGL extraction or ethane rejection or are not.

Chad L. Stephens: Not doing as an injection.

Chad L. Stephens: And so are there any developments there or new plants coming out, NGL plants, or anything coming online that could have a meaningful and material impact of any kind? Just trying to figure out if there's a potentially positive but like a blind spot there.

Chad L. Stephens: And so is there are there any developments there or new.

Chad L. Stephens: Plants come out NGL plants or anything coming online.

Chad L. Stephens: That could have a meaningful or material impact of any kind.

Chad L. Stephens: I'm trying to figure out if there's a potentially positive but like applying spot there.

Donovan Due Schafer: Well, so the Haynesville is dry gas, so there's no NGL liquids coming out of that basin. There is plenty of capacity, in the mid-continent, in the stack, in the scoop, to process the natural gas that's coming online, new production that's coming online that has wet gas that needs processing before turning to sales. The main driver for the NGLs in the next two to three to four years is going to be the Permian Basin, several other smaller private agri-groups that are building, especially the Delaware Basin, really rich gas out there, that are building NGLs out there, and so I don't actually know what the forecasted NGL barrel, the Y grade NGL barrel that's forecasted to come out of the basin over the next two to three years, we don't really watch that as closely, but there is a, from a macro perspective, there's going to be a huge call on U.S. supply of NGLs, especially propane and ethane, in the near future between now and, say, 27 or 28 of maybe 500,000 barrels a day, needed for new demand, global demand. So I, I think there's probably some upside in terms of pricing once once the new supply comes on and feeds this global demand. That's our view on the engine development.

Speaker Change: Well so.

Donovan Due Schafer: The Haynesville is dry gas so there is no.

Donovan Due Schafer: so just to make sure I'm kind of understanding correctly my putting together of the kind of different data points here is that

Donovan Due Schafer: NGL liquids coming out of that basin.

Donovan Due Schafer: There is plenty of capacity.

Donovan Due Schafer: And the mid continent in the stack and the scoop to process.

Donovan Due Schafer: <unk> gas, that's coming online new production, that's coming online that has.

Donovan Due Schafer: Wet gas that needs processing before.

Donovan Due Schafer: Turning to sales.

Donovan Due Schafer: The main the main driver for the Ngls.

Donovan Due Schafer: In the next two to three years to four years is going to be the Permian Basin and you see enterprise energy transfer.

Donovan Due Schafer: Several other smaller private equity groups that are building, especially the Delaware basin really rich gas out there that are building Ngls out there, but and so we don't I don't actually know what the forecasted NGL barrel the Y grade NGL barrel, it's forecasted to come out of the basin over the next two to three years, we don't really watch offset as closely.

Donovan Due Schafer: But there is a.

Donovan Due Schafer: The macro perspective, theres going to be a huge call on U S supply of Ngls, especially propane and ethane.

Donovan Due Schafer: In the near future between now and say 27, or 28 of maybe 500000 barrels a day.

Donovan Due Schafer: Needed for new demand.

Donovan Due Schafer: Global <unk>.

Donovan Due Schafer: Demand.

Donovan Due Schafer: So.

Donovan Due Schafer: I think theres, probably some upside in terms of pricing once.

Donovan Due Schafer: Once the.

Donovan Due Schafer: The new supply comes on in feeds this global demand.

Donovan Due Schafer: That's our view on the incentives.

Donovan Due Schafer: Yes.

Speaker Change: So just to make sure I'm kind of understanding correctly.

Donovan Due Schafer: By putting together the kind of different data points here is that.

Donovan Due Schafer: There could potentially be some increase in the NGL mix that would come from say Springboard 3's contribution, but not something to do with like additional processing capacity or anything along those lines that would impact you guys in terms of the mix of NGLs, and then what you could see based on Chad's comments just now would be more of a potential pricing benefit from the kind of more macro dynamic, is that right?

Donovan Due Schafer: There could be potentially some increase and like the NGL mix that would come from say the springboard three.

Donovan Due Schafer: Contribution, but not something to do with like additional.

Donovan Due Schafer: Additional processing capacity or anything along those lines that would impact you guys in terms of.

Donovan Due Schafer:

Donovan Due Schafer: The mix of Ngls and then.

Donovan Due Schafer: What you could see based on your comments just now it would be more just.

Donovan Due Schafer: Potentially pricing benefit from the kind of more macro dynamic is that right.

Chad L. Stephens: Yeah, if I understand your question, when you say NGL mix, just quickly, the purity products coming off the NGL barrel are ethane, propane, two types of butane, and some pentane, which is gas. And between ethane and propane, that represents 75% to 80% of a typical barrel. Ethane is sold each month based on the dynamic between the cents per gallon price of ethane as compared to leaving the ethane in the gas stream and selling it as BTUs for gas prices, a dollar per MMBTU.

Speaker Change: If I understand your question when you say NGL mix.

Chad L. Stephens: Just quickly the purity products coming off the NGL barrel or.

Chad L. Stephens: <unk> propane two types of butane and some <unk>, which is gasoline.

Chad L. Stephens: And between ethane and propane that represent 75% to 80% of a typical barrel.

Chad L. Stephens: So the number of barrels of ethane can change in any given month based on that dynamic between the ethane price and leaving it in the gas stream and selling as a BTU. Propane, they have to take the propane out to make the gas meet pipeline quality specifications. You know, will the overall NGO barrel out of the scoop increase? Probably, but I don't think, in any scenario, it will become a dramatically bigger problem or an issue or oversaturated or oversupplied versus what will be coming out of the Permian Basin.

Chad L. Stephens: Ethane is sold each month based on the dynamic between the cents per gallon price of ethane as compared to leaving the ethane in the gas train and selling it as b to use in the gas.

Donovan Due Schafer: Okay, I got it.

Donovan Due Schafer: For gas price dollar per M and DTE.

Donovan Due Schafer: Number of barrels of ethane can change in any given month based on then that dynamic between the ethane price and leaving it in the gas stream and selling as a btu propane you have to take the propane out to make the gas meet.

Donovan Due Schafer: <unk> pipeline quality specs so.

Donovan Due Schafer: Hi.

Donovan Due Schafer: Well the the overall NGL barrel out of the Scoop.

Donovan Due Schafer: The increase probably but not I don't think in any in any scenario.

Donovan Due Schafer: <unk> dramatically.

Donovan Due Schafer: A problem or an issue or over saturated are oversupplied.

Donovan Due Schafer: What will be coming out of the Permian basin.

Donovan Due Schafer: Okay, I got it. Thank you, that's helpful. All right, I'll take the rest of my questions offline.

Speaker Change: Okay got it. Thank you that's helpful. All right I'll take the rest of my questions offline.

Donovan Due Schafer: Thanks.

Donovan Due Schafer: Yes.

Donovan Due Schafer: Thank you and we have reached the end of the question and answer session I'll now turn the call back over to Chad Stephens for closing remarks.

Operator: Thank you. And we have reached the end of the question and answer session. I'll now turn the call back over to Chad Stephens for a closing remark.

Chad L. Stephens: Again, I'd like to thank our employees and shareholders for their continued support. I'd also like to note that Ralph and I will continue to expand our investor marketing activities over the coming weeks and months. Specifically, we will be participating in the Steeple Cross-Sector Insights Conference that will be hosted in Boston on June 4th and 5th. If you would be interested in meeting at one of these events or at any time, please let me know. Please don't hesitate to reach out to myself, Ralph, or the folks at ThinkIR. We look forward to hosting our next call in early August to discuss our second quarter 2024 results. Have a nice day!

Chad L. Stephens: Again, I'd like to thank our employees and shareholders for their continued support and I'd also like to note that Ralph and I will continue to expand our investor marketing activities over the coming weeks and months.

Chad L. Stephens: Specifically, we will be participating in the Stifel Cross sector insights conference that will be hosted in Boston on June 4th and fifth if.

Chad L. Stephens: If you would be interested in meeting at one of these events or at any time. Please don't hesitate to reach out to myself, Ralph or the folks at think IR. We look forward to hosting our next call in early August to discuss our second quarter.

Chad L. Stephens: <unk> 2024 results have a nice day.

Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

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

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