Q2 2024 Vitesse Energy Inc Earnings Call
Operator: Greetings, and welcome to the Vitesse Energy second quarter 2024 earnings call. At this time, all participants are in a listen-only mode.
Greetings and welcome to Levi Test energy second quarter 'twenty 'twenty four earnings call. At this time, all participants are in a listen only mode.
Operator: A question and answer session will follow the formal presentation. Please note this conference is being recorded.
<unk> and answer session will follow the formal presentation. Please note. This conference is being recorded I will now turn the conference over to Ben Messier Director Investor Relations and business development. Thank you you may begin.
Ben Messier: I will now turn the conference over to Ben Messier, Director and Investor Relations and Business Development. Thank you. You may begin.
Ben Messier: Good morning, everyone, and thank you for joining. Today, we will be discussing our financial and operating results for the second quarter 2024, which we released yesterday after market close. You can access our earnings release and presentation in the Investor Relations section of our website. We've filed our Form 10-Q with the SEC yesterday.
Speaker Change: Good morning, everyone and thank you for joining US today, we will be discussing our financial and operating results for the second quarter of 2024, which we released yesterday after market close you.
Speaker Change: You can access our earnings release and presentation in the Investor Relations section of our website, we filed our Form 10-Q with the SEC yesterday I'm joined here. This morning by the test as chairman and CEO, Bob guarantee our President Brian Creek, and our CFO Jimmy Henderson our.
Ben Messier: I'm joined here this morning by Vitesse's chairman and CEO Bob Gerrity, our president, Brian Cree, and our CFO, Jimmy Anderson. Our agenda for today's call is as follows. Bob will provide opening remarks in the quarter. After Bob, Brian will give you an operations update; then Jimmy will review our financial results.
Speaker Change: Our agenda for today's call is as follows Bob will provide opening remarks on the quarter. After Bob Brian will give you an operations update then Jimmy will review our financial results. After the conclusion of our prepared remarks, the executive team will be available to answer your questions. Before we begin let's cover our safe Harbor language. Please be advised that our remarks today, including.
Operator: After the conclusion of our prepared remarks, the executive team will be available to answer questions.
Ben Messier: Before we begin, let's cover our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. We disclaim any obligation to update these forward-looking statements, except as may be required by applicable securities laws.
Ben Messier: Before we begin, let's cover our state harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to the risks and uncertainties, some of which are beyond our control, that could cause actual results to be materially different from the expectations contemplated by these forward-looking statements. Those risks include, among others, matters that we've described in our earnings release and periodic filings. We display many obligations to update these forward-looking statements, except as may be required by applicable securities laws.
Speaker Change: And the answers to your questions May include forward looking statements within the meaning of the private Securities Litigation Reform Act.
Speaker Change: These forward looking statements are subject to the risks and uncertainties some of which are beyond our control that could cause actual results to be materially different from the expectations contemplated by these forward looking statements. Those risks include among others matters that we've described in our earnings release and periodic filings, we disclaim any obligation to update.
Speaker Change: These forward looking statements, except as maybe required by applicable securities laws.
Ben Messier: During our conference call, we may discuss certain non-GAAP financial measures, including adjusted net income, net debt, adjusted EBITDA, net debt to adjusted EBITDA ratio, and free cash flow.
Speaker Change: During our conference call, we may discuss certain non-GAAP financial measures, including adjusted net income net debt adjusted EBITDA net debt to adjusted EBITDA ratio and free cash flow.
Ben Messier: Reconciliation of these measures to the closest gap measures can be found in the earnings release that we issued yesterday.
Bob Guarantee: Reconciliations of these measures to the closest GAAP measures can be found in the earnings release that we issued yesterday now I will turn the call over to our chairman and CEO Bob guarantee.
Robert Gerrity: Now I will turn the call over to our Chairman and CEO, Bob Gerrity. Thanks, Ben. Good morning, everyone. Thanks for jumping on the call.
Operator: Thanks, Ben. Good morning, everyone. Thanks for jumping on the call. I'll now hand the call over to our president.
Bob Guarantee: Thanks, and good morning, everyone. Thanks for jumping on the call.
Robert Gerrity: Tests' return of capital strategy continued in the second quarter. We paid an increased dividend of 52.5 cents a share in June, and recently declared another 52.5-cent dividend to be paid in September. As I've said before, in addition to our organic drilling, we are always looking at both near-term development deals and larger asset acquisitions that will support the dividend. We are a dividend-first company. Deal flow continues to be healthy, and we direct capital to the highest rate of return projects. We only make acquisitions if they fit our rigorous underwriting criteria, and then we hedge to protect the returns.
Bob Guarantee: Texas return of capital strategy continued in the second quarter.
Speaker Change: We paid an increased dividend at 52.5 cents a share in June.
Speaker Change: Recently declared another 52.5 cent dividend to be paid in September.
Speaker Change: As I've said before in addition to our organic drilling we are always looking at both near term development deals and larger asset acquisitions that will support the dividend we are a dividend first company.
Speaker Change: Deal flow continues to be healthy and we direct capital to the highest rate of return projects.
We only make acquisitions, if they fit our rigorous underwriting criteria.
Speaker Change: And then we hedge to protect the returns we rely heavily on our debt database that we called luminous which has democratized over our entire organization.
Robert Gerrity: We rely heavily on our debt database that we call Luminous, which is democratized over our entire organization to help direct our investment decision. The strategy remains consistent despite the recent decline in oil prices.
Speaker Change: To help direct our investment decisions. This strategy remains consistent despite the recent decline in oil prices.
Brian Cree: I'll now hand the call over to our President. Brian Cree to discuss our operations. In 2030, barrels of oil equivalent per day for the first six months of the year. As previously announced, during the second quarter, we closed on additional near-term development acquisitions in North Dakota that will result in over 40 million of capital expenditures. The drilling and completion associated with these acquisitions will occur late this summer and fall, and we expect significant increases to both production and cash flows during the second half of the fourth quarter of 2024 and into 2025. As we said before, production will likely be bumpy, lumpy over this period depending on when wells are turned online.
Speaker Change: I'll now hand, the call over to our president.
Speaker Change: Brian Cree to discuss our operations.
Brian Cree: Right. Good morning, everyone. Thanks, Bob in.
Brian Cree: In the second quarter, our production averaged 13504 barrels of oil equivalent per day, an increase of 8% from the first quarter, bringing our year to date production up to 13030 barrels of oil equivalent per day for the first six months of the year.
Brian Cree: As previously announced during the second quarter, we closed on additional near term development acquisitions in North Dakota that will result in over $40 million of capital expenditures the drilling and completion associated with these acquisitions will occur late this summer and fall and we expect significant increases to both.
Brian Cree: <unk> in cash flows during the second half of the fourth quarter of 2024 and into 2025.
Brian Cree: As we said before production will likely be bumpy lumpy over this period, depending on when wells are turned online.
Brian Cree: As of June 30, we had 19.8 net wells in our development pipeline, including 11.1 net wells currently being drilled and completed. The overall pipeline is increased by 3.3 net wells or 20% from the end of the first quarter. This increase is a result of both higher than normal acquisitions in the second quarter and an acceleration of drilling on our organic acreage. Our second quarter oil differential of $5.90 below WTI improved by 9% from the first quarter as the Trans Mountain pipeline expansion turned online on May 1st. We have continued to add oil hedges through 2025.
Brian Cree: As of June 30, we had $19 eight net wells in our development pipeline, including $11. One net wells currently being drilled and completed the overall pipeline has increased by $3 three net wells or 20% from the end of the first quarter.
Brian Cree: This increase is a result of both higher than normal acquisitions in the second quarter and an acceleration of drilling on our organic acreage our second quarter oil differential of $5.90 below W. T. I improved by 9% from the first quarter as the Trans Mountain pipeline expansion turned online on May <unk>.
Brian Cree: <unk>.
Brian Cree: We have continued to add oil hedges through 2025 at the midpoint of our guidance. We are 57% of our remaining 2024 oil production hedged at above $78 per barrel and 2025 hedges at above $74 per barrel.
Brian Cree: At the midpoint of our guidance, we have 57% of our remaining 2024 oil production hedged at above $78 per barrel and 2025 hedges at above $74 per barrel.
Brian Cree: Thanks for your time.
Brian Cree: For your time now I'll turn the call over to our CFO, Jimmy Henderson for our financial highlights.
James Henderson: Now I'll turn the call over to our CFO, Jimmy Henderson, for our financial highlights. Good morning everyone, and thanks for joining my call. I want to highlight just a few financial results from the second quarter.
Jimmy Henderson: Good morning, everyone and thanks for joining the call.
Jimmy Henderson: Want to highlight just a few financial results from the second quarter as always you can refer to our earnings release, and 10-Q, which were filed yesterday for any further details.
James Henderson: As always, you can refer to our earnings release in 10-Q, which were filed yesterday for any further details. As Brian mentioned, our production for the quarter was just over 13,500 BOE per day with a 70% oil cut. This was an increase from our first quarter production by roughly 950 BOE per day, bringing our half year production within guidance to just over 13,000 BOE per day. Lease operating expense came at $12.3 million for the quarter or $9.99 per BOE, a slight decrease from the first quarter on a per unit basis. For the quarter, adjusted evidol was 43.1 million and adjusted net income was 11.7 million, which produced an adjusted earnings per share of 39 cents per share as compared to 34 cents last quarter.
Speaker Change: As Brian mentioned, our production for the quarter was just over 13500 Boe per day with a 70% oil cut this was an increase from our first quarter production by roughly 950 Boe per day, bringing our half year production within guidance to just over 13000 Boe per day.
Speaker Change: Lease operating expense came in at $12 3 million for the quarter or $9 99 per Boe.
Speaker Change: A slight decrease from the first quarter on a per unit basis.
Speaker Change: For the quarter adjusted EBITDA was $43 1 million and adjusted net income was $11 7 million, which produced an adjusted earnings per share of 39 cents per share as compared to 34 last quarter.
James Henderson: Gap net income was 10.9 million and Gap EPS was 31. on Stums. Cash CapEx and acquisition cost total 37.6 million for the quarter and 69.8 million for the first half of the year, which is right at the midpoint of our current guidance on an annualized basis. Like our production, CapEx varies from quarter to quarter depending on activity levels and acquisition opportunities. Operating cash flow net of working capital changes was 40.4 million in the quarter, which covered our dividend and our maintenance CapEx, providing excess discretionary cash flow to fund some of the acquisitions spending in the quarter.
Speaker Change: GAAP net income was $10 9 million and GAAP EPS was <unk> 31.
Speaker Change: Cash Capex and acquisition costs totaled $37, six 6 million for the quarter.
Speaker Change: And $69 8 million for the first half of the year, which is right at the midpoint of our current guidance on an annualized basis.
Speaker Change: Our production capex varies from quarter to quarter, depending on activity levels and acquisition opportunities.
Speaker Change: Operating cash flow net of working capital changes was $44 million in the quarter, which covered our dividend and our maintenance capex, providing excess discretionary cash flow to fund some of the acquisitions spending in the quarter.
James Henderson: The remainder of our CapEx was funded with draws on the credit facility. Dead at the end of the quarter was 115 million and is currently down to 119. The quarter end number resulted in a leverage ratio of 0.67 times on an annualized adjusted EBITDA calculation. The elected commitments on our credit facility currently stand at 245 million after their increase during our semi-annual redetermination in May.
Speaker Change: <unk> of our Capex was funded withdraws on the credit facility.
Speaker Change: Debt at the end of the quarter was $115 million and is currently down to $111 million.
Speaker Change: Quarter end number resulted in a leverage ratio of six seven times on an annualized adjusted EBITDA calculation.
Speaker Change: The elected commitments on our credit facility currently stand at $245 million after their increase during our semiannual redetermination in may thanks.
James Henderson: Thinks as always to the banks in the group for their continued support. Lastly, given the level and timing of development activity that Brian described, we are reaffirming our previously revised 2024 guidance for both production and CapEx.
Speaker Change: Thanks, as always to the banks in the group for their continued support.
Speaker Change: Lastly, given the level and timing of development activity that Brian described we are reaffirming our previously revised 2024 guidance for both production and Capex.
Operator: With that, let me turn the call over to the operator for Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation to indicate your line is in the question Q. You may press star 2 if you would like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you.
Robert Gerrity: The elected commitments on our credit facility currently stand at $245 million after their increase during our semi-annual redetermination in May. With that, let me turn the call over to the operator for Q&A. Thank you. We will now
Speaker Change: With that let me turn the call over to the operator for Q&A.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Thank you.
Jeffrey Graham: Our first question comes from the line of Jeff Graham with the Line's Global Partners. Please proceed with your question.
Speaker Change: Question comes from the line of Jeff Grant with Alliance Global Partners. Please proceed with your question.
Brian Cree: Morning everyone. Brian, you mentioned in the prepared remarks that activity levels at quarter end increase quite a bit sequentially. I know a lot of that was acquisition related from what you guys talked about last quarter, but you also noted an acceleration, I think was the term you used, on your organic acreage. I'm curious to dive into that a bit more. Was that expected going into the year? Is that kind of a newer development that you guys are maybe not anticipating? Just any thoughts on what might be driving that? Yeah, thanks.
Jeff Grant: Good morning, everyone.
Jeffrey Grampp: Brian, you mentioned in the prepared remarks that activity levels at quarter end increased quite a bit sequentially. I know a lot of that was acquisition-related from what you guys talked about last quarter, but you also noted an acceleration, I think was the term you used, on your organic acreage. I'm curious to dive into that a bit more.
Jeff Grant: Brian you mentioned in the prepared remarks.
Jeff Grant: Activity levels at quarter end increased quite a bit sequentially I know a lot of that was acquisition related from what you guys talked about last quarter, but you also noted an acceleration I think was the term you used on your organic acreage I'm curious to dive into that a bit more was that expected going into the year or is that kind of a newer developments that you guys are maybe not anticipating any.
Jeffrey Grampp: Was that expected going into the year? Is that kind of a newer development that you guys are maybe not anticipating? Just any thoughts on what might be driving that? Yeah.
Speaker Change: Thoughts on what might be driving that.
Brian Cree: Yeah, thanks. Good morning, Jeff.
Speaker Change: Yes. Thanks, Good morning, Jeff I think I talked about it a little bit at the end of our first quarter call that we were seeing.
Brian Cree: Good morning, Jeff. I think I talked about it a little bit at the end of our first quarter call. That we were seeing a higher level of AFEs. We weren't sure if that was going to continue, but it has continued during the second quarter, and through the first six months of the year, we're on pace for a pretty significant increase year over year in our organic catback. Again, not sure if that will continue as we go into the second half of the year, but right now we are definitely seeing, even though the rig count hasn't really increased that much.
Brian Cree: I think I talked about it a little bit at the end of our first quarter call that we were seeing a higher level of AFEs. We weren't sure if that was going to continue, but it has continued during the second quarter and through the first six months of the year. We're on pace for a pretty significant increase year over year in our organic CapEx. So again, not sure that that will continue as we go into the second half of the year, but right now we are definitely seeing, even though the rig count hasn't really increased that much, I think you've seen our presentation at the end of the second quarter, we had 20 rigs running out of about 37 rigs.
Speaker Change: A higher level of fees, we weren't sure if that was going to continue but it has continued during the second quarter and through the first six months of the year, we are on pace for a pretty significant.
Speaker Change: Increase year over year, and our organic capex. So.
Speaker Change: Again, not sure that that will continue as we go into the second half of the year, but right now we are definitely seeing even though the rig count.
Speaker Change: Isn't really increase that much I think you see in our presentation at the end of the second quarter. We had 20 rigs running out of about 37 rigs as you guys know, we're typically somewhere between 30% and 50% of the rigs running in the basin.
Brian Cree: I think if you see in our presentation at the end of the second quarter, we had 20 rigs running out of about 37 rigs. As you guys know, we're typically somewhere between 30 and 50 percent of the rigs running in the basin. Today there's just a little over 40 rigs running in the basin, and we've got 18 of those drilling on our wells. It's great to see operators. Drilling on acreage that we have already in our inventory.
Brian Cree: As you guys know, we're typically somewhere between 30 and 50 percent of the rigs running in the basin. Today there are just a little over 40 rigs running in the basin, and we've got 18 of those drilling on our wells. So yeah, it's great to see operators...
Speaker Change: Today, there is just a little over 40 rigs running in the basin and we've got 18 of those drilling on our.
Speaker Change: On our wells so yeah, it's great to see operators.
Speaker Change: Drilling on acreage that we have.
Speaker Change: Already in our inventory.
Jeffrey Graham: Great, appreciate those details. And for my follow-up, I'm curious, you know, Vitesse is obviously not a new company, but you are newer a bit to public investors still. I'm curious, you know, for Bob or anyone to hear, you know, how Vitesse has historically run when we're kind of on the lower end of oil price ranges.
Speaker Change: Great appreciate those details and for my follow ups.
Speaker Change: Curious if the test is obviously not a new company, but you are newer a bit to public investors still.
Speaker Change: I am curious for Bob or anyone to hear how the.
Speaker Change: <unk> has historically run one more kind of on the lower end of oil price ranges I mean, obviously not.
Robert Gerrity: I mean, obviously not to, you know, panic mode by any sense of the imagination, but, you know, what is Vitesse typically done during weaker periods in the market, from a, you know, capital allocation, balance sheet operations perspective? Just any thoughts there would be great. Yeah, thanks, Jeff.
Panic mode by any sense of the imagination, but what is the test typically done during weaker periods in the market from a capital allocation balance sheet operations perspective, just any thoughts there would be great.
Jeff Grant: Yes, Thanks, Jeff.
Robert Gerrity: This month we celebrated our 13th year. And so we have seen it all. And I will tell you that Vitesse has a strategy. By that I mean more economic acquisitions in the $70 oil price range.
Robert Gerrity: This month we celebrated our 13th year in existence. So even though we've only been public for a year and a half, my wife and I founded this company 13 years ago, and we're joined right after that by Brian Cree. So, Jeff, we have seen negative oil prices. We have seen $120 oil price. And so we have seen it all. And I will tell you that Vitesse has a strategy for every oil price environment. We tend to do better acquisitions by that. I mean more economic acquisitions in the $70 oil price range. That's just, it's just what we do.
Speaker Change: This month, we celebrated our 13th year in existence, so even though we've only been public for a year and a half.
Speaker Change: My wife, and I founded this company 13 years ago and Joy.
Speaker Change: Joined right after that by Brian Cree.
Speaker Change: So Jeff we've seen negative oil prices, we have seen $120 oil price.
Speaker Change: And so we have seen it all and I will tell you that the test has a strategy for every.
Speaker Change: Oil price environment.
Speaker Change: We tend to do.
Speaker Change: Better acquisitions.
Speaker Change: That I mean more economic acquisitions in this in the $70 oil.
Speaker Change: Price range.
Speaker Change: And that's just it's just what we do.
Robert Gerrity: We run a process on everything. We're very disciplined about what we buy. It just said it's $70. We seem to have less competition. So we'll be a little bit more inquisitive if it hurdles at $70. And our deal flow right now is terrific. I will also say that when the price flow went to $85, our organic picked up, but our near term drilling slowed down a little bit because we had more competition.
Speaker Change: We run a process on everything we're very disciplined about what we buy it just added $70, we seem to have less competition.
Speaker Change: So we will be a little bit more acquisitive, if it hurdles at 70 and our deal flow right now is terrific.
Speaker Change: I will also say that when the price of oil went to 85, our organic picked up but our near term drilling.
Speaker Change: Slow down a little bit because we had more competition.
Jeffrey Graham: So Jeff, this is a very long duration asset. We've been in business for 13 years. We get up in the morning, and we just run the process that we've been running and developed that whole period of time. All right. Great. I appreciate those details, and thanks for the time. Thank you, Jeff.
Speaker Change: No.
Speaker Change: Jeff This is a very long duration asset we've been in business for 13 years, we get up in the morning and.
Jeff Grant: We just run the process that we've been running and develop that whole period of time so.
Operator: All right. Great, Bob. I appreciate those details, and thanks for your time.
Jeff Grant: Alright, great Bob I appreciate those details and thanks for the time.
Bob Guarantee: Thank you Jeff.
Operator: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Donovan Schafer with Northland Capital markets. Please proceed with your question.
Donovan Schafer: Our next question comes from the line of Donovan Shaffer with Northland Capital Markets. Please proceed with your question.
Donovan Schafer: Hey, guys. Just as a follow-up sort of for Jeff's question, if oil is in, you know, closer to the $70 range and that presents an opportunity for more economic acquisitions, how would you think about tapping capital for that? You're still fairly conservatively levered, but that directionally you have been increasing that.
Operator: Hey guys, just as a follow-up sort of to Jess' question,
Donovan Schafer: Hey, guys.
Donovan Schafer: Just as a follow up sort of suggests question.
Speaker Change: If oil is in closer to the $70 range.
Donovan Schafer: That presents an opportunity for more economic acquisitions, how would you think about tapping capital for that dialogue you are still fairly conservatively levered.
Speaker Change: But directionally you have been increasing that so is that something you think you have a good runway on that to kind of lever up further if opportunities present themselves or would.
James Henderson: So is that something you think you have a good runway on that to kind of lever up further if opportunities present themselves, or would you look at it differently, it approaches this in a different way. Yeah, I'll take a stab at that.
Speaker Change: Would you look at it differently approaches it in a different way.
Speaker Change: Yes, I'll take a stab at that this is Jeremy.
James Henderson: This is Jimmy. Yeah, I think because we have run with a conservative balance sheet that we do have some room for the right opportunities, and if they're a credo to the dividend, and we see a line of sight to bringing that debt back down, I think we can push it a little bit. As we've always stated, we're definitely staying under one time's debt diva da, and we're well under that now, and we'll continue to be there. But certainly, we have some drive powder for the right acquisition opportunities that can help move the companies, really dividend coverage forward.
Jeremy: Yes, I think because we have run with a conservative balance sheet that we do have some room for the right opportunities.
Jeremy: If they are accretive to the dividend and we can we see as a.
Jeremy: Your line of sight to bringing that back down I think we can push it a little bit I think as we've always stated we're definitely staying under one times debt to EBITDA and well under that now and will continue to be there, but certainly we have some dry powder for the right.
Jeremy: Acquisition opportunities that can help move the companies.
Jeremy: Really dividend coverage forward.
Donovan Schafer: Okay, that's helpful.
Speaker Change: Okay. That's helpful.
Brian Cree: And then for, I guess, just also somewhat related to, I think just first question, or maybe it was the second one, but with people, the focus kind of turning to oil prices, or concerns of conceivably a recession, or something like that, can you give us any color on what kind of stress test can you do, and with the hedges in place, do you run it at $50 oil for 12 months, $60 oil for 24 months, just any color on that would be helpful as well. Yeah, Donovan, this is Brian.
Speaker Change: And then for <unk>.
Speaker Change: I guess just.
Speaker Change: Also somewhat related to I think just first question.
Speaker Change: Or maybe it was the second one but.
Speaker Change: With.
Speaker Change: People, the focus kind of turning to oil prices or concerns of considerably a recession or something like that.
Speaker Change: Can you give us any color on what kind of stress testing that you do and with the hedges in place.
Speaker Change: Like do you run it at.
Speaker Change: Yes, $50 oil.
Speaker Change: How can you do a $50 oil for 12 months $60 oil for 24 months you know.
Speaker Change: Just any color on that would be helpful as well.
Speaker Change: Yeah, Jonathan This is Brian I'll take the first crack at that and let Jim here, Bob jump in but obviously, yes, we always run stress tests.
Brian Cree: I'll take the first crack at that, and let Jimier Bob jump in. But obviously, yes, we always run stress tests. It's why we focus on the hedging and make sure that we have the hedges in place that we do to protect that dividend in case the price of oil does go down. We run it at $50, we run it at $60, we run some even disaster cases to look. Obviously, you have to also factor in that if prices go down, you're also going to see your capital expenditure; capital expenditures also decline during that time frame.
Jim: It's why we focus on the hedging and make sure that we have the hedges in place that we do to protect.
Speaker Change: That dividend in case, the price of oil does go down we run it at $50. We run it at $60. We run some some even disaster cases to look obviously you have.
Speaker Change: You have to also factor in that if prices go down you're also going to see your capital expenditure.
Speaker Change: Capital expenditures also decline during that timeframe. So it's not just as easy as dropping in a lower oil price or gas price into a model.
Brian Cree: So it's not just as easy as dropping in a lower oil price or gas price into a model and seeing that result; you have to take a lot of things into consideration. So for us, we take a look at that, and we run it for different periods of time. I think, as we've said before, and Jimier just mentioned, we keep our leverage low for really a couple of different reasons. One is to take advantage of those acquisitions that crop up; that was your real first question. And I think we did a really good job of that last fall.
Speaker Change: Seeing that result, you have to take a lot of things into consideration. So for us we take a look at that and.
Speaker Change: We run it for different periods of time, and I think as we've said before and Jimmy just mentioned, we keep our leverage low for really a couple of different reasons. One is to take advantage of those acquisitions that crop up that was your real first question and I think we did a really good job of that last fall and we also did that at the beginning.
Brian Cree: And we also did that at the beginning of the second quarter here. Hopefully, that opportunity will exist as we go through the remainder of 2024 if oil prices stay in this price range. The other side of that is just making sure that the dividend is covered. And the lower debt allows us some flexibility there. Obviously, if prices are down for an extended period of time, we would have to look at our dividend. But I think prices going down to $60 for a short period of time, we don't anticipate that that would have an impact on our dividend in the short term.
Speaker Change: The second quarter here, hopefully that opportunity will exist as we go through the remainder of 2024, if oil prices stay in this in this price range.
Speaker Change: Other side of that is just making sure that the dividend is covered and the lower debt allows us some flexibility. There obviously if prices are down for an extended period of time, we would have to look at our dividend, but I think.
Speaker Change: Prices going down to $60 for a short period of time.
Speaker Change: We don't anticipate that that would have an impact on our dividend in the short term.
Brian Cree: And the other thing that I might add is that because a significant part of our capital spending is in the acquisition arena We have a lot of flexibility in our spending so unlike maybe an operator that is committed to a certain rig cadence and completion cruise we can adjust very quickly to the pricing environment and And it's kind of get into more of a harvest mode if you will
Brian Cree: The other thing that I might add is that because of significant part of our capital spending is in the acquisition arena, we have a lot of flexibility in our spending.
Speaker Change: The other thing that I might add is that because a significant part of our capital spending is in the acquisition arena, we have a lot of flexibility in our spending so unlike maybe an operator that is committed to a certain rig cadence and completion crews we can.
Brian Cree: So unlike maybe an operator that is committed to a certain rigged cadence and completion crews, we can adjust very quickly to the pricing environment and kind of get into more of a harvest mode if you right.
Speaker Change: Just very quickly to the pricing environment and.
Speaker Change: And to kind of get into more of a harvest mode. If you will.
Speaker Change: Right.
Donovan Schafer: And somewhat related to that last point, Jimmy, I guess the question is, has there been a change in consent rate? I'm guessing maybe not yet. Are you still kind of north of 95% consenting for the refugees that come in, or has that, as there are any changes or adjustments there? Now, there really hasn't been much change on that. It's typically about to say about that 95% change, and it's more driven by geographic or operator statistics than necessarily price tag because we're out of the right. But yeah, the consent has been consent rate has been very consistent.
Speaker Change: And somewhat related to that last point.
Speaker Change: Jimmy I guess the question is.
Jimmy Henderson: Has there been a change in consent rate I'm guessing, maybe not yet and still kind of north of 95%.
Jimmy Henderson: Consenting for they have to use that come in or has that.
Jimmy Henderson: Changes or adjustments there.
Brian Cree: Now there really hasn't been much change on that. It's typically, like you said, right at that 95% range, and it's more driven by geographic or operator statistics than necessarily the price tag, because that would be underwrite. But yeah, the consent rate has been very consistent.
Jimmy Henderson: No there really hasnt been much change on that it's typically.
Speaker Change: Like you said right at that 95% range and its more driven by geographic or operator statistics.
Speaker Change: Necessarily the price deck that we underwrite, but yes their consent has been consent rate has been very consistent.
Donovan Schafer: Okay. Great. Thank you.
Speaker Change: Okay, great. Thank you I'll take the rest of my questions offline.
Donovan Schafer: I'll take the rest of my questions offline.
Operator: Thank you.
Thank you.
Jeffrey Robertson: Our next question comes from the line of Jeff Robertson with Water Tower Research. Please proceed with your question.
Speaker Change: Question comes from the line of Jeff Robertson with water Tower Research. Please proceed with your question.
Brian Cree: Thank you. Bob or Brian, based on your experience in the Williston Basin, do you have a feel for how the consolidation that's been taking place in the industry will affect the market for the near-term development opportunities that have been your hallmark of growth in 2025? And is this key to success in that process just using your luminous system to stay close to the operators who are having them. What you think is the most economic success in their development programs?
Jeff Robertson: Thank you.
Jeff Robertson: Barbara Brian based on your experience in the Williston Basin do you have a feel for how the consolidation that's been taking place in the industry.
Operator: Thank you. Bob or Brian, based on your experience in the Williston Basin, do you have a feel for how the consolidation that's been taking place in the industry?
Barbara Brian: We will affect the market for the near term development opportunities that have been.
Speaker Change: You are a hallmark of growth in 2025, and this is key to success in that process just using your lumina system to stay close to the operators who were having.
Speaker Change: What you think is the.
Speaker Change: The most economic success and their development programs.
Brian Cree: So Jeff, I'll, this Brian, I'll start and Bob can add to it. But, but yeah, clearly luminous, and all of our data plays a key role in that, as does just our history. Bob mentioned we've been doing this for 13 years. So we've developed a lot of relationships among those operators. And that consolidation does generate opportunities at certain times. Not every consolidation generates that new opportunity. But from our standpoint, again, I think we've discussed this in the past. We're a big fan of consolidation. We love to see operators get together because typically what happens when they put those two teams together is they're taking the best of both worlds, and those enhanced and better economics flow down to us as a non-operated working interest owner.
Brian Cree: So Jeff, this is Brian, I'll start and Bob can add to it. But yeah, clearly Luminus and all of our data plays a key role in that, as does just our history. Bob mentioned we've been doing this for 13 years, so we've developed a lot of relationships among those operators. And that consolidation does generate opportunities at certain times. Not every consolidation generates that new opportunity. But from our standpoint, again, I think we've discussed this in the past, we're a big fan of consolidation. We love to see operators get together, because typically what happens when they put those two teams together is they're taking the best of both worlds.
Bryan: So Jeff this is Bryan I'll start and Bob can add to it but yes, clearly luminous and all of our data plays a key role in that as does just our history. Bob mentioned, we've been doing this for 13 years. So we've developed a lot of relationships among those operators in that consolidation.
Speaker Change: Does generate.
Bryan: Opportunities.
Bob Guarantee: At certain times not not every consolidation.
Bob Guarantee: Generates that that new opportunity.
Bob Guarantee: But from our standpoint again I think we've discussed this in the past we are a big fan of consolidation, we love to see operators get together because typically what happens when when.
Bob Guarantee: When they put those two teams together is that they are taking the best of.
Bob Guarantee: Of both worlds and.
Bob Guarantee: Those enhanced and better economic slowdown to to us as a non operated working interest owner. So we're excited about that.
Brian Cree: So we're excited about that. Will, will some of these recent developments increase the opportunity for us to get near term? Yes, probably. And perhaps it even gives us a larger acquisition opportunity. We'll see if any of the non-op assets that are out there come to market. It's something that we'll always take a look at, as we've always said, we're in the market all the time for both near term development and larger acquisitions. As long as they can meet our hurdle rate.
Bob Guarantee: Well some of these recent developments.
Bob Guarantee: Developments.
Bob Guarantee: Increase the opportunity for us to get near term yes.
Bob Guarantee: <unk>.
Bob Guarantee: And perhaps it even gives us a larger acquisition opportunity we'll see if.
Bob Guarantee: Any of the non op assets that.
Bob Guarantee: That are out there come to market, it's something that we'll always take a look at as we've always as we've always said we're in the market all the time for both near term development and larger acquisitions.
Bob Guarantee: As long as they can meet or beat our hurdle rate.
Brian Cree: Thanks.
Speaker Change: Hi, Thanks, one question just on the.
Jeffrey Robertson: And one question just on the philosophy at the test: you all have focused on the Bakken because it's a long-term asset with the chance that technology technology will improve. Are you seeing any operators? to explore different ideas, whether it's engineering or development or drilling wise that you think offer maybe near and intermediate term upside to the top of inventory that you have.
Robert Gerrity: philosophy at Vitesse, you all have focused on the Bakken because it's a long-term asset with a chance, explore different ideas, whether it's engineering or development, or drilling wise that you think offer
Speaker Change: Our philosophy at the tests you all are focused on the Bakken because it's a long term asset with a chance.
Speaker Change: Technologic technology will improve are you seeing any any operators.
Speaker Change: Explore different ideas, whether it's engineering or development or drilling.
Speaker Change: Drilling wise that you think offer.
Speaker Change: I mean near and intermediate term upside to the type of inventory that you have.
Robert Gerrity: Jeff, this is Bob. You know, the trend toward free mile lateral is becoming a little bit more universal. And we were not initially enamored with that concept, but the recent results over the last six months have been really positive for the free mile lateral. I think that's what it encouraged a company like Devon to come in and be so aggressive in their acquisition. So, you know, technological increases are, you know, slow grinding and very consistent. So, each dollar spent in the market right now is much more productive than even a year ago. So, the pocket is leveraged to technology.
Bob Guarantee: Jeff This is Bob.
Operator: Jeff, this is Bob. The trend toward three-mile lateral is becoming a little bit more universal. We, you know, don't see that change in any time in the future.
Speaker Change: The trend towards three mile lateral.
Jeff: Is becoming a little bit more universal.
Speaker Change: And.
Speaker Change: We were not initially.
Speaker Change: Hammered with that concept.
Speaker Change: But the recent results.
Speaker Change: Over the last six months have been really positive for the three mile lateral.
Speaker Change: That's what it encouraged a company like Devon to come in and be so aggressive.
Speaker Change: In.
Speaker Change: Their acquisition.
Speaker Change: So.
Speaker Change: Technological increases are.
Speaker Change: Slow grinding and very consistent so.
Speaker Change: Each dollar spent in the Bakken.
Speaker Change: Right now is much more productive than even a year ago. So.
Speaker Change: The Bakken is leveraged to technology and.
Brian Cree: And we, you know, don't see that change in any time in the future. And Jeff, I'd add that we continue to be excited about the refracts that the refract results have continued to be very strong. We're on pace to see more refracts this year than we have in any other year. So, it's still not, you know, it's not a huge part of our capital spend, but we're still, you know, continuing to remain very optimistic that refracts will be a big part of the story over the next five years. Thank you.
Speaker Change: We.
Speaker Change: Don't see that changing anytime in the future, so and Jeff I would add that we continue to be excited about the re fracs the re frac.
Speaker Change:
Jeff: The results have continued to be very strong we are on pace to see more re fracs. This year than we have in any other year. So it's still not.
Speaker Change: It's not a huge part of our capital spend but.
Speaker Change: We're still.
Speaker Change: Continued to remain very optimistic that <unk>.
Speaker Change: <unk> will be a big part of the story over the next five years.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Noel Parks with two Hope brothers. Please proceed with your question.
Noel Parks: Our next question comes from the line of Noel Parks with two home brothers. Please proceed with your question.
Brian Cree: Hi, good morning. I've had a couple. I'm just wondering, as far as what you're seeing, either on the market or coming to the market, these days for acquisition or both opportunities. Is there is there any pattern to sort of the vintage of what you're seeing and wondering you're just seeing interest or assets from, you know, the very earliest days of the play or maybe from, you know, that period. It's like 10 years ago when operators first started really going to the max with track intensity and so forth with, you know, mixed results. Is there any pattern of what you're seeing coming to market these days?
Noel Parks: Hi, good morning.
Noel Parks: Okay.
Speaker Change: Had a couple.
Noel Parks: I'm just wondering if as far as what you're seeing either on the market or coming to the market. These days.
Noel Parks: For.
Noel Parks: Acquisition of bolt on opportunities.
Is there.
Speaker Change: Is there any pattern to sort of the the vintage of what Youre seeing I'm wondering are you seeing interests.
Brian Cree: or assets from, you know, the very earliest days of the game or maybe from, you know, that period. I think like 10 years ago when operators first started really...
Speaker Change: Our assets from the very earliest days of the play or maybe from that period.
Speaker Change: 10 years ago, when operators first Gary really.
Speaker Change: Go on to the Max with Frac intensity and so forth with.
Speaker Change: Mixed results I was wondering any any pattern of what you're seeing coming to market. These days.
Brian Cree: Well, this is Brian. You know, we don't spend a lot of time looking at PDP opportunities. So most of the most of the things that we analyze that they come to our near term basis are more development opportunities. So I'm not sure I'm really answering your question, but, you know, we did just, we just recently closed on a very small PDP acquisition that had some, you know, flatter production. Somebody was just looking to exit the basin, and it was relatively very small. But, so we do see those from time to time, but most of the things we spend our time analyzing are more development opportunities at this point in time.
Brian Cree: Well, this is Brian. You know... We don't spend a lot of time looking at PDP opportunities. So most of the things that we analyze that come to us on a near-term basis are more development opportunities. So I'm not sure I'm really answering your question, but we just recently closed on a very small PDP acquisition that had some flatter production. Somebody was just looking to exit the basin, and it was relatively small.
Brian Cree: Well this is Brian.
Brian Cree: We don't spend a lot of time looking at PDP opportunities. So most of the.
Brian Cree: Most of the things that we analyzed that come to us on a near term basis are more development opportunities.
Speaker Change: So im not sure Im really answering your question, but but we did.
Speaker Change: We just recently closed on a very small PDP acquisition that.
Speaker Change: <unk> had some flatter production somebody was just looking to exit the basin and it was relatively very small but.
Brian Cree: So we do see those from time to time, but most of the things we spend our time analyzing are more development opportunities at this point in time unless it's a larger transaction. And at this point in time, there are not a lot of larger transactions in the Bakken that are being marketed. Clearly,
Speaker Change: So we do see those from time to time, but most of the most of the things that we spend our time analyzing our more development opportunities at this point in time, unless it's a larger transaction at this point in time, there is not a lot of larger transactions in the Bakken that are being marketed yet clearly no. This is Bob.
Brian Cree: Unless it's a larger transaction. And at this point in time, there's not a lot of larger transactions in the back end that are being marketed.
Robert Gerrity: Yeah, clearly know this is Bob. The Bakken, as a base, is just underestimulated. It was the last to come to the Gen 2 Fract, so we really look forward to refracts being a dominant capital force in the future. Got it, and two degrees that there are assets out there that are ideal for refracts. Is there pretty statistical awareness out there among sellers of what that opportunity would look like? Because on paper it's just like, well, it's developed, you know, it's developed like in the example you gave, the person just looking to exit, there's a lot of transaction, you're not going that deep on it.
Bob Guarantee: The Bakken is.
Bob Guarantee: As a basis just under stimulated.
Bob Guarantee: It was.
Bob Guarantee: West.
Bob Guarantee: To the.
Speaker Change: The Gen. Two frac, so we really look forward to.
Operator: So we really look forward to Refrax being a dominant capital force.
Speaker Change: Re fracs being a dominant.
Speaker Change: Capital for us in the future.
Speaker Change: Got it and to the degree that there are there are.
Speaker Change: There that are idle.
Speaker Change: Deal for for re Fracs is there.
Speaker Change: Is there.
Operator: Pretty specific awareness out there among sellers of what that opportunity would look like. Because on paper, it's just like, well, it's developed. It's developed acreage. So are people sort of keenly aware of what that upside might look like? Or is it something that, like in the example you gave, the person is just looking to exit; they just want a transaction? They're not going that deep on it.
Speaker Change: Pretty specific awareness out there among sellers.
Speaker Change: What that opportunity looks like cookie dough on paper, it's just like well it's developed if developed acreage so.
Speaker Change: Are people sort of keenly aware of what that upside might look like or is it something that.
Speaker Change: And the example, you gave the person just looking to exit things wide transaction youre not going that deep on it.
Brian Cree: I mean, I guess I could tell you in the PDP acquisitions that we've done, we have never added any refract value to our analysis. So I don't know if that means that people are not as aware of it. I think everyone's aware that there's been quite a few refracts done in the Bakken. Maybe they don't put a lot of value on it, but from our standpoint, it's something that we do pay attention to. Our database does allow us to analyze all the refracts that have been done in various areas and to kind of have a good idea.
Speaker Change: I mean, I guess I could tell you in this in the PDP acquisitions that we've done we've never added any re frac value to our analysis.
Speaker Change: So I don't know if that means that people are not as aware of it I think people I think everyone's aware that there's been quite a few re fracs done in the Bakken, maybe they don't put a lot of value on it.
Speaker Change: But from our standpoint, it's something that.
Speaker Change: We do pay attention to our database does allow us to to analyze all the re fracs that had been done in various areas and to kind of have a good idea, but again, we don't see a lot of just PDP opportunities that present themselves, but when they do we will take into consideration that the re frac does have some upside but.
Brian Cree: But again, we don't see a lot of just PDP opportunities that present themselves, but when they do, we'll take into consideration that the refract does have some upside, but we never put any value on it.
Speaker Change: We never we never put any value on it.
Robert Gerrity: This is Bob. Interestingly enough, a lot of the operators will do refract operations as workovers. And so often, we won't even get an ASE for refract. And so it's very difficult to schedule refracts. And they're like Easter eggs. They're wonderful when you find them. So use that to be very diligent. Our data really infers where refract activity is likely to take place, but it's very difficult to schedule out.
Speaker Change: This is Bob interestingly enough a lot of the operators will do re frac operations.
Speaker Change: As workovers.
Speaker Change: And so often we won't even get an AFB for re frac.
Operator: And so it's very difficult to schedule a refresh. Okay, thanks.
Speaker Change: And so it's very difficult to schedule.
Re fracs.
Speaker Change: <unk>.
Speaker Change: They're like Easter eggs are wonderful when you find them. So you just have to be very diligent our data really infers ware.
Speaker Change: <unk> activity is likely to take place, but it's very difficult to schedule out.
Noel Parks: Okay, thanks.
Speaker Change: Okay. Thanks interesting.
Noel Parks: Interesting. Thank you.
Speaker Change: Thank you there are no further questions at this time I would like to turn the floor back over to Bob for closing comments.
Operator: There are no further questions at this time.
Robert Gerrity: I'd like to turn the floor back over to Bob for closing comments. Well, thanks everybody for joining in.
Bob Guarantee: Well, thanks, everybody for joining in please reach out to bed if you have any.
Ben Messier: Please reach out to Ben. If you have any other questions and management, we'll always answer whatever we can for you. Thank you very much, and see you next quarter.
Bob Guarantee: Other questions and management will always answer whatever we can for you. Thank you very much and see you next quarter.
Operator: This concludes today's teleconference.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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Operator: You may disconnect your lines at this time.
Operator: Thank you for your participation.
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