Q1 2024 Vitesse Energy Inc Earnings Call

Operator: Greetings. Welcome to the Vitesse Energy first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Ben Messier, Director of Investor Relations and Business Development. Thank you. You may begin.

Greetings and welcome to the vital energy first quarter 2024 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note. This conference is being recorded I will now turn the conference over to <unk> director of Investor Relations.

Ben Messier: Some business development. Thank you you may begin.

Operator: Okay.

Ben Messier: Good morning, and thank you for joining us. Today, we will be discussing our financial and operating results for the first quarter of 2024, which we released yesterday after market close. You can access our earnings release and presentation in the investor relations section of our website. We will file our Form 10-Q within the next few days. I'm joined here this morning by Vitesse's Chairman and CEO, Bob Gerrity, our President, Brian Cree, and our CFO, Jimmy Henderson.

Ben Messier: Good morning, Thank you for joining us today, we will be discussing our financial and operating results for the first quarter of 2024, which we released yesterday after market close you can access our earnings release and presentation in the Investor Relations section of our website, we will file our Form 10-Q within the upcoming days I'm joined here. This morning by the Texas, Chairman and <unk>.

Ben Messier: CEO, Bob guarantee our president, Brian Craig and our CFO Jimmy Henderson.

Robert W. Gerrity: Our agenda for today's call is as follows Bob will provide some opening remarks on the quarter. After Bob Brian will give you an operations update including some additional information on the recently announced near term development acquisitions.

Ben Messier: Our agenda for today's call is as follows. Bob will provide some opening remarks about the quarter. After Bob, Brian will give you an operations update, including some additional information on the recently announced near-term development acquisitions. Then Jimmy will review our first quarter financial results and updated production and capex guidance. After the conclusion of our prepared remarks, the executive team will be available to answer any questions. Before we begin, let's discuss our safe harbor language.

Ben Messier: And then Jimmy will review, our first quarter financial results and updated production and Capex guidance. After the conclusion of our prepared remarks, the executive team will be available to answer any questions.

Ben Messier: Before we begin let's cover our safe Harbor language. Please be advised that our remarks today, including the answers to your questions may include forward looking statements within the meaning of the private Securities Litigation Reform Act.

Ben Messier: Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties, some of which are beyond our control, that could cause actual results to be materially different from the expectations contemplated by these forward-looking statements. Those risks include, among others, matters that we have described in our earnings release and periodic filings.

Ben Messier: We disclaim any obligation to update these forward-looking statements, except as may be required by applicable securities laws. During our conference call, we may discuss certain non-GAAP financial measures, including adjusted net income, net debt, adjusted EBITDA, net debt to adjusted EBITDA ratio, and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in the earnings release that we issued yesterday. Now, I'll turn the call over to our Chairman and CEO, Bob Gerrity.

Robert W. Gerrity: These forward looking statements are subject to the risks and uncertainties some of which are beyond our control that could cause actual results to be materially different from the expectations contemplated by these forward looking statements.

Robert W. Gerrity: Those risks include among others matters that we have described in our earnings release and periodic filings we disclaim.

Robert W. Gerrity: Any obligation to update these forward looking statements, except as may be required by applicable securities laws during.

Robert W. Gerrity: During our conference call, we may discuss certain non-GAAP financial measures, including adjusted net income net debt adjusted EBITDA net debt to adjusted EBITDA ratio and free cash flow.

Robert W. Gerrity: Reconciliations of these measures to the closest GAAP measures can be found in the earnings release that we issued yesterday now I'll turn the call over to our chairman and CEO Bob Gary.

Robert W. Gerrity: Thank you Ben good morning, everyone and thanks for your participating in todays first quarter 2024 earnings call.

Robert W. Gerrity: Good morning, everyone, and thanks for participating in today's first quarter 2024 earnings call. Management at Vitesse is committed to the dividend as a vehicle to return capital to our stockholders to sustain this return of capital strategy. We must have a very good return on capital investment. We continue to spend capital in a dividend-supporting manner, which led us to raise production and CapEx guidance for 2024. We are sharing the fruits of this labor with our stockholders by increasing our second quarter fixed cash dividend to 52.5 cents per share to be paid in June, an increase of 5% over the first quarter dividend.

Robert W. Gerrity: Management at the tests.

Robert W. Gerrity: Is committed to the dividend as a vehicle to return capital to our stockholders.

Robert W. Gerrity: To sustain this return of capital strategy, we must have a very economic return on capital invested.

Robert W. Gerrity: We continue to spend capital in a dividend supportive manner, which led us to raise production and capex guidance for 2024.

Robert W. Gerrity: We are sharing the fruits of this labor.

Robert W. Gerrity: With our stockholders by increasing our second quarter fixed cash dividend to <unk> 52, five cents per share to be paid in June.

Robert W. Gerrity: An increase of 5% over the first quarter dividend.

Robert W. Gerrity: This is really a harvest of the really good economic deals we have done starting in the second half of last year and continuing into this year. We continue to look at near-term development deals and larger asset acquisitions that would bolster our dividends. So far this year, deal flow has been healthy. As Brian will describe, we have agreed to acquire additional self-sourced, highly economic interest that will allow us to invest over $40 million of CapEx additional to our original projection. When we find... These highly economic acquisitions, we will take them down. We do not have a fixed budget.

Robert W. Gerrity: This is really a harvest of the really economic deals we have done starting in the second half of last year and continuing into this year. We continue to look at near term development deals and larger act asset acquisitions that would bolster our dividend.

Robert W. Gerrity: So far this year deal flow has been healthy as Brian will describe we have agreed to acquire additional self sourced highly economic interest that will allow us to invest over $40 million of capex incremental to our original projection.

Robert W. Gerrity: Yeah.

Robert W. Gerrity: When we find.

Robert W. Gerrity: These highly economic acquisitions, we will take them down we.

Robert W. Gerrity: We do not have a fixed budget, it's all opportunistic.

Robert W. Gerrity: It's all opportunistic. We will continue to pursue all of these opportunities that meet our strict economic parameters. Before I turn it over to Brian, I just want to compliment everyone on our team at VITESS. We are all rowing the boat in harmony. We bust our butts every day to allocate capital in a way that supports our dividend, which is, Really, the dividend belongs to our shareholders. So with that, I'll turn it over to our president, business partner, Brian Cree.

Brian Cree: We will continue to pursue all of these opportunities.

Brian Cree: As Deb.

Brian Cree: That meet our strict economic parameters.

Brian Cree: Before I turn it over to Brian I, just want to compliment everyone on our team at the tests.

Brian Cree: We're all rowing the boat in harmony.

Brian Cree: Buster as everyday to allocate capital in a way that supports our dividend which is <unk>.

Brian Cree: Really the dividend belongs to our shareholders.

Robert W. Gerrity: So with that I'll turn it over to our president business partner, Brian Cree.

Brian Cree: Thanks, Bob, and good morning to everyone, and thanks for participating in today's call. In the first quarter, we had production of 12,557 barrels of oil equivalent per day. As previously mentioned in our February earnings call, production was negatively impacted by the severe weather event in North Dakota in January, as many of the wells were offline for more than a week. Despite this event, we are increasing our 2024 production and CapEx guidance as a result of the additional acquisition activity that Bob mentioned.

Brian Cree: Thanks, Bob and good morning to everyone and thanks for participating on today's call.

Brian Cree: In the first quarter, we had production of 12557 barrels of oil equivalent per day.

Brian Cree: As previously mentioned in our February earnings call production was negatively impacted by the severe weather event in North Dakota in January as many of the wells were offline for more than a week.

Brian Cree: Despite this event, we are increasing our 2020 for production and Capex guidance as a result of the additional acquisition activity.

Brian Cree: Activity that Bob mentioned, we continued to find highly economic opportunities to invest capital through our acquisition pipeline that we have developed over the past 10 plus years. The majority of these near term development acquisitions are more traditional in nature than those closed during the second half of 2023, thus the drilling in <unk>.

Brian Cree: We continue to find highly economic opportunities to invest capital through our acquisition pipeline that we have developed over the past 10 plus years. The majority of these near-term development acquisitions are more traditional in nature than those closed during the second half of 2023. Thus, drilling and completion activity will occur over the summer and fall, with production not likely until the fourth quarter and into 2025. As of March 31st, we had 5.9 net wells that were either drilling or in the completing phase, and another 10.6 net wells that had been permitted for development by our operators.

Brian Cree: <unk> activity will occur over the summer and fall with production not likely until the fourth quarter and into 2025.

Brian Cree: As of March 31, we had $5 nine net wells that were either drilling or completing phase.

Brian Cree: And another $10 six net wells that had been permitted for development by our operators.

Brian Cree: Through the first four months of 2024, we've experienced an increase in plan development on our existing assets in addition to the recent near-term development acquisition activity. We're excited about these trends, which are expected to enhance our return on capital invested over the course of this year and into next. Our oil differential in the first quarter was greater than it has been historically, which we expect to improve as the Trans Mountain Pipeline expansion comes online in Canada, reported to have occurred earlier this month.

Brian Cree: Through the first four months of 2024, we've experienced an increase in planned development on our existing assets. In addition to the recent near term development acquisition activity. We're excited about these trends, which are expected to intent enhance our return on capital invested over the course of this year and into next.

Brian Cree: Our oil differential in the first quarter was greater than it has been historically, which we expect to improve as the Trans Mountain pipeline expansion comes online in Canada reported to have occurred earlier this month.

Brian Cree: We have continued to add oil hedges during the year, and we now have swaps in place through the end of 2025. At the midpoint of our revised guidance for 2024, we have approximately 60% of our remaining oil production hedged at above $78 per barrel and a portion of our 2025 oil production hedged at above $74 per barrel. Thanks for your time. Now, I'll turn it over to our CFO, Jimmy Henderson, to review our financial highlights.

Brian Cree: We have continued to add oil hedges during the year and we now have swaps in place through the end of 2025 at the midpoint of our revised guidance for 2024, we have approximately 60% of our remaining oil production hedged at above $78 per barrel and a portion of our 2025 oil production.

James P. Henderson: Hedged at above $74 a barrel.

Brian Cree: Thanks for your time now I'll turn it over to our CFO, Jimmy Henderson to review our financial highlights.

James P. Henderson: Thanks, Brian and Bob. I appreciate the introduction. Good morning, everyone.

James P. Henderson: Thanks, Brian and Bob I appreciate the introduction and good morning, everyone. I wanted to highlight a few financial results from the first quarter.

James P. Henderson: And as always I'll assume you can refer to our earnings release and our upcoming 10-Q for further details.

James P. Henderson: I wanted to highlight a few financial results from the first quarter, and as always, I'll assume you can refer to our earnings release and our upcoming 10-Q for further details. As Brian mentioned, our production for the quarter was approximately 12,500 BOE per day with a 71% oil cut. Our production was affected by extreme winter conditions in January, but thanks to the great work by our operators, we quickly recovered. I just can't say enough about the men and women out there that are getting the job done day in and day out in North Dakota.

James P. Henderson: As Brian mentioned, our production for the quarter was approximately 12500 Boe per day with a 71% oil cut.

James P. Henderson: Our production was affected by extreme winter conditions in January but thanks to the great work by our operators.

James P. Henderson: Quickly recovered.

James P. Henderson: You just can't say enough about the men and women out there that are getting the job done day in and day out in North Dakota.

James P. Henderson: Lease operating expenses were also negatively impacted by the severe weather event, in addition to continued elevated workover expenses coming in at $11.8 million for the quarter, or $10.32 per BOE. For the quarter, Adjusted EBITDA was $39.1 million, and Adjusted Net Income was $10.2 million. Gap Net Income was a loss of $2.2 million, with that difference being primarily attributable to the unrealized non-cash hedging loss due to the increase in oil prices in the quarter.

James P. Henderson: Lease operating expenses were also negatively impacted by the severe weather event. In addition to continued elevated workover expense coming in at $11 8 million for the quarter or $10 32 per Boe.

James P. Henderson: For the quarter adjusted EBITDA was $39 1 million and adjusted net income was $10 2 million.

James P. Henderson: GAAP net income was a loss of $2 $2 million with the difference being primarily attributable to the unrealized noncash hedging loss due to the increase in oil prices in the quarter.

James P. Henderson: Cash CapEx and acquisition costs for the quarter were $32.2 million, which included costs paid related to acquisitions made earlier in 2023. As a reminder, our CapEx can be variable from quarter to quarter depending on activity levels and acquisition opportunities. During the first quarter, 332,840 shares of Vitesse's common stock were retired after being exchanged for $6.9 million of tax withholding relating to the vesting of restricted stock units. This transaction occurred at a price of $20.85, which is about 8% below our current stock price, yesterday's stock price.

James P. Henderson: Cash Capex and acquisition cost for the quarter were $32 2 million, which included costs paid related to acquisitions made earlier in 2023.

James P. Henderson: As a reminder, our capex can be variable from quarter to quarter, depending on activity levels and acquisition opportunities.

James P. Henderson: During the first quarter 332840 shares of the test is common stock were retired after being in exchange for $6 9 million of tax withholding relating to vesting of restricted stock units.

James P. Henderson: This transaction occurred at a price of $20 85, which is about 8% below our current stock price.

James P. Henderson: Yesterdays stock price, while this effectively functions as a share buyback it does not decrease our repurchasing power under our $60 million share buyback authorization.

James P. Henderson: While this effectively functions as a share buyback, it does not decrease our repurchasing power under our $60 million share buyback authorization. We funded first quarter CapEx and the share retirement with operating cash flows and draws on the credit facility. Debt at the end of the quarter was $98 million, resulting in a leverage ratio of just 0.6 times on a trailing 12-month EBITDA basis.

James P. Henderson: We funded first quarter Capex and the share retirement with operating cash flows and draws on our credit facility.

James P. Henderson: Debt at the end of the quarter was $98 million, resulting in a leverage ratio of just <unk> six times on a trailing 12 month EBITDA basis.

Operator: The elected commitments on our credit facility currently stand at $210 million, but we expect them to increase to $245 million when we complete our semi-annual redetermination in the next couple of weeks. As previously mentioned, we are increasing our original 2024 annual guidance due to the recently acquired, or agreed to be acquired, near-term development assets in North Dakota. These acquisitions are anticipated to result in over $40 million of incremental capital expenditures and are expected to provide material increases to production and cash flows primarily in late 2024 and end of 2025.

James P. Henderson: The elected commitments on our credit facility currently stand at 210 million, but.

Operator: But we expect them to increase to $245 million when we complete our our semiannual redetermination.

Operator: In the next couple of weeks.

Operator: As previously mentioned, we are increasing our original 2024 annual guidance due to the recently acquired or agreed to be acquired near term development assets in North Dakota. These.

Operator: These acquisitions are anticipated to result in over $40 million of incremental capital expenditures and are expected to provide material increases to production and cash flows primarily late 2024 and the end of 2025.

Operator: Our expected production for 2024 now ranges from $13,000 to $14,000 BOE per day, with a 67% to 71% oil cut, and we have increased our 2024 capital expenditures guidance range, which now stands at $130 million to $150 million. Please note that our oil and natural gas production, as well as our capital expenditures, varies from quarter to quarter based on new wells coming online and other operational matters that happen. Commensurate with this increased activity, the board has approved an increase in our dividend to 52.5 cents a share, which demonstrates our confidence in the creative nature of these investments. With that, I will turn the call over to the operator for a Q&A.

Operator: Our expected production for 2024 now ranges from 13000 to 14000 Boe per day, with a 67% to 71% oil cut.

Operator: And we have increased our 2020 for capital expenditures guidance range, which now stands at $130 million to $150 million.

Operator: Please note that our oil and natural gas production as well as our capex varies from quarter to quarter based on new wells coming online and other operational matters that happen.

Operator: Commensurate with this increased activity. The board has approved an increase in our dividend to <unk> 52, five cents per share, which demonstrates our confidence in the accretive nature of these investments.

Operator: With that let me turn the call over to the operator for Q&A.

Operator: Okay.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of John White with Roth Capital Partners. Please proceed with your question.

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

Operator: Confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment and it may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.

Operator: Okay.

John Marshall White: Could we get a little more detail on the acquisitions, like what counties they are predominantly located in, how much existing production is being acquired, and any comments on the undrilled inventory?

Operator: Our first questions come from the line of John White with Roth Capital Partners. Please proceed with your questions.

John Marshall White: Good morning can you hear me okay.

John Marshall White: Absolutely good morning, John.

John Marshall White: Good good morning could.

John Marshall White: Could we get a little more detail on the acquisitions.

John Marshall White: Like what counties are they predominantly located how much existing production is being acquired and any comments on the drilled inventory.

John Marshall White: Absolutely Jon This is Brian I'll take a first crack at that and let anyone add in if they want but.

Brian Cree: Absolutely. John, this is Brian.

Brian Cree: I'll take a first crack at that and let anyone add in if they want, but these are different than what we did last fall. Last fall, many of the acquisitions that we completed were more... very, very developed in terms of the timing of when those wells were going to come online. They were wells that were ducts at the time, or they were just shortly ready to come on.

Brian Cree: These are these are different than what we did last fall last fall many of the acquisitions that we completed were more.

Brian Cree: Very very developed in terms of.

Brian Cree: The timing of when those wells were going to come online. They were wells that were done at the time.

Brian Cree: Or we're just shortly ready to come on these are more kind of traditional in nature. They are they span the entire.

Brian Cree: These are more of a traditional in nature. They span the entire basin, some in Williams, McKenzie. But they're with operators that we have a lot of confidence in. But these are wells that are going to be drilled over the summer and the fall. And so there's really no production coming with these, unlike the last time where we had a lot of wells that were just about ready to start producing. These will start producing, kind of like I said, fall, sometime into the fourth quarter. And so they're a little bit different in nature than what we did last year.

Brian Cree: You know basin some in Williams Mckenzie.

Brian Cree: But they are with operators that we have a lot of confidence in but these are wells that are going to get drilled over the summer.

Brian Cree: In the fall and so Theres really no productions coming with these unlike the last time, where we had a lot of wells that we're just about ready to start producing these will these will start producing kind of like I said fall sometime into the fourth quarter and.

Brian Cree: And so there are little bit different in nature than what we did last year, but very economic from our standpoint again with with some of our favorite operators.

Brian Cree: But very economical from our standpoint, again, with some of our favorite operators in areas of the field that we have a lot of confidence in. They are higher working interest wells. Typically, you know, our average working interest is in that 3% range if you look at our entire portfolio. These are working interests that are north of 20%, and so they're deals that we've been working on for a long time, and just luckily, they came together in April, and we were able to move forward with them.

Brian Cree: In areas of the field that are we have a lot of confidence in they are higher working interest wells typically you know our average working interest is is in that 3%. If you look at our entire portfolio.

Brian Cree: These are working interests that are north of 20% and so there are deals that we've been working for a long time and just Luckily they came together and in April and we're able to move forward with them.

Brian Cree: Yeah.

Brian Cree: Okay, great. And, uh... Bob used the term self-sourced. Does that mean this was not a bid situation?

Speaker Change: Okay, great and.

Brian Cree: Bob you used the term self sourced does that mean this was not a bid situation.

Brian Cree: Yeah, the operators will, you know, come out to several different companies. These were not like investment banking bid processes or anything else. So this is just kind of part of our pipeline. We've been doing this for, like I said, over 10 years. We've developed relationships with all the different operators and sellers of this, and, you know, it is a process where we have to put in an offer. So, unlike maybe the deal we did last year with Marathon, where it was more negotiated, these are still deals that have very few eyes on them from the operators. They send them out to their, kind of, favorite potential buyers, and we go from there.

Speaker Change: Yeah, the the operators will.

Brian Cree: Come out to several different companies. These were not like investment banking bid processes or anything else. So these are this is just kind of part of our pipeline. We've been doing this for like I said over 10 years, we've developed relationships with all the different operators and sellers of this in and.

Brian Cree: It is it is a process, where we have to put in an offer.

Brian Cree: So unlike maybe the deal we did last year with marathon.

Brian Cree: Where where it was more negotiated but but these are still deals that are have very few eyes on them from the operators they send them out to their kind of their favorite a potential.

Brian Cree: Potential buyers and we go from there.

Brian Cree: But thanks again, and Ned Akeridge is involved.

Speaker Change: Thanks, again, and our net acreage involved.

Brian Cree: Most of these are well-bore deals, so there's not really much additional new acreage. These are all wells that are really well-bore AFVs that are, again, being drilled over the course of the summer.

Brian Cree: Most of these are wellbore deals so theres not really much additional new acreage. This is all wells that are that are really wellbore fees that are again being drilled over the course of the summer.

Operator: Thanks a lot for the extra detail.

Speaker Change: Thanks, a lot for the extra detail.

Speaker Change: Youre welcome.

Operator: Thank you. Our next questions come from the line of Michael Schwartz with Jeffries. Please proceed with your questions.

Operator: Thank you our next questions come from the line of Michael Swartz with Jefferies. Please proceed with your questions.

Operator: Okay.

Michael Schwartz: Hey guys, congrats on the acquisition. My first question is, you know, given that these wells are going to be drilling at the end of the year, how should we be thinking about production and CapEx in 2025?

Michael Schwartz: Hey, guys.

Michael Schwartz: Congrats on the acquisition.

Michael Schwartz: My first question is given that these are wells.

Michael Schwartz: Whilst they're gonna be telling you at the end of the year, how should we thinking thinking about production capex in 2025.

James P. Henderson: Yeah, it's a little early, Michael, to be thinking about giving any guidance of any sort for 2025, but clearly we're confident to tell with increasing the dividend that we'll increase production and cash flow as we exit 2024 into 2025, and so I think you should see, be pretty happy with the change year over year, but we don't want to get too far ahead of ourselves, but we think we can, you know, although it's not our objective necessarily, I think you will see some production growth as we go into next year, and then I think you think about CapEx sort of returning to a maintenance mode as we go into 2025.

Michael Schwartz: Yeah.

Speaker Change: Yeah, It's a little early Michael will be thinking about giving any guidance of any sort for 2025, but clearly.

James P. Henderson: We're confident.

James P. Henderson: With increasingly dividend it will increase production and cash flow as we exit 2000 and 425.

James P. Henderson: And so I think you should see.

James P. Henderson: <unk> be pretty happy with the change year over year, what we don't want to get too far ahead of ourselves, but we think we can.

James P. Henderson: Although it is not our objective necessarily.

James P. Henderson: Thank you will see some production growth as we go into next year and then I think you can think about capex sort of returning to a maintenance mode.

James P. Henderson: As we go into 2025.

Michael Schwartz: make sense. I completely understand that it's early.

Michael Schwartz: Makes sense I completely understand that it's early so I. Just also wanted to ask about the decision to raise the dividend from your comments it sounds like it's tied to kind of deals in this kind of growth youre seeing.

Robert W. Gerrity: So I just also want to ask about, you know, the decision to raise the dividend. From your comments, it sounds like it's tied to the kind of deals and this kind of growth you're seeing. What do we need to see to grow the dividend further? Are there any metrics that we should be thinking about for that?

Robert W. Gerrity: What do we need to see to grow the dividend further if there kind of any metrics that we should be thinking about after that.

Robert W. Gerrity: Well, it's really a function of the economics of our drilling. We're, you know, capital allocators, and when we can allocate capital in a way that gives us a very high rate of return, well, we're going to return that money to the shareholders. So that can happen in a lot of different ways.

Speaker Change: Well, it's really a function of the economics of our drilling.

Robert W. Gerrity: We're capital Allocators, and when we can allocate capital in a way that gives us a.

Robert W. Gerrity: A very high rate of return well, we're going to return that money to the shareholders. So that can happen and a lot of different ways. If we continue to find the deals we're finding in the last nine months, that's very constructive to the dividend obviously.

Robert W. Gerrity: If we continue to find the deals we've been finding in the last nine months, that's very constructive to the dividend. Obviously, we hedge those acquisitions to the degree that we can, and a stable oil price will certainly be supportive of the dividend. But Michael, this is what we live for. And so the calculus of this is very dense. Ben, do you want to add something to that?

Ben Messier: We hedge those acquisitions to the degree that we can.

Robert W. Gerrity: And.

Ben Messier: Stable oil price will certainly be supportive to the dividend, but Michael This is what we look for and so the calculus at this is very dense.

Robert W. Gerrity: Ben do you want to add something to that.

Ben Messier: Yeah, hi Michael. Yeah, we like to think about our dividend coverage in a flat production environment, really. So when we set this dividend level, we're thinking about, you know, sort of a maintenance mode capex level of, call it, 90 million dollars to hold production flat in the mid to high 13 MBOE per day range. And if you look at our business model in that environment, we're generating more than enough operating cash flow at current commodity prices to conservatively cover the dividend and the maintenance capex.

Ben Messier: Hi, Michael.

Ben Messier: Yes, we like to think about our dividend coverage and a flat production environment really so when we set this dividend level, we're thinking about sort of a maintenance mode capex level of call it $90 million to hold production flat in the mid to high <unk> and BOE per day range. So if you look at our business model.

Ben Messier: In that environment, we are generating more than enough operating cash flow at current commodity prices. The current conservatively cover the dividend and the maintenance Capex.

Ben Messier: And then, as Bob said, we've been lucky enough to find really attractive acquisitions since we spun off that have allowed us to grow production more than maybe we originally thought we could, and we're happy to draw on our RBL to fund those. You know, we're still 0.6 times levered. We have, you know, we're 40% drawn on our revolving credit facility.

Speaker Change: And so we look at that and we feel really good about where we are from from a dividend standpoint.

Ben Messier: As Bob said, we've been lucky enough to find really attractive acquisitions. Since we've spun off that have allowed us to grow production more than maybe we originally thought we could and we're happy to draw our RVO that fund those.

Ben Messier: We're still points eight times Levered, we have we're 40% drawn on our revolving credit facility. So a ton of capacity there to drive growth as these really attractive rates of return.

Ben Messier: So a ton of capacity there to drive growth at these really attractive rates of return, and, you know, it obviously comes with the short-term hit of more capex, but that's to the benefit of longer-term production and free cash flow growth. And so we're not as concerned about the optics of, you know, looking like we're covering the dividend in the short term. Because we know that having more free cash flow over the next 30 years is, in the end, that's for dividends. So that's some of the calculus that goes into how we set it and when we raise it.

Ben Messier: It obviously comes with the short term head of more capex, but that's to the benefit of longer term production and free cash flow growth and so we're not as concerned about the optics.

Ben Messier: Looking like we're covering the dividend in the short term.

Ben Messier: Because we know that having more free cash flow over the next 30 years is in the end that's for the dividends. So.

Ben Messier: Thats some of the calculus that goes into how we set it in when we raise it really.

Michael Schwartz: Sounds good, and it makes a lot of sense to me. Thank you, guys.

Speaker Change: Understood makes a lot of sense to me. Thank you guys.

Operator: Thank you. Our next questions come from the line of Stephen Richardson with Evercore ISI. Please proceed with your question.

Michael Schwartz: Thank you. Our next question is coming from the line of Stephen Richardson with Evercore ISI. Please proceed with your questions.

Stephen Richardson: Hi, good morning. I was wondering if you could talk a little bit, appreciate the comments in the prepared remarks about the in-process wells and permitted wells, but you could talk a little bit about what you're seeing in terms of operator activity on your lands, particularly relative to, you know, how you guided earlier in the year and how things were playing out, just acknowledging that you had weather impacts in Q1, but could you just talk about what you're seeing from Sure, Steve.

Stephen Richardson: Hi, good morning.

Stephen Richardson: I was wondering if you could talk a little bit I appreciate the comments in the prepared remarks.

Steve: Remarks about the in process wells and permitted wells, if you could talk a little bit about what youre seeing in terms of operator.

Steve: Activity on your lands, particularly relative to how you guided earlier in the year and how how things are playing out just acknowledging that you had weather impacts in Q1, but could you just talk about what you're seeing from the operators at this point.

Brian Cree: You know, I kind of mentioned, I made a quick comment on it, that we're seeing a little bit of accelerated activity on our asset. Typically, we think about $40 to $50 million a year of kind of organic CapEx. That's what we've talked about in the past. You know, it's early in the year still, but we're actually seeing an accelerated pace. We've received more AFEs in the first four months of the year, and that puts us on a pace to exceed that $40 to $50 million.

Brian Cree: Sure, Stephen. This is Brian.

Stephen Richardson: Sure Stephen this is Brian.

Brian Cree:

Brian Cree: We kind of mentioned I made a quick comment on it is that we're seeing a little bit of accelerated activity on our.

Brian Cree: On our asset typically we think about $40 million to $50 million a year of kind of organic capex. That's what we've talked about in the past.

Brian Cree: So we like that. We've seen more three-mile laterals. Clearly, the operators are moving toward that, the three-mile laterals whenever they can, so we've seen more of that in terms of our development. We've seen quite a few refracts this year, probably at a pace that exceeds what we saw in 2023 and is closer to where we were in 2022. So we're excited about that. We think the operators will continue to look at that refract activity.

Brian Cree: It's early in the year still but we're actually seeing a you know an accelerated pace. We've received more fees in the first four months of the year that puts us on a pace for two.

Brian Cree: Exceed that $40 million to $50 million. So we like that we've seen more three mile laterals clearly the operators are moving toward a.

Brian Cree: The three mile laterals whenever they can so we've seen more of that in terms of our of our development.

Brian Cree: We've seen quite a few re fracs this year, probably on a pace that exceeds what we saw in 2023 and closer to where we were in 2022. So we're excited about that we think the operators continue to to look at that re frac activity, but yet. It's a you know we've seen an accelerated pace that we're not sure that that will continue we're excited.

Brian Cree: But yeah, we've seen an accelerated pace, but we're not sure that that will continue. We're excited about it at this point in time. We think the three-mile laterals, we know the operators are all very excited about the three-mile laterals. We have confidence in their ability to pull those together and see those as being more economical than the two-mile. Time will tell exactly how those play out, but the combination of all of that just gives us a higher level of excitement about 2024 than we had at the beginning of the year.

Brian Cree: About it at this point in time.

Brian Cree: We think the three mile laterals, we know the the operators are all very excited about the three mile laterals, we we have confidence in their ability to to.

Brian Cree: Pull those together and see those as being more economic than the two mile.

Brian Cree: Time will tell exactly how those play out but.

Brian Cree: The combination of all of that.

Brian Cree: <unk> gives us.

Brian Cree: A higher level of excitement about 2020 for them than we had at the beginning of the year.

Brian Cree: Great.

Stephen Richardson: Brian, maybe Brian, while I've got you as well, on the acquisitions, could you appreciate that the activity on these wellbores is going to be in the back part of the year, one, you know, based on your risking and appreciate that you don't have full visibility, but as you looked at it, is, will you have production contribution from all these wellbores by year end? Like, will it be in the exit rate, or does it trickle into Q1, Q2 of next year as you kind of looked at it and risked it?

Brian Cree: Maybe Brian well I've got you as well on the acquisitions could could you I appreciate that the activity on these well bores is going to be in the back part of the year. One you know based on your risking and I. Appreciate that you don't have full visibility, but as you looked at it as well you have production contribution from all of these well bores by year end like will it be in the <unk>.

Stephen Richardson: Right or is it does it trickle into Q1 Q2 of next year as you kind of looked at it and risked it.

Brian Cree: You know, based on our underwriting, Stephen, we definitely expect all of these wells to be on at some point in time in the fourth quarter. But, as you know, it's just it's it's hard to tell for sure.

Brian Cree: Based on our underwriting Stephen we definitely expect all of these wells to be on.

Brian Cree: At some point in time in the fourth quarter, but as you know, it's just it's hard to it's hard to tell for sure.

Stephen Richardson: That's how we've modeled them. You know, we modeled things last fall when we made those acquisitions with production coming on a little slower. So, you know, I think we do a pretty good job in our underwriting in terms of estimating timing. But, as Jimmy mentioned, it's not in our control. It is in the control of the operators. But again, these are operators that we have confidence in, and I think they'll they'll they'll meet our timeline.

Brian Cree: How we've modeled them.

Speaker Change: We modeled things last fall when we made those acquisitions.

Stephen Richardson: With the production coming on a little slower so I.

Stephen Richardson: I think we do a pretty good job on in our underwriting in terms of estimating timing, but as Jimmy mentioned its not in our control. It is in the control of the operators, but again these are operators that are.

Stephen Richardson: We have confidence in and I think they'll they'll meet our timelines.

Stephen Richardson: Okay. The last one for me, if I could squeeze it in, was just following up on Ben's previous comment about kind of thinking about the financial resources of the company in terms of the reinvestment opportunity set. So, if you think about that 0.6 times levered, can you just remind us where you're happy or where you're comfortable taking that considering, depending on how you look at it, this is probably a little bit above kind of a mid-cycle oil price, but at least for most investors. So, where are you willing to take that if the opportunity set continues to present itself? Thanks. Yeah, I'll jump in here.

Speaker Change: Okay last one from me if I could squeeze it in it was just on just following up on bens previous comment on kind of thinking about the financial resources of the company in terms of and the reinvestment opportunity set. So if you think about that 0.6 times Levered can you just remind us where you're happy or where you're comfortable taking that.

Stephen Richardson: During.

Stephen Richardson: Spending on how you look at it this is probably a little bit above kind of a mid cycle oil price, but or at least for most investors. So like where are you willing to take that considering if the opportunity set continues to present itself. Thanks.

James P. Henderson: Yeah, I think we've always said that we're going to remain under, certainly under one-time leverage, and I think we're confident that we'll remain there with these opportunities and the ability to further invest. I don't really see much of an increase from where we are today as, you know, we're getting contribution from the acquisitions that we did late last year for the remainder of the year, and then these acquisitions kick in. So I think we're in a really comfortable position from a leverage standpoint and a liquidity standpoint, given our current resources.

James P. Henderson: Yeah, I'll jump in here. This is Jimmy.

Stephen Richardson: Yeah I'll jump in here this is Jeremy.

Jimmy: Yeah, I think we've always said that we're going to remain at or under certainly under one times Levered and I think.

Jimmy: I'm confident that we'll we'll remain there with these opportunities.

Jimmy: To further invest.

Jimmy: I don't really seeing much increase from where we're at today is.

Jimmy: You know, we're getting contribution from the acquisitions that we did late last year and for the remainder of the year and then these.

Jimmy: <unk> here again.

Jimmy: I think we're in a really comfortable position from a leverage standpoint, and a liquidity standpoint.

Jimmy: Really within our current resources.

Jimmy: Great. Thanks, a lot.

Operator: Thank you. Our next questions come from the line of Jeff Grampp with Alliance Global Partners. Please proceed with your questions.

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

Jeffrey Scott Grampp: Morning, guys. I was curious about the near-term development acquisition market, obviously, really, really active here so far, is that just a function of those being higher working interests? If you guys were to look at it, maybe on a, I don't know, gross deal basis, are things pretty consistent? Or how might you guys characterize kind of current market dynamics versus, say, you know, 2023 or whatever reference period you'd like?

Jeffrey Scott Grampp: Good morning, guys.

Jimmy: Was curious with the near term development acquisition market, obviously really really active here. So far is that just a function of those being higher working interests. If you guys were to look at it maybe on a I don't know gross deal basis or are things pretty consistent or how might you guys characterize kind of current market dynamics versus say 2020.

Jeffrey Scott Grampp: Three or whatever reference period you'd like.

Brian Cree: Yeah, Jeff, this is Brian. I'll jump in again. You know, the market remains very robust at this point in time. We see a lot of deals. We still evaluate a lot of deals. You know, as we said in the past, our hit rate is probably 10% for these, but I think, you know, for us, when you look at those higher working interest opportunities, we've had a little more success there.

Jeffrey Scott Grampp: Yeah, Geoff it's Brian I'll jump in again.

Brian Cree: The market remains.

Brian Cree: Very robust at this point in time, we see a lot of deals we still evaluate a lot of deals.

Brian Cree: You know as we said in the past our hit rate is probably 10% for these but I think.

Brian Cree: For us when you look at those higher working interest opportunities, we had a little more success. There are theres, probably a lot less competition when youre talking about those kind of dollars versus.

Brian Cree: There's probably a lot less competition when you're talking about those kind of, you know, those in the million or two million dollar deal range with smaller working interest. So, yeah, we've tried to take advantage of that. And again, it's always very lumpy, right?

Brian Cree: Those in the a million or 2 million dollar deal range smaller working interest. So yes. We've we've tried to take advantage of that and again, it's always very lumpy right. I mean, we see a lot of deals.

Brian Cree: I mean, we see a lot of deals. In the first quarter, we bid on a lot of things, and nothing really came to fruition. And then all of a sudden, you know, some things come together.

Brian Cree: In the first quarter, we bid on a lot of things and nothing really came to fruition.

Brian Cree: And then all of a sudden some things come together. So it's just it's a timeline that we have to work through these working with the various operators.

Brian Cree: So it's just, it's a timeline that we have to work through these, working with the various operators, the various sellers, to make sure that we really understand what's going on and bid on these at the hurdle rates that we find very attractive. The one thing I will say is just, you know, to add to your question is that while that pipeline is really good, when oil prices get higher, you know, from our standpoint, it actually makes it a little more difficult to close some of these pipelines because I think others will become a little more optimistic.

Brian Cree: Various sellers to make sure that we really understand what's going on and and bid. These that the hurdle rates that we find very attractive. The one thing I will say just to add to your to your question is.

Brian Cree: While that pipeline is really good when oil prices get higher.

Brian Cree: From our standpoint, it actually makes it a little a little more difficult to close some of these because I think others will get a little more optimistic we typically will underwrite. These that are at a price deck that.

Brian Cree: We typically will underwrite these at a price deck that is below strip. And so when prices get a little higher, it becomes a little more difficult for us. So really... That $70 to $75 range seems to be a great range for us, where our underwriting does very well against the competition.

Brian Cree: Is below strip and so when prices get a little higher it becomes a little more difficult for us so really.

Brian Cree: That 70 to $75 range seems to be a great range for us where kind of our underwriting.

Brian Cree: Does very well.

Brian Cree: Against the competition.

Jeffrey Scott Grampp: That's really helpful. I appreciate that. And maybe a question for Jimmy.

Speaker Change: That's really helpful. I appreciate that and maybe a question for Jimmi hedges bumped up nicely, especially first part of 'twenty five should we expect more and more volumes there perhaps as these new acquisitions come online or how are you guys thinking about the.

James P. Henderson: Hedges bumped up nicely, especially the first part of 25. Should we expect more volumes there, perhaps, as these new acquisitions come online? Or how are you guys thinking about the hedge book here, especially in the context of the increased dividends?

Jimmy: The hedge book here, especially in the context of increased dividend.

James P. Henderson: Yeah, definitely. Obviously, hedging is a key component of our dividend decision-making and, you know, protecting the cash flow so that we can continue to make these investments going forward. So, yeah, you'll definitely see volumes added to 2025 as we move forward. But we have a couple of things working against us. Obviously, the backwardation of the market, so we have to be patient and kind of let that wave move forward. At the same time, we're only allowed to hedge a certain percentage under our credit agreement.

Jimmy: Yeah, definitely obviously hedging is a key component of <unk>.

James P. Henderson: R R.

James P. Henderson: Our dividend decision, making.

James P. Henderson: Protecting the cash flows so that we can continue to make these investments going forward.

James P. Henderson: So, yes, youll definitely see volumes added to 2025 as we move forward.

James P. Henderson: Have a couple of things working against US obviously, the backwardation of the markets. So we got to be patient and kind of where we would move forward at the same time, we're only allowed to hedge a certain percentage of under our credit agreement. So as we move forward in time, we are able to continue to fill that.

James P. Henderson: So, as we move forward in time, we are able to continue to fill that bucket. So, we've tried to methodically push ahead on hedging, and these acquisitions, as they come online, add to that PDP level so that we can enter into transactions to support them. So, we always try to have a little bit of room versus our limits so that we can support acquisitions as we do them, but it is somewhat limited until we do that, but we push it as far as we can.

James P. Henderson: Bucket.

James P. Henderson: So we've tried to methodically push ahead on hedging and these acquisitions as they come online and to their PDP levels. So that we can enter.

James P. Henderson: Enter into transactions to support those.

James P. Henderson: We always had tried to have a little bit of room.

James P. Henderson: Versus our limits so that we can support acquisitions as we do them, but somewhat limited ability to do that but pushing as far as we can.

Jeffrey Scott Grampp: understood. I appreciate those comments. Thanks, guys.

Speaker Change: Understood I appreciate those comments thanks guys.

Jeffrey Scott Grampp: Okay.

Operator: Thank you. Our next questions come from the line of Jeff Robertson with Water Tower Research. Please proceed with your question.

Jeffrey Scott Grampp: Thank you our next questions come from the line of Jeff Robertson with water Tower Research. Please proceed with your questions.

Jeffrey Woolf Robertson: Good morning, Barbara, and Brian. A question on luminous.

Jeffrey Woolf Robertson: Thanks, and good morning.

Jeffrey Woolf Robertson: Barbara Brian a question on aluminum are you able to adapt to that system as you see consolidation in the basin.

Jeffrey Woolf Robertson: Are you able to adapt that system as you see consolidation in the basin and assets change hands from one operator to another to help you identify acquisition opportunities to target?

Jeffrey Woolf Robertson: And assets change hands from one operator to another to help you identify acquisition opportunities to target.

Robert W. Gerrity: Absolutely, Jeff. Luminus gets more vibrant every day. Everybody has a relationship to Luminus, and some, you know, we're developing some AI capacity. Everybody does AI, or we can do it with Luminus as well, and it's amazing the amount of information you can get when you've got over 15,000 wells loaded into your system. So we do rely on Luminus. Everybody enjoys it. And it just, we call it democratizing, is that everybody in the organization, whether they're a revenue clerk, whether they're a landman, engineer, or in the finance department.

Speaker Change: Absolutely Jeff luminous it gets more vibrant everyday everybody has a relationship to luminous and.

Robert W. Gerrity: Some were developing some AI capacity, everybody does AI, where we can do it with luminous as well and it's amazing the amount of information you can get when you've got over 15000 wells loaded into your system. So we do rely on luminous.

Robert W. Gerrity: Everybody enjoys it.

Robert W. Gerrity: We call it.

Robert W. Gerrity: Democratize is that everybody in the organization, whether there are revenue clerk, whether they're land man engineer or the finance Department.

Robert W. Gerrity: learns from Luminus every day. And it's a great question. We're thrilled with it. We had an hour and a half meeting yesterday about other developments that we're looking forward to with Luminus. So it's an important part of our company, and it gets better and develops every day.

Robert W. Gerrity: <unk> from luminous everyday and its a great question, we're thrilled with it we had already have meeting yesterday.

Robert W. Gerrity: About other developments that were.

Robert W. Gerrity: That we are looking forward to.

Robert W. Gerrity: With luminous so it's important part of our company and it gets better and develops everyday.

Jeffrey Woolf Robertson: Does the ability to understand not only your asset base but what's going on in the basin and where opportunities lie factor into the decision to raise the dividend in the context of understanding what Vitesse's runway is?

Robert W. Gerrity: Does the ability to understand not only your asset base, but what's going on in the basin and where opportunities lie.

Jeffrey Woolf Robertson: Does that factor into the decision to raise the dividend in the context of understanding.

Jeffrey Woolf Robertson: What what the test is runway is.

Robert W. Gerrity: Yeah, I'd say that the dividend decision is an output, I guess, from what goes into Luminus. So Luminus, as Bob spoke, allows us to analyze these opportunities and make smart investments, which, of course, drives the ability to increase the dividend. So kind of an indirect output to that, but certainly is supportive.

Jeffrey Woolf Robertson: Yeah, I'd say that the dividend decision is an output I guess from where it goes into alumina. So.

Robert W. Gerrity: Luminous certainly as Bob spoke allows us to analyze these opportunities and make smart investments, which of course drives the ability to increase the dividend so kind of an indirect output to that but it certainly is supportive.

Speaker Change: Thank you.

Operator: Thank you. Our next questions come from the line of Donovan Schafer with Northland Capital Markets. Please proceed with your question.

Robert W. Gerrity: Thank you our next questions come from the line of Donovan Schafer with Northland Capital markets. Please proceed with your questions.

Donovan Due Schafer: Hey guys, thanks for checking the questions. So my first question is just if we can get an update on kind of the original deeper, denser, expanded thesis that I know you guys had when you created this company to kind of repeat what had been done before in the DJ basin. But also, if we can connect, I guess, you know, maybe answer that sort of.

Donovan Due Schafer: Hey, guys. Thanks for taking my questions. So my first question is just if we can get an update on kind of the original deeper denser extended thesis.

Donovan Due Schafer: I know you guys had when you created.

Donovan Due Schafer: Created this company to kind of repeat what it had been done before in the D. J basin, but also if we can connect.

Donovan Due Schafer: I guess, maybe answer that sort of.

Donovan Due Schafer: Separately, if it's a separate thing, or, you know, if the opportunity presents itself, does this tie in with the 40 million CapEx increase? You know, are there things you can point to where some of these specific opportunities tie to, you know, either tighter infill drilling or maybe with a three-mile lateral, it allows you to step out a little bit further? I know you guys are probably not, you know, taking risks on a totally virgin step-out, but, you know, maybe infill drilling wells that have been de-risked because of more recent successful step-outs or things along those lines. Just anything, just the general update, and then if it actually is in any way sort of highlighted or demonstrated with these opportunities.

Donovan Due Schafer: Separately, if it's a separate thing or you know if the opportunity presents itself does this tie in with the $40 million Capex increase you know are there things you can point to where some of these specific opportunities themselves tied to them.

Donovan Due Schafer: Either tighter infill drilling or maybe it was a three mile lateral it allows you to step out a little bit further I know you guys are probably not taking risks on.

Donovan Due Schafer: Totally Virgin step out, but maybe infill drilling wells that had been de risked because of more recent.

Donovan Due Schafer: Successful step outs or things along those lines just anything just the general update and then if it's.

Donovan Due Schafer: Actually is in anyway sort of highlighted are demonstrated with these opportunities.

Robert W. Gerrity: Yeah, hi Donovan, this is Bob. The Deeper, Dancer, Cheaper, Better expanded concept that we had was really just about the field over the course of time becoming more economical. We saw that in the DJ, and we're seeing it in hyperspeed in the Bakken. It just seems that every well that's being drilled is more economical than its offset well, simply because technology improves every day. And so this is really, when we look at the Bakken, we look at the Bakken through the lens of technology. And it's amazing what has happened out in the field.

Donovan Due Schafer: Yeah, Hi, Jonathan this is Bob the deeper dance or cheaper better expanded concept that we had was really just about the field over the course of time, becoming more economic we saw that in the DJ and we're seeing it.

Robert W. Gerrity: In Hyperscale in the Bakken.

Robert W. Gerrity: It just seems that every well thats being drilled is more economic than then it's offset well simply because technology.

Robert W. Gerrity: Improves every every day.

Robert W. Gerrity: And so this is really when we look at the Bakken, we look at the Bakken through the lens of technology.

Robert W. Gerrity: It's amazing what has happened out in the field.

Robert W. Gerrity: Of course, technology unless it's, you know, at a cost-efficient basis is meaningless. And the costs in the field have certainly stabilized, if not gone down a little bit. But you're right. The field has expanded, and we're getting Tier 1 economics on a map that not that many years ago was considered Tier 3.

Robert W. Gerrity: Of course technology unless it's.

Robert W. Gerrity: At a cost efficient basis is meaningless and the costs in the field have.

Robert W. Gerrity: They have certainly stabilized if not gone down a little bit.

Robert W. Gerrity: But youre right.

Robert W. Gerrity: <unk> has expanded and we're getting tier one economics.

Robert W. Gerrity: On a map that not that many years ago was considered tier three so we love the position we have in the Bakken It does get better every day and we're excited to find out what's next.

Donovan Due Schafer: Okay, great. And then... I have another question.

Speaker Change: Okay, Great and then.

Speaker Change: As another question.

Donovan Due Schafer: So, I know I'm kind of putting Jimmy on the spot here, so, well, or I may... I should almost, you know, in a perfect situation, I'd have him leave the room or something, but you know, he joined a few quarters ago, I know, it's a bit odd, but you know, he joined a few quarters ago, and I did make a point of going through his LinkedIn profile, you know, his bio from other companies we've been involved in. Jim's experience, not to toot his horn, but it was very relevant. And I thought it was quite impressive.

Speaker Change: So I know I'm kind of putting Jimmy on the spot here, so well or I mean.

Donovan Due Schafer: I should almost.

Donovan Due Schafer: Perfect situation of having to leave the room or something but.

Donovan Due Schafer: Okay.

Donovan Due Schafer: It's a bit odd that but you know he joined a few quarters back you know and I did make a point of going to like sort of a linkedin profile and as you know bio from other companies who've been involved in.

Donovan Due Schafer: Jim's experience.

Donovan Due Schafer: Not to toot his horn, but it was very relevant and I thought it was quite impressive in particular, the you know there was a strong focus in the Bakken and also sort of the Rockies more generally.

Robert W. Gerrity: And particularly, you know, there was a strong focus on the Bakken and also sort of the Rockies more generally, probably a pretty thick Rolodex there as well. And so I'm just kind of curious if we can get an update like this: I think when Jimmy first joined, I thought, gee whiz, maybe this means there's going to be some amazing, incredible package or something that gets put together.

Robert W. Gerrity: Probably pretty sick rolodex, there as well and so I'm just kind of curious if we can get to know an update like is I think when Jimmy first John I thought Gee Whiz you know maybe this means there's going to be some didn't.

Robert W. Gerrity: Amazing incredible package or something that gets put together and you know deals only you don't do deals for their own sake right. So instead, we've gotten this sort of acceleration.

Robert W. Gerrity: And, you know, a deal is only, you know, you don't do deals for their own sake, right? So instead, we've gotten this sort of acceleration of these near term drilling development program opportunities. And so I'm just kind of curious, you know, has Jimmy been an important part of like making the decision of, okay, we're going to focus a bit there instead of, yeah, like, like, you know, kind of maybe what, John White was hinting at with like large acreage accumulations like kind of gaming it out and like working that Rolodex and getting the higher working interest, anything, Jimmy, you could speak to it, but I'd also just be more interested broadly, from the other guys, you know, a sense of the role and how that ties in.

Robert W. Gerrity: These near term drilling development program opportunities.

Robert W. Gerrity: So I'm just kind of as Jimmy <unk> been an important part of like making the decision of okay. We're going to focus a bit there instead of yeah like like you know kind of maybe what a.

Robert W. Gerrity: John why it was changing out with like large acreage accumulations like kind of gaming it out and like working that rolodex and getting the higher working interest.

Robert W. Gerrity: Anything Jimmy you can speak to it but I'd also just be more interested broadly.

Robert W. Gerrity: The other guys you know a sense of the rollout and how that ties them.

Robert W. Gerrity: Yep, you nailed it Donovan. Bringing Jimmy on was a win in every way for Vitesse. You know, Jimmy's experience is unparalleled, and just having that knowledge and experience and scar tissue to understand what works and what doesn't work, it's invaluable. You don't learn it in a book; you just learn it through the hard knocks of experience.

Speaker Change: Yes, you nailed the Donovan, bringing Jimmy on was our win in every way for them to test.

Robert W. Gerrity: Jimmy <unk> experience.

Robert W. Gerrity: Is unparalleled and just having that knowledge and scar tissue to understand what works and what doesn't work.

Robert W. Gerrity: It's invaluable you don't.

Robert W. Gerrity: Learning a book you just Florida bi.

Robert W. Gerrity: Hard knocks of experience.

Robert W. Gerrity: Jimmy was a perfect fit for Brian and me. He came in, and it was as if we were partners for a long time. You know, you can call him the accelerator. And I think it is fair to... Give Jimmy a lot of credit for us being able to source additional deals. So Jimmy, are you sweating yet, or not?

Robert W. Gerrity: Jimmy was a perfect fit for Brian and I. He came in and it was as if we were partners for a long time.

Robert W. Gerrity: You can call him the accelerator.

Robert W. Gerrity: And I think it's it is fair to two <unk>.

Robert W. Gerrity: Give jimmie a lot of credit for.

Robert W. Gerrity: For us being able to source additional deals so Jamie are you sweat and yet or.

James P. Henderson: OK, enough of that. I'd like to, as much as I would like to take credit for the ability to do what we've done so far in the last few months, it is really a testament to the team that has been assembled here and as well as things we've talked about, Luminous, and that, you know, it's really a culmination of all those things that have been developed over the years of existence for this company. And I really appreciate all the comments, but I'm just here to be able to take advantage of what's already been built and keep it moving forward, but I really appreciate the thoughts.

Speaker Change: Okay enough of that.

Robert W. Gerrity: <unk>.

James P. Henderson: I'd like to as much as I would like to take credit for.

James P. Henderson: The ability to do what we've done so far in the last few months.

James P. Henderson: It's really a testament to the team has been assembled here and as well as things you've talked about room and there was some good.

James P. Henderson: It's really a culmination of all of those things has been developed over the years of existence for this company and.

James P. Henderson: I really appreciate all the comments for I'm just being.

James P. Henderson: Being able to take advantage of what's already been built and keep it moving forward, but I really appreciate the thoughts.

Donovan Due Schafer: Okay, and of course, you guys, if you have anything really negative to say, you can just call and tell me later. I'll find it. But, so, then there's my one last question.

Speaker Change: Okay and of course, you guys. If you have anything really to say you can just call him telling me later.

Donovan Due Schafer: [laughter], but so then my one last question is just with the dividend sort of stress testing I have to imagine.

Donovan Due Schafer: It's just that the dividend is sort of stress testing that. I have to imagine, you know, even presenting it to the board, for example, to get their approval for raising the dividend. I would assume you do some kind of stress testing, but if you can just kind of confirm that and maybe what type of parameters, you know, how, you know, you've got a lot of hedging in place for the next year. So do you say, you know, assuming $60 oil, how many years or months or what are kind of some of the parameters that you've done for stress tests and back stops?

Donovan Due Schafer: Resenting be presenting it to the board for example to get their approval on raising your dividend.

Donovan Due Schafer: I would assume you do some kind of stress testing, but if you can just kind of confirm that and maybe what type of parameters how are you.

Donovan Due Schafer: You've got a lot of hedging in place for the next year. So do you say.

Donovan Due Schafer: You know assuming a $60 oil how long can we germany years or months or what are kind of some of the parameters that you have done just that.

Donovan Due Schafer: Dressed Hudson backstop that.

James P. Henderson: Yeah, Donovan, this is Jimmy, and I can take the first cut and let you guys jump in, but yeah, certainly, I mean, the strip itself kind of provides a pretty good litmus test, the way that it's back-redated, and we look at, can we maintain this coverage ratio for the dividend, even with that back-redation, and what would happen if we go further than that, and, you know, knowing that there's a lot of things you have to adjust in the model in a lower-for-longer type scenario, costs tend to go down, etc., so we do get confidence we're able to maintain the level of dividend in most scenarios, and then we can make adjustments to support as best we can for a period of time. So yeah, we definitely run multiple scenarios, and probably like most long gas companies, kind of a flat, flattish price that we are a little more confident in, and then a strip, and then something lower even than that.

Donovan Due Schafer: Yes. This is Jeremy I can take first got in which guys jump in but certainly I mean, the strip itself kind of provide some pretty good litmus test in the way that it's backward dated and we work hard can we maintain this coverage ratio for the dividend even with the with that backwardation.

James P. Henderson: And what would happen if we go further than that and knowing that theres a lot of things you have to adjust in the model.

James P. Henderson: A lower for longer type scenario and costs tend to go down et cetera. So we.

James P. Henderson: We do get confidence we're able to maintain.

James P. Henderson: <unk> maintained our level of dividend.

James P. Henderson: And in most scenarios and then we can make adjustments to <unk> to support as best we can for a period of time, so yes, we definitely run.

Speaker Change: Multiple scenarios and.

James P. Henderson: Probably like most of the oil and gas companies kind of a flat flattish price.

Speaker Change: Or a little more confident.

Speaker Change: Confident Aaron.

James P. Henderson: They're in the strip and then something or even in.

James P. Henderson: Brian, you can step down. You've done a lot more than I have. Yeah, this is Bob.

James P. Henderson: Brian stepped down you've done a lot more than I am yeah. This is Bob I'll just have a brief comment.

Robert W. Gerrity: Yeah, this is Bob. I'll just have a brief comment. The dividend end is... is very obviously what we live for. It's important to understand, and we've seen it. When the price of oil goes down, activity goes down. So when activity goes down, our CapEx goes down. So, you know, you can't just fix a problem when you're doing the stress test. You just can't fix everything.

Robert W. Gerrity: The dividend and it is.

Robert W. Gerrity: It's obviously, it's what we live for.

Robert W. Gerrity: It's important to understand and we will.

Robert W. Gerrity: We've seen it.

Robert W. Gerrity: When the price of oil goes down activity goes down so when activity goes down our Capex goes down so that you know you can't just fix.

Robert W. Gerrity: When youre doing a stress test you just can't fix everything you have to realize that if the.

Robert W. Gerrity: You have to realize that if the price of oil goes down to 50, the activity level will go down accordingly. So the key measure for us is what Ben said earlier, that our maintenance CapEx is around 90 million bucks. So that is a real critical number for us. So above that is where we become additional capital allocators. Our rate of return on that maintenance capex is the highest we've got.

Robert W. Gerrity: Price of oil goes down to 50, the activity level will go down accordingly, so the key measure for US is what Ben said earlier is that our maintenance Capex is around 90 million Bucks. So that is a real critical number for us so above that.

Speaker Change: That is.

Robert W. Gerrity: Where we become additional capital allocators, our rate of return of that maintenance Capex is the highest we've got so for us to spend more money that $90 million a year, it's going to have to be very very attractive. So we think about all the time Donovan Brian would you.

Robert W. Gerrity: So for us to spend more money than $90 million a year, it's going to have to be very, very attractive. So we think about it all the time, Donovan. Brian, would you add?

Brian Cree: The only thing that I would really add there, Donovan, is, again, that's one of the reasons that Vitesse has always tried to keep that leverage low, right? I mean, it just provides us with some flexibility. Not that we want to use debt to pay the dividend, but if oil prices were to decline on a short-term basis, we feel like that extra capacity there to allow us to keep that fixed dividend is something that is obviously very important to us.

Brian Cree: The only thing that I would really add there Donovan is again, that's one of the reasons that the test has always tried to keep that leverage right. I mean, it just it provides us some flexibility not that we want to use that to pay the dividend, but if oil prices were to decline on a short term basis, we feel like that that that extra.

Brian Cree: The passage there to allow us to keep that fixed dividend, it's something that we're that we're that obviously is very important to us we've talked about it a lot and but look if oil prices went down for for a long period of time, we would have to adjust in and look at everything, but clearly that that extra.

Brian Cree: We've talked about it a lot, but look, if oil prices went down for a long period of time, we would have to adjust and look at everything. But clearly, that extra debt capacity is something that factors into our calculations.

Brian Cree: That capacity is something that factors into our calculation.

Donovan Due Schafer: Okay, very helpful. Thank you, guys. I'll pass it on.

Speaker Change: Okay very helpful. Thank you guys.

Speaker Change: Thanks ill pass it on.

Donovan Due Schafer: Yes.

Operator: Thank you. Our next questions come from the line of Noel Parks with the Tui Brothers. Please proceed with your questions.

Donovan Due Schafer: Thank you our next questions come from the line of Noel Parks with Tuohy Brothers. Please proceed with your questions.

Noel Parks: Hi, good morning.

Noel Parks: morning. I just had a couple.

Operator: Hum.

Noel Parks: An interesting one.

Noel Parks: With the <unk>.

Noel Parks: I was interested in when, with the... Continue the era of capital efficiency. There's a lot to recommend the non-operated model, just how diversified you are across many operators and so forth. And I'm wondering, have you seen any signs of any new entrants, other non-ops, looking to get active in the Bakken or your other bases?

Noel Parks: In an era of capital efficiency, there's a lot to recommend the non operated model just how diversified you are across many operators and so forth and I'm wondering have you seen any signs of any new entrants.

Noel Parks: Other non ops looking too.

Noel Parks: Get active in the Bakken are you know they are basically.

Noel Parks: Yeah.

Brian Cree: Yeah, I mean, we constantly see new family offices come in, there's, you know, there's been some transactions so far this year where there's been new entrants into the Bakken. And there's some other operators that are, they're looking to sell their assets, you know, that along with consolidation is something that's exciting to us. I mean, it's always good to see, you know, the consolidation in the basin, operators taking on the best of what each side has looked at.

Speaker Change: Yes, I mean, we constantly see new family office has come in there is theres been some transactions. So far this year, where there's been new entrants into into the Bakken.

Brian Cree: And there are some other operators that are theyre looking to sell their assets.

Brian Cree: That along with consolidation is something that's exciting to us I mean, it's it's always good to see.

Brian Cree: The consolidation in the basin.

Brian Cree: Operators are taking on the best of what each side has looked at and so.

Brian Cree: From a pure non op standpoint, there's always.

Brian Cree: And so, you know, from a pure non-op standpoint, there's always, you know, for smaller deals, we see a little more competition. But again, I think from what we've been able to accomplish so far this year, those larger deals, I don't think we've really seen any new entrants from the non-op space. This is Bob.

Brian Cree: For smaller deals, we see a little more competition, but again I think from from what we've been able to accomplish so far this year those larger deals I don't think we've really seen any any new entrants.

Brian Cree: From from the non op space and this is Bob it's hard to buy your way into the Bakken, It's really tightly held and has been for seven or eight years.

Robert W. Gerrity: This is Bob. It's hard to buy your way into the Bakken. It's really tightly held and has been for seven or eight years.

Robert W. Gerrity: We could never reconstruct the 50 some-odd thousand acres we have. We bought them at a very low cost per acre.

Bob: Could never.

Bob: Reconstruct the 50, some odd thousand acres, we have we bought it at a very low cost.

Bob: Cost per acre.

Noel Parks: Got you. Thanks. That's a helpful consideration, and I'm just curious as far as Well, you described that a number of deals just sort of came together last month. And in terms of interacting with potential sellers... Do they tend to be more price-sensitive, or are they more time-sensitive, just looking to get these interests sold, and just looking for sort of whatever price... Yeah, I mean, I think...

Speaker Change: Gotcha, Thanks that.

Speaker Change: Helpful consideration and I'm, just curious as far as.

Noel Parks: Would you describe that.

Noel Parks: Number of deals just sort of came together.

Noel Parks: Last month and in terms of interacting with potential sellers do.

Noel Parks: Do they tend to be more price sensitive or are they.

Noel Parks: More time sensitive just looking to get these interest sold and.

Noel Parks: Just looking for sort of whatever price.

Noel Parks: Meet their thresholds.

Brian Cree: Yeah, I mean, I think for the sellers price is always something that's important to them, but at the same time I think they, just the history most of them have had with us, they have trust that they can move forward with a transaction, that we're going to look at it, and that we're going to be able to close. And, you know, a lot of times these guys will get AFEs in, they then have 30 days from which to make a decision, and they're trying to move these AFEs a lot of times within that 30 days, so having somebody to deal with, that they have the confidence that can get it done, will close, that is not going to back out on them in the last minute, it's going to provide them a reasonable offer, I think that all plays into it.

Noel Parks: Yeah, I mean, I think I think for the sellers price is always something that's important to them, but but at the same time I think they.

Brian Cree: [inaudible]

Brian Cree: Just the history most of them have had with us they have they have trust that they can move forward with the transaction that we're going to look at it.

Brian Cree: And then we're going to be able to close and you know a lot of times. These guys will get a of fees in they then have 30 days from which to make a decision and they're trying to move these afg's a lot of times within that 30 days, so having somebody to deal with that they have the confidence that that can get it done we will close that is not going to back out on them in the lab.

Brian Cree: Minute, it's going to provide them a reasonable offer.

Brian Cree: I think that all plays into it.

Speaker Change: Great. Thanks, a lot.

Speaker Change: Okay. Thanks kicked off.

Operator: Thank you. There are no further questions at this time. I would now like to hand the call back over to Bob Gerrity for closing remarks.

Robert W. Gerrity: Thank you there are no further questions at this time I would now like to hand, the call back over to Bob guarantee for closing remarks.

Robert W. Gerrity: Thank you all for the time you spent with us this morning. If you had any follow-up questions, Ben Messier does a great job of filling in the cracks here.

Robert W. Gerrity: Thank you all for the time, you've spent with US. This morning, if you've had any follow up questions. Ben FCA is does a great job of filling and filling in the cracks here. So look forward to seeing everybody or talking to you in three months. Thank you bye bye.

Operator: So I look forward to seeing everybody or talking to you in three months. Thank you. Bye-bye.

Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.

Robert W. Gerrity: Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect at this time enjoy the rest of your day.

Operator: [music].

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: Hmm.

Operator: [music].