Q2 2024 Granite Ridge Resources Inc Earnings Call
Speaker Change: Good morning and welcome everyone to Granite Ridge Resources' 2nd Quarter 2024 Earnings Conference Call. Currently, all participants are in a listen-only mode.
Operator: Earnings Consultants Call. Currently, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star 1. I will now turn the call over to Wes Harris, Investor Relations Representative for Granite Ridge.
Speaker Change: A question and answer session will follow the formal presentation.
Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press the star 1. I will now turn the call over to Wes Harris, Investor Relations Representative for Granite Ridge. You may begin.
Wes Harris: Thank you, operator, and good morning, everyone. We appreciate your interest in Granite Ridge resources. We will begin our call with comments from Luke Brandenburg, our President and Chief Executive Officer, who will provide an overview of key matters for the second quarter and an outlook for 2024. We will then turn the call over to Tyler Farquharson, our Chief Financial Officer, who will review our financial results. Luke will then return to provide some closing comments before we open the call up for questions.
Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to our channel.
Wes Harris: Thank you, operator, and good morning, everyone. We appreciate your interest in Granite Ridge resources.
Luke Brandenburg: We will begin our call with comments from Luke Brandenburg, our President and Chief Executive Officer, who will provide an overview of key matters for the second quarter and an outlook for 2024.
Tyler Farquharson: We will then turn the call over to Tyler Farquharson, our Chief Financial Officer, who will review our financial results.
Speaker Change: Luke will then return to provide some closing comments before we open the call up for questions.
Wes Harris: Today's conference call contains certain projections and other forward-looking statements within the meaning of federal securities law. These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements. We would ask that you also review the cautionary statement in our earnings release. Granite Ridge disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements.
Speaker Change: Today's conference call contains certain projections and other forward-looking statements within the meaning of federal security laws.
Speaker Change: These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements. We would ask that you also review the cautionary statement in our earnings release.
Granite Ridge: Granite Ridge disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements.
Wes Harris: These and other risks are described in yesterday's press release and in our subsequent filings with the SEC. This conference call also includes references to certain non-GAAP financial measures. Information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures is available in our earnings release that is posted on our website. Finally, as a reminder, this conference call is being recorded. A replay and transcript will be made available on our website following today's call. So with that, I'll turn the call over to Luke. Luke? Thank you.
Granite Ridge: These and other risks are described in yesterday's press release in our followings with the SEC.
Granite Ridge: This conference call also includes references to certain non-GAAP financial measures. Information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures is available in our earnings release that is posted on our website.
Granite Ridge: Finally, as a reminder, this conference call is being recorded. A replay and transcript will be made available on our website following today's call. So with that, I'll turn the call over to Luke. Luke?
Luke Brandenburg: Thank you, Wes. Good morning.
Luke Brandenburg: And thank you to everyone for joining us. We've been busy over the last few months. And I would like to begin by sharing my appreciation for our people here at Granite Ridge. It has been a bit of a deal frenzy as of late, which drives an increased workload across all functions in the organization. It has truly been a team effort as folks step in for one another to get the job done and provide space to spend time with families during summer vacation.
Luke Brandenburg: Thank you, Wes.
Luke Brandenburg: Good morning and thank you to everyone for joining. We've been busy over the last few months and I would like to begin by sharing my appreciation for our people here at Granite Ridge.
Luke Brandenburg: It has been a bit of a deal frenzy as of late, which drives an increased workload across all functions in the organization. It has truly been a team effort as folks step in for one another to get the job done and provide space to spend time with families on summer vacation. I'm grateful to work with each and every one of you.
Luke Brandenburg: I'm grateful to work with each and every one of you. Let's start by discussing the deal side. From April to July, we closed acquisitions representing 95 gross or 25.1 net locations for a total entry, inclusive of expected future drilling carries of $48 million. In aggregate, we expect these locations to account for $215 million of development capital, the vast majority of which we expect to occur over the next two years. These acquisitions were about 90% premium weighted, and of that, about 75% fall into our controlled capital program, including the addition of a new Midland Basin-focused strategic partner.
Speaker Change: Let's start by discussing the deal side. From April to July , we closed acquisitions representing 95 gross or 25.1 net locations for a total entry, inclusive of expected future drilling carries, of $48 million.
Speaker Change: In aggregate, we expect these locations to account for $215 million of development capital, the vast majority of which we expect to occur over the next two years.
Speaker Change: These acquisitions were about 90% premium-weighted, and of that, about 75% fall into our controlled capital program, including the addition of a new Midland Basin-focused strategic partner.
Luke Brandenburg: Speaking of our Controlled Capital Program, we now have 5.5 net wells producing in 40.5 net locations, including wells in process. For 2024, we expect Controlled Capital Development CapEx to represent over 40% of our total development CapEx for the year. It is exciting to see this strategy materialize as we make concentrated investments in high-conviction operated projects with compelling expected returns. One of the qualities we value in a co-op is the ability to adapt to whatever the market throws at you. A mentor of mine recently suggested that I look into the legendary investor Henry Singleton. Many of you may know the name well, but I was not familiar.
Speaker Change: Speaking of our controlled capital program, we now have 5.5 net wells producing, and 40.5 net locations, including wells in process. Or 2024, we expect controlled capital development capex will represent over 40% of our total development capex for the year.
Speaker Change: It is exciting to see this strategy materialize as we make concentrated investments in high-conviction operated projects with compelling expected returns.
Speaker Change: One of the qualities we value in non-op is the ability to adapt to whatever the market throws at you.
Speaker Change: A mentor of mine recently suggested that I look into legendary investor Henry Singleton.
Luke Brandenburg: I'm on my way down the rabbit hole now, but one quote stood out to me as we were comparing our current 2024 expectations to what we guided to back in March. Mr. Singleton shared, quote: I know a lot of people have very strong and definite plans that they've worked out on all kinds of but they were subject to a tremendous number of outside influences, and the vast majority of them cannot be predicted. So my idea is to stay flexible, end quote. What outside influences have changed our industry over the past five months? The easiest to identify are hydrocarbons.
Speaker Change: Many of you may know the name well, but I was not familiar. I'm on my way down the rabbit hole now, but one quote stood out to me as we were comparing our current 2024 expectations to what we guided to back in March.
Henry Singleton: Mr. Singleton shared, quote, I know a lot of people have very strong and definite plans that they've worked out on all kinds of things.
Mr. Singleton: But we're subject to a tremendous number of outside influences and the vast majority of them cannot be predicted So my idea is to stay flexible end quote
Speaker Change: What outside influences have changed our industry over the past five months? The easiest to identify is hydrocarbon prices.
Luke Brandenburg: Comparing the full year 2024 consensus pricing when we provided initial guidance in March versus full year 2024 consensus pricing now, gas is down about 22%, and oil is down about 2%. So what does that mean for Granite Ridge? We can shift our capital allocation to the most economically advantaged projects to drive long-term value for shareholders. But as a non-op, how do we do that?
Speaker Change: Comparing the full year 2024 consensus pricing when we provided initial guidance in March versus full year 2024 consensus pricing now, gas is down about 22% and oil is down about 2%.
Speaker Change: So what does that mean for Granite Ridge? We can shift our capital allocation to the most economically advantaged projects to drive long-term value for shareholders.
Luke Brandenburg: In our traditional non-op business, we make it a point to partner with like-minded operators that maintain conservative leverage profiles, which enables them to maintain a focus on shareholder value. In challenging gas environments such as this, we see our operating partners taking steps, including deferring or ducking gas wells in the Haynesville and Dry Gas Eagleford basins and restricting production to maximize long-term value. While we continue to see deal flow in these areas, we have largely not engaged on projects with near-term gas development as they do not currently compete for capital.
Speaker Change: As a non-op, how do we do that?
Speaker Change: In our traditional non-op business, we make it a point to partner with like-minded operators that maintain conservative leverage profiles, which enables them to maintain a focus on shareholder value.
Speaker Change: In challenging gas environments such as this, we see our operating partners taking steps including deferring or ducking gas wells in the Haynesville and Dry Gas Eagleford and restricting production to maximize long-term value.
Speaker Change: While we continue to see deal flow in these areas, we have largely not engaged on projects with near-term gas development as they do not currently compete for capital.
Luke Brandenburg: In addition, in our controlled capital business, we've allocated additional capital to oil-weighted projects as we continue to capture opportunities that meet or exceed our target return. We are not changing production guidance at this time, but I will say that while there are still five months left in the year, I can see a scenario where oil production beats current guidance and gas comes in low, both of which are prudent as we adapt to the current hydrocarbon price environment. With gas-to-oil equivalent at six to one, despite trading at closer to 30 to one, this could push us towards the low end of the barrel equivalent production guide.
Speaker Change: Further, in our controlled capital business, we've allocated additional capital to oil-weighted projects as we continue to capture opportunities that meet or exceed our target returns.
Speaker Change: We are not changing production guidance at this time, but I will say that while there are still five months left in the year, I can see a scenario where oil production beats current guidance and gas comes in low, both of which are prudent as we adapt to the current hydrocarbon price environment.
Speaker Change: With gas to oil equivalent at 6 to 1, despite trading at closer to 30 to 1, this could push us towards the low end of the barrel equivalent production guide.
Luke Brandenburg: We anticipate that our oil production will continue to rise over the next two quarters, particularly in the third quarter, where we may see a 10% quarter-over-quarter increase. On the gas side, we expect a 5% to 10% decrease over each of the next two quarters.
Speaker Change: We anticipate that our oil production will continue to rise over the next two quarters, particularly in the third quarter, where we may see a 10% quarter-over-quarter increase.
Speaker Change: On the gas side, we expect a 5-10% decrease over each of the next two quarters.
Luke Brandenburg: Looking at wells turned to sales, we are not changing our guidance range at this time, but we do expect to have a good number of wells in process towards the end of the year that may come online in late 2024 or early 2025 that will not contribute much to 2024 production. More near term, we expect about four net wells to turn to sales in the third quarter. On the CAPEX side, we are taking inventory acquisition guidance up from $35 million to $60 million based on identified opportunities that either closed or are expected to close post-June 30th.
Speaker Change: Looking at wells turned to sales, we are not changing our guidance range at this time, but we do expect to have a good number of wells in process towards the end of the year that may come online in late 2024 or early 2025 that will not contribute much to 2024 production.
Speaker Change: More near-term, we expect about four net wells to turn to sales in the third quarter.
Speaker Change: On the CAPEX side, we are taking inventory acquisitions guidance up from $35 million to $60 million based on identified opportunities that either closed or are expected to close post-June 30th.
Luke Brandenburg: Additionally, we are raising development capex guidance by $60 million at the midpoint for a total capex range of $355 to $365 million. About half of the $60 million increase is driven by a shuffling in our controlled capital drilling schedule, and the other half is development tied to the acquisition CapEx increase. We do not anticipate a 2024 production impact from the $60 million increase in development capex, but we are excited about how it will position us going into 2025.
Speaker Change: Additionally, we are raising development capex guidance by 60 million dollars at the midpoint for a total capex range of 355 to 365 million dollars.
Speaker Change: About half of the $60 million increase is driven by a shuffling in our controlled capital drilling schedule. And the other half is development tied to the acquisition CapEx increase.
Speaker Change: We do not anticipate a 2024 production impact from the $60 million increase in development capex, but we are excited about how it will position us going into 2025.
Luke Brandenburg: Looking at the remaining CAPEX allocation over the next couple of quarters, we expect the vast majority of identified acquisitions to close in the third quarter and that development CAPEX will be split roughly 40-60 across the third and fourth quarters. With that, I will turn it over to Tyler to discuss our results for the quarter. Thanks, Luke, and good morning, everyone.
Speaker Change: Looking at remaining CapEx allocation over the next couple of quarters, we expect the vast majority of identified acquisitions to close in the third quarter, and that development CapEx will be split roughly 40-60 across the third and fourth quarters. With that, I will turn it over to Tyler to discuss our results for the quarter.
Tyler Farquharson: Average daily total production for the quarter was 23.1 thousand BOE per day, up seven percent compared to the prior year quarter. Oil production as a percentage of total production increased to 47% for the second quarter. Our oil mix should continue to drift higher throughout the remainder of the year as some of our natural gas focus operators continue to defer development projects. As a result, we are increasing our 2024 oil production mix guidance to 48% for the year and looking to exit 2024 around 50%.
Tyler Farquharson: Thanks Luke and good morning everyone. Average daily total production for the quarter was 23.1 thousand VOE per day up 7% compared to the prior year quarter.
Tyler Farquharson: Oil production as a percentage of total production increased to 47% for the second quarter. Our oil mix should continue to drift higher throughout the remainder of the year as some of our natural gas-focused operators continue to defer development projects.
Tyler Farquharson: As a result, we are increasing our 2024 oil production mix guidance to 48% for the year and look to exit 2024 around 50%.
Tyler Farquharson: While we expect our total production to remain relatively flat, we anticipate our oil production to increase by 10% headed into the third quarter. Our annual production guidance range of 23,250 to 25,250 BOE per day remains unchanged.
Tyler Farquharson: While we expect our total production to remain relatively flat...
Tyler Farquharson: We anticipate our oil production to increase by 10% headed into the third quarter. Our annual production guidance range of 23,250 to 25,250 BOE per day remains unchanged. However, we now expect more oil production for the year than originally guided.
Tyler Farquharson: However, we now expect more oil production for the year than originally guided. Our adjusted EBITDA was $68.3 million, and adjusted EPS was $0.13 per diluted share for the second quarter. Adjusted EBITDA was flat from the prior year due to lower natural gas prices and the impact of divested assets offset by our increase in production from the prior year period. Per unit lease operating costs were $6.50 per BOE, and production and ad valorem taxes were 7.6% of sales for this year's quarter, both of which were within our guidance range for the full year of 2024. Q&A expense, excluding non-cash stock-based compensation, was $2.87 per VOE for the quarter.
Tyler Farquharson: Our adjusted EBITDA was 68.3 million and adjusted EPS was 13 cents per diluted share for the second quarter.
Tyler Farquharson: Adjusted EBITDA was flat from the prior year due to lower natural gas prices and the impact of divested assets offset by our increase in production from the prior year period.
Tyler Farquharson: Per-unit lease operating costs were $6.50 per BOE, and production and ad valorem taxes were 7.6% of sales for this year's quarter, both of which were within our guidance range for the full year of 2024.
Tyler Farquharson: Q&A expense, excluding non-cash stock-based compensation, was $2.87 per BOE for the quarter. Our annual guidance range of $23 million to $26 million is unchanged.
Tyler Farquharson: Our annual guidance range of $23 million to $26 million is unchanged. During the quarter, our operating partners completed and placed on production a total of 62 gross, or 9.1 net, wells, with nearly all the activity occurring in the Permian Basin. At quarter end, we had an additional 9.6 net wells in process and expect about four of those to be placed on production during the third quarter. In total, we continue to expect 22 to 24 net wells to be placed online during 2024, with nearly 80% of those wells being in the Permian Basin.
Tyler Farquharson: During the second quarter, we closed multiple transactions that added 16.4 net future drilling locations, primarily in the Permian Basin. The total acquisition cost, including $6 million of expected future drilling carries, was $22 million. In addition, subsequent to quarter end, we closed, or are in the process of closing, additional transactions acquiring 8.7 net future drilling locations. Total acquisition costs, including $3 million of expected future drilling carries, are estimated to be $25 million. As a result, we are increasing our 2024 acquisition capital guidance to $60 million to reflect our recent success on this front. Development capital spending during the second quarter was in line at $67 million.
Jerry: Of expected future drilling Jerry's is estimated to be $25 million.
Tyler Farquharson: As a result, we are increasing our 2020 for acquisition capital guidance to $60 million to reflect our recent success on this front.
Tyler Farquharson: Development capital spending during the second quarter was in line at $67 million.
Luke Brandenburg: We are also raising our 2024 development CapEx guide by $60 million at the midpoint. As Luke outlined, about half of this increase results from new development on our recently acquired properties, with the balance being driven by a swap to a higher working interest unit in our controlled capital drilling schedule. While we do not anticipate a 2024 production impact from this increase, we're very excited about how it positions us for growth headed into 2025.
Tyler Farquharson: We are also raising our 2020 for development Capex guide by $60 million at the midpoint.
Luke Brandenburg: As Luke outlined about half of this increase results from new development on our recently acquired properties with the balance being driven by swap to a higher working interest units and our controlled capital drilling schedule.
Luke Brandenburg: While we do not anticipate a 2024 production impact from this increase were very excited about how it positions us for growth headed into 2025.
Luke Brandenburg: Finally, we also continued our ongoing quarterly cash dividend program. During the second quarter, we paid an 11 cents per share quarterly cash dividend. Subsequent to quarter end, our board declared an $0.11 per share quarterly cash dividend payable on September 13, 2024 to shareholders of record as of August 30, 2024. On an annualized basis, this represents a 7.3% dividend yield measured against Wednesday's closing price. I will now hand it back to Luke for his closing comments.
Luke Brandenburg: Finally, we also continued our ongoing quarterly cash dividend program. During the second quarter, we paid an <unk> 11 per share quarterly cash dividend subsequent to quarter end. Our board declared an <unk> 11 per share quarterly cash dividend payable on September 13th 2024 to shareholders of record as of August.
Luke Brandenburg: 32024.
Luke Brandenburg: On an annualized basis. This represents a seven 3% dividend yield measured against Wednesday's closing price.
Luke Brandenburg: I'll now hand, it back to Luc for his closing comments Luke.
Luke Brandenburg: I have concluded each quarter by stating that I believe Granite Ridge is undervalued. By making that statement, I am inherently saying that I believe the street is missing something. There are three primary ways to win with Granite Ridge. First, an over 7% dividend underpinned by conservative leverage and hedged cash flow. Second, the value that is unlocked from increased trading volume as our shareholder-based broadens, and third is the value of our business, which is what I believe the street is missing, both strategically as we continue to allocate more capital to our higher return-controlled capital model and from a capitalization standpoint.
Luc: I have concluded each quarter by stating that I believe granite ridge is undervalued.
Luc: I'm, making that statement I am inherently saying that I believe the street is missing something.
Luc: There are three primary ways to win with granite Ridge first and over 7% dividend underpinned by conservative leverage and hedged cash flow.
Luc: Second the value that is unlocked from increased trading volume is our shareholder base broadens.
Luc: Third is the value of our business, which is what I believe the street is missing.
Luc: Strategically as we continue to allocate more capital to our higher return controlled capital model.
Luc: And from a capitalization standpoint.
Luke Brandenburg: I've shared that we believe Granite Ridge can grow production mid to high single digits annually out of cash flow. I've also shared that we started with an unlevered business and, over the past 18 months, have been drawing down a conservative amount of debt to invest in growth. If you look at analyst models, most suggest that we will continue to grow production at mid to high single-digit annual rates. However, I do not believe the street is giving us appropriate credit, or arguably any credit, for the impact this debt will have on our production growth in 2025 and beyond.
Luc: I have shared that we believe granite ridge can grow production mid to high single digits annually out of cash flow.
Speaker Change: <unk> also shared that we started with an unlevered business and over the past 18 months have been drawing down a conservative amount of debt to invest in growth.
Speaker Change: If you look at analyst models. Most suggests that we will continue to grow production at mid to high single digits annually.
Speaker Change: Do not believe the street is giving us appropriate credit or arguably any credit for the impact that will have on our production growth in 2025 and beyond.
Luke Brandenburg: While it is too early to share 2025 guidance, we are looking at double-digit production growth year over year. Most of this debt has effectively funded our controlled capital program, which has a longer lead time as we spent a year building out inventory and did not bring on our first pad until this June. Recognizing that we can only go from no debt to conservative debt once, what we have built at Granite Ridge is a powerful compounding machine that will continue to recycle the cash flows generated from this new production to grow the business in a prudent, disciplined manner.
Speaker Change: While it is too early to share 2025 guidance, we are looking at double digit production growth year over year.
Speaker Change: Most of this debt is effectively funded our controlled capital program, which has a longer lead time as we spent a year of building out inventory and did not bring on our first pad until this June.
Speaker Change: Recognizing that we can only go from no debt too conservative that works, what we have built at granite ridge. The powerful compounding machine that will continue to recycle the cash flows generated in this new production to grow the business in a prudent disciplined manner.
Luke Brandenburg: Thank you to everyone for sharing your time with Granite Ridge. We especially thank the investors that have been kind enough to have a call or host us in their offices and our partners on the banking side that have set up roadshows. We are still a nascent public company with a differentiated story and believe it is incumbent on us to earn the right to be heard. So, as I tell Tyler, have an investor deck, we'll travel.
Speaker Change: Thank you to everyone for sharing your time with granite ridge, we especially thank the investors that have been kind to have a call where hostess in their office and our partners on the banking side that have set up road shows we are still in nascent public company with a differentiated story and believe it is incumbent on us to earn the right to be heard.
Speaker Change: So as I tell Tyler have investor deck will travel we have quite a conference schedule over the next several months as outlined in our earnings release.
Luke Brandenburg: We have quite a conference schedule over the next several months, as outlined in our earnings release. We would appreciate the opportunity to meet at a conference, to visit your office, or to hop on a call to share the latest on the Granite Ridge story. Best wishes for the new school year, and look forward to talking again in the fall. Operator?
Speaker Change: I appreciate the opportunity to meet at a conference to visit your office or to hop on the call is to share the latest on the granite Ridge story.
Speaker Change: Best wishes for the New school year, and look forward to talking again in the fall with that let's turn it over to questions operator.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the Q&A. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Your first question comes from the line of Phillip Johnson with Capital One. Your line is open.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question simply press Star one again if.
Speaker Change: If you were called upon to ask your question and our listening via Speaker phone device. Please pickup your handset to ensure that your phone is knock on mute when asking a question again, Chris <unk> to join the queue.
Your first question comes from the line of Phillips Johnston with <unk>.
Speaker Change: Capital One your line is open.
Phillip Johnson: Hey, thanks for the time guys. Appreciate the color on the quarterly trajectory of oil production here in the back half of the year. It sounds like you're expecting, I think Luke you said a 10% sequential increase in oil here in Q3, and that's despite only about four net tills in the quarter. And if there's the potential to exceed your oil guide for the year, you know, that would imply, I guess, a decent amount of growth from Q3 and Q4. Can you maybe just talk about some of the drivers in terms of growth in your various regions? I assume a lot of that's coming out of the Permian, but I'm just looking for some color.
Phillips Johnston: Hey, Thanks for the time guys I appreciate the color on the quarterly trajectory of oil production here in the back half of the year.
Luke Brandenburg: Sounds like Youre expecting I think Luke you said, 10% sequential increase in oil here in Q3, and that's despite only about four net sales in the quarter.
Speaker Change: And if theres potential to exceed your oil guide for the year.
Speaker Change: Would imply I guess, a decent amount of growth from Q3 into Q4 can you maybe just talk about some of the drivers in terms of the growth.
Speaker Change: From your various regions I assume a lot of that is coming out of the Permian, but just looking for some color on that.
Luke Brandenburg: Yeah, you got it, Phillip. Thanks for the question.
You've got: You've got a bill thanks for the question. So the first thing I would point to we brought on our first control capital pad in early June.
Luke Brandenburg: So the first thing I'd point to is that we brought on our first controlled capital pad in early June. That was five and a half net wells all in one pad, so clean up time a little bit. And so we anticipate that'll be a primary contributor to the oil increase from second quarter to third quarter. But really, as Tyler mentioned, the vast majority of what we're seeing is coming out of Permian. So while you are getting a gas component, there's certainly oil weighted in there.
Five five net wells all on one pad early June cleanup time, a little bit and so we anticipate that will be a primary contributor to the oil and increase from second quarter third quarter.
Tyler Farquharson: Really as Tyler mentioned.
Tyler Farquharson: The vast majority of what we're seeing is coming out of the Permian. So while you are getting gas component.
Tyler Farquharson: Certainly oil weighted.
Luke Brandenburg: We expect to get that pretty decent increase in oil from the second to third quarter and anticipate it'll still continue to increase throughout the rest of the year, but at a less aggressive clip because we're really planning for the end of the year with a lot of wells in process and hope to see the benefits of that early next year.
Tyler Farquharson: We expect that getting a pretty decent increase in oil from second and third quarter.
Tyler Farquharson: But it will still continue to increase throughout the rest of the year, but at a less aggressive clip because we're really planning on at the end of the year with a lot of wells in process and hope to see the benefits of that early next year.
Phillip Johnson: Yeah, I guess just on that note, you know, I think you guys did a really good job of explaining the $60 million increase in the development budget and how that's mostly wells that won't be coming online until either very late this year or early next year. And I think Tyler mentioned that sort of set you up in 2025 really well. Obviously, it's too early to sort of get into a discussion about next year, but I guess would you expect that activity to sort of, you know, set you up for directional growth in, you know, like in Q1 of next year versus kind of your, you know, fairly strong fourth quarter exit right here?
Speaker Change: Yeah, and I guess just on that note I think you guys. The $60 increase in the development budget. I think you guys did a really good job of explaining that and how thats thats, mostly wells that will be coming online until either very late this year early next year.
Tyler Farquharson: I think Tyler mentioned.
Tyler Farquharson: That sort of sets you up.
Speaker Change: 2025, really well, obviously, it's too early to sort of get into a discussion about next year, but I guess would you expect that activity to sort of set you up for directional growth.
Speaker Change: In Q1 of next year versus kind of your.
Speaker Change: Fairly strong fourth quarter exit rate here.
Luke Brandenburg: Absolutely. Yeah, we think that that'll really set us up for growth in the first quarter. We're anticipating double-digit growth next year, which is quite a bit higher than we're looking at for this year, if you're looking at 23 to 24. So absolutely, we plan to go into 25 with a bang. We're really excited about what that could represent.
Speaker Change: Absolutely, yes, we think that that will really set us up for growth in the first quarter.
Speaker Change: We're anticipating double digit growth next year, which is quite a bit higher than we're looking at for this year. If youre looking at 'twenty three 'twenty four so absolutely we plan to.
Speaker Change: Go into 25 with the bank.
Speaker Change: Cited about what that could represent a big piece of that to control capital allocation and I mentioned, we're roughly about 40% of our development dollars. This shall be controlled capital, but next year I think that will be about 50%.
Phillip Johnson: You know, a big piece of that, too, is the controlled capital allocation. And I mentioned that roughly 40 percent of our development dollars this year will be controlled capital. But next year, I think that'll be about 50 percent. And, you know, a decent amount is wells in progress right now, so those are going to be a bit chunkier. A big piece of the driver, I think, that you'll see early next year is not only more wells but chunkier wells.
Speaker Change: And a decent amount is.
Speaker Change: Wells in progress right now and so those are going to be a big chunk here. So that's good.
Speaker Change: Big piece of the driver I think that Youll see early next year is not only.
Speaker Change: More wells, but chunkier wells.
Michael Scialla: Sounds good. Thanks, guys. I appreciate it. Thank you, Phillips.
Speaker Change: Sounds good thanks, guys appreciate it thank.
Bill: Thank you Bill.
Michael Scialla: Our next question comes from the line of Michael Scialla with Stevens. Your line is open.
Mike <unk>: Our next question comes from the line of Mike <unk> with Stifel. Your line is open.
Speaker Change: Yes.
Speaker Change: Good morning, everybody.
Luke Brandenburg: Luke, just to follow up on that last point, you know, with the double-digit growth next year. Given the trajectory of the wells in progress, would you anticipate most of that growth coming in the first half of the year? Would it be, I guess... Pretty significant double-digit growth in the first half before moderating in the second half. Is that the way you're looking at it right now?
Speaker Change: Look just to follow up on that last point.
Speaker Change: The double digit growth next year.
Speaker Change: Given the trajectory on the.
Speaker Change: The wells in progress would you anticipate most of that growth comes in the first half of the year would it be.
Speaker Change: I guess.
Speaker Change: Yes.
The significant double digit growth first half before.
Speaker Change: Moderating in the second half is that the way youre looking at it right now.
Michael Scialla: You know, that's a great question. I think there's a bit of a wait and see involved there. I think that you will have the largest quarter over quarter growth may be that fourth quarter to first quarter, just due to the number of wells in progress we're going to have at the end of the year. But I anticipate that it won't just be a bump and then a decline that we'll just continue to bring in wells throughout the course of the year. But yes, I think you'll see a real benefit to the whips that we're going to end the year with in the first quarter.
Speaker Change: That's a great question I think there's a bit of a wait and see there I think that you will have.
Speaker Change: Largest quarter over quarter growth may be that fourth quarter to first quarter.
Speaker Change: Due to the number of wells in progress, we're going to have at the end of the year.
Speaker Change: But I anticipate that it won't just be a bump and then decline that will just continue to bring on wells throughout the course of the year, but yes, I think youll see a real benefit to the whips or in the year with in the first quarter.
Luke Brandenburg: Okay, great. And the 8.7 locations that you acquired after the second quarter, were those in the controlled capital partnerships? And if so, how much of that was in the new Midland partnership versus your, you know, your Admiral partnership? Yeah.
Speaker Change: Okay great.
Speaker Change: The $8 seven locations that you acquired after the second quarter were those in the controlled capital partnerships and if.
Speaker Change: If so how much of that was in the new Midland partnership versus your.
Speaker Change: Your Admiral partnership.
Luke Brandenburg: Yeah, good question. A good chunk of that was with our new Midland Basin partner. So probably, gosh, over half was an opportunity that they were able to capture and we were able to partner with them on. So I think if you're looking at capital allocation, most of it is in the control capital bucket. And again, the big chunk is on that Midland Basin side, which we really fired up.
Speaker Change: Yes. Good question a good chunk of that was with our new Midland Basin partners, probably gosh over half.
Speaker Change: That was an opportunity that they were able to capture and we were able to partner with them on so.
Speaker Change: I think if youre looking at capital allocation most of it is in the control capital bucket.
Speaker Change: And again.
Speaker Change: Big chunk is on the Midland Basin side, which we're really fired up about.
Michael Scialla: Can you give a little more color on what you're doing with the Midland-Basin partnership, maybe where you're drawing, what you're planning to do there? It looked like that particular 8.7 locations, you paid a little bit more for those, some explanation there on why that was a bit more expensive on a per location basis versus what you've done prior. Yeah, but what they're
Speaker Change: And can you give a little more color on what youre doing with the Midland Basin.
Speaker Change: Partnership with maybe where youre drilling what youre planning to do there it looked like that particular.
Speaker Change: $8 seven locations you paid a little bit more for those.
Speaker Change: <unk>.
Speaker Change: Driver there on why that was a bit more expensive on a per location basis versus what you've done prior.
Luke Brandenburg: Yeah, they're focused on the northern Midland Basin, and this is a team that has been known for a long time that has a long track record of success up there. I'd say what they initially were able to pick up, it was all inventory, didn't have any production with it, but it's an area that they know very well and that they have high conviction of. There's a component of this being really their first asset in their current vehicle, and so there was a bit of, hey, let's take this opportunity.
Speaker Change: Yes.
Focus on the northern Midland Basin, and this is the team that we've known for a long time that has a long track record of success up there.
Speaker Change: Let's say what they initially were able to pick out there. It was all inventory didn't have any production with it but it's an area that they know very well.
Speaker Change: My conviction.
Speaker Change: There is a component of this is really their first asset in their current vehicle and so there was a bit of hey, let's get this opportunity, we're going to pay a little bit more for that to acquire a foothold and theres a lot of let's say.
Luke Brandenburg: We're going to pay a little bit more for that to acquire a foothold, and there's a lot of low-hanging fruit around that. So, I anticipate that you wouldn't see this above-average dollar per location continue, but they'll continue to work that down as they bolt on to their initial entry. Appreciate the color. Sir, thanks for the question.
Low hanging fruit around that so I would anticipate that you wouldn't see that above average dollar per location continue.
Speaker Change: They'll continue to work that down, let's say bolt onto their initial entry.
Speaker Change: I appreciate the color. Thank you.
Speaker Change: Sure Thanks for the questions.
John White: The next question comes from the line of John White with Roth Capital.
Speaker Change: Next question comes from the line of John White with Roth Capital. Your line is open.
John White: Good morning, and congratulations on a solid quarter.
John White: Good morning, and congratulations on a solid quarter.
Luke Brandenburg: Hey, good morning. Thank you, John.
John White: Hey, good morning, Thank you John.
John White: Yeah, you mentioned most of the capital this year and next year is going into your control capital business model as far as new drilling opportunities go forward. How is it decided to source those through your traditional non-op or through your controlled capital, or is that based on an opportunistic basis?
Speaker Change: Yes, you had mentioned most of the capital this year and next year is going into your controlled.
Speaker Change: Capital business model.
Speaker Change: As far as new drilling opportunities going forward.
Speaker Change: How is it decided the source that goes through your traditional non op or through year control capital.
Speaker Change: Or is that based on an opportunistic basis.
Luke Brandenburg: Yeah, that's a great question. Ultimately, you know, we view capital allocation as our primary job. That's really what we do as a business. And so our position has always been that every opportunity has to compete for capital. And the neat part about this, you know, the control capital program and these partnerships that we've developed, we're dramatically increasing the opportunity set available to us. And I think as a capital allocator, it's neat to be in a spot where you have a very wide breadth of opportunities.
Speaker Change: Yes, that's a great question ultimately, we view capital allocation as our primary job that's really what we do as a business and so our position has always been that every opportunity to compete for capital on a neat part about this.
Speaker Change: Control capital program in these partnerships that we've developed we are dramatically increasing the opportunity set available to us and I think as a capital allocator.
Speaker Change: Need to be in a spot where you have a very wide.
Luke Brandenburg: But you need to be, you know, in a position to take concentrated investment risk where you have high conviction. And so that's really the spot that we're in. So right now, we're talking about, gosh, 50% or more of next year's development may be in that controlled capital bucket. And that's based on inventory that we have in hand now. That can change. If we continue to find more compelling opportunities on the traditional non-op side, maybe some more capital allocation there. But really, we're excited about what we're seeing. But I don't think that'll be the case. I think that these guys will continue to pick up attractive opportunities, and we'll continue to allocate capital to them.
Breadth of opportunities.
Speaker Change: But you need to be.
Speaker Change: In a position to take concentrated investment.
Speaker Change: Risk, where you have high conviction and so thats really the spot that we're in so right now we're talking about 50% or more of next year's development, maybe in that controlled capital bucket and Thats based on inventory that we have in hand now.
Speaker Change: That could change.
Speaker Change: We continue to find more compelling opportunities on a traditional model side, maybe some working capital allocation there, but really we're excited about what we're seeing.
Speaker Change: I think that'll be the case, so I think that these guys will continue to pick up attractive opportunities and we'll continue to allocate capital there.
John White: Thanks for that detail; I appreciate it. I'll turn the call back. Excellent.
Speaker Change: Thanks for that detail I appreciate it I'll turn the call back.
Luke Brandenburg: Excellent. Thanks, Sean. Have a good weekend.
Speaker Change: Excellent Thanks, Sean I have a good weekend.
Noah Hangness: Our next question comes from the line of Noah Hangness with Bank of America. Your line is open.
Speaker Change: Our next question comes from the line of Noah <unk> with Bank of America. Your line is open.
Noah Hangness: Morning guys, I just wanted to ask here about the ducts and or the deferred ducts and then the wells that might be choked back. How much net production is there? I'm just trying to quantify how much net production could be added with minimal CAPEX if we do see an increase in commodity prices.
Noah <unk>: Good morning, guys I just wanted to ask here about the ducks and the deferred docs and then the wells that might be choked back how much net production is there I'm just trying to quantify it.
Speaker Change: How much production net production could be added with minimal capex, if we do see an increase in commodity prices.
Luke Brandenburg: Oh goodness, so you're thinking about on the gas side, it's really, if I had to guess on wells that have been either deferred or ducked, you know, we've got probably half a well or so that's just been deferred if we think about what we were looking at at the beginning of the year to the end of the year. And then we probably have, I'd say, at least a well and a half or two nets that are ducked across several operators.
Speaker Change: Hello, goodness, so youre thinking about on the gas side, it's really if I had to guess on wells that have been either deferred or debt.
Speaker Change: We've got probably.
Speaker Change: Well there. So that's just been deferred if we think about what we're looking at the beginning of the year to the end of the year and then we probably have I would say at least well in an opportune debt that are dumped across several operators. Those ducks are generally in the haynesville.
Luke Brandenburg: Those ducks are generally in the Haynesville, so gosh, thinking about the production impact of that. You know, a couple net wells in the Haynesville, pretty high rate early on. Real dollars associated with that, though, you know, the completion side in the Haynesville is certainly an expensive hobby. So what would you say, Tyler?
Speaker Change: So gosh thinking about the production impact of that.
Speaker Change: A couple of net wells Haynesville pretty high rate early on.
Speaker Change: All dollars associated with that though the completion side in the Haynesville.
Speaker Change: Certainly it is an expensive hobby.
Speaker Change: So what would you say Tyler maybe.
Tyler Farquharson: Maybe if I was looking at an average well cost, it's going to be maybe 60%, 66% of that. And you've got the ability to bring on at least a couple, two and a half, maybe, net wells in total. So I wouldn't say it's a tremendous amount, to be honest with you, Noah, but I think it could be impactful, especially as you do see our gas production declining a bit quarter over quarter as we've allocated less capital there.
Tyler Farquharson: Looking at the average well cost that's going to be maybe 60%, 66% of that and you've got the ability to bring on.
Tyler Farquharson: You've got the ability to bring on at least a couple two and a half maybe.
Speaker Change: Net wells in total.
Speaker Change: So I wouldn't say, it's a tremendous amount to be honest with you know, but I think it could be impactful, especially as you do see our gas production declined a bit.
Speaker Change: Quarter over quarter.
Speaker Change: Less capital there.
Noah Hangness: Okay, that's really helpful. And then I just wanted to touch on LOE. Your guys' LOE was at the bottom end of your guidance. Could you kind of talk about what drove that lower and then how sticky that lower LOE is?
Speaker Change: Okay, that's really helpful.
Speaker Change: And then I just wanted to touch on Hello.
Speaker Change: You guys had low he was at the bottom end of your guidance could you kind of talk about what drove that lower and then how sticky.
Speaker Change: That lower low years.
Luke Brandenburg: Yeah, absolutely. So part of that actually ties in with what we were just chatting about on the gas side. So with deferrals, particularly in the Ames bill, we take some of that gas in kind. And so we're seeing pretty... We're seeing quite a bit of decline on those assets. And as those assets decline, our taken kind volumes are going down, and there's a cost to move those taken kind volumes, a gathering charge.
Speaker Change: Yeah, absolutely so part of that actually ties to what were just chatting about on the gas side, so with deferrals.
Particularly in the Haynesville, we take some of that gas in time.
Speaker Change: And so we are seeing.
Speaker Change: Pretty.
Speaker Change: We're seeing quite a bit of a decline on those assets and those assets decline are taken kind volumes are going down and.
Speaker Change: And there is a cost to move those taken kind volumes in gathering charge.
Luke Brandenburg: And for us, that maps to LOE. So we're seeing that number go down more than expected this year when we originally put out guidance just because of those deferrals. The other component was less workover expense, particularly in Bakken, so we had, you know, less activity up there, but the primary driver was our gathering costs going down on wells that we take in kind in the HVAC system.
Speaker Change: For us that maps to low so we're seeing that number go down.
Speaker Change: More than expected this year when we originally put out guidance just because of those deferrals.
Speaker Change: The other component was less workover expense, particularly in.
Bakken So we had.
Speaker Change: Less activity up there, but the primary driver was.
Speaker Change: Our gathering costs are going down on wells that we take in kind in the Permian the haynesville.
Speaker Change: Haynesville.
Noah Hangness: Sounds good, guys. Thanks so much.
Speaker Change: Sounds great guys. Thanks, so much.
Speaker Change: Great. Thanks, David.
Jeff Robertson: And we do have our last question, which comes from the line of Jeff Robertson with Water Tower Research. Your line is open.
Speaker Change: And we do have our last question comes from the line of Jeff Robertson with water Hover research. Your line is open.
Jeff Robertson: Luke, to clarify on the guidance, when you're talking about potentially double-digit production growth in 2025, are you talking about BOEs or oil?
Jeff Robertson: Thank you Luke to clarify on the guidance when you are talking potentially double digit production growth in 2025, Youre talking Boe or oil.
Luke Brandenburg: Great question. So we're talking BOEs, although I anticipate that that'll be oil-weighted. And that's really the primary driver. We just haven't put a lot of capital into new dry gas projects as of late. And so, at least given the current outlook for hydrocarbon prices, I would anticipate that, talking about BOEs, but oil will be the majority of the driver there. If you end the...
Alright, great question, So we're talking Bo.
Speaker Change: Although I anticipate that that will be oil weighted and Thats really primary driver. We just haven't put a lot of capital into new dry gas projects as of late and so at least given the current outlook for hydrocarbon prices I would anticipate that.
Speaker Change: We're talking BOE, but oil will be the majority of the driver there.
Jeff Robertson: And if you end the year at around 50%..., waiting and with the projects you have teed up at least early into 2025, that would suggest a much higher than 10% year-on-year oil production growth, wouldn't it?
And if you ended the year at around 50% weight.
Speaker Change: Waiting and with the <unk>.
Speaker Change: Projects, you have teed up at least early into 2025.
Speaker Change: Whats suggests that much higher than 10% year on year oil production growth I think wasn't it.
Luke Brandenburg: Yes, I'd say we're in the double digits, but we're not in a spot where we want to share exactly what we think that'll be yet. But yes, I do hope that it exceeds 10 percent. Based on, again, our current plans and the current pricing environment, we would hope that it would exceed 10 percent.
Speaker Change: Yes, I'd say, we're in the double digits, but were not in a spot where we weren't sure exactly what we think that will be yet, but yes, I do hope that at 10%.
Speaker Change: Based on again, our current plans and current pricing environment.
Speaker Change: Hope that that would exceed 10%.
Jeff Robertson: Luke, on the controlled capital with that potential representing 40% of development capital in 2025, how do you think the controlled capital part of the business and growing that over the next several years? impacts your visibility with respect to future production growth, future cash flows, and therefore supporting the dividend and ultimately what investors would view as maybe more longevity in the cash flow profile of Granite Ridge. Well, I appreciate that question, Jeff, because it really hits a key component.
Speaker Change: Look on the controlled capital with that protection, representing 40% of development capital in 2025.
Speaker Change: How do you think the controlled capital part of the business and growing that over the next several years.
Speaker Change: Impacts your visibility with respect to future production growth future cash flows and therefore supporting the dividend and ultimately what investors.
Speaker Change: Would view as a.
Speaker Change: Maybe a more more longevity and the cash flow profile of granite ridge.
Luke Brandenburg: Well, I appreciate that question, Jeff, because it really hits a key component of why we want to pursue that strategy. In fact, I think next year, control capital will be over 50 percent, primarily driven by the addition of a second strategic partner there.
Speaker Change: Well I appreciate that question, Jeff because it really hit.
Speaker Change: Key component of why we want to pursue that strategy. In fact, I think next year control capital will be over 50%, primarily driven by the addition of a second strategic partner there.
Luke Brandenburg: We think that, look, this will give us a lot more insight. It will give us a lot more ability, both internally to predict what the world's going to look like over the next 12, 18 months, but also externally. We hope that we can get even better at our guidance. So, we're a big fan of what this could represent for the business. But, to be totally transparent, there's a couple things that we're going to have to work through.
Speaker Change: We think that this will give us a lot more insight it will give us a lot.
Speaker Change: Our ability both internally.
Predict what the world's going to look like over the next 12 to 18 months, but also externally we hope that we can get even better at our guidance.
Speaker Change: So we're a big fan of what this could represent for the business to be totally transparent. There is a couple of things that we're going to have to work through just for example, the controlled capital is great. Because we really have the flexibility to move the rig schedule around to make sure that we're maximizing the NPV of any given project, but one day.
Luke Brandenburg: Just for example, the controlled capital is great because we really have the flexibility to move the rig schedule around to make sure that we're maximizing the NPV in any given project. But one driver is the $60 million development capital increase for this year, right? Half of that was because we moved the schedule around.
Speaker Change: <unk> is the $60 million.
Speaker Change: Development capital increase for this year right half of that was because we moved the schedule around so we'll certainly have more predictability I think that we'll be able to paint a better picture of what our inventory is to demonstrate that we can continue that dividend and can continue to grow the business.
Luke Brandenburg: So, we'll certainly have more predictability. I think that we'll be able to paint a better picture of what our inventory is to demonstrate that we can continue to pay that dividend and can continue to grow the business. It won't remove all of the luckiness that's inherent in the model, at least at our scale, but I think it will continue to improve, and we're just really excited about what that's going to look like, especially going into 2025.
Speaker Change: Welcome to move all of the Lumpiness inherent in the model at least at our scale, but I think it will continue to improve.
Speaker Change: We're just really excited about what that's going to look like especially going into 2025.
Luke Brandenburg: You know, we really started this concept in early 2023, picked up a rig at the end of 2023, and the first walls came online in June. And so, we're really starting to get the wheels turning there, and I hope that as that continues to perform, like we expect, we'll see that inflection point late this year to where next year it's really singing.
Speaker Change: Really started this concept in early 'twenty three picked up a rig at the end of 'twenty three <unk> wells came online in June and so we're really starting to get the wheels, turning there I hope it is.
Michael Scialla: We have another question coming from the line of Michael Scialla with Stephens. Your line is open.
Speaker Change: As that continues to perform like we expect we will see that inflection point late this year to where next year, it's really saying it.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: We have another question comes from the line of Michael Gallo with Stephens. Your line is open.
Speaker Change: Yes.
Michael Scialla: Yeah, I just wanted to follow up, Luke. I thought your comments on natural gas being depressed, you know, obviously, wanting to weight the spending toward oil-driven projects right now. Do you see, from an acquisition standpoint... Any more opportunities to pick up non-op interest in natural gas given the depressed prices, or can you not really afford to sit and wait on locations that may not be drilled for awhile?
Michael Gallo: Yes, I just wanted to follow up Luca I thought your comments were interesting.
Speaker Change: Natural gas.
Speaker Change: <unk> obviously.
Speaker Change: Wanting to wait the spending towards oil.
Speaker Change: Driven projects right now.
Speaker Change: Do you see from an acquisition standpoint.
Speaker Change: Any more opportunities to pick up.
Speaker Change: Non op interest in natural gas given the depressed prices or can you not really afford to sit and wait on locations that may not be drilled for awhile.
Luke Brandenburg: Well, it's a good question, Mike. I'd say it's less of not being able to afford to sit and wait. Well, maybe that is the driver, but there's just a pretty big gap between buyers and sellers on the gas side right now. You know, if you just look at what a seller wants you to embrace, and I understand it. If I was in their shoes, I would do the same thing.
Speaker Change: Well, it's a good question, Mike I'd say, it's less of not being able to afford to sit and wait well maybe that is the driver, but theres, just a pretty big gap between buyers and sellers on the gas side right now.
Speaker Change: Just look at what a seller wants you to embrace and I understand that I was in their shoes I would do the same thing we've really struggled to have a meeting of the minds. There any yes, we've looked at.
Michael Scialla: But we've really struggled to have a meeting of the minds there. Any gas deal that we've looked at, it's just, it's hard. It's hard because even as you look out several years, you just have such a wide range and predictions of what gas prices are going to be. And so I think there are opportunities there. There are probably people that will be successful in getting gas deals done. To be honest with you, we looked at several.
Speaker Change: It's hard.
Speaker Change: It's hard because even as you look out several years.
Speaker Change: You just have such wide range and predictions of what gas price is going to be and so.
Speaker Change: I think there are opportunities there there are probably people that will be successful in getting gas deals done to be honest with you. We looked at several we struggled and so we're not allocating much time evaluating dry gas fields right now just for that reason.
Michael Scialla: We struggled. And so we're not allocating much time to evaluating dry gas deals right now just for that reason. You may be able to look at 100 and a couple you're able to get that are really good, but that hit rate is just so low. We've had better success on the oil side, where we are really focused on near-term development.
Speaker Change: You might be able to look at 100 at a couple.
Speaker Change: Able to get that are really good but that hit rate is just so low we've had better success on the oil side, where we are really focused on near term development.
Luke Brandenburg: Yeah, that makes sense. I wanted to ask one more, as you're thinking about scaling the controlled capital part of the business, you said it's going to be greater than 50% of next year's capital plan, most likely versus, I think, 40% this year. As you look at scaling that business up versus your traditional non-op, you know, the non-op side, you said you could double production or more without really adding much, if any, G&A. How does that compare with the controlled capital business?
Speaker Change: Yes that makes sense.
Speaker Change: To ask one more is it thinking about scaling the controlled capital part of the business you said its going to be greater than 50%.
Speaker Change: Next year's capital plan, most likely versus I think 40%. This year as you look at scaling that business up versus your traditional non up.
Speaker Change #100: None upside you said, you could double production or more.
Speaker Change #101: Without really adding much if any G&A, how does that compare with the controlled capital business.
Luke Brandenburg: Yeah, that's a great question. I would say it's pretty much the same. It's actually, in another way, probably, more acquisitive, if you will, because we're spending more dollars on each of these teams. And these teams are, again, fully developed teams of 20-plus people across all disciplines. So it's neat because on the traditional non-ops side, you know, we're sourcing the deals and then doing full evaluations from scratch. On the controlled capital side, you know, we're partnering with just very sophisticated folks that have been doing this a long time.
Speaker Change #102: Yes, that's a great question I would say, it's pretty much the same.
It's actually.
Speaker Change #103: Another way probably.
Speaker Change #103: More accretive if you will because we're spending more dollars, which each of these teams and these teams are again fully developed teams of 20 plus people across all disciplines. So there it's neat because on the traditional non outside we're sourcing the deals and then doing full evaluation from scratch on the control capital side.
Speaker Change #103: Partnering with just very sophisticated folks that have been doing this a long time, they're capturing the opportunities and doing all the evaluation and then we're also evaluating alongside them, but yet actively have a broader team doing that evaluation and so you can do it more quickly and these are more capital intensive projects and so I think thats the point.
Luke Brandenburg: They're capturing the opportunities and doing all the evaluation, and then we're also evaluating alongside them. But you effectively have a broader team doing that evaluation, and so you can do it more quickly. And these are more capital-intensive projects, and so I think that's a point that I'm glad you made. I probably should have because it's a big selling point for controlled capital is that we can, you know, further decrease the overhead per barrel, if you will, because we can spend less time on higher working interest projects, which is great.
Speaker Change #103: I'm glad you made it I probably should have because it's a big selling point for control capital is we can.
Further decrease the overhead per barrel, if you will because we can spend less time on higher working interest projects, which is great.
Michael Scialla: I appreciate that. Thanks, Luke. Thank you. Ladies and gentlemen, that concludes today's call. Thank you all.
I.
Luke Brandenburg: Thanks Luke.
Luke Brandenburg: You.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Speaker Change #104: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change #104: [music].
Operator: In the next video, we'll see you in the next video.