Q3 2024 Freehold Royalties Ltd Earnings Call
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Operator: All participants please continue to stand by. The conference will begin momentarily. Once again, please continue to stand by.
Speaker Change: All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
Operator: We thank you for your patience. Nous vous remercions de bien vouloir patienter. La conférence débutera sous peu.
Speaker Change: No one else, you'll just walked us hilty duckenfield they'd be taught soup to nuts.
Operator: Nous vous prions de bien vouloir attendre quelques instants et nous vous remercions de patienter.
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Operator: Thanks for watching! This conference is being recorded. Cette conférence est enregistrée. All participants, please stand by.
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Speaker Change: This conference is being recorded.
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Speaker Change: All participants please standby your conference is ready to begin.
Operator: Your conference is ready to begin.
Operator: Good morning. Welcome to the Freehold. It should be advised that certain statements on this call constitute forward-looking information. All statements other than those of historical facts may be forward-looking and we caution the listeners. As a new added feature this quarter, you can now submit your questions in the Q&A window on the web page.
Speaker Change: Good morning, welcome to the Freehold royalties third quarter results conference call. Please be advised that certain statements on this call constitute forward looking information all statements other than those of historical facts may be forward looking and we caution listeners.
Speaker Change: <unk> added features.
Speaker Change: You can submit your questions in the Q&A window.
Speaker Change: Your web page or ask your questions through the telephone line is preferred.
Speaker Change: I would now like to turn the meeting over to Mr. David Spyker. Please go ahead.
Operator: Good morning, everyone, and thank you for joining us today. On the call from Freehold are Rob King, our COO, Dave Hendry, our CFO, and new to our team, Todd McBride, as Manager, Investor Relations. So on today's call, we will share with you our third quarter results, as well as share our excitement around two big projects that we've been working on. One is our asset book, which will be an in-depth review of the extensive opportunity set in our portfolio. And second is an investor day where we can walk through this in detail and provide our shareholders with an update on our business and how we think of things going forward.
Good morning, everyone and thank you for joining us today.
Speaker Change: On the call from Freehold are Rob <unk>, our CFO.
Speaker Change: Dave Hendry our CFO.
And even though our team Todd Mcbride as manager of Investor Relations.
Speaker Change: So on today's call, we will share with you our third quarter results as well as share our excitement around two big projects that we've been working on.
Speaker Change: One is our asset book, which will be an in depth review of extensive opportunity set in our portfolio.
Speaker Change: Second at the Investor Day, where we can walk through this in detail and provide our shareholders with an update on our business and how we think of things going forward.
Operator: We will highlight our attractive dividend yield, currently just under 8%, the sustainability of our dividend levels, which through the strategic oil-focused portfolio work that we have done, it's covered well below current prices, and third, our multi-decades of inventory in the top oil basins across North America that will support our business and our dividends for years to come. We built a great company here at Freehold, and we look forward to sharing more of these thoughts at our Investor Day.
Speaker Change: We will highlight our attractive dividend yield currently just under 8% the sustainability of our dividend level, which through the strategic oil focused portfolio work that we have done is covered well below current prices and third our multi decades of inventory in the top oil basins across the.
Speaker Change: North America that will support our business and our dividends for years to come.
Speaker Change: We built a great company here at Freehold and we look forward to sharing more of these thoughts at our Investor day there'll be in Calgary on December 3rd with full virtual access.
Operator: It'll be in Calgary on December 3rd with full virtual access. So turning our attention to our third quarter results, liquids production in the quarter was 93.67 barrels a day, up 3% from Q3 2023, and up 4% year to date this year compared to 2023. As you've been hearing through these quarterly calls, our liquid-weighted portfolio is key to delivering strong realized pricing and cash flows. Our realized price of $54.36 per BOE this quarter was 10% and 78% higher than our Canadian royalty peers. As our Texas production in the Permian and Eagleford basins, our light oil barrels situated right on the Gulf Coast sales point.
Speaker Change: Yeah.
Speaker Change: So turning our attention to our third quarter results liquids production in the quarter was $93 67 barrels a day up 3% from Q3 2023 and.
Speaker Change: 4% year to date this year compared to 2023.
Speaker Change: As you've been hearing through these quarterly calls our liquids weighted portfolio is key to delivering strong realized pricing and cash flows.
Speaker Change: Our realized price of $54 36 per BOE This quarter was 10% at 78% higher than our Canadian royalty peers as our Texas production in the Permian and Eagle Ford basins, our light oil barrel barrels situated right on the Gulf coast sales points.
Operator: This drives a much stronger realized price, well above the price of any Canadian barrel at today's exchange rates. So in Canada, our production of 9,075 BUE a day was impacted by gas volumes, which were down 270 BUE a day from the prior quarter, really a reflection of the week A co-pricing throughout the summer and early fall. This weak pricing had led to production curtailments, as well as deferred drilling activity as our operators pushed that drill program into Q4 and into Q1 2025, looking to capture an expected better gas pricing environment. We should note that while the gas prices impacted our top line production numbers, it had a negligible impact on cash flow in the current quarter.
Speaker Change: This drives a much stronger realized price well above the price of any Canadian barrel at today's exchange rates.
Speaker Change: So in Canada, our production of 9075 <unk> a day was impacted by gas volumes, which were down 270 BOE a day from the prior quarter really a reflection of the weak coal pricing throughout the summer and early fall.
Speaker Change: This weak pricing Atlanta production curtailments, as well as deferred drilling activity as our operators push stack drilling programs into Q4.
Speaker Change: Q1, 2025, looking at the calendar or unexpected battery gas pricing environment.
Speaker Change: We should note that while the gas prices impacted our topline production numbers you had a negligible impact on cash flow in the current quarter.
Operator: As of the 20 year low in gas prices that we saw in Q3, less than 4% of our Q3 funds from operations was from natural gas. I'll get into a little bit more detail later in the call, but I just wanted to touch on the oil-focused drilling activity on Freehold's lands, particularly the Clearwater, Manville Heavy Oil, Southeast Saskatchewan, and Viking Light Oil Plays, where we had 82 wells drilled in Q3. In the U.S., which is a very high returns part of our business, our production remaining near record levels at 5,533 BUE a day in the quarter.
Speaker Change: percent of our Q3 funds from operations was from natural gas.
Speaker Change: I'll get into a little bit more detail later in the call, but I just wanted to touch on the oil focused drilling activity on Freehold's lands, particularly the Clearwater, Mandel Heavy Oil, Southeast Saskatchewan, and Viking Light Oil Plays, where we had 82 wells drilled in Q3.
Speaker Change: In the U.S., which is a very high returns part of our business, our production remaining near record levels at 5,533 BUE a day in the quarter.
Operator: We currently have 32 rigs active on our U.S. lands, with our market share of rigs active at about 5% are drilling on our lands in the quarter. Wells drilled in our Midland acreage have been outperforming previous year type curves as operators are drilling longer wells, with 3-mile wells becoming much more common. They're optimizing what we call multi-bench continuous development or cube development strategies and they continue to optimize their frac designs. Our acquisition strategy has been really focused on acquiring mineral title in these undeveloped drill spacing units in the core of the Permian in both Midland and Delaware sides.
Speaker Change: We currently have 32 rigs active on our U.S. lands, with our market share of rigs active at about 5% are drilling on our lands in the quarter.
Speaker Change: Wells drilled in our Midland acreage have been outperforming previous year type curves as operators are drilling longer wells, with 3-mile wells becoming much more common. They're optimizing what we call multi-bench continuous development or cube development strategies.
and they continue to optimize their frac designs.
Speaker Change: Our acquisition strategy has been really focused on acquiring mineral title in these undeveloped drill spacing units in the core of the Permian in both Midland and Delaware sides.
Operator: We have further advanced our U.S. presence with an active ground game, working with a well-established team based in Houston. The ground game means we are purchasing mineral titles, one by one, in the drill spacing units that can be drilled and developed using the latest and greatest technology to optimize production and reserve recovery. We are very excited about having this as part of our portfolio build strategy. A little further on rig efficiency, operators are needing fewer rigs to achieve the same level of activity. It's worth noting that in Diamondback's comments on their Q3 call, where they're a key operator in the Midland Basin, they indicated they will only need 18 rigs to drill the same lateral footage as about 23 rigs in the past.
Speaker Change: We have further advanced our U.S. presence with an active ground game, working with a well-established team based in Houston. The ground game means we are purchasing mineral titles one by one in the drill spacing units that can be drilled and developed using the latest and greatest technology to optimize production and reserve recovery.
Speaker Change: We are very excited about having this as part of our Portfolio Build Strategy.
Speaker Change: A little further on rig efficiency, operators are needing fewer rigs to achieve the same level of activity.
Speaker Change: It's worth noting that in Diamondback's comments on their Q3 call, where they're a key operator in the Midland Basin, they indicated they will only need 18 rigs to drill the same lateral footage as about 23 rigs in the past.
Operator: I was in Midland about three weeks ago with Dave Hendry, our CFO, and we were on those rigs and the technology that's being deployed to continually improve the drilling efficiency is quite impressive.
Speaker Change: I was in Midland about three weeks ago with Dave Hendry, our CFO, and we were on those rigs and the technology that's being deployed to continually improve the drilling efficiency is quite impressive.
Operator: Turning to our financial performance, our funds from operations was $56 million in the quarter. Our focus on oil and NGL production growth in both Canada and the U.S. has been key in our ability to generate solid financial results. Our diversified exposure to pricing markets throughout North America helps drive our net backs and cash flows and allows the business to grow over time. This quarter, we paid $41 million to our shareholders in the form of dividends and reduced our net debt by $12 million to $187 million. This equates to a 73% payout ratio and a net debt at 0.8 times our trailing funds from operations.
Speaker Change: Turning to our financial performance, our funds from operations was $56 million in the quarter. Our focus on oil and NGL production growth in both Canada and the U.S. has been key in our ability to generate solid financial results.
Speaker Change: Our diversified exposure to pricing markets throughout North America helps drive our netbacks and cash flows and allows the business to grow over time.
Speaker Change: This quarter we paid 41 million dollars to our shareholders in the form of dividends and reduced our net debt by 12 million dollars to 187 million. This equates to a 73 percent payout ratio and a net debt at 0.8 times our trailing funds from operations.
Operator: Our balance sheet remains strong as we continue to operate well below our debt target range. So just turning back to the drilling side, we had another strong quarter drilling activity with a total of 278 wells drilled across our North American portfolio, an increase of 11% compared to Q3 last year. In Canada, our net wells increased by 41% as payers elevated their drilling activity on our mineral title lands wherein we receive a higher royalty rate. This is really a function of the amount of leasing activity that we've done over the last couple of years and we're seeing drillers focus on those lands.
Speaker Change: Our balance sheet remains strong as we continue to operate well below our depth target range.
Speaker Change: So just turning back to the drilling side, we had another strong quarter drilling activity with a total of 278 wells drilled across our North American portfolio, an increase of 11% compared to Q3 last year.
Speaker Change: In Canada, our net wells increased by 41% as payers elevated their drilling activity on our mineral title lands wherein we receive a higher royalty rate.
Speaker Change: This is really a function of the amount of leasing activity that we've done over the last couple of years and we're seeing drillers focus on those lands.
Operator: We saw more wells focused on the heavy-oil-weighted manville stack and clear-water formations this quarter, with about 55% of drilling in the quarter in the clear-water and manville, making it the highest level of heavy-oil drilling activity on our lands over the past several years. With the weaker gas pricing, the drilling focus has been on oil wells, which have a lower overall productive capability on a BOE a day basis versus a gas well, but they contribute significantly more revenue given the relative strength of oil prices.
Speaker Change: We saw more wells focused on the heavy oil-weighted manville stack and clear water formations this quarter, with about 55% of drilling in the quarter in the clear water and manville, making it the highest level of heavy oil drilling activity on our lands over the past several years.
Speaker Change: With the weaker gas pricing, the drilling focus has been on oil wells, which have a lower overall productive capability on a BOE a day basis versus a gas well, but they contribute significantly more revenue given the relative strength of oil prices.
Operator: Turning to our U.S. portfolio, both growth and net drilling were up 14% from Q3 2023 to 0.8 net wells. We continue to be encouraged by our U.S. assets and their ability to grow over time. Our lands are situated in the best place in North America with some of the best operators, continually finding more efficient ways to grow production and add to their portfolios through M&A work. With M&A, our top U.S. operators will be ExxonMobil after their $60 billion acquisition of Pioneer and ConocoPhillips after their $23 billion acquisition of Marathon. Both these companies have made significant investments in our core U.S.
Speaker Change: Turning to our US portfolio, both growth and net drilling were up 14% from Q3 2023 to 0.8 net wells.
Speaker Change: We continue to be encouraged by our U.S. assets and their ability to grow over time. Our lands are situated in the best place in North America with some of the best operators continually finding more efficient ways to grow production and add to their portfolios through M&A work.
Speaker Change: With M&A, our top U.S. operators will be ExxonMobil after their $60 billion acquisition of Pioneer and ConocoPhillips after their $23 billion acquisition of Marathon. Both these companies have made significant investments in our core U.S. operating areas.
Operator: operating areas.
Operator: Overall, our Q3 results show the strength of the company and our ability to navigate through volatility and commodity prices. We drive premium pricing on our assets through our North American exposure, and we're well positioned in the best oil place. We have 33 million a day in natural gas that will help drive gas oil growth as those gas markets strengthen. We encouraged by the drilling and leasing activity on our lands, and we look ahead as we look ahead to the last few months of 2024 and into 2025.
Speaker Change: Overall our Q3 results show the strength of the company and our ability to navigate through volatility and commodity prices. We drive premium pricing on our assets through our North American exposure and we're well positioned in the best oil plays.
Speaker Change: We have 33 million a day in natural gas that will help drive gas oil growth as those gas markets strengthen.
Speaker Change: We are encouraged by the drilling and leasing activity on our lands, as we look ahead to the last few months of 2024 and into 2025.
Operator: So just to close things off, as mentioned at the beginning of remarks, we will be hosting an in-person and webcasted Investor Day in Calgary on December 3rd, as well as introducing our updated 2024 asset book. We look forward to having our leadership team walk you through all the exciting developments we have made over the past few years and highlight our unique competitive advantage as a North American energy royalty company.
Speaker Change: So just to close things off, as mentioned at the beginning of remarks, we will be hosting an in-person and webcasted Investor Day in Calgary on December 3rd, as well as introducing our updated 2024 asset book.
Speaker Change: We look forward to having our leadership team walk you through all the exciting developments we have made over the past few years and highlight our unique competitive advantage as a North American energy royalty company.
Operator: So with that, we will now take the time to answer any questions that you may have. We will now. If you have a question, please press star 1. You may cancel your question at any time by pressing star 2. There will be a brief pause while the call is being recorded.
Speaker Change: So with that, we will now take the time to answer any questions that you may have.
Speaker Change: Thank you. We will now take questions from the telephone lines. If you have a question, please press star 1. You may cancel your question at any time by pressing star 2. Please press star 1. At this time, if you have a question, there will be a brief pause while the participants register for questions. Thank you for your patience.
Speaker Change: The first question will be from Christopher Jones from Haywood Securities. Please go ahead.
Christopher Jones: Hey, good morning. Thanks for taking my question. Some of your top royalty pairs on both sides of the border. I've completed acquisitions over the past 12 months and I. There's been exposure with payers on both the Acquire and Target sites, just curious what sort of trends you may have seen or observed from an activity-based post-consolidation We've heard a lot about M&A tempering growth as it requires slow to target activities. So just sort of wondering if you've seen that as well and have you incorporated any slow down.
Christopher Jones: Hey, good morning. Thanks for taking my question. Some of your top royalty payers on both sides of the border have completed acquisitions over the past 12 months, and I believe
Christopher Jones: We've heard a lot about M&A tempering growth as acquirers slow the target's activity, so just sort of wondering if you've seen that as well, and have you incorporated any slowdown in activity particularly from this type of consolidation into the outlook?
Operator: Thanks Chris.
Robert King: It's Rob King speaking. Maybe I'll talk first from the U.S. side and then second from the Canadian side. I would actually, on the U.S. side, to kind of put numbers around it, Exxon was like less than 2%, less than 1% of our drillers and royalty production last year performed as a pioneer deal. They've actually increased their pace on our lands and now they represent 5% of our production and probably closer to 15.15% of our net drilling so far this year. So we've been encouraged with the way that Exxon has communicated to the market when they acquired Pioneer.
Sure.
Speaker Change: Thanks Chris, it's Rob King speaking. Maybe I'll talk first from the U.S. side and then second from the Canadian side. I would actually on the U.S. side, to kind of put numbers around it, an Exxon was like...
less than 2%, less than 1% of our drillers.
Speaker Change: and Royalty Production last year performed with the Pioneer deal. They've actually increased their pace on our lands and now they represent 5% of our production and probably closer to 15.5% of our net drilling so far this year. So we've been encouraged with the way that Exxon has communicated to the market when they acquired Pioneer.
Robert King: They're going to grow their position from 1.3 million barrels a day to 2 million barrels a day in the Permian and we're sort of seeing them active on our lands.
Speaker Change: and we're sort of seeing them fairly active on our lands.
Robert King: I think the second, which we'll have to wait and see a little bit here, is how Conoco is going to approach Marathon's Eagleford assets. It's one where Marathon really used those Eagleford assets as a cash cow to fund other parts of its portfolio. It will be interesting to see Conoco when they acquired it. It sounded like they might be a little more constructive with respect to what kind of capital they might be allocating to the Eagleford, but that transaction has not yet closed, so we don't know at this point.
Speaker Change: I think the second, which we'll have to wait and see a little bit here, is how Conoco is going to approach Marathon's Eagleford assets. You know, it's one where Marathon really used those Eagleford assets as a cash cow to fund other parts of its portfolio. You know, it'll be interesting to see.
Speaker Change: to see Conoco when they acquired it, sounded like they might be a little more constructive with respect to what kind of capital they might be allocating to the Eagleford, but that transaction has not yet closed, so we don't know at this point.
Robert King: On the Canada side, what I'd say is one of the green shoots we've seen with respect to consolidation and for M&A activity point to southeast Saskatchewan, where a number of the incumbent players have been monetizing their Saskatchewan assets as they've been moving further west. The privates and the juniors have really stepped into that basin in a material way and bringing new ideas and multi-lap technology to seeing an area that has been largely a plank in our portfolio, being something that we're seeing some modest organic growth. What we're seeing just starting to show up in Southeast Saskatchewan is the multi-lot, horizontal multi-lot drilling.
Speaker Change: On the Canada side, one of the green shoots we've seen with respect to consolidation and for M&A activity point to southeast Saskatchewan where a number of the incumbent players have been monetizing their Saskatchewan assets as they've been moving further west.
Speaker Change: And, you know, the privates and the juniors have really stepped into that base in a material way and bringing sort of new ideas and, you know...
Speaker Change: you know, multi-lap technology to sort of seeing, you know, an area that has been largely a plank in our portfolio, you know, being something that, you know, we're seeing some modest organic growth.
OK.
Thank you. Bye.
Robert King: It's been going on for about a year in the bucket, but there are operators that are pushing that into other formations as well. Notably, there's been some spearfish wells drilled. We see that as an opportunity to unlock significant oil reserves in Southeast Saskatchewan that wasn't even on the radar a year or two ago.
Speaker Change: He was out the multilat, horizontal multilat drilling. So it's been going on for about a year in the bucket, but there are operators that are pushing that into other formations.
Speaker Change: as well, notably there's been some spearfish wells drilled, and so we see that as an opportunity to unlock significant oil reserves in southeast Saskatchewan that wasn't even on the radar a year or two ago.
Operator: Okay, thanks for that caller. I'll hand it over.
Okay, thanks for that, Kala. I'll hand it over.
Speaker Change: The next question is from Jamie Kubik from CIBC, please go ahead.
Unknown Attendee: Yeah, good morning. Thanks for taking my question here. Just on the wells drilled in the quarter, wells drilled in Canada were up considerably versus the prior year on a net basis. Can you just talk about indications from operators for this to continue through the end of the year? And maybe into next year and then also can you just comment on the activity on the U.S.
Speaker Change: Yeah, good morning. Thanks for taking my question here just on the wells drilled in the quarter wells drilled in Canada We're up considerably versus the prior year on a net basis. Can you just
Speaker Change: talk about indications from operators for this to continue through the end of the year and and maybe into next year and then also can you just comment on the activity on the US base and being Relatively flat and how you expect that to trend moving forward. Thanks. Bye
Robert King: relatively flat and how you expect that to Rob again, on the Canada side, a lot of our net drilling in the corridor was in our Clearwater and Manitoba stack heavy oil assets, and you're right about the nets being up materially year over year, largely as a result, you can sort of see this as a testament to the leasing programs that we've been talking about over the last several conference calls, where we had a number of 15 plus percent mineral title lands being drilled, leases being converted into drills over the corridor.
Speaker Change: Sure. Thanks, Janie. Rob again. On the Canada side, a lot of our net drilling in the corridor was in our Clearwater and Mandelstach heavy oil assets.
Speaker Change: And, you know, you write about the, you know, the nets being up materially year over year, you know, largely as a result, you can sort of see this as a testament to the leasing programs, you know, that we've been talking about over the last several conference calls where...
Robert King: In terms of the target of that going forward, I think it's going to be largely dependent on overall commodity pricing. I would say at the end of Q3, we usually have about 30% of the net wells that still haven't been turned in line. At the end of Q3 this year, it was closer to 50%, and that's probably much more of a reflection of where net gas pricing was. Say we had a number of payto and tourmaline wells that they did not bring on line in Q3, and we'll sort of see when they bring those wells in line.
Speaker Change: that still haven't been turned in line. At the end of Q3 this year, it was closer to 50%. That's probably much more of a reflection of where NatGas pricing was. We had a number of Alpedo and Tourmaline wells that they did not bring online in Q3, and we'll sort of see when they bring those wells in line.
Robert King: Unfortunately, gas pricing still doesn't look overly constructive, and as a title and royalty owner, we're okay for them to do it waiting as well, because we get that better pricing as well.
Speaker Change: Unfortunately, gas pricing still doesn't look overly constructive and as a title and royalty owner, we're okay for them to do it waiting as well because we get that better pricing as well.
Operator: On the U.S. side, again, it's largely been 70% of the wells being drilled in the Midland Basin, and 30% in Eagleford. Marathon is a little quieter in Q3. They were actively bringing wells on, but they were less active drilling in Q3, so I Okay, that's good.
Speaker Change: And on the U.S. side, again, it's largely been 70% of the wells being drilled in the Midland Basin and 30% in Eagleford. Marathon is a little quieter in Q3. They were actively bringing wells on, but they were less active drilling in Q3. So I think we'll anticipate...
Speaker Change: I think with Conoco, it's going to be a more measured pace of drilling in our Eagleford asset, which is about 50% of our US production.
Subs by www.zeoranger.co.uk
Okay, that's good. I'll hand it back. Thank you.
Speaker Change: Thank you. Once again, please press star 1 if you have any questions.
Operator: Maybe while we're waiting for those, if there's any questions coming in on the phone, we do have some questions that have come up online, a couple of them, just looking for a little bit of color on the U.S. investment opportunities and how we think of building that portfolio.
Speaker Change: Maybe while we're waiting for those, if there's any questions coming in on the phone, we do have some questions that have come up online, a couple of them.
Speaker Change: Just looking for a little bit of color on the U.S. investment opportunities and how we think of
Operator: So maybe I'll turn that over to Rob and David Hendry to just address how we think of using our balance sheet, how we think of NCIB in light of the opportunity sets that we're seeing.
Speaker Change: building that portfolio. So maybe I'll turn that over to Rob and Dave Henry to just address how we think of using our balance sheet, how we think of NCIB in light of the opportunities that we're seeing.
Robert King: David, I'll start off with just the market and maybe hand it over with respect to how we're thinking about financing and allocation of capital. On the size of the market, the U.S. is still an incredible place to be looking for opportunities. Texas is over 98% privately owned mineral title, as well as when you multiply that against the significant oil base that's available there between the Permian and the Eagleford. It should provide significant opportunities.
Alright guys
Speaker Change: Sure, Dave, I'll start off with just the market and maybe hand it over with respect to how we're thinking about financing, and the allocation of capital.
Speaker Change: significant oil base that's available there between the Permian and the Eagleford. It should provide significant opportunities. As Dave mentioned, we've been starting a new initiative this quarter working with a grassroots ground game opportunity where we're literally buying an acre at a time and being able to target in exact areas within the Midland Basin.
David Hendry: As Dave mentioned, we've been starting a new initiative this quarter working with a grassroots ground game opportunity where we're literally buying an acre at a time and being able to target in exact areas within the Midland Basin with exact operators that we want to be under. We're still looking at a lot of the other opportunities as well, but it's sort of one where the quality bar that we've set is very high and it certainly has to not only make us better, but it also has to be accretive for our shareholders, both near term and long term.
Speaker Change: is very high, and it certainly has to not only make us better, but it also has to be accretive for our shareholders, both near term and long term.
David Hendry: Dave from Financing and Allocation of Capital. Yeah, so right now, we're trending at around 0.8 times net debt to cash flow, and so that's a level we're very comfortable with. We like it below one times, but our strategic range is around 1.5 or lower. So effectively utilizing our capacity of our balance sheet for any opportunities that are accretive, as Rob pointed out, both in the near term and the long term. And so that is our focus as far as on the shareholder basis for ultimately returning capital or being accretive to shareholders. When we're looking at acquisition opportunities, we look at what our leverage is, ultimately by looking at how we're going to return capital to shareholders.
Speaker Change: or lower, so effectively utilizing our capacity of our balance sheet for any opportunities that are accretive, as Rob pointed out, both in the near term.
in the long term.
Speaker Change: And so that is our focus as far as on a shareholder basis.
David Hendry: As of right now, it is our largest return. So we've got over 70% of our capital returned, which is a competitive activity. Like, for example, share buybacks, ultimately that's another tool that a lot of our competitors use in the sector as a whole, and it's something we look at, and when we're looking at acquisitions, we do compare it to that, so we don't ever say no to it, but at this point, with our relatively high dividend yield and our opportunities at hand, prioritizing our accretive cash flow means we're probably not likely to do any share buybacks or register an NTIB in the relatively short term.
Speaker Change: comparison of yield to our competitors. But we do look at other...
measures like for example share buybacks
Speaker Change: Ultimately, that's another tool that a lot of our competitors use.
Speaker Change: in the sector as a whole, and it's something we look at, and when we're looking at acquisitions, we do compare it to that, so we don't ever say no to it, but at this point, with our relatively high dividend yield and our opportunities at hand, prioritizing our accretive cash flow means we're probably not likely to do any share buybacks.
register an NTIB in the relatively near term.
Um...
Robert King: Another question, there's a couple of questions, a question just about how do we think of permeate growth over the coming year and Rob, I'll get you to maybe handle that and then we've got another question on stock ownership which I'll handle. So in terms of Permian growth, I think our Permian assets, Exxon, would be our most important driller on our lands there, as well as a couple of privates, smaller cap companies in Howard County. I think we look at our Permian asset in a $75 oil price environment, it's probably growing in the mid-single-digit type range.
Speaker Change: Another question, there's a couple of questions. A question just about how do we think of permeate growth over the coming year and Rob, I'll get you to maybe handle that and then we've got another question on stock ownership which I'll handle.
Speaker Change: So, in terms of Permian growth, I think our Permian apps, as Exxon would be our most important
Speaker Change: you know, driller, you know, on our, on our lands there, you know, as well as, you know, a couple of privates, you know, the smaller cap companies in Howard County.
Speaker Change: I think we look at our Permian asset in a $75 oil price environment, it's probably growing in the mid-single-digit type range.
Robert King: If it's a lower commodity price environment, then I think you'd also see that growth rate take down.
Speaker Change: If it's a lower commodity price environment, then I think you'd also see that growth rate tick down. I'll observe Diamondback's comments with their Q3 results where they certainly looked at a $70 WTI environment, they are sort of guiding towards a 2% growth rate with respect to their Permian assets.
Robert King: I observed Dynavac's comments with their Q3 results where they certainly looked at a $70 WTI environment, they're sort of guiding towards a 2% growth rate with respect to their Permian assets. So it's one where the capital discipline amongst the quality companies that we're under in the Permian is live and well.
Speaker Change: So it's one where the capital discipline amongst the quality companies that we're under in the Permian is wide and well.
David Spyker: Hey, just a question on asking me personally, Dave Spyker, what my percentage of net worth is in Freehold stock, and I personally own 180,000 shares that I've been buying on the market. It's the only stock that I own, and I just continue to build that position. So my activity shows my underlying belief in the company as we continue to build the company and I continue to build my ownership.
Speaker Change: I have a question on asking me personally, Dave Spyker, what my percentage of net worth is in pre-gold stock and I personally own 180,000 shares that I've been buying on the market. It's the only stock that I own and I just continue to build that position.
Speaker Change: You know, so is my underlying belief in the company as we continue to build the company and I continue to build my ownership in it.
Thank you for watching!
Operator: I think we've covered off the questions, so unless anyone else either wants to phone in or type on in, I think we'll just wait a minute or so here and then end the call. Okay, well, I think we've got things covered off, so thanks everyone for joining today, and thank you for supporting this talk, and we look forward to connecting with each of you at Investor Day on December 3rd. Thank you.
Speaker Change: I think we've covered off the question so unless anyone else either wants to phone in or type on in I think we'll just wait a minute or so here and then and then end the call.
Speaker Change: Okay, well I think we've got things covered off, so thanks everyone for joining today and thank you for supporting this talk and we look forward to connecting with you, each of you, at the Investor Day on December 3rd. Thank you.
Operator: The press conference has now ended.
Operator: No three minute call this time.
No three-minute call this time.
Operator: This conference is no longer being recorded.