Q4 2024 Magnolia Oil & Gas Corp Earnings Call
Megan: Good morning everyone and thank you for participating in Magnolia Oil and Gas Corporation's fourth quarter 2024 earnings conference call. My name is Megan and I will be your moderator for today's call.
Megan: At this time, all participants will be placed in a listen-only mode as our call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question and answer session.
Megan: Thank you, Megan, and good morning everyone. Welcome to Magnolia Oil and Gas's fourth quarter 2024 earnings conference call. Participating on the call today are Chris Stavros, Magnolia's President and Chief Executive Officer, and Brian Corales, Senior Vice President and Chief Financial Officer.
Speaker Change: As a reminder, today's conference call contains certain projections and other forward-looking statements.
Speaker Change: within the meeting of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.
Speaker Change: Additional information on risk factors that could cause results to differ is available in the company's annual annual report on Form 10-K filed with the SEC.
Speaker Change: A full safe harbor can be found on slide 2 of the conference call slide presentation with the supplemental data on our website.
Speaker Change: You can download Magnolia's fourth quarter 2024 earnings press release as well as the conference call slides from the investor section of the company's website at www.MagnoliaOilGas.com. I will now turn the call over to Mr. Chris Stavros.
Chris Stavros: Thanks Tom and good morning everyone. We appreciate you joining us for our discussion of our fourth quarter and full year 2024 financial operating results.
Chris Stavros: I'll briefly highlight how our business model and core principles continue to deliver results that compound per share value and is evidenced through Magnolia's performance since its founding.
Chris Stavros: Finally, I'll conclude by providing an outlook of Magnolia's 2025 Capital and Operating Plan, which is expected to deliver moderate growth with a similar level of capital spending while providing additional capture of low-cost resource opportunities.
Chris Stavros: Brian will then review our financial results in greater detail and provide some additional guides before we take your questions.
Chris Stavros: Starting on slide three of the investor presentation and looking at the highlights, Magnolia ended 2024 on a high note with across-the-board strength in both both financially and in our operations.
Chris Stavros: Record quarterly production volume during the fourth quarter of 93.1 thousand barrels of oil equivalent per day lifted full year 2024 total production to 89.7 thousand POE per day.
Chris Stavros: This amounted to annual total company production growth of 9% for a second consecutive year and with full-year oil production growth of 11% exceeding our original expectations.
Chris Stavros: Our total production at Giddings grew 16% with oil growing 21% and partially supported by a prior year acquisition in addition to strong well productivity and the continued expansion of our development area in this field.
Chris Stavros: This allowed the company to generate free cash flow of $430 million last year, and we returned 88% of the free cash flow, or approximately $378 million to our shareholders through our growing base dividend and ongoing share purchase program.
Chris Stavros: Our asset teams and field employees embraced our asset optimization and field-level cost reduction initiatives implemented early last year and were successful in lowering our lease operating costs by 10% per BOE through the year.
Chris Stavros: This, in combination with our efforts in continuing to work with our materials vendors and oilfield service providers, lowered our overall finding and development costs, helping us achieve a return on capital employed of 22% last year, and places Magnolia's overall cost structure in a position of strength into 2025.
Chris Stavros: The confidence and strength in Magnolia's outlook supported our board's approval of a 15% increase to our quarterly dividend payment earlier this month to $0.15 per share, or an annualized payment of $0.60 per share.
Chris Stavros: Magnolia's board also authorized an increase of 10 million shares for our existing share repurchase program designated for open market repurchases and as we continue with our plan to repurchase 1% of our shares outstanding per quarter.
Chris Stavros: Turning to slide four, Magnolia's business model has remained reliably consistent and steady since the company was founded. As I've stated before, our objective has been and continues to be to operate a highly investable, attractive E&P business that is enduring and focused on generating absolute per share value over the long term.
Chris Stavros: Our objective is to be the most efficient operator of best-in-class oil and gas assets, generating the highest returns on those assets while employing the least amount of capital for drilling and completing our wells.
Chris Stavros: Our continued low in reinvestment rate, which has delivered moderate growth and significant free cash flow generation, serves as evidence of achieving that goal.
Chris Stavros: This formula enables a significant portion of the free cash flow to be returned to our shareholders, in our case through our consistent and ongoing share purchases and a secure and growing-based dividend.
Chris Stavros: The combination of reducing our total share count, moderate production growth, and low-cost structure creates an investment proposition that provides average annual dividend growth of approximately 10%.
Chris Stavros: Additional free cash flow accrues to the balance sheet, allowing us to opportunistically pursue attracted bolt-on oil and gas property acquisitions that can improve and extend our high return business.
Chris Stavros: The results of our model and strategy are apparent when examining what we've achieved over the longer term. As shown on slide 5, Magnolia has had one of the lowest capital reinvestment rates while realizing one of the highest rates of production per share growth among U.S. oil and gas producers over the past four years.
Chris Stavros: Turning to slide 6, Magnolia continues to generate high pre-tax operating margins largely a result of our high quality assets, our emphasis around efficiencies and cost containment.
Chris Stavros: We successfully lowered our overall well cost and DNC capital during 2023 and reduced field-level operating costs last year, which at current product prices should lead to improved full-cycle operating margins in 2025.
Chris Stavros: As shown on slide seven, the strength of our balance sheet remains best in class. Maintaining low leverage is a key component of our business model, minimizing overall financial risk while providing flexibility and optionality for the company.
Chris Stavros: The absence of any oil and gas hedges provides us with the ability to accrue a significant amount of excess cash flow to the balance sheet during a period of higher product prices, which can then gradually be deployed as product prices recede.
Chris Stavros: Deploying this counter cyclical strategy has been in our experience benefiting the company and our shareholders by executing on a creative bolt-on acquisition opportunities during more modest product prices.
Chris Stavros: While other producers have shown the ability to capitalize on one or two of these metrics, it is uncommon to have a low reinvestment rate with above average growth per share combined with high operating margins and low debt.
Chris Stavros: It's effective and potent combination allows us to maximize free cash flow generation and continue to support our highly competitive capital return program.
Chris Stavros: Slide 8 shows our returns at the corporate level or the overall financial outcome of our business model. As I mentioned, our return on capital employed delivered another solid result with RCE of 22% during 2024 and despite lower year-over-year product prices.
Chris Stavros: Magnolia's return on capital employed on average over the past six years or approximately since the company's inception was 26% or roughly three times our weighted average cost of capital.
Chris Stavros: These superior returns are a function of our high-quality assets, our strategy around disciplined capital allocation, maintaining our low debt, a low-cost structure, and further enhanced by our ongoing share purchase program. This combination has proven to be a successful recipe.
Chris Stavros: Finally on slide 9, Magnolia's business model continues to result in consistent and reliable free cash flow through the cycle with a significant portion of that free cash returned to our shareholders.
Chris Stavros: Since inception, Magnolia has returned nearly $1.6 billion, or approximately 35% of its current market capitalization, through a combination of share repurchases and dividends.
Chris Stavros: We enter 2025 on south footing after a very solid year of operating performance and a strong financial position with an improved cost structure.
Our business model and strategy remains largely unchanged.
Chris Stavros: Magnolia plans to operate two drilling rigs and one completion group during 2025 and expects to maintain this level of activity through the year with total D&C capital spending anticipated in the range of $460 to $490 million dollars.
Chris Stavros: This level is roughly flat with last year, and current product prices represent a reinvestment rate of less than 55% of our adjusted EBITDAX. This also includes an estimate of non-operated capital that is roughly the same as 2024 levels.
Chris Stavros: Our activity and spending is expected to deliver total annual production growth of five to seven percent, including low single-digit annual growth in oil production, with the overall characteristics and quality of this year's program expected to be very similar to what we experienced last year.
Chris Stavros: Most of our oilfield service materials costs are under contract through at least mid-2025 and we continue to see some ongoing D&C efficiency improvements generated by our operations team at Giddings, inclusive of last year's 7% increase in drilling feet per day.
Chris Stavros: While our D&C spending levels are expected to be similar to 2020-2024, lower overall well costs combined with improved operating efficiencies allows more wells to be drilled, completed, and turned in line, supporting Magnolia's high margin growth while providing additional operational flexibility.
Chris Stavros: Approximately 75 to 80% of this year's activity will consist of multi-well development pads in the Giddings area. Over the last several years, we have gained a much better understanding of the subsurface and normal technical knowledge through our own drilling and data gathering at Giddings.
Chris Stavros: We plan to put some of this knowledge to work and allocate a portion of our capital to further delineate and our significant acreage position at Giddings through some appraisal wells, decide to test some concepts, further extend the boundaries of the field, and expand the competitive advantage that we have gained in the area.
Chris Stavros: Our Carnes area assets continue to generate significant free cash flow and we expect to allocate approximately 20 to 25 percent of our capital to this asset this year including modest development as well as some appraisal activity.
Chris Stavros: We believe that our business model and strategy provides for the durable competitive advantage to sustain our moderate growth over time and allowing us to continue to act as serial compounders of value for our shareholders.
Chris Stavros: I'll now turn the call over to Brian to provide more details on our financial and operating results.
Brian Corales: Thanks Chris and good morning everyone. I will review some items from our fourth quarter and four-year results and refer to the presentation slides found on our website. I'll also provide some additional guidance for the first quarter of 2025 and the remainder of the year before turning it over for questions.
Brian Corales: Magnolia ended 2024 in a strong note, highlighted by steady and consistent execution.
Brian Corales: During the fourth quarter, we generated a total net income of $89 million, with a total adjusted net income of $95 million, or $0.49 per diluted share. Our adjusted EVA DAX for the quarter was $236 million, with total capital associated with drilling completions and associated facilities of $132 million.
Brian Corales: For the full year adjusted EBITDAX was $953 million with DNC capital representing 50% of EBITDAX.
Brian Corales: Fourth quarter production volumes grew 9% year-over-year to 93.1 thousand barrels of oil equivalent a day. For the full year production volumes grew 9% to 89.7 thousand barrels of oil equivalent a day with oil growth of 11%.
Brian Corales: During the year we purchased a total of 11 million shares
Brian Corales: Looking at the quarterly cash flow waterfall chart on slide 11, we started the year with 401 million of cash. Cash flow from operations before changes in working capital was 919 million. Worth working capital changes and other small items impacting cash by 11 million.
Brian Corales: During the year, we paid dividends of $107 million and allocated $273 million towards share repurchases.
Brian Corales: We added $165 million of bolt-on acquisitions through the year. We incurred $487 million on drilling completions, facilities, and leasehold, and ended the year with $260 million of cash.
Brian Corales: Looking at slide 12, this chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in the second half of 2019.
Brian Corales: Since that time, we have repurchased 72.9 million shares, leading to a change in weighted average diluted shares outstanding of 23% net of issuances.
Brian Corales: Magnolia's weighted average diluted share count declined by more than 2 million shares sequentially, averaging 196.2 million shares during the fourth quarter.
Brian Corales: As Chris discussed, the board recently approved a 10 million share increase to our share repurchase authorization, leaving 11.7 million shares remaining under our current repurchase authorization, which are specifically directed to repurchasing Class A shares in the open market.
Brian Corales: Turning to slide 13, our dividend has grown substantially over the past few years, including a 15% increase announced earlier this month.
to $0.15 per share on a quarterly basis.
Brian Corales: Our next quarterly dividend is payable on March 3rd and provides an annualized dividend payout rate of 60 cents per share.
Brian Corales: Our plan for annualized dividend growth is an important part of Magnolia's investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares, and increasing the dividend per share payout capacity of the company.
Brian Corales: Magnolia continues to have a very strong balance sheet and we ended the quarter with 260 million of cash. Our recently financed senior notes of 400 million do not mature until 2032.
Brian Corales: Including our fourth quarter ending cash balance of 260 million and our undrawn 450 million revolving credit facility, our total liquidity is approximately 710 million. Our condensed balance sheet as of December 31st is shown on slide 14.
Brian Corales: Turn to slide 15 and looking at our per unit cash costs and operating income margins. Total revenue per BOE declines year-over-year due to the decline in oil prices.
Brian Corales: Our total adjusted cash operating costs, including G&A, were $10.62 per BOE in the fourth quarter of 2004.
Brian Corales: Our operating income margin for the fourth quarter was $14.48 per barrel or 38% of total revenue. 95% of the decrease in our quarter-over-quarter pre-tax operating margin was driven by the decrease in commodity prices.
Brian Corales: On slide 16, Magnolia had a very successful organic drilling program during the year.
Brian Corales: The total approved developed reserves at year-end 2024 were 149 million BOEs. Excluding acquisitions and price-related revisions, the company added 44 million barrels of oil equivalent of approved developed reserves during the year.
Brian Corales: Total drilling and completions capital was $477,024,000 resulting in organic proof developed F&D cost of $10.77 per BOE.
and reflective of our current drilling program.
Brian Corales: Turning to guidance, we expect our 2025 capital spending for drilling completions and associated facilities to be in the range of $460 to $490 million, which includes an estimate of non-ob capital that is about the same as 2024 levels.
Brian Corales: We expect first quarter DNC capital expenditures to be approximately $135 million and anticipate this to be the highest quarterly rate of spending for the year.
Brian Corales: Total production for the first quarter is estimated to be approximately 94 MVOE a day with 2025 full-year total production growth expected to be 5 to 7 percent.
Brian Corales: Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all of its oil and natural gas production.
Brian Corales: The fully diluted share count for the first quarter of 2025 is expected to be approximately 195 million shares, which is 5% lower than first quarter 2024 levels.
Brian Corales: We expect our effective tax rate to be approximately 21%, with most of this being deferred. Our cash tax rate is expected to be between 7% to 9% for 2025.
We are now ready to take your questions.
Brian Corales: We will now begin the question and answer session. To ask a question, you may press star and 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Brian Corales: If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
The first question comes from...
from Neil Dingman with Truist Security.
Thank you for joining us. We appreciate it. Thank you.
Please go ahead.
Speaker Change: Congratulations guys, another great quarter. Chris, my first question's just on your well cost. Specifically, one time I know you all had a good bit of, you know, your well cost included a number of tests that you performed.
Brian Corales: downhole before actually producing the well. I'm just wondering, you know, now when you look at the plan, are you still doing a fair amount of science as you drill some of these Giddings wells, or is it now just strictly a development program?
Morning, Neal. Thanks. You know, we're...
Speaker Change: Sort of down the path, pretty good here. You know, we've been doing this for a while, several years in gettings, certainly after COVID, fairly consistently.
Speaker Change: You know the science now is probably far and away more limited maybe to some of the newer areas and I would tell you that
Speaker Change: We're more down the development path in Giddings other than maybe some of the appraisal activity, which is a bit different But as far as you know pouring actual science down wells, it's it's more limited right now So it's really more more pure development
Speaker Change: No, that was great to hear. And then second question, just on shareholder return, I continue to think you all have one of the more appropriate dividend and buyback policies. I'm just wondering...
Speaker Change: Assuming you don't probably spend too much terribly on bolt-on and other opportunities and the cast position continues to grow to I don't know Five six hundred million. Are you comfortable with keeping that on a balance sheet?
or whether it be various other strategic plans. Thanks.
Speaker Change: Well, we've seen this happen before, where the cash built to $700 million for a little bit of time, I called it the winnings during a period of
Speaker Change: very high product prices, and then, you know, with a little bit of patience.
Speaker Change: not believing that it would burn a hole in our pocket for too long. We deployed it when the time was right.
Thank you. Bye bye. Bye bye. Bye bye.
Speaker Change: or when we saw attractive opportunities come along. So I'm not adverse to seeing it happen and holding on to the cash for a little bit of time.
Speaker Change: but not a lengthy period of time. I just don't think that it would occur for that long. So anyway, I think there'll be things that always come up.
Speaker Change: Our next question comes from Oliver Wong with TPH. Please go ahead.
Oliver Wong: Good morning, Chris and Brian, and thanks for taking the questions.
Oliver Wong: I know you all are fairly conservative when it comes to booking of reserves, but it would appear that you all have quite a bit of gassy inventory that gets very little credit from the market. So just kind of wondering, what would it take to just lean into that acreage a bit more, just kind of given the trajectory of gas prices in the near term to maybe unlock some of that value there?
Thank you.
Oliver Wong: Yeah, I guess part of the answer is that, you know, we, I think our cost structure has seen quite a bit of improvement, so, you know, it all starts with, well, economics, and...
Oliver Wong: some of the actions that we've taken the last couple of years around reducing our well costs.
Oliver Wong: may have improved the returns in certain areas that might have been previously a little bit more marginal and puts us in a much better position. So, you know, we continuously revisit and review these areas to see if they could work.
Oliver Wong: and revisit them again as we further optimize just in terms of other efficiencies. So look, I think
Help!
Oliver Wong: built exactly the same within our extensive position in Giddings, the 550,000 acres, you know, probably not. There's probably some variability in the performance or whatnot or in the acreage.
Oliver Wong: But, you know, will more of it work out over time? Probably yes, because we're learning more every day, and that's...
Speaker Change: Okay, makes sense. And maybe for a follow-up question just on well costs, I know you all have done a good job of...
Oliver Wong: Lowering well costs over the past couple of years, first starting with the completion side, then moving to the drilling side last year.
Speaker Change: but just kind of wondering, are there any immediate levers or line of sight to things that...
Oliver Wong: you could potentially do maybe along the lines of longer laterals just given how contiguous the acreage is and if not, is there anything in particular that's keeping you all from kind of taking that step?
Oliver Wong: No, nothing that's preventing us from taking the step. I mean, again...
Oliver Wong: It continues, as I said, it really all starts with the economics and that we're in a much better position right now.
Oliver Wong: We're examining different parts of the field and trying to test some new things.
Oliver Wong: and, you know, push the boundaries a little bit around the field. So I, you know, it seems to me before we go out and pay, you know, four or five, six million or whatever per undrilled location.
Oliver Wong: that we should probably take a closer look within the acres that we already own.
Oliver Wong: So as I mentioned, we gathered a lot of data subsurface
Thank you. Bye-bye.
Oliver Wong: and also from some of the assets that we've acquired in the northern part of Giddings, southern part of Giddings, and as we integrate and optimize some of the learnings from those assets.
Oliver Wong: It should allow us to expand some of the boundaries of the field. Actions that we've already taken around not just the cost, but also some of the optimization around inventory, etc.
Oliver Wong: I think it's led to us adding, you know, tens of thousands of incremental lateral feet to our drilling inventory and over time it'll likely amount to multiples of that. So we continue to test some concepts.
Oliver Wong: and I think it's it's going to go well for us over time.
Awesome, thanks for the time.
Speaker Change: The next question comes from Carlos Collanz with Wolf Research. Please go ahead.
Speaker Change: Hi, it's McKinley for Callers. So it's a good call for the team. Thank you guys for taking my questions. So my question is, what is your
Speaker Change: What does your 2025 capital program say about your long-term sustained capital? And my second question is, how close are you guys to dropping a rig, even if partially, going forward? Thank you.
Speaker Change: Yeah, I feel very comfortable with the range of capital spending the 460 to 490 million that we gave, you know, sort of the midpoint is
Speaker Change: right around, you know, certainly at current product prices, what it'll take to generate
Speaker Change: the type of growth that we talked about, the 5-7% and lower single-digit oil growth. I wouldn't imagine that we'd have to, if your question was around
Speaker Change: slowing activity or dropping a rig, I wouldn't, I wouldn't, uh, and certainly a current product price is not going to happen. I would imagine that that would have to be something.
below $60 before we even thought about that.
Speaker Change: site on oil. I don't see that happening right now but you know we're prepared to do it. We have a lot of optionality and flexibility in the program. We've done a lot to improve our cost structure and so we're well set up.
Speaker Change: to achieve what we plan to achieve for this year. So I think, I expect the plan to be fairly steady.
Thank you.
Speaker Change: The next question comes from Zach Parham with JPMorgan. Please go ahead.
Zach Parham: Good morning. Just wanted to ask on the trajectory of your expected production through the year. You talked about 1Q capex being that the high point of the year. Should that drive more growth in 2Q and then maybe flatten out in the back half? Just curious if you could provide some color there.
Zach Parham: Thanks, Zach. Yeah, so I expect it to grow rateably through the year. It may...
Zach Parham: You know, you may see some variability, but I expect it to grow fairly rateably through the year. You'll see growth and
4Q to 1Q, 1Q to 2Q generally.
and Brian Corales. Thank you so much.
you know, the percentage.
Zach Parham: Between quarters may be jump around a bit. It's depending on the pace of activity and as we said the first quarter Will be a little bit higher and the highest part of the year in terms of capital Which you know should?
Zach Parham: see good first half volumes, but then I fully expect to end the year at at a pretty good clip
You know
Zach Parham: We could start to see likely, frankly, maybe triple digits on overall volumes or certainly getting close to that.
Zach Parham: And then, you know, certainly in the year, maybe 40,000 a day of oil, if not a little bit better. I think these numbers are more or less in line with consensus, maybe a little bit better.
Speaker Change: Thanks for that color. My follow-up, I just want to ask about Carnes. You mentioned some appraisal work that you're doing there. Can you just give us a little more color on what you're testing at Carnes?
Zach Parham: Yeah there was a an opportunity that we we got involved in about a year or so ago through a small acquisition.
Zach Parham: about 25,000 acres. I've mentioned it on on previous calls and again I describe it as a as an exploitation or appraisal option.
Zach Parham: It's an oily area, and if we can make it work, it could...
Zach Parham: go together with some of the activity that we typically pursue in CARNs.
Zach Parham: We have had a couple of recent wells there that have performed quite good.
Zach Parham: but I do think we still need to study it a bit further before moving forward so we'll just have to see how it goes. It's still a little early but I'm encouraged by what we've seen so far.
Thanks for listening.
Thanks.
Noah Hungness: The next question comes from Noah Hungness with Bank of America. Please go ahead.
Noah Hungness: Morning guys. My first question, I was just hoping to get your latest take on the M&A opportunity set across the Eagleford and where you see that greatest opportunity set. Is it in the oily window or the natural gas or somewhere in the middle?
Noah Hungness: Yeah, you know, look, over the last 6 to 12 months there have been several opportunities and assets or packages that have popped up in Eagleford, mainly west of Carnes and of varying quality and size.
Noah Hungness: You know, as we've said often times, we look at everything. We take a lot of tires and we may or may not participate in some actual processes, but anyway, we look at a lot of things.
Noah Hungness: and we'll just sort of see how it goes. There isn't anything that's...
Noah Hungness: I would describe as massive or huge, but it certainly does have a varying degree of quality. And, you know, we've always talked about, on M&A, not looking to just add
existing volumes but looking to add
Noah Hungness: you know opportunities where we can be happy the chance to Improve our resource set and upside over time. So, you know, we carefully look at those things, too
but they are generally about here. Oh, sorry.
Noah Hungness: Yeah, they have tended to be a bit oilier, as you would imagine, in the Lower Eagle Firm.
And then for my second question, I was just wondering,
Noah Hungness: current CAPEX guidance has a range for the splitting it out by area for CARNs between 20 and 25 percent and GIDDINGS between 80 and 75 percent. How should we think about what would cause it to go one way or the other?
Noah Hungness: I don't think it's, I don't think you're going to see, you know, any subtleties that you might have appreciated or looked through into the the wording of the remarks.
is really around the noise.
Noah Hungness: You know, for Giddings as an example, last year it represented 76%, I think, of our overall company volumes.
You know I
Noah Hungness: I think it's within a range, the 75% to 80%, same for CARNs, it might be slanted a little bit more around some appraisal work that we do in one area versus the other, etc., could be partially timing, but I wouldn't tell you that there's going to be a
Noah Hungness: sizable or significant shift one way or the other. I mean, we still like both assets for what they're capable of delivering and providing to the organization, to the company.
you know, so
I wouldn't expect a big change.
Sounds good. Thank you.
Thanks.
Our next question comes from...
This question comes from Neil Maida with Goldman Sachs.
Please go ahead.
Neil Maida: Yeah, good morning, team, and I apologize if this question was asked already, but just your perspective on the big focus areas around gettings and in the year ahead, what are some of the operational milestones that the market should be looking for in terms of continuing to assess?
and how that project is developing.
Neil Maida: Well, I hope to be able to talk about, you know, some, you know, further expansion of the field in terms of our, you know, appraisal work and
some of the things in terms of further
It all starts with
you know, well, economics and...
Neil Maida: we're just in such a much better position or a really really strong position from our cost side of things and so more comes into the fold with some of that.
Neil Maida: and it provides us with more flexibility and optionality to pursue some things or take a little bit more risk around appraisal work and test some areas.
Thank you.
You know
Neil Maida: test the boundaries, expand the boundaries of the field, if you will. So I hope to have more more color and and and maybe provide some more actual feedback or data around our results second half of this year. We're really just starting to get at it. So, you know in terms of this year, so hopefully back half of the year we'll have more to say.
Neil Maida: which is differentiated relative to a lot of SMITCAP E&P. And so, just your perspective on the sustainability of that dividend growth and your ability to continue to achieve 10% type of numbers and how do you balance...
Neil Maida: whether dividends or buybacks are the right use of that incremental dollar.
Neil Maida: Well, on the dividend, you know, the safety and security of the dividend is a critical element of it. I don't want to be one of those...
Neil Maida: You know, small, mid, cap, or any peak company for that matter that sort of, you know, promises dividend growth, implements a growing dividend, then it sort of somehow vanishes in the midst of a deteriorating portion of the cycle. So I don't want to be one of those.
companies that sort of have to fall back on that.
So I'm comfortable knowing that
Neil Maida: we'll be able to grow it. And remember, we talk about.
Neil Maida: growing this dividend per share payout capacity so the the share repurchase program and the consistency of that sort of
Neil Maida: builds into that and and works for you in terms of reducing the share count so your actual cash dollars outlay
Neil Maida: doesn't increase as much as the percentage increase in the per share of the dividend. So it's sort of a natural benefit that plays hand-in-hand in that growth. And so I think it's, you know, on the share of purchases, the consistency of the program.
really is a good...
Neil Maida: mix of ingredients, if you will, around the recipe of our overall shareholder return program.
Neil Maida: And I feel confident that it's, you know, we've done the right thing by our shareholders and sort of dollar cost averaging and for share repurchases and it's improved everything on a per share metric over time. So the balance of how we're doing it, I think, is a reasonable approach.
Thanks team, appreciate it.
Thanks.
Jeff J.: The next question comes from Jeff J. with Daniel Energy Partners.
please go ahead.
Jeff J.: Hey guys, I just was looking for some clarification around the Giddings appraisal work. If, you know, this works out and you find what you're looking for, how significant is it for, you know, your location count down there? I mean, is it incremental or is this sort of a really big deal?
Speaker Change: and the other two are the ones that we have been working on for a couple of years. I'm going to give you a little bit of a sneak peek of what we have been doing in terms of the details of the next phase of the project. I'm going to turn it over to you, Brian, and we will be getting started in just a moment. Thank you. Thank you, Tom. Thank you, Brian. Thank you, Tom. Thank you, Brian. Thank you, Tom. Thank you,
Speaker Change: You know, we always look to add more opportunistically if and when we can and that might even include, you know, some additional lease opportunities with time and some bolt-ons as we've done in the past.
Speaker Change: You know, look, it doesn't take much. You know, we we continue to, as I said, press on the boundaries of the field. And, you know, by adding, as I mentioned, incremental lateral feet to to that drilling inventory.
Brian Corales: and I'm going to turn it over to you, Brian. Thank you.
Brian Corales: It doesn't take much to make a sizable impact on our overall resource relative to our annual drilling program. So I think about it that way. But over time, and over multiple years, it can be quite sizable.
Excellent. Thank you.
Thanks.
Brian Corales: This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.