Q2 2024 Northern Oil and Gas Inc Earnings Call

Operator: Greetings and welcome to the NOG's 2nd Quarter 2024 Earnings Conference. At this time, all participants are in a listen-only mode; a question and answer session will follow the formal presentation.

Operator: Greetings and welcome to the NOG's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation.

Speaker Change: Greetings and welcome to the NOG's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation and if you have a question at that time, please press star 1 on your telephone keypad.

Operator: And if you have a question at that time, please press star one on your telephone keypad. As a reminder, this call is being recorded.

Operator: And if you have a question at that time, please press star one on your telephone keypad. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Evelyn Infurna, Vice President, Investor Relations. Thank you. You may begin. Good morning.

Evelyn Leon Infurna: As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Evelyn Infurna, Vice President, Investor Relations. Thank you. You may begin.

Evelyn Infurna: It is now my pleasure to introduce your host, Evelyn Infurna, Vice President Investor Relations. Thank you.

Operator: You may be again.

Operator: Good morning. Welcome to NOG's second quarter earnings conference call. Yesterday, after the market closed, we released our financial results for the second quarter. You can access our earnings release and presentation on our Investor Relations website at noginc.com. And our thank you will be filed with the SEC within the next few days.

Evelyn Leon Infurna: Welcome to NOG's second quarter earnings conference call. Yesterday, after the market closed, we released our financial results for the second quarter. You can access our earnings release and presentation on our investor relations website at NOGinc.com, and our thank you letter will be filed with the SEC within the next few days. I'm joined this morning by our Chief Executive Officer, Nico Grady, our President, Adam Dirlam, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, Jim Evans.

Evelyn Leon Infurna: Good morning.

Speaker Change: Welcome to NOG's second quarter earnings conference call.

Evelyn Leon Infurna: Yesterday, after the market closed, we released our financial results for the second quarter. You can access our earnings release and presentation on our investor relations website at NOGinc.com. And our thank you will be filed with the SEC within the next few days.

Operator: I'm joined this morning by our chief executive officer, Nico Grady, our president, Adam Dirlam, our chief financial officer, Chad Allen, and our chief technical officer, Jim Evans. Our agenda for today's call is as follows. Nick will provide remarks on the quarter and on our recent accomplishments. Then Adam will give you an overview of operations and business development activities. And Chad will review our financial results and walk through updates to our 2024 guidance. After our prepared remarks, the team will be available to answer any questions.

Speaker Change: I'm joined this morning by our Chief Executive Officer, Nico Grady, our President, Adam Dirlam, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, Jim Evans. Our agenda for today's call is as follows.

Evelyn Leon Infurna: Our agenda for today's call is as follows. I will give remarks on the quarter and on our recent accomplishments. Then Adam will give you an overview of operations and business development activities, and Chad will review our financial results and provide walkthrough updates to our 2024 guidance. Before we begin, let me cover our safe harbor language.

Evelyn Leon Infurna: After our prepared remarks, the team will be available to answer any questions.

Operator: Before we begin, let me cover our safe verbal language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of this Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward-looking statements. Those risks include, among others, matters that we have described in our earnings release, as well as in our filings with the SEC, including our annual report on the form 10-K and our quarterly reports on form 10-Q.

Evelyn Leon Infurna: Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of this Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward-looking statements. Those risks include, among other things, matters that we have described in our earnings release, as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements.

Speaker Change: Before we begin, let me 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 this Private Securities Litigation Reform Act.

Speaker Change: These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward-looking statements.

Those risks include, among others, matters that we have described in our earnings release, as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q .

Operator: We display any obligations to update these forward-looking statements.

Speaker Change: We disclaim any obligations to update these forward-looking statements.

Operator: During today's call, we may discuss our non-GAAP financial measures, including adjusted EBITDA, adjusted net income, and free cash flow. Reconciliation of these measures to the closest gap measure can be found in our earnings release.

Evelyn Leon Infurna: During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, and free cash flow. Reconciliations of these measures to the Closest Gap measure can be found in our earnings release. With that, I'll turn the call over to Nick. Thanks, Evelyn. Good morning, everyone.

Nico Grady: With that, I'll turn the call over to Nick. Thanks, Evelyn. Welcome and good morning, everyone. And thank you for your interest in our company.

Nico Grady: And thank you for your interest in our company. I'm going to change things up this quarter by answering five key questions. Number one.

Nico Grady: I'm going to change things up this quarter by answering five key questions. Number one, so how's it been going? On our fourth quarter call, and several before that, I have spoken about the importance of delivering growth and profitability over time. I'd like to use that framework once again and put the results from the second quarter in the context. Our second quarter, adjusted EBITDA was up 31% year over year and 52% versus two years ago. Our quarterly cash flow from operations, excluding working capital, was up 33% year over year and about 48% versus two years ago.

Speaker Change: I'm going to change things up this quarter by answering five key questions.

Nico Grady: So how's it been going? On our fourth quarter call, and several before that, I have spoken about the importance of delivering growth and profitability over time. I'd like to use that framework once again and put the results from the second quarter into context. Our second quarter adjusted EBITDA was up 31% year over year and 52% versus two years ago. Our quarterly cash flow from operations, excluding working capital, was up 33% year over year and about 48% versus two years ago.

Speaker Change: Number one.

Speaker Change: So how's it been going?

Speaker Change: I'd like to use that framework once again and put the results from the second quarter into context.

Nico Grady: We, she's outsized growth per share despite commodity prices that flush away. Oil prices were a bit higher and gas prices a bit lower than a year ago, but two years ago oil prices were over $20 higher and gas prices over triple the current price. Even more impressive is the fact that despite our growth and a volatile commodity price environment, our LQA debt ratio is to stay in check in the low 1.1 range. This range is actually lower than a year ago, so in summary, our per share metrics continue to rise throughout the cycle, supported by a low leveraged and strong balance sheet.

Nico Grady: We achieved outsized growth per share despite commodity prices that fluctuate. Oil prices were a bit higher and gas prices a bit lower than a year ago, but two years ago, oil prices were over $20 higher, and gas prices were more triple the current price.

Speaker Change: We achieved outsized growth per share despite commodity prices that fluctuate.

Speaker Change: Oil prices were a bit higher and gas prices a bit lower than a year ago but two years ago oil prices were over $20 higher and gas prices over tripled the current price.

Nico Grady: Even more impressive is the fact that despite our growth in a volatile commodity price environment, our LQA debt ratios have stayed in check in the low 1.1 range, actually lower than a year ago. So, in summary, our per share metrics continue to rise throughout the cycle, supported by a low leveraged and strong balance sheet. While growth is important, returns and capital efficiency are paramount. Our return on capital this quarter was approximately 25%.

Speaker Change: Even more impressive is the fact that despite our growth in a volatile commodity price environment, our LQA debt ratios have stayed in check in the low 1.1 range.

Speaker Change: This range is actually lower than a year ago, so in summary, our per share metrics continue to rise throughout the cycle supported by a low leveraged and strong balance sheet.

Nico Grady: While growth is important, returns and capital efficiency are paramount. Our return on capital this quarter was approximately 25%, impressive when taking into account the step up in capitalization we experience every time we make a significant acquisition. In the last year, our return on capital employed was over 28%; that was 14% higher than the average of our 16 company Pearson, and for business context, double that of the average public non operators in our Pearson. Within our broader Pearson, it shows that our business model allows for superior capital allocation, but I bring up other non operators to show that from a managerial and asset perspective.

Speaker Change: While growth is important, returns and capital efficiency are paramount.

Speaker Change: Our return on capital this quarter was approximately 25 percent, impressive when taking into account the step up in capitalization we experience every time we make a significant acquisition.

Nico Grady: Impressive when taking into account the step-up in capitalization we experience every time we make a significant acquisition. In the last year, our return on capital employed was over 28%, that was 14% higher than the average of our 16 company peer set. And, for business purposes, double that of the average public non-operators in our peer set.

Speaker Change: In the last year, our return on capital employed was over 28%.

Speaker Change: That was 14% higher than the average of our 16 company peer set, and for business context, double that of the average public non-operators in our peer set.

Nico Grady: Within our broader peer set, it shows that our business model allows for superior capital allocation, but I bring up other non-operators to show that from a managerial and asset perspective, we're also doing it better than others within our own niche. Our company continues to be focused on the same simple philosophy, finding ways to sustainably grow profits per share through the cycle and over time for our investors. We believe that this is the path to driving long-term share price outperformance.

Speaker Change: Within our broader peer set it shows that our business model allows for superior capital allocation, but I bring up other non-operators to show that from a managerial and asset perspective we're also doing it better than others within our own niche.

Nico Grady: We're also doing it better than others within our own niche.

Nico Grady: Our company continues to be focused on the same simple philosophy: finding ways to sustainably grow profits per share through cycle and over time for our investors. We believe that is the path to driving long-term share price outperformance. While oil and gas prices go through cycles that can and will affect our profits, again, it is our job, and we will find ways to grow the business through such times.

Speaker Change: Our company continues to be focused on the same simple philosophy.

Speaker Change: finding ways to sustainably grow profits per share through cycle and over time for our investors. We believe that is the path to driving long-term share price outperformance.

Nico Grady: While oil and gas prices go through cycles that can and will affect our profits, again, this is our job, and we will find ways to grow the business through such times. With our assets performing well, solid organic growth in the pipeline, and recently announced acquisitions, our business is poised to grow profits and cash flow further. Number two.

Speaker Change: While oil and gas prices go through cycles that can and will affect our profits, again it is our job and we will find ways to grow the business through such times.

Nico Grady: With our assets performing well, solid organic growth in the pipeline, and recently announced acquisitions, our business is poised to grow profits and cash flow further. Number two, so what does that mean for you? We haven't even closed on our XEL or point transactions, but based on where the business is here to date and our confidence in the outlook, we will be recommending a mid-year bump to the dividend. Additionally, we've been active in the first half, repurchasing shares and have renewed our share repurchase plan. We are very discerning about when we repurchase shares and have had a track record of entering the market during periods of value compression, and when we believe the market has understated our growth potential.

Speaker Change: With our assets performing well, solid organic growth in the pipeline, and recently announced acquisitions, our business is poised to grow profits and cash flow further.

Nico Grady: So what does that mean for you? We haven't even closed on our XCL or point transactions, but based on where the business is year to date and our confidence in the outlook, we will be recommending a mid-year bump to the dividend. Additionally, we've been active in the first half of the year repurchasing shares and have renewed our share repurchase plan. We are very discerning about when we repurchase shares and have had a track record of entering the market during periods of value compression and when we believe the market has understated our growth potential, and hence we have had the opportunity in the first half of 2024. We prioritize that over dividend growth in the short term, but that won't always be the case, as our increased recommendation should also show our investors. Let me be explicitly clear.

Speaker Change: Additionally, we've been active in the first half repurchasing shares and have renewed our share repurchase plan.

Nico Grady: And hence, we've had the opportunity in the first half of 2024. We prioritize that over dividend growth in the short term, but that won't always be the case as our increased recommendation should also show our investors. Let me be explicitly clear: we believe there is additional capacity for growth, either in dividends or in future buyback capacity, but we are also remaining conservative and dedicated to managing leverage carefully, as we have done meticulously over the past six plus years.

Speaker Change: We prioritize that over dividend growth in the short term, but that won't always be the case, as our increased recommendation should also show our investors.

Nico Grady: We believe there is additional capacity for growth, either in dividends or in future buyback capacity, but we are also remaining conservative and dedicated to managing leverage carefully as we have done meticulously over the past six plus years. We will sit down with the board during our regular review in Q125 to discuss a further increase in the dividend, additional buyback capacity, and obviously ensuring that our balance sheet remains strong and is on a path to getting stronger after the outlay of the capital for the Point and FCL acquisition. Number three. What's Behind the Uintas?

Speaker Change: Let me be explicitly clear. We believe there is additional capacity for growth, either in dividends or in future buyback capacity, but we are also remaining conservative and dedicated to managing leverage carefully, as we have done meticulously over the past six plus years.

Nico Grady: We will sit down with the board during our regular review in Q125 to discuss a further increase to the dividend, additional buyback capacity, and obviously ensuring that our balance sheet remains strong and is on a path to getting stronger after the outlay of the capital for the point in XEL acquisitions.

Speaker Change: We will sit down with the board during our regular review in Q125 to discuss a further increase to the dividend, additional buyback capacity, and obviously ensuring that our balance sheet remains strong and is on a path to getting stronger after the outlay of the capital for the point and FCL acquisitions.

Nico Grady: Number three, what's behind the you went to? And June we announced our largest transaction ever, the co-purchase of XEL Resources, you went to base NASA's with SM Energy. For many investors, the UNTA is less well known than the marquee shale place. In the past four years, however, it's been amongst the fastest growing oil place in the country. I won't mince words when I say that, personally, I have never been more excited about a transaction during my tenure here at NOG. The benefits of this asset will pay huge dividends for our investors over the next decade.

Speaker Change: Number three, what's behind the U-Incident?

Nico Grady: In June, we announced our largest transaction ever, the co-purchase of XCO resources' Uintah Basin assets with SM Energy. For many investors, Uintah is less well known than the Marquee Shale Way. In the past four years, however, it's been amongst the fastest growing oil plays in the country. I won't mince words when I say that, personally, I have never been more excited about a transaction during my tenure here at NOG. The benefits of this asset will pay huge dividends for our investors over the next decade. The facts are simple.

Speaker Change: In the past four years, however, it's been amongst the fastest-growing oil plays in the country.

Speaker Change: I won't mince words when I say that personally I have never been more excited about a transaction during my tenure here at NOG.

Speaker Change: The benefits of this asset will pay huge dividends for our investors over the next decade.

Nico Grady: The facts are simple. You have a multi-stacked pay asset where, unlike the Permian, much of the exploration was not allocated value in our acquisition, providing upside for our investors, even as many of these benches have been proven out by other operators. When planning with SM, we put forth very conservative costs, spacing, and pricing assumptions. The economics of the wells are very similar and competitive with those in the Delaware Basin in terms of productivity, but with a cost structure of Midland wells and an extremely high oil cut with high quality crude that is a good exceptionally valuable.

Nico Grady: You have a multi-stacked pay asset where, unlike the Permian, much of the exploration was not allocated value in our acquisition, providing upside for our investors, even as many of these benches have been proven out by other operators. When planning with SM, we put forth very conservative cost spacing and pricing assumptions. The economics of the wells are very similar and competitive with those in the Delaware Basin in terms of productivity, but with the cost structure of Midland Wells and an extremely high oil cut with high-quality crude that is exceptionally valuable.

Speaker Change: The facts are simple. You have a multi-stacked pay asset where, unlike the Permian, much of the exploration was not allocated value in our acquisition, providing upside for our investors, even as many of these benches have been proven out by other operators.

Speaker Change: When planning with SM, we put forth very conservative costs, spacing, and pricing assumptions.

Speaker Change: The economics of the wells are very similar and competitive with those in the Delaware Basin in terms of productivity, but with the cost structure of Midland Wells and an extremely high oil cut with high quality crude that is exceptionally valuable.

Nico Grady: And while the one knock on the play is the higher cost of oil takeaway, the logistical changes that have taken place over the past few years are less well known. Whereas once the oil was captured to a handful of local refiners, there is now easily expandable rail capacity to take oil away from the basin to the Gulf Coast where the crude is in high demand. Over the longer term, we believe project by project there will be ways to cut the transport costs further as well. Even when accounting for the higher transport cost, the economics compete favorably with anything in our portfolio.

Nico Grady: And while the one knock on the play is the higher cost of oil takeaway, the logistical changes that have taken place over the past few years are less well known. Whereas once the oil was captive to a handful of local refiners, there is now easily expandable rail capacity to take oil away from the basin to the Gulf Coast, where the crude is in high demand. Over the longer term, we believe project by project, there will be ways to cut the transport costs further as well. Even when accounting for the higher transport costs, the economics compete favorably with anything in our portfolio.

Speaker Change: And while the one knock on the plate is the higher cost of oil take away, the logistical changes that have taken place over the past few years are less well known.

Speaker Change: Whereas once the oil was captive to a handful of local refiners, there is now easily expandable rail capacity to take oil away from the basins of the Gulf Coast where the crude is in high demand.

Speaker Change: Over the longer term, we believe project by project, there will be ways to cut the transport costs further as well.

Speaker Change: even when accounting for the higher transport costs.

Nico Grady: And over the next several years, I think our investors will come to appreciate this asset more and more. And we believe it will pay dividends in the years to come, both figuratively and literally. Number four, how's the future looking?

Speaker Change: The economics compete favorably with anything in our portfolio.

Nico Grady: And over the next several years, I think our investors will come to appreciate this asset more and more, and we believe it will pay dividends in the years to come, both figuratively and literally.

Speaker Change: And over the next several years, I think our investors will come to appreciate this asset more and more. And we believe it will pay dividends in the years to come, both figuratively and literally.

Nico Grady: Number four, how's the future looking? We find the business in the cat bird scene as we hit mid-year. We have come through some of the heaviest spend periods over the past few quarters, which has required some patience from our investors. And as you see in the results today, that's converting into significant free cash flow now. Our balance sheet debt ratios are ahead of schedule, and more than half of Q2's turn-in line activity will actually have more impact on Q3 volumes. So we see a very strong outlook for the base business as the year progresses, even as our capital commitment stabilizes.

Speaker Change: Number four, how's the future looking?

Nico Grady: We find the business in the catbird seat as we hit mid-year; we have come through some of the heaviest spend periods over the past few quarters, which has required some patience from our investors. And as you see in the results today, that's converting into significant free cash flow now. Our balance sheet debt ratios are ahead of schedule, and more than half of Q2's turn in line activity will actually have more impact on Q3 volumes, so we see a very strong outlook for the base business as the year progresses, even as our capital commitments stabilize. Organic activity on our acreage has also been very healthy.

Speaker Change: We find the business in the catbird seat as we hit mid-year. We have come through some of the heaviest spend periods over the past few quarters, which has required some patience from our investors. And as you see in the results today, that's converting into significant free cash flow now.

Speaker Change: Our balance sheet debt ratios are ahead of schedule, and more than half of Q2's turn in line activity will actually have more impact on Q3 volumes, so we see a very strong outlook for the base business as the year progresses, even as our capital commitments stabilize.

Nico Grady: Organic activity on our acreage has also been very healthy, and as you've seen, we've had success in all facets of our business, including the ground gain and significant bolt odds. We're seeing a vast ounce of sorts in the Williston with longer laterals and a notable increase in refract activity as operators are finding ways to maintain and even grow in our legacy basin.

Speaker Change: Organic activity on our acreage has also been very healthy and as you've seen we've had success in all facets of our business, including the ground game and significant bolt-ons.

Nico Grady: And as you've seen, we've had success in all facets of our business, including the ground game and significant bulldog. We're seeing a renaissance of sorts in the Williston with longer laterals and a notable increase in refract activity as operators are finding ways to maintain and even grow in our legacy basin. In 2023, we raised equity without announcing an acquisition for the first time in my tenure here at NOG, something we didn't take lightly.

Speaker Change: We're seeing a renaissance of sorts in the Williston with longer laterals and a notable increase in reef rack activity as operators are finding ways to maintain and even grow in our legacy basin.

Nico Grady: In 2023, we raised equity without announcing an acquisition for the first time in my tenure here at NOG, something we didn't take lightly. In marketing our offering, I told investors that, quote, we were getting ahead of the opportunities in front of us and believe it sets the stage for over $1 billion worth of acquisitions on a balance sheet in just the next year. Here we are, nine months later, and we've deployed $900 million through two Delaware transactions, one Utica transaction in our marquee wins a transaction. Our balance sheet remains in great shape, and we still have capacity within our framework to do more if the right opportunity arises.

Speaker Change: In 2023, we raised equity without announcing an acquisition for the first time in my tenure here at NOG, something we didn't take lightly.

Nico Grady: In marketing our offering, I told investors that quote we were getting ahead of the opportunities in front of us and believed it set the stage for over $1 billion worth of acquisitions on a balance sheet in just the next year. Here we are, nine months later, and we have deployed $900 million through two Delaware transactions, one Utica transaction, and our Marquis Uinta transaction. Our balance sheet remains in great shape, and we still have capacity within our framework to do more if the right opportunity arises. We are people that believe in doing what we say.

Speaker Change: In marketing our offering, I told investors that, quote, we are getting ahead of the opportunities in front of us and believe it sets the stage for over $1 billion worth of acquisitions on a balance sheet in just the next year.

Speaker Change: Here we are, nine months later, and we have deployed $900 million through two Delaware transactions, one Utica transaction, and our Marquee-Uinta transaction.

Speaker Change: Our balance sheet remains in great shape and we still have capacity within our framework to do more if the right opportunity arises.

Nico Grady: We are people that believe in doing what we say, and when we raise that capital, first of all, we believe we have the opportunity set to put it to good work. And secondly, we wanted to be in a position to deliver a creative growth to our investors on the other side. And I'm proud to say I believe we've done just that. Something few companies can match in the space.

Speaker Change: We are people that believe in doing what we say, and when we raise that capital, first of all, we believe we have the opportunity set to put it to good work. And secondly, we wanted to be in a position to deliver accretive growth to our investors on the other side. And I'm proud to say I believe we've done just that.

Nico Grady: And when we raise that capital, first of all, we believe we have the opportunity set to put it to good work. And secondly, we want to be in a position to deliver accretive growth to our investors on the other side. And I'm proud to say I believe we've done just that. These transactions, combined with our other organic projects, have us poised for year over year per share growth in 2024 and in 2025, regardless of the commodity strip, something few companies can match in the space. Number five.

Speaker Change: These transactions, combined with our other organic projects, have us poised for year-over-year per share growth in 2024 and in 2025, regardless of the commodity strip, something few companies can match in this space.

Nico Grady: Number five, so what's next? In an era of substantial industry consolidation, we've been at the forefront of the trend in our niche, and what we've created in just the past few years is incredibly valuable and not always fully appreciated by our investors. An example would be EKT's recent non-operated asset sale in the Appalachian. It implies that three to five times, or even greater value for what we purchased in the Marcellus just a few short years ago. We're proud of what we've accomplished. We believe we've been superior capital allocators and been ahead of the curve in terms of strategy.

Nico Grady: So what's next? In an era of substantial industry consolidation, we've been at the forefront of the trend in our niche. And what we've created in just the past few years is incredibly valuable and not always fully appreciated by our investors. An example would be EQT's recent non-operated asset sale in Appalachia.

Speaker Change: Number five. So what's next?

Speaker Change: In an era of substantial industry consolidation, we've been at the forefront of the trend in our niche. And what we've created in just the past few years is incredibly valuable, and not always fully appreciated by our investors.

Speaker Change: An example would be EQT's recent non-operated asset sale in Appalachia.

Nico Grady: It implies a three to five times or even greater value for what we purchased in the Marcellus just a few short years ago. We're proud of what we've accomplished. We believe we've been superior capital allocators and ahead of the curve in terms of strategy. But, as I mentioned earlier this year, we also believe the best is yet to come. People then ask us, what is the end game? As a fiduciary, we don't get to answer that question. There is no end.

Speaker Change: It implies a three to five times or even greater value for what we purchased in the Marcellus just a few short years ago.

Speaker Change: We're proud of what we've accomplished. We believe we've been superior capital allocators and been ahead of the curve in terms of strategy. But as I mentioned earlier this year, we also believe the best is yet to come.

Nico Grady: But, as I mentioned earlier this year, we also believe the best is yet to come.

Nico Grady: People then ask us, what is the end game? As a fiduciary, we don't get to answer that question. There is no end. Our goal is to never stop growing our profits and ultimately the value of the stock for you. Maximizing value is the main goal. However, that can be achieved. That's how our board motivates us, and that's how we're aligned.

Speaker Change: People then ask us, what is the end game?

Speaker Change: As a fiduciary, we don't get to answer that question. There is no end. Our goal is to never stop growing our profits and ultimately the value of the stock for you.

Nico Grady: Our goal is to never stop growing our profits and ultimately the value of the stock for you. Maximizing value is the main goal, but that can be achieved. That's how our board motivates us, and that's how we're aligned. From a competitive landscape, we would continue to reiterate what we have said ad nauseum quarter after quarter, which is that scale begets scale and that we stand on our own. Basic business rules apply in our line of work. Barriers to entry are real, and those focused on small deals on small assets with small capital commitments face significant competition.

Speaker Change: Maximizing value is the main goal, however that can be achieved. That's how our board motivates us, and that's how we're aligned. From a competitive landscape, we would continue to reiterate what we have said ad nauseum quarter after quarter, which is that scale begets scale, and that we stand on our own.

Nico Grady: From a competitive landscape, we would continue to reiterate what we have said, Adnazian quarter after quarter, which is that scale begets scale and that we stand on our own. Basic business rules apply in our line of work; barriers to entry are real. And those focused on small deals, on small assets, with small capital commitments, based significant competition. But the transactions you have seen us participating in, the creative, complex, and customized solutions are largely those where we simply stand alone. And those ones where return potential is much higher or long term upside with our operating partners is higher.

Speaker Change: Basic business rules apply in our line of work. Barriers to entry are real and those focused on small deals on small assets with small capital commitments face significant competition.

Nico Grady: But the transactions you have seen us participating in, the creative, complex, and customized solutions, are largely those where we simply stand alone, and those ones where return potential is much higher, where long-term upside with our operating partners is higher, and where you'll see us focus our efforts in the long term to the benefit of our stakeholders. That concludes my prepared remarks, so I'll close out, as I always do, by thanking the NOG engineering, land, BD, finance, and planning teams, and everyone else on board, our investors and covering analysts for listening, and our operators and partners for all the hard work they do in the field. We will hit the mid year 2024 in great shape.

Speaker Change: But the transactions you have seen us participating in, the creative, complex, and customized solutions are largely those where we simply stand alone, and those ones where return potential is much higher, where long-term upside with our operating partners is higher.

Nico Grady: And where you'll see us focus our efforts in the long term to the benefit of our stakeholders.

Speaker Change: and where you'll see us focus our efforts in the long term to the benefit of our stakeholders.

Nico Grady: That concludes with my prepared remarks. So I'll close out as I always do by thanking NNOG Engineering, Land, BD, Finance and Planning teams and everyone else on board. Our investors and covering analysts for listening, and our operators and partners for all the hard work they do in the field. We hit mid year, 2024, and great change. And as always, our team is laser-focused on delivering optimal total return. That's because we're a company run by investors for investors.

Speaker Change: That concludes my prepared remarks, so I'll close out, as I always do, by thanking the NOG engineering, land, BD, finance and planning teams, and everyone else on board, our investors and covering analysts for listening, and our operators and partners for all the hard work they do in the field.

Adam Dirlam: And as always, our team is laser focused on delivering optimal total return. That's because we're a company run by investors for investors. With that, I'll turn it over to Adam. Thanks, Nick.

Speaker Change: We hit mid-year 2024 in great shape, and as always, our team is laser-focused on delivering optimal total return. That's because we're a company run by investors for investors. With that, I'll turn it over to Adam.

Adam Dirlam: With that, I'll turn it over to Adam. Thanks, Nick. As usual, I will tick things off with review or operational highlights and then turn to our business development efforts and the current MNA alliance date. During the second quarter, we saw production increase to over 123,000 BLE per day driven by steady turn-in-line activity and some increased Permian, Utica, and Marcel's activity. We turned in line 30.1 net wells, with the Permian making up more than two thirds of the activity during the quarter. The most important comment I would make in terms of Q2 tails is that over half of them occurred in the month of June, and the bulk of those wells were cleaning up and contributed very little to volumes.

Adam Dirlam: As usual, I will kick things off with a review of our operational highlights and then turn to our business development efforts and the current M&A landscape. During the second quarter, we saw production increase to over 123,000 BOE per day, driven by steady turn-in-line activity and some increased Permian, Utica, and Marcellus activity. We turned in line 30.1 Met Wells, with the Permian making up more than two-thirds of the activity during the quarter.

Adam Dirlam: Thanks Nick. As usual, I will kick things off with a review of our operational highlights and then turn to our business development efforts and the current M&A landscape.

Adam Dirlam: During the second quarter, we saw production increase to over 123,000 BOE per day, driven by steady turn-in-line activity and some increased Permian, Utica, and Marcellus activity.

Adam Dirlam: We turned in line 30.1 Net Wells, with the Permian making up more than two-thirds of the activity during the quarter.

Adam Dirlam: The most important comment I would make in terms of Q2 earnings is that over half of them occurred in the month of June, and the bulk of those wells were cleaning up and contributed very little to volume. They will have a much larger impact on Q3 oil and total volumes, and this bodes very well as we continue on track through the year. Thus far in 2024, we have seen steady activity, including robust organic activity, increased withdrawal proposals, and continued production momentum from our various JV projects as a significant portion of the capital we've deployed in the past nine months converts into sales.

Speaker Change: The most important comment I would make in terms of Q2 tills is that over half of them occurred in the month of June and the bulk of those wells were cleaning up and contributed very little to volumes.

Adam Dirlam: They will have a much larger impact on Q3 oil and total volumes, and it's both very well as we continue on track during the year. Thus far in 2024, we have seen steady activity, including robust organic activity, increased retract proposals, and continued production momentum from our various JD projects, as a significant portion of the capital we deployed in the past nine months converts into sales. Overall, we expect the relatively consistent cadence in terms of tails for the balance of 2024, though Q3 will likely be lower because of the pull forward latent Q2. This will not have an effect on production as many of those wells are still ramping.

Adam Dirlam: It will have a much larger impact on Q3 oil and total volumes, and this bodes very well as we continue on track through the year.

Adam Dirlam: Thus far in 2024, we have seen steady activity, including robust organic activity, increased retract proposals,

Adam Dirlam: and continued production momentum from our various JV projects as a significant portion of the capital we've deployed in the past nine months converts into sales.

Adam Dirlam: Overall, we expect a relatively consistent cadence in terms of tills for the balance of 2024, though Q3 will likely be lower because of the pull-forward late in Q2. This will not have an effect on production as many of those wells are still rampant.

Adam Dirlam: Overall, we expect a relatively consistent cadence in terms of tills for the balance of 2024, though Q3 will likely be lower because of the pull forward late in Q2.

Adam Dirlam: This will not have an effect on production as many of those wells are still rampant.

Adam Dirlam: We see robust activity in Q4 both in terms of tails and additional refract AAPs in the will estate. In the second quarter, we can sense to another 16.7 net wells, a 46% increase from Q1 on a net basis and a 20% increase on a growth basis, with 197 total consensus. This points out that we saw a larger average working interest in Q2s; well proposals almost doubling the average working interest from Q1. The economics remain strong as we can sense it to the 94% of our well proposals on a net basis, where we continue to manage the portfolio non consenting those that do not meet our real rate requirements.

Adam Dirlam: We see robust activity in Q4, both in terms of tills and additional refract AFVs in the Williston. In the second quarter, we consented to another 16.7 net wells, a 46% increase from Q1 on a net basis and a 20% increase on a gross basis with 197 total consents. This points out that we saw a larger average working interest in Q2's well proposals, almost doubling the average working interest from Q1. However, economics remains strong as we consented to 94% of our well proposals on a net basis, while we continue to manage the portfolio, non-consenting those that do not meet our hurdle rate requirements.

Adam Dirlam: In the second quarter, we consented to another 16.7 net wells, a 46% increase from Q1 on a net basis, and a 20% increase on a gross basis, with 197 total consents.

Adam Dirlam: It's worth noting that the working interest average in our non consent is roughly half that of our consented average, which is a testament to our active management. We focus on purchasing more lands in the best areas, and our lower working interest and low value areas tend to be the areas where we non consent. In terms of costs, well we have enjoyed cost reductions from prior levels on some of our major joint ventures; we are seeing stable cost portfolio wide. That's any major changes to commodity prices; we are not anticipating any meaningful changes to develop a cost going forward.

Adam Dirlam: It's worth noting that the working interest average in our non-consents is roughly half that of our consented average, which is a testament to our active management. We focus on purchasing more land in the best areas, and our lower working interest and low value areas tend to be the areas where we non-consent. In terms of cost.

Adam Dirlam: We focus on purchasing more land in the best areas and our lower working interest and low value areas tend to be the areas where we non-consent.

Adam Dirlam: While we have enjoyed cost reductions from prior levels on some of our major joint ventures, we are seeing stable costs portfolio-wide. As with any major changes to commodity prices, we are not anticipating any meaningful changes to development costs going forward. The acquisitions we completed in the past few years continue to shine, and capital efficiency is beginning to bear fruit as our free cash flow more than doubled in the quarter and should remain strong as we turn to the back half of the year.

Adam Dirlam: In terms of costs, while we have enjoyed cost reductions from prior levels on some of our major joint ventures, we are seeing stable costs portfolio-wide.

Adam Dirlam: As to any major changes to commodity prices, we are not anticipating any meaningful changes to development costs going forward.

Adam Dirlam: The acquisitions we completed in the past few years continue to shine, and the capital efficiency is beginning to bear fruit as our free cash flow more than doubled in the quarter and should remain strong as we turn to the back half of the year. At the same time, we continue to see strong AFD activity on our average that should keep our production stable over time.

Adam Dirlam: At the same time, we continue to see strong AFE activity on our A-bridge that should keep our production stable over time. Shifting gears to business development and the M&A landscape, the second quarter highlighted another banner quarter for NOG both on our ground game and in larger M&A. In a shift from 2-1, our ground game in the second quarter saw a market pick up as we focused on bespoke, larger working interest. By doing so, we've been able to maintain our full cycle hurdle rates and avoid the more commoditized, smaller scale market with lower barriers to entry.

Adam Dirlam: At the same time, we continue to see strong ASE activity on our A-bridge that should keep our production stable over time.

Adam Dirlam: Chasing years to business development in the NNA landscape, the second quarter highlighted another banner quarter for N.O.G, both on our ground game and in larger NNA. In a shift from Q1, our ground gain in the second quarter, the market pickup, as we focused on the spoke larger working interests. By doing so, we've been able to maintain our full cycle hurdle rates and avoid the more commoditized, smaller scale market with lower barriers to entry. In total, we spent approximately 25 million in capital on the ground gain, just under 11 million of which was acquisition capital, acquired 6.1 net wells and approximately 1,800 net acres.

Adam Dirlam: Shifting gears to business development and the M&A landscape, the second quarter highlighted another banner quarter for NOG both on our ground game and in larger M&A.

Adam Dirlam: In total, we spent approximately $25 million in capital on the ground gain, just under $11 million of which was acquisition capital, acquiring 6.1 net wells and approximately 1,800 net acres. Here today, that brings us to approximately 6.7 net wells and almost 3500 net acres in total. During the quarter, we also signed our largest transaction ever, expanding into the Uinta Basin in a joint acquisition of the XCL Resources assets with SM Energy

Adam Dirlam: Year to date, that brings us to approximately 6.7 net wells and almost 3,500 net acres in total. During the quarter, we also signed our largest transaction ever, expanding into the U.I. database in a joint acquisition of the XCl resources assets with SM Energy. Similar to our approach with Novo and Forge, we partnered with SM to purchase a large scale, operated asset, coupled with a long-term joint development agreement and area of mutual interest. This asset has a very long life, tremendous upside, economics that compete with anything in our existing portfolio, and we see significant operational upside from SM stewardship, as well as future exploration potential from the multi-stack benches.

Adam Dirlam: Year-to-date, that brings us to approximately 6.7 net wells and almost 3,500 net acres in total.

Adam Dirlam: Similar to our approach with NOVO and FORGE, we partnered with SN to purchase a large-scale operated asset coupled with a long-term joint development agreement and area of mutual interest. This asset has a very long life, tremendous upside, and economics that compete with anything in our existing portfolio, and we see significant operational upside from SM's stewardship, as well as future exploration potential from the multi-stack benches. Specific to XDL, within our AMI, we are already working on acquisition opportunities, which would create additional optionality and future upsides. Subsequent to the closing of the quarter, we have continued the momentum, partnering once again with our friends at Vital, agreeing to purchase the Ward County Delaware assets from Point Energy Partners for $220 million net to NOG.

Adam Dirlam: Specific to XCl within our AMI, we are already working on acquisition opportunities, which would create additional optionality and future upside. Subsequent to the closing of the quarter, we have continued the momentum, partnering once again with our friends at Vital, agreeing to purchase the Ward County Delaware assets, Point Energy Partners for 220 million net to NOG. Similar to XCl and our past transactions, we also have a long-term joint operating agreement in place with Vital and look forward to many years of development on the asset. As we have seen with our Forge JD, we think Vital can bring significant improvements to go for performance on the point assets.

Adam Dirlam: Specific to XEL, within our AMI, we are already working on acquisition opportunities, which would create additional optionality and future upside.

Adam Dirlam: Subsequent to the closing of the quarter, we have continued the momentum, partnering once again with our friends at Vital, agreeing to purchase the Ward County Delaware Assets Point Energy Partners for $220 million net to NOG.

Adam Dirlam: Similar to XCO and our past transactions, we also have a long-term joint operating agreement in place with Vital and look forward to many years of development on the asset. As we have seen with our FORGE-JD, we think Vital can bring significant improvements to future performance on the point asset. As all these transactions detail, we continue to build scale, but scale combined with a key focus on return. As Nick noted, our return on capital continues to be best in class, all the more impressive given how acquisitive we have been. It's a testament to the rigor of our acquisition underwriting, our capital allocation methodology, and the quality of the properties that we seek and ultimately acquire.

Adam Dirlam: Similar to XTL and our past transactions, we also have a long-term joint operating agreement in place with Vital and look forward to many years of development on the asset.

Adam Dirlam: As we have seen with our FORGE-JD, we think vital can bring significant improvements to go-forward performance on the point assets.

Adam Dirlam: As all these transactions detail, we continue to build scale, but scale combined with a key focus on returns. As Nick noted, our return on capital continues to be best in class, all the more impressive given how acquisitive we have been. It's a testament to the rigor of our acquisition underwriting, our capital allocation methodology, and the quality of the properties that we seek and ultimately acquire. The overall in-state continues to be robust, and we see another wave of defectors coming on the back end of the large-scale M&A that has transpired over the past 18 months. Many large operators are looking to clean up their portfolios for, in some cases, their balance sheets, and we expect NOG may find some significant opportunities as these processes emerge.

Adam Dirlam: As Nick noted, our return on capital continues to be best in class, all the more impressive given how acquisitive we have been.

Adam Dirlam: The overall landscape continues to be robust, and we see another wave of divestitures coming on the back end of the large-scale M&A that has transpired over the past 18 months. Many large operators are looking to clean up their portfolios, or in some cases, their balance sheets, and we expect NOG may find some significant opportunities as these processes emerge. Some of these parties have reached out directly to us seeking out customized solutions, and we will continue to have those conversations.

Speaker Change: The overall landscape continues to be robust, and we see another wave of defestatures coming on the back end of the large-scale M&A that has transpired over the past 18 months.

Adam Dirlam: So these parties have reached out directly to us seeking out customized solutions, and we'll continue to have those conversations. As I've described before, these off-market transactions can be tailor-made for both parties, and with our growth in size and liquidity, could be as large or larger than any of our recent transactions. Simply put, the option to deploy capital on top tier assets is in no way slowing down for NOG. Depending on the needs and the wants of the operator, the solutions could include simple, non-op portfolio cleanups, joint development agreements, co-buying operated properties, minority interest carve-outs of operated positions, or any combination thereof.

Adam Dirlam: Some of these parties have reached out directly to us, seeking out customized solutions, and we will continue to have those conversations.

Adam Dirlam: As I've described before, these off-market transactions can be tailored-made for both parties and, with our growth in size and liquidity, could be as large or larger than any of our recent transactions. Simply put, the option to deploy capital on top-tier assets is in no way slowing down for NOG. Depending on the needs and the wants of the operator, the solutions could include simple non-op portfolio cleanups, joint development agreements, co-buying operated properties, minority interest carve-outs of operated positions, or any combination thereof.

Adam Dirlam: Simply put, the options to deploy capital on top-tier assets is in no way slowing down for NOG.

Adam Dirlam: At NOG, we continue to demonstrate unmatched execution with win-win solutions through creativity and alignment with our current and prospective operating partners. By focusing on returns first, growth has become the natural output as we continue to compound capital for our investors and remain singularly focused on putting our stakeholders first.

Adam Dirlam: At NOG, we continue to demonstrate unmatched execution with win-win solutions through creativity and alignment with our current and prospective operating partners. By focusing on returns first, growth has become a natural output as we continue to compound capital for our investors and remain singularly focused on putting our stakeholders first. With that, I'll turn it over to Chad. Thanks, Adam.

Adam Dirlam: At NOG, we continue to demonstrate unmatched execution with win-win solutions through creativity and alignment with our current and prospective operating partners.

Chad Allen: With that, we'll turn it over to Chad. Today's Adam, our second quarter results did not disappoint and were one for the record books. Average daily production in the quarter was more than 123,000 BLE per day, up nearly 4,000 BLE per day compared to Q1 and up 36% compared to Q2 of 2023. Establishing a new NOG record. We continue to see out performance on our recent Uniqua acquisition, as well as on our solar side that helped drive the bean on production. Oil production came in at just over 69,600 BLE per day, even though over half of our Q2 net well ads occurred in June and contributed only modestly to our Q2 volumes, including our higher oil cut mascot project, which is still clean up, but both well as we entered the third quarter.

Adam Dirlam: With that, we'll turn it over to Chad.

Chad Allen: Our second quarter results did not disappoint and were one for the record book. Average daily production in the quarter was more than 123,000 VOE per day, up nearly 4,000 VOE per day compared to Q1 and up 36% compared to Q2 of 2023. Establishing a new energy record. We continue to see outperformance on our recent Unica acquisition, as well as our Marcellus access, which helped drive the beat on production. Oil production came in at just over 69,600 barrels per day.

Chad Allen: Thanks, Adam.

Chad Allen: Our second quarter results did not disappoint and were one for the record books.

Chad Allen: establishing a new energy record.

Chad Allen: We continue to see outperformance on our recent Unica acquisition, as well as our Marcellus assets that helped drive the bean on production.

Speaker Change: Oil production came in at just over 69,600 barrels per day.

Chad Allen: Even though over half of our Q2 net well adds occurred in June and contributed only modestly to our Q2 volumes, including our higher oil cut mascot project, which is still cleaning up, but bodes well as we enter the third quarter. Adjusted EBITDA in the quarter was $413 million, up 7% sequentially, and a record for NOG due to stronger well performance, lower costs, and better oil realization. Free cash flow of $134 million in the quarter was higher sequentially and nearly tripled from the same period last year due to the strength of our underlying assets and the pull-forward of activity in the prior quarter, which kept capital in check.

Chad Allen: Even though over half of our Q2 net well adds occurred in June and contributed only modestly to our Q2 volumes, including our higher oil cut mascot project, which is still cleaning up, but bodes well as we enter the third quarter.

Chad Allen: Adjusted it even though the quarter was 4 and 13 million, up 7% sequentially, and a record for NOG. Do stronger well performance, lower costs and better oil realizations. Free cash of 134 million in the quarter was higher sequentially and nearly tripled from the same period last year due to the strength of our underlying assets and the pull forward of activity in the prior quarter, which kept capital in check. We anticipate free cash flow to continue to stay elevated in Q3 and remain elevated for the balance of 2024 as the remainder of our tills come online and begin to contribute to production and revenue.

Chad Allen: Adjusted EBITDA in the quarter was $413 million, up 7% sequentially, and a record for NOG due to stronger well performance, lower costs, and better oil realizations.

Chad Allen: Free cash flow of $134 million in the quarter was higher sequentially and nearly tripled from the same period last year due to the strength of our underlying assets and the pull forward of activity in the prior quarter, which kept capital in check.

Chad Allen: We anticipate free cash flow to continue to stay elevated in Q3, and remain elevated for the balance of 2024, as the remainder of our kills come online and begin to contribute to production and revenue. However, oil differentials were better than our expectations at an average of $3.55 per barrel, below the lower end of our guide.

Chad Allen: We anticipate free cash flow to continue to stay elevated in Q3 and remain elevated for the balance of 2024.

Chad Allen: As the remainder of our kills come online and begin to contribute to production and revenue.

Chad Allen: Oil and this branchals were better than our expectations at an average of $3.55 per barrel below the lower end of our guidance. We listen to differentials trended down in the second quarter as we anticipated, and Permian differentials were also improved, normalizing from winter months. We also saw better realizations from our joint development projects. Bachelor gas realizations are also at a schedule at a hundred and seventy percent of benchmark prices for the quarter. with cheerily ahead of our forecast to better than anticipated natural gas prices in Q2 and higher NGO price realizations. This was partially offset by weaker appellation differentials and negative wild gas from most of the quarter.

Chad Allen: Oil differentials were better than our expectations at an average of $3.55 per barrel, below the lower end of our guidance.

Chad Allen: Williston differentials trended down in the second quarter as we anticipated, and Permian differentials were also improved, normalizing for winter months. We also saw better realizations from our joint development project. Natural gas realizations are also ahead of schedule at 107% of benchmark prices for the quarter, materially ahead of our forecast. These are better than anticipated natural gas prices in Q2, and Higher NGL Price Realization. This was partially offset by weaker Appalachian differentials and negative Waha gas for most of the quarter.

Chad Allen: Williston differentials trended down in the second quarter as we anticipated, and Permian differentials were also improved, normalizing for winter months.

Chad Allen: We also saw better realizations from our joint development projects.

Chad Allen: Natural gas realizations are also ahead of schedule at 107% of benchmark prices for the quarter.

Chad Allen: materially ahead of our forecast.

Chad Allen: These are better than anticipated natural gas prices in Q2.

Chad Allen: and Higher NGL Price Realizations.

Chad Allen: This was partially offset by weaker Appalachian differentials and negative Waha gas for most of the quarter.

Chad Allen: Overall, for the year, however, we believe differentials will trend towards our revised guidance range, especially now that gas is returned to lower levels. L.O.E. was down seven percent sequentially to $8.99 per B.O.E. reflected the continued shift of our production to the Permian, which carries a lower L.O.E. compared to the Wilson. L.O.E. also benefited from the evening of weather-related trends from the prior quarter. As we previously discussed, we anticipate L.O.E. per B.O.E. to gradually decline as production ramps from our joint development projects. Additionally, our recently announced acquisitions will add more production with materially lower L.O.E. these assets are resilient and low cost, and the XCl asset also brings very high oil cuts.

Chad Allen: Overall for the year, however, we believe differentials will trend towards our revised guidance range, especially now that gas has returned to lower levels. LOE was down 7% sequentially to $8.99 per BOE, reflected the continued shift of our production to the Permian, which carries a lower LOE compared to the Williston.

Chad Allen: Overall for the year, however, we believe differentials will trend towards our revised guidance range, especially now that gas has returned to lower levels.

Chad Allen: LOE was down 7% sequentially to $8.99 per BOE. Reflected the continued shift of our production to the Permian, which carries a lower LOE compared to the Williston.

Chad Allen: And we also benefited from the easing of weather-related shut-ins from the prior quarter. As we previously discussed, we anticipate LOE per BOE to gradually decline as production ramps up from our joint development project. Additionally, our recently announced acquisitions will add more production with materially lower LOE. These assets are resilient and low cost, and the XEL asset also brings very high oil costs. Production taxes were 8.7%, slightly below our guidance as gas production ramped up in all basins, as gas typically carries a lower production tax rate.

Chad Allen: We also benefited from the evening of weather-related showings from the prior quarter.

Chad Allen: As we previously discussed, we anticipate LOE per BOE to gradually decline as production ramps from our joint development projects.

Chad Allen: Additionally, our recently announced acquisitions will add more production with materially lower LOA.

Chad Allen: These assets are resilient and low cost, and the XEL asset also brings very high oil costs.

Chad Allen: Production taxes will 8.7 percent, slightly lower guidance as gas production ramp in all basins. As gas typically carries a lower production tax rate, we anticipate production taxes to trend even lower after the addition of XCl as the winter comes with a lower tax rate. On the CapEx front, we invested 237 million inclusive of ground gain in the quarter. Of the 237 million, 59 percent was allocated to Permian, 37 percent of the will spend, and 4 percent to Appalachian. We continue to experience a pull-forward of organic activity driven by the strength and oil prices. However, given the level of completion in our DNC list, the higher-to-come Q2 did not have a material impact on total CapEx for the quarter.

Chad Allen: Production taxes were 8.7% slightly below our guidance as gas production ramped in all basins.

Chad Allen: as gas typically carries a lower production tax rate.

Chad Allen: We anticipate production taxes to trend even lower after the addition of XCL as the winter comes with a lower tax rate. On the CapEx front, we invested $237 million, inclusive of ground game and a quarter. Of the $237 million, 59% was allocated to Permian.

Chad Allen: We anticipate production taxes to trend even lower after the addition of XCL as the winter comes with a lower tax rate.

Chad Allen: On the CapEx front, we invested $237 million, inclusive of ground game and a quarter.

Chad Allen: Of the $237 million, 59% was allocated to Permian.

Chad Allen: 37% to the Williston and 4% to Appalachian. We continue to experience a pull-forward of organic activity driven by the strength in oil prices. However, given the level of completion in our DMC list, the higher tail count on Q2 did not have a material impact on total capex for the quarter. With that said, if the strength in oil prices persists. Capital expenditures may trend towards the higher end of our revised guidance range for the year.

Chad Allen: 37% to the Williston and 4% to Appalachian.

Chad Allen: We continue to experience a pull-forward of organic activity driven by the strength in oil prices. However, given the level of completion in our DMC list,

Chad Allen: The higher tail count on Q2 did not have a material impact on total capex for the board.

Chad Allen: With that said, if the strength and oil prices persist, CapEx may trend towards the higher end of our revised guidance range for the year. Some of this capital would be driven potentially by 2025 turn in lines that could be accelerated into 2024, and by additional AFD activity for 2025 turn in lines, we anticipate in the back half of the year. This will obviously be dependent on commodity price environment, material and weaker oil prices will of course slow operate our activity. With that said, if we did see higher CapEx, it will be accompanied by higher production as our DNC list is actively converting to Tills and Spuds and drawing down our working capital.

Chad Allen: With that said, if the strength in oil prices persists.

Chad Allen: CapEx may trend towards the higher end of our revised guidance range for the year.

Chad Allen: Some of this capital would be driven potentially by 2025 turn-in lines that could be accelerated into 2024 and by additional AFV activity for 2025 turn-in lines we anticipate in the back half of the year. This will obviously be dependent on the commodity price environment. Materially weaker oil prices would, of course, slow operator activity. With that said... If we did see higher capex, it would be accompanied by higher production as our DNC list is actively converting to tills and spuds and drawing down our working capital, specifically on the Wharton Capital Front. Food and the Impact of Derivatives

Chad Allen: Some of this capital would be driven potentially by 2025 turn-in lines that could be accelerated into 2024, and by additional AFB activity for 2025 turn-in lines we anticipate in the back half of the year.

Chad Allen: This will obviously be dependent on commodity price environment. Materially weaker oil prices would of course slow operator activity.

Chad Allen: With that said...

Chad Allen: If we did see higher capex, it would be accompanied by higher production as our DNC list is actively converting to tills and spuds and drawing down our working capital.

Chad Allen: Specifically on the working capital front, excluding the impact of derivatives, we have seen an improvement of approximately 65 million year-to-date. As a result of the improvement in working capital, we reduced our borrowing to our volume credit facility by 65 million during the quarter. At the June 30th, we had a 1.3 billion liquidity comprised of $33 billion cash on hand, including the deposit for XCl, and 1.3 billion available on our evolving credit facility. At quarter and that debt to LQAE, but it was 1.1 times. We expect the ratio to tick up modestly upon the closing of our recently announced transactions.

Chad Allen: specifically on the working capital front, excluding the impact of derivatives.

Chad Allen: We have seen an improvement of approximately $65 million year-to-date. As a result of the improvement in working capital, we reduced our borrowing to our well-being credit facility by $65 million during the quarter. As of June 30th, we had over $1.3 billion of liquidity comprised of $33 billion of cash on hand, including the deposit for XCL, and $1.3 billion available on our Evolving Credit Facility. That quarter-end net debt to LQA EBITDA was 1.1 times.

Chad Allen: We have seen an improvement of approximately $65 million a year today.

Chad Allen: As a result of the improvement in working capital, we reduced our borrowing to our well-being credit facility by $65 million during the quarter.

Chad Allen: As of June 30th, we had over $1.3 billion of liquidity comprised of $33 billion of cash on hand, including the deposit for FCL, and $1.3 billion available on our evolving credit facility.

Chad Allen: That quarter-end net debt to LQA EBITDA was 1.1 times.

Chad Allen: We expect the ratio to tick up modestly upon the closing of our recently announced transactions but train down throughout 2025 solidly to our stated target, as Nick discussed earlier. We actively repurchase shares in the first half of the year. Here today, we repurchase over 1.4 million shares or approximately 55 million of our common equity at an average price of $37.99.

Chad Allen: We expect the ratio to tick up modestly upon the closing of our recently announced transactions, but train down throughout 2025 solidly to our stated target.

Chad Allen: but trained down throughout 2025 solidly to our state and target. As Nick discussed earlier, we actively repurchased shares in the first half of the year. Year-to-date, we repurchased over 1.4 million shares or approximately 55 million of our common equity at an average price of $37.99. We are committed to allocating capital to share repurchases where there is a mark that is between our absolute and relative performance. However, given we are funding our announced acquisitions with our revolver, we will be mindful of getting leverage back to our state and target. Given the outperformance of our wells, year-to-date, and the anticipated closings of our pending acquisitions, I'd like to address our adjustments to guidance.

Speaker Change: as Nick discussed earlier.

Nick: We actively repurchase shares the first half of the year.

Nick: Year-to-date, we repurchased over 1.4 million shares or approximately 55 million of our common equity at an average price of $37.99.

Chad Allen: We are committed to allocating capital to share repurchases where there is a marked divergence between our absolute and relative performance. However, given we are funding our announced acquisitions with Revolver, who will be mindful of getting leverage back to our stated target. Given the outperformance of our wells year-to-date and the anticipated closings of our pending acquisitions, I'd like to address our adjustments to guidance. Please note this guidance assumes an October 1st close for both acquisitions, and the actual closing dates could change.

Nick: We are committed to allocating capital to share repurchases where there is a marked divergence between our absolute and relative performance.

Nick: However, given we are funding our announced acquisitions with Revolver, we will be mindful of getting leverage back to our stated target.

Nick: Given the outperformance of our wells year-to-date and the anticipated closings of our pending acquisitions, I'd like to address our adjustments to guidance.

Chad Allen: Note this guidance assumes an October 1st close to both acquisitions, and the actual closing dates could change, so the guidance is somewhat preliminary in nature. We will give an update on our 3rd quarter fall if anything changes materially during the closing processes. We are raising total production guidance by 4% at the midpoint to a range of 120,000 to 124,000 BLE per day. Obviously, we only get around one quarter of benefit from our new deals, so this reflects some of the outperformance we've seen year-to-date, particularly on gas production. We have also increased guidance on oil production at the midpoint by 4% to a range of 73,000 to 76,000 BLE per day.

Chad Allen: So this guidance is somewhat preliminary in nature. We will give an update on our third quarter call if anything changes materially during the closing processes. We are raising total production guidance by 4% at the midpoint to a range of $120,000 to $124,000 BLE per day.

Nick: Note this guidance assumes an October 1st close for both acquisitions and the actual closing dates could change. So this guidance is somewhat preliminary in nature.

Nick: We will give an update on our third quarter call if anything changes materially during the closing processes.

Nick: We are raising total production guidance by 4% at the midpoint to a range of 120,000 to 124,000 BLE per day.

Chad Allen: Obviously, we only get around one quarter of the benefit from our new deals, so this reflects some of the outperformance we've seen here today, particularly in gas production. We have also increased guidance on oil production at the midpoint by 4% to a range of 73,000 to 76,000 barrels per day, reflecting the higher oil cut of the Uinta and Point relative to our corporate average. Our terminal line guidance moves up to a range of 93 to 98 net wells, with response going into a range of 73 to 78 net wells.

Chad Allen: Obviously, we only get around one quarter of benefit from our new deals, so this reflects some of the outperformance we've seen here today, particularly on gas production.

Chad Allen: We have also increased guidance on oil production at the midpoint by 4% to a range of 73,000 to 76,000 barrels per day.

Chad Allen: Reflecting the higher oil cut of the UNTA and point relative to our corporate average. Our turnaround guidance moves up to a range of 93 to 98 net wells, the spuds going to a range of 73 to 78 net wells. With respect to unit costs, given the unique nature of the UNTA, we are low in LLE by 3% at the midpoint of the range of 9.15 to 9.040 per BLE. Production guidance should also trim lower to a range of 9% to 9.5%, and we are raising the high end of our old differential $4.85 per BLE to reflect higher transportation costs than UNTA.

Chad Allen: Reflecting the higher oil cut of the Uintah and Point relative to our corporate average.

Chad Allen: Our terminal line guidance moves up to a range of 93 to 98 net wells.

Chad Allen: with spuds going to a range of 73 to 78 net wells.

Chad Allen: With respect to unit costs... Given the unique nature of Uinta, we are lowering LOE by 3% at the midpoint of the range of $9.15 to $9.40 per BOE. Production taxes should also trend lower to a range of 9% to 9.5%.

Chad Allen: With respect to unit costs.

Chad Allen: Given the unique nature of the Uinta, we are lowering LOE by 3% at the midpoint of the range of $9.15 to $9.40 per BOE.

Chad Allen: Production taxes should also trend lower to a range of 9% to 9.5%.

Chad Allen: And we are raising the high end of our oil differential to $4.85 per BOE to reflect higher transportation costs in the winter, and we are increasing our gas realizations to a range of 87.5% to 92.5% to reflect better NGL and natural gas pricing. With respect to D&A, we're tightening the range to $16.50 to $17.50 per DOE. Borrowed Oil Cash and Non-Cash G&A, Purdue A, should both decline, demonstrating the benefits of increased scale and the inherent operating leverage of our unique business model.

Chad Allen: And we are raising the high end of our oil differential to $4.85 per VOE to reflect higher transportation costs in the winter.

Chad Allen: We are increasing our gas realizations to a range of 87.5% to 92.5% to reflect better NGL and natural gas pricing. With respect to DDNA, we are cutting the range to $16.50 to $17.50 per BLE. Our rural cash and non-cash unit per BLE should both decline and demonstrate the benefits of increased scale and inherent operating leverage of our unique business model.

Chad Allen: And we are increasing our gas realizations to a range of 87.5% to 92.5% to reflect better NGL and natural gas pricing.

Chad Allen: With respect to D&A, we're cutting the range to $16.50 to $17.50 per BOE.

Speaker Change: Borrowed Oil Cash and Non-Cash G&A, Purdue Aid

Chad Allen: should both decline, demonstrating the benefits of increased scale and the inherent operating leverage of our unique business model.

Operator: That concludes our prepared remarks.

Operator: That concludes our prepared remarks. I'd like to open the call to questions. Thank you. If you have a question, please press star 1 on your telephone keypad. To withdraw your question, simply press star 1 again.

Operator: I'd like to open the call up to questions. Thank you. If you have a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again.

Speaker Change: That concludes our prepared remarks.

Speaker Change: I'd like to open the call up to questions.

Speaker Change: Thank you. If you have a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again. In the interest of time, please limit yourself to one question and rejoin the queue if necessary.

Operator: In the interest of time, please limit yourself to one question and rejoin the queue if necessary.

Operator: In the interest of time, please limit yourself to one question and rejoin the queue if necessary. Your first question comes from the line of Neal Dingmann with Truist Securities. Your line is open.

Neal Dingmann: Your first question comes from the line of Neil Dingman with Truist Securities. Your line is open. Monica, nice quarter and outlook. Nick, my first question maybe for you, Adam, is just on deal parameters specifically. I'm just wondering maybe how things have changed now with these larger deals. Did you talk about how your requirements when you think about payback periods, putt value, undrilled location value, all that sort of thing, how that sort of shakes out today versus maybe a year or two ago. Daniel, I don't think anything's really changed. I mean, I think in general, over the last three years, we have raised our hurdle rates materially.

Speaker Change: Your first question comes from the line of Neal Dingmann with Truist Securities. Your line is open.

Neal David Dingmann: Morning guys, nice quarter in Outlook. Nick, my first question, maybe for you, Adam, is just on deal parameters specifically. I'm just wondering maybe how things have changed now, you know, with these larger deals. Could you talk about how your requirements, when you think about sort of payback periods, HUD values, you know, undrilled location values, all that sort of thing, how that sort of shakes out today versus maybe a year or two ago? And you know, I don't think anything's really changed. I mean, I think in general over the last three years.

Neal David Dingmann: Morning, guys. Nice quarter and outlook. Nick, my first question maybe for you, Adam, is just on...

Neal David Dingmann: Deal parameters specifically, I'm just wondering maybe how things have changed now, you know, with these larger deals. Could you talk about

Speaker Change: how your requirements, when you think about sort of payback periods, PUD value, you know, undrilled location value, all that sort of thing, how that sort of shakes out today versus maybe a year or two ago.

Neal David Dingmann: Daniel, I don't think anything's really changed. I mean I think in general over the last

Nico Grady: You know, we have raised our hurdle rates materially, you know, just, you know, I would say, as the cost of capital rose, we generally increased our hurdle rates, and that's been something we have done since college 2020. But otherwise, I think we generally look for a balanced portfolio, which is what we want. We look for, at a package level, self-funding assets where we can, but we will look for, you know, there are specific things where, if it is an asset that is in development, that can be okay, too.

Daniel: Three years.

Daniel: You know, we have raised our hurdle rates materially, you know, just, you know, I would say, as the cost of capital rose, we've generally increased our hurdle rates. And that's been something we've consistently done since, call it 2020.

Neal Dingmann: I would say, as the cost of capital rose, we've generally increased our hurdle rates, and that's been something we've consistently done since 2020. But otherwise, I think we generally look for a balanced portfolio, which is that we want, we look for at a package level self-funding assets where we can, but we will look for, you know, for there are specific things where if it is an asset, which is in development, that can be okay too.

Chad Allen: But otherwise, I think we generally look for a balanced portfolio, which is what we want.

Chad Allen: We look for, at a package level, self-funding assets where we can, but we will look for

Chad Allen: There are specific things where

Neal Dingmann: I don't know if you want to comment on that. Yeah, I think it also dovetails into the governance, right? And the asset specifics in that regard. And so if there's ways that we can get comfortable with the underwriting, with, you know, kind of the go forward governance in order to maintain alignment and get that transparency, that's all going to come into play. Not only with the quantitative, but the qualitative, you know, review. Yeah. And I think, you know, one of the questions we've gotten from our investors is just, you know, the difference between sort of the co-purchase of assets with operators versus a traditional non-operated asset and how you win.

Chad Allen: If it is an asset which is in development, that can be okay too. I don't know.

Nico Grady: I don't know, Adam, if you want to comment on that. Yeah, I think it also dovetails into the governance, right, and the asset specifics in that regard, and so if there's ways that we can get comfortable with the underwriting with, you know, kind of the go-forward governance in order to maintain alignment and get that transparency, that's all going to come into play. Not only with the quantitative but the qualitative, you know, review.

Speaker Change: want to comment to that. Yeah, I think it also dovetails into the governance right and the asset specifics in that regard and so if there's ways that we can get comfortable with the underwriting with you know kind of a go forward.

Speaker Change: governance in order to maintain alignment and get that transparency that's all going to come into play not only with the quantitative but the qualitative, you know, review. Yeah, and I think you know, one of the questions we've gotten from our investors is just

Adam Dirlam: Yeah, and I think, you know, one of the questions we've gotten from our investors is just, you know, the difference between sort of the co-purchase of assets with operators versus a traditional non-operated asset and how you win, and I think it's a great question, there are different paradigms to earning supernormal returns, right, versus how you underwrite, which is that on an on operated asset, how you win is ultimately that we the undeveloped asset is you try to pay as little as possible on that undeveloped piece and ultimately be surprised by the future development, right, which is that the PUD value and what you're paying for, ultimately, you get the future development costs at a discount, right, and that that's the benefit of buying on operated assets at that discount, and what we've observed on the co purchase of those assets is that we've seen huge synergies from from the vitals and from the Permian resources in which as they've taken possession of these assets they've become much superior operators and they've cut costs and drilled better wells and so we've seen huge upside in performance on those assets as they've been able to do better and so we've seen returns in a different way. So it's different ways to create the same types of upside. Yeah, well said.

Speaker Change: You know, the difference between sort of the co-purchase of assets with operators versus a traditional non-operated asset and how you win, and I think it's just, there are different paradigms to earning supernormal returns, right, versus how you underwrite, which is that on a non-operated asset, how you win.

Neal Dingmann: And I think it just, there are different paradigms to earning super normal returns, right? Versus how you underwrite, which is that on a non-operated asset, how you win is ultimately that we, the undeveloped asset is, you try to pay as little as possible on that undeveloped piece and ultimately be surprised by the future development, right? Which is that the plug value and what you're paying for ultimately, you get future development costs at a discount, right? And that, that's the benefit of buying non-operated assets at that discount. And what we've observed on the co-purchase of those assets is that we've seen huge synergies from the vitals and from the permeant resources in which, as they've taken possession of these assets, they've become much superior operators and they've cut costs and drilled better wells.

Speaker Change: is ultimately that we, the undeveloped asset is...

Speaker Change: You try to pay as little as possible on that undeveloped piece and ultimately be surprised by the future development, right, which is that.

Chad Allen: the PUD value and what you're paying for. Ultimately, you get future development costs at a discount, right? And that's the benefit of buying non-operated assets at that discount.

Speaker Change: And what we've observed on the co-purchase of those assets is that we've seen huge synergies from From the vitals and from the Permian resources in which as they've taken possession of these assets They've become much superior operators and they've

Speaker Change: cut costs and drilled better wells. And so we've seen huge upside in performance on those assets as they've been able to do better. And so we've seen increases in returns in a different way. So it's different ways to create the same types of upside.

Neal Dingmann: And so we've seen huge upside and performance on those assets as they've been able to do better. And so we've seen increases in returns in a different way. So it's different ways to create the same types of upside. The well said, and then my second just on capital location, specifically, you know, you all maintain an active ground game to say the least and well continue to, you know, even recently boosted the dividend and talked about shareholders return again.

Nico Grady: And then my second question, just on capital allocation specifically, you all maintain an active ground game, to say the least, and while continuing to, you know, even recently boosting the dividend and talking about shareholdings return again, I'm just wondering, can you talk about, I know they're not exclusive, but maybe just talk about how those two sort of play together. Yeah, I mean, in terms of the ground game, I mean, I think it ebbs and flows, obviously, there is a seasonality to it. I would expect, as we get towards the end of the year, it tends to get a bit busier. I would imagine we see a bit of a pick-up, you know, it may start to get active towards the end of the third quarter, potentially, as budgets start And our ground game has evolved somewhat, which has become a bit more bespoke and generally more concentrated in the last few years, in terms of how it has happened.

Adam Dirlam: and Adam Dirlam.

Adam Dirlam: Yeah, well said. And then my second, just on capital allocation specifically, you know, you all maintain an active ground game, to say the least. And while continuing to, you know, even recently boosting the dividend and talking about shareholds return again, I'm just wondering, could you talk about, I know they're not exclusive, but maybe just talk about how those two sort of play together.

Neal Dingmann: I'm just wondering, could you talk about another nice exclusive that maybe just talk about how those two sort of play together? Yeah, I mean, I think in terms of the ground game, I mean, I think it ebbs and flows. Obviously, there is a seasonality to it. I would expect, as we get towards the end of the year, it tends to get a bit busier. I would imagine we see a bit of a, you know, it may start to get active towards the end of the third quarter, potentially, as budgets start to get tighter. And our ground game has evolved somewhat, which it has become a bit more bespoke and more, generally more concentrated in the last few years.

Speaker Change: Yeah, I mean, I think in terms of the ground game, I mean, I think it ebbs and flows. Obviously, there is a seasonality to it, I would expect.

Adam Dirlam: As we we get towards the end of the year, it tends to get a bit busier. I would imagine we see a bit of a, you know, it may start to get active towards the end of the third quarter, potentially, as budgets start to get tighter. And.

Adam Dirlam: Our ground game has evolved somewhat, which it has become a bit more bespoke and more generally more concentrated in the last few years.

Neal Dingmann: In terms of how it has happened, it's been a little bit chunkier in terms of the interests. But ultimately, in terms of, I don't think we view them as mutually exclusive, Neil. And I think, you know, as we mentioned in our prepared remarks, I think, you know, I think we'll sit down with the board in the beginning of the year. We really do believe that the business has the capacity for additional shareholder returns, particularly on the dividend side. The only other thing I'd add on the ground game is that it's also going to depend on kind of what the organic asset is pulling, right?

Nico Grady: It's been a little bit chunkier in terms of the interests. But ultimately, in terms of shareholder returns, I don't think we view them as mutually exclusive, Neal. And I think, you know, as we mentioned in our prepared remarks, I think, you know, I think we'll sit down with the board at the beginning of the year and we really do believe that the business has the capacity for additional shareholder returns, particularly on the dividend side.

Adam Dirlam: In terms of how it has happened, it's been a little bit chunkier in terms of the interests.

Adam Dirlam: But ultimately, in terms of shareholder returns, I don't think we view them as mutually exclusive, Neal, and I think, you know, as we mentioned in our prepared remarks, I think, you know, I think we'll sit down with the board in the beginning of the year. We really do believe that.

Speaker Change: The only other thing I'd add on the ground game is that it's also going to depend on kind of what the organic asset is pulling, right? So we're looking at that on a monthly basis.

Nico Grady: Neal, the only other thing I'd add on the ground game is that it's also going to depend on kind of what the organic asset is pulling, right? So we're looking at that on a monthly basis and understanding exactly what the working interests are coming in at. And that'll also dictate that, you know, whether or not we're leaning in on any particular opportunities on the ground game one way or another. Your next question comes from the line of John Freeman with Raymond. Your line is: Good morning, guys.

Neal Dingmann: So we're looking at that on a monthly basis and understanding exactly what the working interests are coming in at, and that will also dictate whether or not we're leaning in on any particular opportunities on the ground game, one way or another.

Speaker Change: and understanding exactly what the working interests are coming in at and that will also dictate whether or not we're leaning in on any particular opportunities on the ground game, one way or another.

John Freeman: Your next question comes from the line of John Freeman with Raymond James. Your line is open. Good morning, guys. All right, well done.

Speaker Change: Your next question comes from the line of John Freeman with Raymond James. Your line is open.

John Christopher Freeman: All right. The first question I had is that XCL recently closed on the Ultimat acquisition. Can you please provide any color on how that potentially impacts the original, you know, XCL purchase price, kind of any pro forma, you know, estimates, things like that. Yeah, so that you're correct, John. So the FTC granted approval to XEL to acquire Altamont.

John Christopher Freeman: Good morning, guys.

John Freeman: The first question I had I saw that XCL recently closed on the ultimate acquisition just can you all provide any color on how that potentially impacts the original, you know, XCL purchase price can any pro forma, you know, estimate things like that. Yeah, so that you're correct, John. So the FTC granted approval to X to XEL to acquire Ultimate and as part of that, that is within the AMI for for SM and us. And so we will have the option to purchase those assets. Of what I can tell you is that we are under, we are currently doing our analysis and review of those assets, and what I will say is we're very encouraged.

John Christopher Freeman: The first question I had, I saw that XCL recently closed on the Altamont acquisition, just can y'all provide any color on how that potentially impacts the original XCL purchase price, kind of any pro forma estimates, things like that?

Unknown Executive: And as part of that, that is within the AMI for SM and us. And so we will have the option to purchase those assets. What I can tell you is that we are currently doing our analysis and review of those assets, and what I will say is we're very encouraged by what we see. And obviously, if we choose to exercise that option, respectively, it would be, you know, 8020.

Speaker Change: Yeah, so that you're correct John , so the FTC granted approval to XEL to acquire Altamont and as part of that

Speaker Change: That is within the AMI for SM and us, and so we will have the option to purchase those assets. What I can tell you is that we are under, we are currently doing

Speaker Change: Our analysis and review of those assets. And what what I will say is we're very encouraged by what we see. And obviously, if, if we choose to exercise that option, respectively, obviously, it would be, you know, 8020.

John Freeman: But by what we see. And obviously if, if we choose to exercise that option, respectively, obviously, it would be, you know, 80, 20. It would be a material ad in terms of acreage to our position, but very immaterial in terms of capital. Yeah, and there's a number of, you know, BSUs that are directly authentic to position. And that's kind of where the focus is.

Unknown Executive: It would be a material add-on in terms of acreage to our position, but very immaterial in terms of capital. Yeah, and there's a number of, you know, BSUs that are directly offsetting the position. And that's kind of where the focus is. Got it? And then my follow-up question, when we think about the timing of those tills coming on, over half of them come in June and then specifically on the mascot wells that are taking a while to clean up, you know, now that we're basically through July, I'm just trying to get a sense on the mascot wells. Are they... fully cleaned up?

Speaker Change: It would be a material add in terms of acreage to our position, but very immaterial in terms of capital. Yeah, and there's a number of, you know, BSUs that are directly offsetting the position, and that's kind of where the focus is.

John Freeman: Got it.

John Freeman: And then my follow up question, when we think about the timing on those pills coming on, over half of them come on June, and then specifically on the mascot wells that are taken a lot of clean up. You know, now that we're basically through July, I'm just trying to get a sense on the mascot wells. Are they like fully cleaned up, or are we still going through that process? I'm just trying to get a sense of whether you're going to get the full three cube benefit from those mascot wells or if it can drag a little bit more into the quarter.

Speaker Change: Got it. And then my follow-up question, when we think about...

Speaker Change: The timing on those tills coming on, over half of them come on June and then.

Unknown Executive: Are we still going through that process? I'm just trying to get a sense of whether you're going to get the full three Q benefit from those mascot wells to drag a little bit more into the course. Well, I mean, you put 10 million barrels of water into the ground, right?

Speaker Change: specifically on the mascot wells that are taking a while to clean up.

Speaker Change: You know, now that we're basically through July , I'm just trying to get a sense on the mascot wells. Are they like fully cleaned up? Are we still going through that process? I'm just trying to get a sense of whether you're going to get the full 3Q benefit from those mascot wells or if it's going to drag a little bit more into the quarter.

Unknown Executive: So it takes several months for a cube to develop. So, you know, I would imagine by the end of the third quarter, you're going to be pretty I mean, Jim, tell me I'm wrong, but probably by the end of the third quarter, they'll be pretty much fully developed. So you'll get, I would imagine by the end of August or September, they'll be at full capacity. But, you know, it takes what it takes; you're pumping out, call it, 30,000 barrels a day of water out of them.

John Freeman: Well, I mean, you put 10 million of 10 million barrels of water into the ground, right? So it takes several months in a cube development to take it. So, you know, I would imagine by the end of the third quarter, you're going to be pretty, I mean, Jim, tell me I'm wrong, but probably by the end of the third quarter, they'll be pretty much fully going. So you'll get, I would imagine by, you know, by the end of August or September, they'll be at full capacity. But, you know, it takes what it takes; you're pumping out.

Speaker Change: Well, I mean, you put 10 million, 10 million barrels of water into the ground, right? So it takes several months in a cube development to take it. So you know, I would imagine by the end of the third quarter, you're going to be pretty I mean, Jim, tell me I'm wrong, but probably by the end of the third quarter, they'll be pretty much fully going. So you'll get

James B. Evans: I would imagine by, you know, by the end of August or September , they'll be at full capacity. But, you know, it takes what it takes. You're pumping out, call it like 30,000 barrels a day of water out of them. So it's going to take some time, but everything's going according to plan.

John Freeman: Call it like 30,000 barrels a day of water out of them. So it's going to take some time, but everything's going according to plan. You're not going to get all that water out, John, but it just in a cube development like this where you're doing all the zones. It's a massive project, right? So everything's going about the way it's expected.

Unknown Executive: So it's going to take some time, but everything's going according to plan. You're not going to get all that water out, John, but it just does in a cube development like this where you're doing all the zones.

Speaker Change: You're not going to get all that water out, John , but it just, it.

Speaker Change: In a cube development like this, where you're doing all the zones, it's a massive project, right? So, everything's going about the way it's expected.

Unknown Executive: It's a massive project, right? So everything's going well. Your next question comes from the line of Scott Hanold. Your line is open. Hey, thanks.

Scott Hanold: Your next question comes from the line of Scott handled with RBC. Your line is open. Thanks. You have a question on M&A. You know, obviously, you guys have done a number of deals here over the last few years, and it sounds like there's still some pretty decent visibility. You've got ultimons or the things you went to give us a sense of, you know, how do you think about the balance sheet? I know I think it was Mick or Chad mentioned you, you know, some of the stuff you, you know, felt you pre-funded coming into, you know, earlier this year.

Speaker Change: Your next question comes from the line of Scott Hanold with RBC. Your line is open.

Scott Michael Hanold: You know, I have a question on M&A. You know, obviously, you guys have done a number of deals here over the last few years, and it sounds like there's still some pretty decent visibility. You've got Ultimanto, the things in Uintah.

Scott Michael Hanold: Hey, thanks. You know, I have a question on M&A. You know, obviously...

Scott Michael Hanold: You guys have done a number of deals here over the last few years, and it sounds like there's still some pretty decent visibility. You've got Ultimanto, the things in the Uintah. Can you give us a sense of, you know, how you think about the balance sheet? I know, I think it was Nick or Chad mentioned, you know, some of the stuff you've...

Scott Michael Hanold: Can you give us a sense of, you know, how you think about the balance sheet? I think Nick or Chad mentioned some of the stuff you, you know, felt you pre-funded coming into, you know, earlier this year, but can you think about, as you think about moving forward in the balance sheet, any incremental transactions? How do you look at funding?

Speaker Change: You know, I felt like you pre-funded coming into, you know, earlier this year, but can you think about, like, as you think about moving forward,

Scott Hanold: But can you think about, like, as you think about moving forward in the balance sheet, any incremental transactions? How do you look at funding and where do you kind of like to see that balance sheet leverage at on a go for base? Yeah, I mean, it's got certainly within our framework, we have the capacity currently to do, you know, a significant amount more before we would bust out of our kind of self-described framework, which is really kind of a one and a half times. I mean, I think could we go slightly over that for a period of time if we were comfortable, sure, would we like to do that?

Speaker Change: In the balance sheet, any incremental transactions, how do you look at funding and where do you kind of like to see that balance sheet leverage at on a go-forward basis?

Scott Michael Hanold: And where do you kind of like to see that balance sheet leveraged on a go forward basis? Yeah, I mean, Scott, certainly within our framework, we have the capacity currently to do a significant amount more before we would bust out of our kind of self-described framework, which is really kind of a one and a half times. I mean, I think we could go slightly over that for a period of time if we were comfortable. Sure. Would we like to do that? No.

Speaker Change: Yeah, I mean Scott certainly within our framework we have the capacity currently to do you know a significant amount more before we would

Speaker Change: bust out of our kind of self-described framework, which is really kind of a one-and-a-half times. I mean, I think

Speaker Change: Could we go slightly over that for a period of time if we were comfortable? Sure. Would we like to do that? No.

Scott Hanold: No. But I think, you know, from a liquidity perspective, you know, you could always bond out that capital if we really needed to. I don't think we feel compelled to do that at all, just given the cash generation of the business at that current. But I think look, the fact that matter is, with M&A, the timing is very unpredictable. So unless something was to come in the immediacy, you know, if we roll the clock forward nine months from now, as the business generates cash flow, quite frankly, we'll be able to handle more M&A on balance sheet without worrying about these types of things, right?

Nico Grady: But I think we, you know, from a liquidity perspective, we could always bond out that capital if we really needed to. I don't think we feel compelled to do that at all, just given the cash generation of the business at the moment. But I think, look.

Speaker Change: But I think we, you know, from a liquidity perspective, you know, we could always bond out that capital if we really needed to. I don't think we feel compelled to do that at all, just given the cash generation of the business at current. But I think, look.

Nico Grady: The fact of the matter is, with M&A, the timing is very unpredictable unless something were to come in the immediacy, you know. If we roll the clock forward nine months from now, as the business generates cash flow, quite frankly, we will be able to handle more M&A on the balance sheet without worrying about these types of things, right? Because ultimately, it's all more a function of timing than anything else, right? I don't know if I could say it any differently than that, meaning the way we modeled this out within a few quarters, we're right back on target.

Speaker Change: The fact of the matter is, with M&A, the timing is very unpredictable, so.

Speaker Change: Unless something was to come.

Speaker Change: In the immediacy, you know, if we roll the clock forward nine months from now, as the business generates cash flow.

Speaker Change: quite frankly are...

Speaker Change: We'll be able to handle more M&A on balance sheet without worrying about these types of things, right, because

Scott Hanold: Because ultimately it's all, it's more a function of timing than anything else, right? I don't know if I could say it any differently than that, meaning like the way we modeled this out within a few quarters, we're right back to target. And so therefore, I don't really, unless M&A becomes so substantial that you'd really have to capitalize it in some other way. So it really, it's more about the acute moment in time than it is absolute leverage. Once again, my apologies.

Speaker Change: Ultimately, it's all it's more a function of timing than anything else, right? I don't know if I could say it any differently than that. Meaning like the way we model this out within a few quarters, we're right back to target. And so therefore, I don't really unless M&A becomes so substantial.

Nico Grady: And so, therefore, I don't really unless M&A becomes so substantial that you'd really have to capitalize it in some other way. So it really is more about the acute moment in time than it is about the absolute level. Once again, my name is Jeff.

Speaker Change: But you really have to capitalize it in some other way. So it really, it's more about the acute moment in time than it is absolute leverage.

Speaker Change: Once again, ladies and gentlemen, my apologies.

Operator: Once again, ladies and gentlemen, we ask that you please limit yourself to one question.

Operator: Once again, ladies and gentlemen, we ask that you please limit yourself to one question. Your next question comes from the line of Donovan Schafer with Northland Capital Markets. Your line is open. Hey guys, thanks for taking the questions. So first, I just want to dig into the play a little bit. I'm not as familiar with that one in the more current shale revolution type context. I know that from a more historical standpoint.

Speaker Change: Once again, ladies and gentlemen, we ask that you please limit yourself to one question.

Donovan Schaefer: Your next question comes from the line of Donovan Schaefer with Northern Northland Capital Markets. Your line is open. Hey guys, thanks for taking the questions.

Speaker Change: Your next question comes from the line of Donovan Schafer with Northland Capital Markets. Your line is open.

Donovan Schaefer: So first, I just want to dig into the arena play a little bit. I'm not as familiar with that one in the more like kind of shell revolution type context, and I was from a more historical standpoint.

Donovan Due Schafer: Hey guys, thanks for taking the questions.

Donovan Due Schafer: So, first, I just want to dig into the Uinta play a little bit. I'm not as familiar with that one in the more like current shale revolution type context. I know that from a more historical standpoint.

Donovan Schaefer: So the different benches and things being developed there, is it more of, is it really like a true sort of shell play, or is it kind of a statistical play where, you know, as long as you pick up holes in the ground, you can feel good about the returns, or is it, you know, going into something more conventional, but having an opportunity to exploit it with, for example, drilling, fracking, and so forth? Any clarification that would be helpful?

Speaker Change: So, the different benches and things being developed there, is it more of, is it really like a true...

Speaker Change: sort of shale play, or is it kind of a statistical play where, you know, as long as you put enough holes in the ground, you can

Speaker Change: feel good about the returns or is it you know going into something more conventional but but having an opportunity to exploit it with horizontal drilling fracking and so forth any clarification that would be helpful

Jim Evans: Yeah, hey, Donovan, this is Jim. Yeah, I would attribute it similar to a shell play, very similar to the pertinent, where you've got, you know, 4,000 feet above all these stacked zones. We do see that there is true separation. If you look at the oil that comes out of the different benches, they are different colors, different grades. So you can tell that they are true standalone, different zones. All of them have been proven from a vertical standpoint. It's just recently that they switched to horizontal. The main target is what they call the lower cube. That's the primary, you, you you lambute upper wastes that has been targeting most recently.

Donovan Due Schafer: So the different benches and things being developed there, is it more of is it really like a true sort of shale play? Or is it kind of a statistical play where you know, as long as you put enough holes in the ground, feel good about the returns, or is it going into something more conventional but having an opportunity to exploit it with horizontal drilling, fracking, and so forth? Any clarification there would be helpful. Yeah, hey, Donovan, this is Jim.

Speaker Change: Yeah, hey Donovan, this is Jim. Yeah, I would attribute it similar to Shale Play, very similar to the Permian.

Speaker Change: where you've got, you know, 4,000 feet of all these stacked zones.

James B. Evans: Yeah, I would attribute it to a shale play, very similar to the Permian, where you've got, you know, 4000 feet of all these stacked zones; we do see that there is true separation. If you look at the oil that comes out of the different benches, it's different color, different grades. So you can tell that they are true standalone different zones. All of them have been proven from a vertical standpoint; it's just recently that they've switched to horizontal.

Speaker Change: We do see that there is true separation. If you look at the oil that comes out of the different benches, they are different color, different.

Speaker Change: grades. So you can tell that they are true standalone different zones. All of them have been proven from a vertical standpoint. It's just recently that they've switched to horizontal. The main target is what they call the lower cube. That's the primary.

James B. Evans: The main target is what they call the lower cube. That's the primary Ewing Butte, upper Wasatch that has been targeted most recently. They're now starting to target the upper cube, which is going to be your Garden Gulch and Douglas Creek. That's a little bit earlier in the stages, but those are the primary zones that are being targeted. You've also got deeper zones as well that are kind of early stages proven vertically, but not yet horizontally. We're giving no value to that.

Speaker Change: Eulen Butte, Upper Wasatch that has been targeted most recently.

Jim Evans: They're now starting to target the upper cube, which is going to be your garden, gold, Douglas Creek. That's a little bit earlier in the stages, but those are the primary zones that are being targeted. You've also got deeper zones as well that are kind of early stages proven vertically, but not yet horizontally. We're giving no value to that, but that's kind of what we're seeing here from a geologic standpoint.

Speaker Change: They're now starting to target the upper cube, which is going to be your Garden Gulch, Douglas Creek. That's a little bit earlier in the stages, but those are the primary zones that are being targeted. You've also got deeper zones as well that are kind of early stages, proven

Speaker Change: Vertically, but not yet horizontally. We're giving no value to that, but that's kind of what we're seeing here from a geologic standpoint.

Charles Meade: Your next question comes from the line of Charles Meade with Johnson Rice. Your line is open. There's a good morning, the whole energy team there. I want to actually pick up on where you just left off with that discussion of the Uinta. As I've tried to come up speed on the play, some of the big players there, let's say that there may be emphasizing other parts of their portfolio, but it looks like XCl and SM have given the most disclosure or maybe the most aggressive in identifying the upside.

James B. Evans: But that's kind of what we're seeing here from a geologic standpoint. Your next question comes from the line of Charles Meade with Johnson Rice. Your line is open. Good morning to the whole NRG team out there.

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

Charles Arthur Meade: I want to actually pick up where you just left off with that discussion of UINTA. As I've tried to come up to speed on the play, you know, some of the big players there, let's just say that they're maybe emphasizing other parts of their portfolio, but it looks like XCL and SM have been the most, have given the most disclosure, or maybe the most, aggressive in identifying the upside. So my impression is that most of the development has been in Utland Butte.

Charles Arthur Meade: Good morning to the whole energy team there. I want to actually pick up on where you just left off with that discussion of the Uinta. As I've tried to come up to speed on the play, some of the big players there

Speaker Change: Let's just say that there may be emphasizing other parts of their portfolio but it looks like XCL and and and SM have been the most have given the most disclosure in or maybe the most

Charles Meade: So, my impression is most of the development has been in that Ute Land Butte, and I'm wondering if you could say if that's your plan going forward for the next 12 months, if that's what you're going to target. And what any timeline is to target some of these other horizons with horizontal wells that have been historically proven productive and vertical wells. Yeah, so the plan is to primarily focus on the lower and upper cube. It's going to be a mix of both. We're not just drilling the uteland butte and wasatch. We're mixing in the Douglas Creek as well.

Speaker Change: aggressive in identifying the upside. So my impression is most of the development has been in that Utland Butte.

Charles Arthur Meade: And I'm wondering if you could, you know, kind of say if that's your plan going forward for the next, you know, 12 months, if that's what you're going to target and what any timeline is to, target some of these other horizons with horizontal wells that have been historically proven productive in vertical wells. Yeah, so the plan is primarily focused on the lower and upper cube. It's going to be a mix of both. We're not just drilling for oil in the Eutland Butte and Wasatch. We're mixing in Douglas Creek as well, so we plan to co-develop the upper and lower cubes together. The deeper stuff is farther down the road.

Speaker Change: and and I'm wondering if you could you know get

Speaker Change: say if that's your plan going forward for the next you know 12 months if that's what you're going to target

Charles Arthur Meade: and what any timeline is to target some of these other horizons with horizontal wells that have been historically proven productive in vertical wells.

Speaker Change: Yeah, so the plan is to primarily focus on the lower and upper cube. It's going to be a mix of both. We're not just drilling the Eutland Butte and Wasatch. We're mixing in the Douglas Creek.

Charles Meade: So we plan to co-develop the upper and lower cube together.

Charles Arthur Meade: as well. So we plan to co-develop the upper and lower cube together. The deeper stuff is farther down the road. We'll develop that as we kind of see, you know, how these first couple of cubes turn out and then we'll go from there.

Charles Meade: The deeper stuff is farther down the road. We'll develop that as we kind of see how these first couple of cubes turn out, and then we'll go from there.

James B. Evans: We'll develop that as we kind of see, you know, how these first couple of cubes turn out, and then we'll go from there. Your next question comes from the line of Phillips Johnston with Capital One. Your line is open.

Phillips Johnston: Your next question comes from the line of Phillips Johnson with Capital One. Your line is open. Hey, thanks for taking the question. I wanted to ask about your implied natural gas production guidance for the back after the year. It's sort of suggested volumes will decline by more than 15% from the second quarter. I know you had some EQT wells that led to some pretty strong growth in Q2, but it seems like the decline for the rest of the years pretty steep. I guess especially considering you've got some incremental gas in the door from these two acquisitions.

Speaker Change: Your next question comes from the line of Phillips Johnston with Capital One. Your line is open.

John Phillips Little Johnston: Hey, thanks for taking the question. I wanted to ask you about your implied natural gas production guidance for the back half of the year. It sort of suggests that volumes will decline by more than 15% from the second quarter. You know, I know, you had some EQT wells that led to some pretty strong growth in Q2, but it seems like the decline for the rest of the year is pretty steep, I guess, especially considering you've got some incremental gas in the door from these two activities.

John Phillips Little Johnston: Hey, thanks for taking the question. I wanted to ask about your implied natural gas production guidance for the back half of the year. It sort of suggests that volumes will decline by more than 15% from the second quarter. I know you had some EQT wells that led to some pretty strong growth in Q2.

Speaker Change: It seems like the decline for the rest of the year is pretty steep, I guess, especially considering you've got some incremental gas in the door from these two acquisitions.

Phillips Johnston: Yeah, that's right, Phillips. So it's really a function that our plan DQT development really came on. We had some deferred production from Q1 that came back on YouTube, plus our EQT wells for the year were completed, as well as some other Marcel as well. And our unit of project came online in Q2. So that was as flushes will be, so that will be that really peaked out in Q2. So obviously that's over a hundred million a day of our production, which will be in decline. Obviously, you'll get the benefit of the other assets. And so you will have growth in the other basins, but that will really be the peak of the gas production for the years that is the drive.

John Phillips Little Johnston: Yeah, that's right, Philip. So it's really a function that our planned EQT development really came on, we had some deferred production from Q1, that came back in Q2, plus our EQT wells for the year were completed, as well as some other Marcellus wells, and our Utica project came online in 2Q. So that was as flush as it would be.

Speaker Change: Yeah, that's right, Philip. So it's really a function that our planned EQT development really came on. We had some deferred production from Q1

Speaker Change: that came back on Q2, plus our EQT wells for the year were completed.

Speaker Change: as well as some other, Marcellus Wells, and our Utica project came online in two queues. So that was as flush as will be. So that really peaked out in Q2. So obviously that's over $100 million a day of our production, which will be in decline. Obviously, you'll get the benefit of the other assets.

Chad Allen: So that will be that really peaked out in Q2. So obviously, that's over 100 million a day of our production, which will be in decline. Obviously, you'll get the benefit of the other assets. And so you will have growth in the other base. But that will be that will really be the peak of gas production for the year. So that is the driver.

Speaker Change: And so you will have growth in the other basins.

Speaker Change: but that will that will really be the peak of the gas production for the year so that is the drive so that is that's correct.

Chad Allen: So that is that's correct. So our Appalachian production tends to go in waves. So it tends to be especially on our Marsalis asset, where the development tends to be in the spring every year.

Phillips Johnston: So that is, that's correct. So our Appalachian production tends to go in waves. So it tends to be especially on our Marcel's asset where the development tends to be in the spring every year. And so there'll be another wave of development next year around the spring.

Speaker Change: So, our Appalachian production tends to go in waves, so it tends to be, especially on our Marsalis asset, where the development tends to be in the spring every year, and so there'll be another wave of development next year around the spring. So you'll have another surge next spring, but we're sort of done for the year.

Chad Allen: And so there'll be another wave of development next year around the spring. So you'll have another surge next spring, but we're sort of done for the year. Your next question comes from the line of Paul Diamond with Citi. Your line is open. Good morning, thanks for taking the time. Just a quick one on kind of timing and cadence.

Phillips Johnston: So if you have another search next spring, but we're sort of done for the year.

Paul Diamond: You're next question comes from the line of Paul Diamond with City. Your line is open. Good morning. I was taking the time. I just a quick one on kind of tiny ingredients. So that's the course of seeing, you know, kind of a pull forward of activity. And then you talked about a possibility that could continue to occur.

Paul Michael Diamond: The last few quarters have seen, you know, kind of a pull forward of activity. I know you talked about a possibility that could continue to occur, you know, later in this year, potentially pulling some 25% of activity forward. I just wanted to know if you'd talk about kind of whether you see that as more of a permanent compression or just a function of current market dynamics. Or, I guess, how should we be thinking about that going forward? Yeah, Paul, I mean, I think we're a little gun shy. And so I think that's kind of where our heads are right now. I think, you know, I guess what the term is, once bitten, twice shy.

Speaker Change: Your next question comes from the line of Paul Diamond with Citi. Your line is open.

Chad Allen: And so I think, you know, as we've kind of pointed people to the sort of, you know, kind of post the midpoint of our guidance, it's with the assumption that, based on the AFE activity we've seen year to date, that we'll continue to see robust AFE activity and the possibility of continued pull forwards. Now, those pull forwards don't always work, And that's why we really do want to see it, why we keep that band there.

Paul Michael Diamond: Good morning, thanks for taking the time. Just a quick one on kind of timing and cadence. The last few quarters have seen, you know, kind of a pull forward of activity. I know you talked about a possibility that that could continue to occur.

Paul Diamond: I just want to know if you could talk about kind of if you see that as a more of a permanent compression or just a function of current market dynamics, or I guess how should we be thinking about that going forward? Yeah, Paul, I mean, I think we're a little gun-shy. And so I think that's kind of where our heads are right now. I think, you know, I guess what's the term: once bitten, twice shy. And so I think, you know, as we've kind of pointed people to the sort of up, you know, kind of post the midpoint of our guidance with the assumption that we'll see, based on the aft activity we've seen here today, that will continue to see robust aft activity in the possibility of continued pull forward.

Speaker Change: later half of this year potentially pulling some 25 activity forward. I just want to know if you could talk about kind of if you see that as a more of a permanent compression or just a function of current market dynamics or I guess how should we be thinking about that going forward?

Speaker Change: Yeah, Paul, I mean, I think we're a little gun shy. And so I think that's kind of where our heads are right now. I think, you know, I guess what's the term, once bitten, twice shy. And so I think

Speaker Change: You know, as we've kind of pointed people to the sort of

Speaker Change: up, you know, kind of post the midpoint of our guidance, it's with the assumption that

Speaker Change: We'll see, based on the AFE activity we've seen year to date, that we'll continue to see robust AFE activity and the possibility of continued pull-forts. Now, those pull-forts don't always...

Paul Diamond: Now those pull forwards don't always account for additional rules, but they can. And so the concept was that we would see potentially in the fourth quarter a combination of both pull forward of tills and potentially 25 activity being pulled forward. And so that's kind of where our heads are now. It's not a given, per se. And so that's why the band is slightly wider. But we have seen that, and it will be price dependent. So obviously, if we were to see commodity prices taking those dive, it's unlikely that that would happen. And that's why we really do want to see why we keep that band there, but that's correct.

Speaker Change: account for additional accruals, but they can.

Speaker Change: and so the concept was that we would see potentially in the fourth quarter a combination of both

Speaker Change: Pulled forward of tills and potentially 25 activity being pulled forward and so that's kind of where our heads are now It's not a given per se and so that's why the band is slightly wider But we have seen that and it will be price dependent So obviously if we were to see commodity prices take a nosedive It's unlikely that that would happen and that's why we really do want to see you know

Chad Allen: But that's correct. But I do think, you know, if we see, you know, high 70s and low 80s, it is more likely to happen than not, because that's the trend we've been seeing for the last 18 months. Your next question comes from the line of Noah Hungness with the... Your line is: Morning all.

Paul Diamond: It could, but I do think, you know, if we see, you know, high 70s and low 80s, it is more likely to happen than not because that's the trend we've been seeing for the last 18 months.

Speaker Change: why we keep that band there, but that's correct, it could, but I do think, you know, if we see, you know, high 70s and low 80s, it is more likely to happen than not, because that's the trend we've been seeing for the last 18 months.

Noah Hungness: Your next question comes from the line of Noah Hungness with Via Basic Securities. Your line is open.

Speaker Change: Your next question comes from the line of Noah Hungness with B of A Securities. Your line is open.

Noah Hungness: Morning all, I just wanted to ask on the refract opportunities that you're seeing today and really what's driving that increase there and how you guys compare the refracts to maybe new new drills in a similar place in the basin. Yeah, I mean, I think it's been notable. I think we view, you know, refracts as locational, right, which is that not all refracts are good. And it's important to understand that which is that they are significant in cost, right? They can be 60 or 70% of the cost of a new well. But we have seen a pickup specifically in the well, and in the last few years, you know, historically, we have literally just budgeted it in our work over budget.

Noel Augustus Parks: I just wanted to ask about the refraction, really what that increase is, and how you guys compare the refracts. New Drills. Yeah, I mean, I think it's been notable. I think we view refracts as locational, right, which is that not all refracts are good. And it's important to understand that they are significant in cost, right, they can be 60 or 70% of the cost of a new well. But we have seen, I'll pick up specifically on Williston in the last few years, you know, historically, we have literally just budgeted them in our work over budget.

Noah Hungness: Morning all. I just wanted to ask on the refrack opportunities that you're seeing today and really what's driving that increase there and how you guys compare the refracks to maybe new drills in a similar place in the basin.

Speaker Change: Yeah, I mean, I think it's been notable. I think we view, you know, refracts as locational, right, which is that not all refracts are good.

Speaker Change: And it's important to understand that, which is that, you know, they are significant in cost, right, they can be 60 or 70% of the cost of a new well, but we have seen

Speaker Change: I'll pick up specifically in the Williston in the last few years, you know, historically, we have literally just budgeted it in our work over budget. And, you know, as our analysts have been asking us why our work over budget kept going up, we realized that we had to start to break it out because it is productive capital.

Noah Hungness: And, you know, as our analysts have been asking us why our work over budget kept going up, we realize that we had to start to break it out because it is productive capital.

Noel Augustus Parks: And, you know, as our analysts have been asking us why our work over budget kept going up, we realized that we had to start to break it out because it is productive capital. Yeah, I can jump in here.

Jim Evans: But I'll let Jim talk a little bit more about it. Yeah, and I can jump in here. I've got the stats in front of us. I think here to date, we've received roughly around 30 gross refract proposals. And, you know, the bulk of that work is going to be done in the third and the fourth quarters. It's also going to depend on whether or not it's an offensive or a defensive frack, meaning a defensive frack is coupled alongside new drills, so they're refracting legacy wells while they're drilling the new drills. And then you've also got kind of the offensive refracts, and that's going to be effectively going into it, you know, pretty much a fully developed legacy unit and then refracting those.

James B. Evans: I've got the stats in front of us. I mean, year to date, we've received roughly around 30 gross refract proposals, and the bulk of that work is going to be done in the third and fourth quarters. It's also going to depend on whether or not it's an offensive or a defensive frack, meaning a defensive frack is coupled alongside new drills. So they're refracking legacy wells while they're drilling the new drills.

Speaker Change: But I'll let Jim talk a little bit more about it. Yeah, I can jump in here. I've got the stats in front of us. Year to date, we've received roughly around 30 gross refract proposals.

James B. Evans: and the bulk of that work is going to be done in the third and the fourth quarters. It's also going to depend on whether or not it's an offensive or a defensive frack.

Speaker Change: Meaning a defensive frack is coupled alongside new drills, so they're refracking legacy wells while they're drilling the new drills. And then you've also got kind of the offensive refracks.

James B. Evans: And then you've also got kind of the offensive refracks, and that's going to be effectively going into, you know, pretty much a fully developed legacy unit and then refracking those. That's going to depend on the depletion as well as, you know, the completion methodology.

James B. Evans: and that's going to be effectively going into

Speaker Change: you know, pretty much a fully developed legacy unit, and then refracking those, that's going to depend on the depletion as well as, you know, the completion methodology. And so it's very intensive in terms of what our technical team is underwriting, but I'd say that, you know, probably two-thirds of

Jim Evans: That's going to depend on the depletions, as well as, you know, the completion methodology. And so it's very intensive in terms of what our technical team is underwriting. But I'd say that, you know, probably two thirds of the refract proposals that we've received in the Williston have been kind of through Grayson Mill and now ultimately Devon. And you've seen, you know, some of their commentary there. So I think we're relatively encouraged, and they continue to kind of tweak and refine things.

Adam Dirlam: And so it's very intensive in terms of what our technical team is underwriting. But I'd say that, you know, probably two-thirds of. The refract proposals that we've received in the Williston have been kind of through Grayson Mill and now ultimately Devin, and you've seen some of their commentary there. So I think we're relatively encouraged. And they continue to kind of tweak and refine things so, your next question comes from the line of Noel Parks with the Tui Brothers. Your line is open. Hi, good morning.

Speaker Change: The REFRAC proposals that we've received in the Williston have been kind of through Grayson, Mill, and now ultimately Devin, and you've seen, you know, some of their commentary there. So I think we're relatively encouraged, and they continue to kind of tweak and refine things.

Noel Parks: Your next question comes from the line of Noel Parks with Tui Brothers. Your line is open. Hi, good morning. You know, I'm just looking at the announcement you just had with Vital and taking an additional position in the Permian. I'm just curious in the M&A landscape of what you're seeing. I mean, the potential deal is coming to you, and so forth. I'm just wondering about your thoughts on sort of the sort of prolific but still gaffier. Touch to the Delaware, you know, somewhat further south. This one may how much you're seeing out there in the market and whether you're, you know, kind of what your appetite is in that part of the plane.

Speaker Change: Your next question comes from the line of Noel Parks with Tuohy Brothers. Your line is open.

Noel Augustus Parks: Um, you know, I'm just looking at this announcement you just had with vital and [inaudible] Parts of the Delaware, you know, somewhat further south. Just wondering how much you're seeing out there in the market and whether you're, you know, kind of what your appetite is in that part of the play, all things being equal. Yeah, I mean, as you go south in Delaware, the geology, it doesn't mean it's all bad, but the geology becomes very complex, right? You have a lot of faulting. Specifically, in Reese County, and as you get into Baker, it's very challenging geology.

Noel Augustus Parks: Hi, good morning. Um, you know, I'm just looking at the, um, uh, this announcement you just had with, uh, with Vital and, uh, uh,

Speaker Change: taking an additional position in the Permian.

Noel Augustus Parks: I'm just curious in the

Noel Augustus Parks: M&A landscape of what you've seen, the potential deals coming to you and so forth. I'm just wondering about your thoughts on sort of the sort of prolific but still gassier

Noel Augustus Parks: Parts of the Delaware, you know, somewhere further south. Just wondering how much you're seeing out there in the market and whether you're, you know, kind of what your appetite is in that part of the play, all things being equal.

Noel Parks: All things being equal. Yeah, I mean, as you go south in the Delaware, that you all, it doesn't mean it's all bad, but the geology becomes very complex, right? You have a lot of faulting specifically in Rees County. And as you get into big, it's a very challenging geology. So there are people who know how to do it. It's operated by Operator. And so it can be done.

Speaker Change: Yeah, I mean, as you go south in the Delaware, it doesn't mean it's all bad, but the geology becomes very complex, right? You have a lot of faulting.

Noel Augustus Parks: specifically in Reeves County, and as you get into Vegas, it's a very challenging geology, so there are people who know how to do it. It's operator by operator, and so it can be done.

Nico Grady: So there are people who know how to do it. It's operator by operator, and so it can be done. But I would say it is definitely something you wouldn't go with, as you would say, not with a hammer, but with a scalpel.

Noel Parks: But I would say it is definitely something you would you wouldn't go with as you would say, not with a hammer, but with a scalpel. And so I think it's not something that's out of the question. It's just something that requires more of a fine-tooth comb. You know, certainly it's, you know, it's a different paradigm. But you know, what I would tell you is that we were focused on quality, but I would also tell you that, you know, inventory in general in the country is changing. And some people would tell you that they're looking for the next wave of inventory, and that is something, you know, that we have to adapt in the world, which is that ultimately we have to recognize in the United States that the sticks are becoming more and more scary.

Noel Augustus Parks: But I would say it is definitely something you wouldn't go with, as you would say, not with a hammer, but with a scalpel.

Nico Grady: And so I think it's not something that's out of the question. It's just something that requires more of a fine-tooth comb. You know, certainly it's, you know, it's a different paradigm. But, what I would tell you is that we're focused on quality, but I would also tell you that, you know, inventory in general in the country is changing. And some people would tell you that they're looking for the next wave of inventory. And that is something, you know, that we have to adapt to in the world, which is that, ultimately, we have to recognize in the United States that sticks are becoming more and more scarce.

Noel Augustus Parks: And so I think it's not something that's out of the question. It's just something that requires more of a fine-tooth comb. You know, certainly, it's, you know, it's a different paradigm, but, you know,

Noel Augustus Parks: What I would tell you is that we're focused on quality, but I would also tell you that

Noel Augustus Parks: You know, inventory in general in the country is changing, and some people would tell you that they're looking for the next wave of inventory, and that is something, you know, that we have to...

Noel Augustus Parks: adapt in the world which is that ultimately we have to recognize in the United States that sticks are becoming more and more scarce and so this may be

Noel Parks: And so this may be what is the new paradigm in a few years. And so we'll evolve as the market does. And I'm telling out to that. And I think it's evidence in terms of what we've seen in the Williston with operators for finding the police techniques and stepping out and, you know, if we're focused on radar return, we need to continue to monitor the dynamics and the changes there. We've obviously looked in southern Delaware before, and there's, you know, have been a number of opportunities that haven't necessarily fit the bill. But as, you know, operations change hands that, you know, using forages an example, you know, we've seen a 13% reduction in well costs.

Nico Grady: And so this may be what the new paradigm is in a few years. And so we'll evolve as the market does. But I'm dovetailing off of that. And I think it's evident in terms of what we've seen in Williston with operators refining techniques and stepping out, and, you know, if we're focused on rate of return, we need to continue to monitor the dynamics and the changes there. We've obviously looked in Southern Delaware before, and there have been, you know, been a number of opportunities that haven't necessarily fit the bill.

Noel Augustus Parks: What is the new paradigm in a few years and so we'll evolve as the market does. I'm dovetailing off of that and I think it's evidence in terms of what we've seen in Williston with operators refining completion techniques and stepping out and

Noel Augustus Parks: If we're focused on rate of return, we need to...

Speaker Change: continue to monitor the dynamics and the changes there. We've obviously looked in southern Delaware before and there's, you know, have been a number of opportunities that haven't necessarily fit the bill.

Adam Dirlam: But as, you know, operations change hands, that, you know, using forages as an example, we've seen a 13% reduction in well costs, and we've seen, you know, early performance on, you know, underwritten type curves that have exceeded by roughly 20%, right? And so if we start, you know, rolling those types of changes into acreage that otherwise wouldn't necessarily pass our griddle rates, then maybe that So that's why we're continuing to do our look backs, both with our operating partners, as well as the folks that were participating on a heads up basis.

Noel Augustus Parks: but as, you know, operations change hands that, you know, using FORGE as an example.

Noel Augustus Parks: You know, we've seen a 13% reduction in well costs.

Noel Parks: And we've seen that, you know, early performance on underwritten type curves that have exceeded by roughly 20%. And so if you start, you know, rolling those types of changes into acreage that otherwise didn't necessarily pass our breweries, then maybe that changes in the future. And so that's why we're continuing to do our look backs, both with our operating partners as well as the folks that were participating on a heads up basis. And if it goes, things continue to change, and we've got conviction in that, then that's something that will honor.

Noel Augustus Parks: and we've seen, you know, early performance on

Noel Augustus Parks: you know, underwritten type curves that have exceeded by roughly 20%, right? And so if we start, you know, rolling those types of changes into acreage that otherwise didn't necessarily pass our brittle rates, then maybe that changes in the future. And so that's why we're continuing to do our look backs, both with our operating partners, as well as

Adam Dirlam: And if those things continue to change and we've got conviction in that, then that's something that we'll honor. Your next question is a follow-up from Charles Meade with Johnson Rice. Your line is open. Thanks for letting me back in the queue there.

Noel Augustus Parks: the folks that were participating on a heads up basis and if those things continue to change and we've got conviction in that, then that's something that we'll honor.

Charles Meade: Your next question is a follow-up from Charles Mead with Johnson Rice. Your line is open. Thanks for letting me back in the queue there. Nick, I wanted to ask a question about the, on these co-purchase deals, the dynamics and the motivations of your partners. When I think about what they would look for or the advantages they get from partnering with you, I think about, well, first of all, I think you kind of get the size of the deal where they want it. But truthfully, if you're taking a 20% cut, that's not maybe that big of a delta.

Noel Augustus Parks: Your next question is a follow-up from Charles Meade with Johnson Rice. Your line is open.

Charles Arthur Meade: Nick, I wanted to ask a question about these co-purchase deals, the dynamics, and the motivations of your partners. When I think about what they would... look for or the advantages they get from partnering with you. I think about, well, first off, they can kind of get the size of the deal where they want it. But truthfully, if you're taking a 20% cut, that's not maybe that big of a delta.

Speaker Change: Thanks for letting me back in the queue there. Nick, I wanted to ask a question about the, on these co-purchase deals, the dynamics and the motivations of your, of your

Charles Arthur Meade: Your partners when I when I think about we what would they would

Speaker Change: Look for, or the advantages they get from partnering with you, I think about, well first off, they can kind of get the size of the deal where they want it, but truthfully, if you're taking a 20%

Charles Arthur Meade: I don't imagine that you're bringing a lower cost of capital or a significantly lower cost of capital, and I think that perhaps from the operator's point of view, they're reducing their LOE a bit by... charging you some overhead. But what are the, what do you think, you know, when you sit down with these guys, what is the... They can't charge us over that. What do you bring to the table for them? Say it again?

Nico Grady: I think that I don't imagine that you're bringing a lower cost of capital or significantly lower cost capital to the deal, and I think that perhaps from the operator's point of view that they're reducing their L.O.E. a bit by charging you some overhead, but what are the, what do you think, you know, when you sit down with these guys, what is the difference? They can't charge us overhead. What do you bring to the table for them? Say again? They can't charge us overhead. They do not, but cannot, okay. No, I mean, you pay, no, we pay the, you know, typical, we pay L.O.E.

Speaker Change: Cut that's not maybe that big a delta. I think that I don't imagine that you're bringing a lower cost of capital or significantly lower cost of capital to the deal.

Speaker Change: And I think that perhaps from the operator's point of view, they're reducing their LOE a bit by charging you some overhead, but what are the, what do you think, you know, when you sit down with these guys, what is the...

Speaker Change: They can't charge us over that. What do you bring to the table for them?

Speaker Change: Say again? They can't charge us overhead.

Nico Grady: They can't charge us overhead, not but they cannot. Okay, yeah I mean you pay. No, we pay debt. Typical, we pay LOE straight. It's just it's an undivided, But the answer is, you hit on the same thing, which is that, if it's the cost of capital, it's very simple, which is that if you're a company and you are looking, I mean, I can't answer the motivations for every company. So, I mean, you're asking me to answer somebody else's question, but

Speaker Change: that do not, but cannot. Okay. No, I mean, you pay.

Speaker Change: Now, we pay the typical, we pay LOE straight. It's just, it's an undivided interest.

Nico Grady: straight. It's just, it's an undivided interest.

Nico Grady: But the answer is, you hit at the same thing, which is that, if it's cost of capital, you know, it's very simple, which is that if you're a company and you are looking, I mean, I can't answer the motivations for every company, so I mean, you're asking me to answer somebody else's question, but what I would tell you is that we're an oil and gas company right at the end of the day. We are certainly a financial owner in many ways, but we're not a financial entity. We're a permanent owner of the assets. Right. We're not, we're not turning it into a security.

Speaker Change: But the answer is...

Speaker Change: You hit at the same thing, which is that

Speaker Change: If it's cost of capital.

Speaker Change: It's very simple, which is that, if you're a company and you are looking, I mean, I can't answer the motivations for every company. So, I mean, you're asking me to answer somebody else's question, but,

Nico Grady: What I would tell you is that we're an oil and gas company right at the end of the day. We are certainly a financial owner in many ways, but we're not, and then we turn it around. Whereas, for us, we're true oil and gas concerned.

Speaker Change: What I would tell you is that we're an oil and gas company right at the end of the day We are certainly a financial owner in many ways, but we're not

Speaker Change: a financial entity. We're a permanent owner of the assets, right? We're not, we're not turning it into a security.

Nico Grady: So our cost of capital, in some ways, is higher, right? But if you're a private equity firm, your main goal is to own it for five years and then flip it, right? And you require a lot of maintenance. And so your cost of capital might be lower than ours. But then, at the end of the day, it's heads or tails. I win because I needed to be a security, and then I need you to buy me out at the end, and I need you to manage it and do all these things. And then turn it around.

Speaker Change: So our cost of capital in some ways is higher, right, but

Speaker Change: if you're a private equity firm.

Speaker Change: your main goal is to own it for five years and then flip it, right? And you require a lot of maintenance. And so your cost of capital might be lower than ours. But then at the end of the day, it's heads or tails, I win, because I needed to be a security and then I need you to buy me out at the end. And I need you to manage it and do all these things and

Nico Grady: Whereas for us, we're a true oil and gas concern form. So, from the operator's perspective, we're a great, quote, silent partner because we understand and we can underwrite alongside them. We have our own engineering team. We literally can sit down with them, and we do our own underwriting, right? Number one, our technical team become a great sounding board because they can sit there and say they know that we agree with them when we go through this process when we're going to purchase these things. And so that we know we all agree. But number two, for those partners, they can understand that when they're going to size these transactions, they're not stretching themselves financially, right?

Speaker Change: and then turn it around. Whereas for us, we're true oil and gas concern from so from the operators perspective we're a great quote silent partner because

Nico Grady: So from the operator's perspective, we're a great, quote, silent partner because we understand them, and we can underwrite alongside them. We have our own engineering team. We literally can sit down with them, and we do our own underwriting, right? Number one, our technical team becomes a great sounding board because they can sit there and say they know that we agree with them when we go through this process, when we're going to purchase these things, so that we know we all agree.

Speaker Change: We understand and we can underwrite alongside them. We have our own engineering team. We literally can sit down with them and we do our own underwriting, right? Number one, our technical team become a great sounding board because they can sit there and say they know that we agree with them when we go through this process, when we're going to purchase these things.

Nico Grady: But number two, for those partners, they can understand that when they're going to size these transactions, they're not stretching themselves financially, right? But if they take on more debt or they take on another financial party, they have to deal with that party at some point, whereas we own it forever, right? And they don't have to worry about what we're going to do with the other end or buying us out. Or if something goes wrong in the case of a security in which that person says they have to be paid or that, you know, a VPP where, in a VPP, I'm not sure you're aware, but if the volumes disappoint, you have to give them more volumes, right? So no matter what happens, you pay the man, right?

Speaker Change: but and so that we know we all agree.

Speaker Change: But number two, for those partners, they can understand that

Speaker Change: when they're going to size these transactions, they're not stretching themselves financially, right? And, but if they take on more debt or they take on another financial party, they have to deal with that party at some point, whereas we own it forever, right? And they don't have to worry about what we're gonna do at the other end or buying us out. Or if something goes wrong in the case of a security in which that person says they have to be paid or that, you know, a VPP where, in a VPP, I'm not sure you're aware, but if the volumes disappoint, you have to give them more volumes, right? So no matter what happens, you pay the man, right? And so ultimately we wind up being a much better partner where we take risk alongside and undivided interest means we share in the benefits and if things go wrong.

Nico Grady: But if they take on more debt or they take on another financial party, they have to deal with that party at some point, whereas we own it forever, right? And they don't have to worry about what we're going to do with the other end or buying us out. Or if something goes wrong in the case of a security in which that person says they have to be paid or that, you know, a VPP, where in a VPP, I'm not sure you're aware, but if the volume's disappointed, you have to give them more volumes, right? So no matter what happens, you pay the man, right?

Nico Grady: And so ultimately, we wind up being a much better partner where we take risk alongside an undivided interest. This means we share in the benefits and if things go wrong.

Nico Grady: Your next question is a follow-up from Philips, Johnston with Capital One. Your line is open. Hey, thanks for the follow-up. It's early to talk 25. I know, but just from a directional standpoint, it looks like consensus cat-x next year is around 975, which is pretty similar to this year. Just wondering if you guys would potentially envision a higher spend next year, considering your implied capital efficiency. So, for this year's program, it's helped by about 20 more net-tills than what you have plans for net-spuds. Yeah, yeah, Philips, it's a little early, but I would just say this: like, you know, looking at consensus so far, we haven't seen anything we've really object to. But again, I don't want to, it's too early to truly opine on it. But so far, we haven't seen anything that is terribly scared us.

Nico Grady: And so ultimately, we wind up being a much better partner where we take risks alongside, and an undivided interest means we share in the benefits and if things go wrong. Your next question is a follow-up from Phillips Johnston with Capital One. Your line is open. Hey, thanks for the follow up. It's early to talk about 25, I know, but just from a directional standpoint, it looks like consensus capex next year is around 975, which is pretty similar to this year. Just wondering if you guys would potentially envision a higher spend next year, considering your implied capital efficiency for this year's program is held by about 20 more net tills than what you have plans for net spud.

Speaker Change: Your next question is a follow-up from Phillips Johnston with Capital One. Your line is open.

John Phillips Little Johnston: Hey, thanks for the follow-up. It's early to talk 25, I know, but just from a directional standpoint.

Speaker Change: It looks like consensus CapEx next year is around $9.75, which is pretty similar to this year.

Speaker Change: Wondering if you guys would potentially envision a higher spend next year considering your, you know, your implied capital efficiency for this year's program is held by about 20 more net tills than what you have plans for net spuds.

Nico Grady: Yeah, Phillips, it's a little early. But I would just say this, like, you know, looking at the consensus so far, we haven't seen anything we really object to. But again, I don't want to; it's too early to truly opine on it.

Speaker Change: Yeah, yeah, it's a little early, but I would just say this, like, you know, looking at consensus so far, we haven't seen anything we really object to. But again, I don't want to, it's too early to truly opine on it. But so far, we haven't seen anything that is terribly scared us.

Operator: This concludes the question and answer session.

Nico Grady: I'll turn the call to Nicol Grady for closing remarks. Thank you for joining us today. We appreciate your continued support and look forward to touching base with you in the coming weeks.

Speaker Change: This concludes the question and answer session. I'll turn the call to Nick O'Grady for closing remarks.

Nick O'Grady: Thank you for joining us today. We appreciate your continued support and look forward to touching base with you in the coming weeks.

Operator: This concludes today's conference call. We thank you for joining.

Speaker Change: This concludes today's conference call. We thank you for joining. You may now disconnect.

Operator: You may now disconnect.

Operator: Please wait; the conference will begin shortly.

John Phillips Little Johnston: But so far, we haven't seen anything that is terribly scary. Question and answer session. I'll turn the call over to Nicole Grady for closing. Thank you for joining us today. We appreciate your continued support and look forward to touching base with you in the coming weeks. This concludes today's conference call. We thank you for joining us.