Q4 2024 Sitio Royalties Corp Earnings Call
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I will now hand over to your host Alyssa Stephens Vice President of Investor Relations to begin. Please go ahead.
Alyssa Stephens: Thanks, operator, good morning, and welcome to our fourth quarter and full year 2024 conference call by now it is our hope that you have been through our materials.
Alyssa Stephens: You can find our recent news release and supplemental slides on our website under the Investor Relations section.
I'm joined this morning by our CEO, Chris <unk>, and our CFO Cary Oc test after our brief prepared remarks, Chris Carey and other members of our leadership team will be available to take your questions before we start I would like to remind you that our discussion today may contain forward looking statements and non-GAAP measures. Please refer to our earnings release.
Hello, and welcome everyone to the city of royalties fourth quarter cuts to inch full earnings call. My name is Becky and I'll be your operator today.
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Alyssa Stephens: Investor presentation, and publicly filed documents for additional information regarding such forward looking statements and non-GAAP measures I will now turn the call over to Chris.
I will now hand over to your host Alyssa Stephens Vice President of Investor Relations to begin. Please go ahead.
Alyssa Stephens: Thanks, Melissa and welcome everyone I want to publicly welcome Alyssa Stephens to the CTO team, who joined US earlier this year as our new VP of Investor Relations. Many of you may have met her already but she is a great addition to say to you. This has allowed <unk> to take on additional leadership responsibilities on our finance team.
Alyssa Stephens: Thanks, operator, good morning, and welcome to our fourth quarter and full year 2024 conference call by now it is our hope that you have been through our materials.
Alyssa Stephens: You can find our recent news release and supplemental slides on our website under the Investor Relations section.
Alyssa Stephens: Let's get started we will divide today's call into three segments first I'll review, our 2024 highlights and how we strengthen the business through accretive acquisitions and active management of our minerals.
Alyssa Stephens: I'm joined this morning by our CEO, Chris <unk>, and our CFO Cary Ootheca. After a brief prepared remarks, Chris Carey and other members of our leadership team will be available to take your questions before we start I would like to remind you that our discussion today may contain forward looking statements and non-GAAP measures. Please refer to our earnings release.
Alyssa Stephens: Gary will summarize our recent financial results and our 2025 outlook Lastly, we will review our key priorities for the year.
Alyssa Stephens: 2024 was a strong year of execution for <unk> and we have a solid list of accomplishments I'll hit the highlights.
Speaker Change: Investor presentation, and publicly filed documents for additional information regarding such forward looking statements and non-GAAP measures I will now turn the call over to Chris.
Alyssa Stephens: First we delivered against our full year projections, we had record fourth quarter production of about 41000 barrels of oil equivalent per day, a 14% year over year increase and averaged over 39000 barrels of oil equivalent for the year pro forma for the DJ Basin acquisition.
Speaker Change: Thank you Melissa and welcome everyone I want to publicly welcome Melissa Stevens to the CTO team joined US earlier this year as our new VP of Investor Relations. Many of you may have met her already but she is a great addition to say to you. This.
Speaker Change: This has allowed Ross along to take on additional leadership responsibilities on our finance team.
Alyssa Stephens: We exceeded the high end of full year guidance, even after raising guidance twice during the year our.
Speaker Change: Let's get started with today's call into three segments first I'll review, our 2024 highlights and how we strengthen the business through accretive acquisitions and active management of our minerals.
Alyssa Stephens: Our expenses and taxes fell within or slightly below our guidance range.
Our solid results were due to the exceptional work of the entire team at city of the quality of our land positions in the most prolific U S basins strong activity in well performance from our industry, leading operators accretive acquisitions, and our differentiated asset management capabilities.
Speaker Change: Gary will summarize our recent financial results and our 2025 outlook Lastly, we will review our key priorities for the year.
Speaker Change: 2024 was a strong year of execution for <unk> and we have a solid list of accomplishments I'll hit the highlights.
Alyssa Stephens: Second we continue to develop innovative efficiencies. This is one of our core competencies that differentiates us from our peers throughout.
Speaker Change: First we delivered against our full year projections, we had record fourth quarter production of about 41000 barrels of oil equivalent per day, a 14% year over year increase and averaged over 39000 barrels of oil equivalent for the year pro forma for the D. J Basin acquisition.
Alyssa Stephens: Throughout 2024, we refined our proprietary custom built asset management applications, which allow us to process and analyze significantly more data per person.
Alyssa Stephens: Can now automatically process more than 99% of the revenue check data we receive from our operators.
Speaker Change: We exceeded the high end of full year guidance, even after raising guidance twice during the year.
Alyssa Stephens: <unk> approximately 21 million rows of data down to 100000 records for our staff to review annually.
Speaker Change: Our expenses and taxes fell within or slightly below our guidance range.
Alyssa Stephens: This a step further we use AI models to interpret contracts that enable us to identify revenue payment discrepancies producing a dashboard for further analysis by our team in 2024, we captured $19 million of missing revenue payments offsetting over two thirds of our cash G&A.
Speaker Change: Our solid results were due to the exceptional work of the entire team at Citi you the quality of our land positions in the most prolific U S basins strong activity in well performance from our industry, leading operators accretive acquisitions, and our differentiated asset management capabilities.
Alyssa Stephens: We have invested in our future both in terms of highly skilled people across the company and new technologies.
Speaker Change: Second we continue to develop innovative efficiencies. This is one of our core competencies that differentiates us from our peers.
Alyssa Stephens: A relatively small investments and asset management systems will be returned many times over and we expect meaningful reductions in cash G&A costs per Boe as we continue to scale our minerals position.
Speaker Change: Throughout 2024, we refined our proprietary custom built asset management applications, which allow us to process and analyze significantly more data per person.
Alyssa Stephens: Next we closed 16 high value acquisitions throughout the year.
Speaker Change: We can now automatically process more than 99% of the revenue check data we receive from our operators.
Alyssa Stephens: These were immediately accretive to discretionary cash flow per share and represented some of the highest return investments in our history.
Speaker Change: <unk> approximately 21 million rows of data down to 100000 records for our staff to review annually.
Alyssa Stephens: It was a standout year for consolidation of high return small and medium size deals.
Speaker Change: Miss a step further we use AI models to interpret contracts that enable us to identify revenue payment discrepancies producing a dashboard for further analysis by our team in 2024, we captured $19 million of missing revenue payments offsetting over two thirds of our cash G&A.
Alyssa Stephens: <unk> has demonstrated its ability to negotiate deals outside of normal broad auction processes.
Alyssa Stephens: Our practices are repeatable and and the deals we've executed our impactful in the aggregate.
It was a healthy year of deal flow for us with acquisitions totaling more than $350 million, including fourth quarter deals of approximately $140 million.
Speaker Change: We have invested in our future both in terms of highly skilled people across the company and new technologies.
Alyssa Stephens: The fourth quarter deals added 3300, net royalty acres to our portfolio primarily in the Delaware Basin.
Speaker Change: A relatively small investments and asset management systems will be returned many times over and we expect meaningful reductions in cash G&A costs per Boe as we continue to scale our minerals position.
Alyssa Stephens: Number four we're committed to a strong balance sheet and our capital structure is solid in December our borrowing base was increased to $925 million an increase of $75 million.
Speaker Change: Next we closed 16 high value acquisitions throughout the year.
Speaker Change: These were immediately accretive to discretionary cash flow per share and represented some of the highest return investments in our history.
Alyssa Stephens: Year over year, our annual interest expense on a per BOE basis was down over 17% as we refinanced higher cost notes in late 2023.
Speaker Change: It was a standout year for consolidation of high return small and medium sized deals.
Speaker Change: <unk> has demonstrated its ability to negotiate deals outside of normal broad auction processes.
Alyssa Stephens: <unk> capital structure high quality assets and robust coverage ratios helped ensure our financial flexibility ample liquidity and access to future capital at attractive rates. Our senior notes continue to trade well above par and we are one of two minerals companies currently accessing the public debt markets, which advantages our cost of capital.
Speaker Change: Our practices are repeatable and deals we've executed our impactful in the aggregate.
Speaker Change: It was a healthy year of deal flow for us with acquisitions totaling more than $350 million, including fourth quarter deals of approximately $140 million.
Alyssa Stephens: Lastly, we prioritize capital returns to shareholders and deliver value on a per share basis in.
Speaker Change: The fourth quarter deals added 3300, net royalty acres to our portfolio primarily in the Delaware Basin.
Alyssa Stephens: In 2024, we returned $330 million to owners or over 70% of our discretionary cash flow.
Speaker Change: Number four we're committed to a strong balance sheet and our capital structure is solid in December our borrowing base was increased to $925 million an increase of $75 million.
Alyssa Stephens: Since becoming public in mid 2022 are cumulative return of capital to shareholders is nearly $850 million, including dividends and share buybacks.
Speaker Change: Year over year, our annual interest expense on a per BOE basis was down over 17% as we refinanced higher cost notes in late 2023.
Alyssa Stephens: This represents nearly 30% of our current market capitalization at current commodity prices, we expect that number to exceed $1 billion in 2025.
Speaker Change: Capital structure high quality assets and robust coverage ratios helped ensure financial flexibility ample liquidity and access to future capital at attractive rates. Our senior notes continue to trade well above par and we are one of two minerals companies currently accessing the public debt markets, which advantages our cost of capital.
Alyssa Stephens: This was a great year for US we had a winning combination of execution efficiency gains and acquisition activity that allowed us to maintain our strong balance sheet and return capital to shareholders Importantly, our results underscore the repeatability of our business model.
Alyssa Stephens: With that I'll turn it over to Kerry to summarize our recent financial results and 2025 outlook.
Speaker Change: Lastly, we prioritize capital returns to shareholders and deliver value on a per share basis in.
Kerry: Thanks, Chris for the fourth quarter, our results beat consensus estimates for production adjusted EBITDA and discretionary cash flow adjusted EBITDA was $141 2 million, which was 4% higher than the prior quarter and reflected strong production and lower than expected cash G&A.
Speaker Change: In 2024, we returned $330 million to owners or over 70% of our discretionary cash flow.
Speaker Change: Since becoming public in mid 2022 are cumulative return of capital to shareholders is nearly $850 million, including dividends and share buybacks. This.
Production was up 6% quarter over quarter, averaging nearly 41000 Boe per day, we had a 9% increase in net turned in line wells in the quarter, which was driven by increased operator drilling and completion activity.
Speaker Change: This represents nearly 30% of our current market capitalization at current commodity prices, we expect that number to exceed $1 billion in 2025.
Speaker Change: This was a great year for US we had a winning combination of execution efficiency gains and acquisition activity that allowed us to maintain our strong balance sheet and return capital to shareholders Importantly, our results underscore the repeatability of our business model.
Kerry: On approximately $140 million of acquisitions late in the corner.
We are committed to returning capital to shareholders through cash dividends and opportunistic share repurchases. Our board declared a fourth quarter cash dividend of <unk> 41 per share payable on March 28, and during the fourth quarter, we repurchased 643000 shares for $12 9 million equating.
Speaker Change: With that I'll turn it over to Kerry to summarize our recent financial results and 2025 outlook.
Kerry: Thanks, Chris for the fourth quarter, our results beat consensus estimates for production adjusted EBITDA and discretionary cash flow adjusted EBITDA was $141 2 million, which was 4% higher than the prior quarter and reflects the strong production and lower than expected cash G&A.
Kerry: Equating to <unk> <unk> per share and repurchases.
Kerry: Fortunately this represents a total return of capital of 49 per share at year end, we had about $80 million remaining under our 200 million repurchased authorization.
Kerry: Production was up 6% quarter over quarter, averaging nearly 41000 Boe per day, we had a 9% increase in net turned in line in the quarter, which was driven by increased operator drilling and completion activity.
Kerry: Turning now to the balance sheet, we had $1 1 billion of debt outstanding with $437 2 million of availability under our revolving credit facility at year end 2020 for our borrowing base was increased by 75 million to $925 million and despite our 140 million.
Kerry: It's on approximately $140 million of acquisitions late in the quarter.
Kerry: We are committed to returning capital to shareholders through cash dividends and opportunistic share repurchases. Our board declared a fourth quarter cash dividend of <unk> 41 per share payable on March 28, and turning to the fourth quarter, we repurchased 643000 shares for $12 9 million.
Kerry: Of cash acquisitions in the fourth quarter liquidity only decreased by $15 million.
Kerry: We look to 2025, we expect activity levels to remain consistent with last year and have good visibility of the 45 net line of sight wells and commentary from operators and their activity levels. We expect our oil production at the midpoint will be 18500 barrels per day and total production will be just under 40.
Kerry: <unk> to <unk> <unk> per share and repurchases importantly, this represents a total return of capital of 49 per share at year end, we had about $80 million remaining under our 200 million repurchased authorization.
Kerry: <unk> thousand Boe per day at the midpoint. This represents a 3% increase over our reported full year 2020 for production.
Kerry: Turning now to the balance sheet, we had $1 $1 billion of debt outstanding with $437 2 million of availability under our revolving credit facility at year end 2020 for our borrowing base was increased by 75 million to $925 million and despite our 140.
Kerry: As a reminder, we do not forecast acquisitions, our published guidance. However, our history shows that we consistently create value through blocking and tackling with high return acquisitions and our pipeline remains strong. Please reference our materials for additional details I'll hand, it back to Chris.
Kerry: Of cash acquisitions in the fourth quarter liquidity only decreased by $15 million.
Speaker Change: Thanks, Gary before taking your questions. Let me quickly discuss how we define and measure success at CIT to your.
Kerry: As we look to 2025, we expect activity levels to remain consistent with last year and have good visibility of the 45 net line of sight wells and commentary from operators and their activity levels. We expect our oil production at the midpoint will be 18500 barrels per day and total production will be just under four.
Speaker Change: Number one on the list is healthy deal flow, we have a proven team with relationships and technical experience across all the major U S basins, we maintain strong relationships with large mineral owners and smaller mineral aggregators.
Speaker Change: Today, we continue to see consistent deal flow and attractive opportunities that meet our criteria for risk adjusted returns.
Kerry: <unk> thousand Boe per day at the midpoint. This represents a 3% increase over our reported full year 2020 for production.
Speaker Change: Continued market interest in M&A activity in the mineral space is increasingly drawing the attention of long term mineral owners, some who have held their minerals for more than 20 years and now appear more open to selling.
Chris Carey: As a reminder, we do not forecast acquisitions, our published guidance. However, history shows that we consistently create value through blocking and tackling with high return acquisitions and our pipeline remains strong. Please reference our materials for additional details I'll hand, it back to Chris.
Speaker Change: Many have been holding for yield but are recognizing that based on maturity along with development activity levels suggest favorable timing for a sale.
Speaker Change: We are very selective in the deals we consider must clear a high bar in 2024, we evaluated more than 160 transactions and ultimately executed on just 10% of those.
Speaker Change: Thanks, Gary before taking your questions. Let me quickly discuss how we define and measure success at Citigroup.
Speaker Change: Number one on the list is healthy deal flow, we have a proven team with relationships and technical experience across all the major U S basins, we maintain strong relationships with large mineral owners and smaller mineral aggregators today, we continue to see consistent deal flow and attractive opportunities that meet our criteria for risk adjusted returns.
Speaker Change: From a net royalty acre standpoint, we acquired just 4% of what we screened as a result, our 2024 deals had a weighted average unlevered IRR of more than 15% and next 12 month cash flow yield exceeding 25% well above our underwrite thresholds.
Speaker Change: Market interest in M&A activity in the mineral space is increasingly drawing the attention of long term mineral owners.
Speaker Change: We will remain disciplined in our underwriting assumptions and we will continue to look for the right deals to create value.
Speaker Change: Who have held their minerals for more than 20 years and now appear more open to selling.
Speaker Change: Second is growth per share.
Speaker Change: We are focused on adding value on a per share basis, our fourth quarter production was up 14% year over year, while our share count dropped 3%.
Speaker Change: Many have been holding for yield but are recognizing that based on maturity along with development activity levels suggest favorable timing for a sale.
Speaker Change: Becoming public we have increased production per debt adjusted share by more than 50%, representing a 20% compound annual growth rate.
Speaker Change: We are very selective in the deals we consider must clear a high bar in 2024, we evaluated more than 160 transactions and ultimately executed on just 10% of those.
Speaker Change: We will continue to use free cash flow to maintain our balance sheet and return meaningful cash to shareholders.
Speaker Change: From a net royalty acre standpoint, we acquired just 4% of what we screened as a result, our 2024 deals had a weighted average unlevered IRR of more than 15% and next 12 month cash flow yield exceeding 25% well above our underwrite thresholds.
Speaker Change: On the list is efficiency as measured by cash G&A per Boe.
Speaker Change: EBITDA margins and capturing missing revenue we're in the early innings of realizing the full potential of our proprietary automation tools and applications that underpin our asset management system.
Speaker Change: Automation and increases the value out of our professionals and maximizes the value of our assets with this platform in place we are positioned to seamlessly tack on additional assets supporting our margins and cost effective growth in the future.
Speaker Change: We will remain disciplined in our underwriting assumptions and we will continue to look for the right deals to create value.
Speaker Change: Second is growth per share.
Speaker Change: We are focused on adding value on a per share basis, our fourth quarter production was up 14% year over year, while our share count dropped 3%.
Speaker Change: Over the last three years, we've been very selective in how we have grown our business today, we have scale that can be leveraged to the advantage of our owners' recent investments in people and new technologies will create sustainable efficiencies in the years ahead.
Speaker Change: Becoming public we have increased production per debt adjusted share by more than 50%, representing a 20% compound annual growth rate.
Speaker Change: Closing <unk> is in a strong and advantaged position today in the minerals industry consolidation will continue and minerals assets will continue to migrate to bigger and more efficient companies like us.
Speaker Change: We will continue to use free cash flow to maintain our balance sheet and return meaningful cash to shareholders.
Speaker Change: On the list is efficiency as measured by cash G&A per Boe.
Speaker Change: EBITDA margins and capturing missing revenue we are in the early innings of realizing the full potential of our proprietary automation tools and applications that underpin our asset management system.
Speaker Change: We will continue to employ our proprietary practices to prudently manage our assets maintain financial strength and create long term value for our shareholders.
Speaker Change: Operator, we are now ready to take questions.
Speaker Change: Automation increases the value out of our professionals and maximizes the value of our assets with this platform in place we are positioned to seamlessly tack on additional assets supporting our margins and cost effective growth in the future.
Speaker Change: If you wish to ask a question. Please press star followed by one on your telephone keypad now if any reason you want to remove your question from Nicky. Please press star followed by <unk>.
Speaker Change: Over the last three years, we've been very selective in how we have grown our business today, we have scale that can be leveraged to the advantage of our owners' recent investments in people and new technologies will create sustainable efficiencies in the years ahead.
Speaker Change: To ask a question. Please ensure your device is Amit just likely our first question is from Neal Dingmann I'm curious securities your.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Good morning, guys.
Speaker Change: My first question just can you talk about your various marketing deals I'm just wondering how those compare there's been a lot of market deals are for how that compares to the crisp reveals and jewelry were complete.
Speaker Change: In closing <unk> is in a strong and advantaged position today in the minerals industry consolidation will continue and minerals assets will continue to migrate to bigger and more efficient companies like us.
Speaker Change: Hi, Good morning, Neal it's great it's great to hear from you.
Speaker Change: We will continue to employ our proprietary practices to prudently manage our assets maintain financial strength and create long term value for our shareholders.
Speaker Change: Just a couple of comments on that.
Speaker Change: M&A environment.
Speaker Change: You noted the deals to be evaluated in the deals we did.
Speaker Change: Operator, we are now ready to take questions.
So it was a robust year from your standpoint.
Speaker Change: If you wish to ask a question. Please press star followed by one on your telephone keypad now if any reason you want to remove your question from Nicky. Please press star followed by <unk>.
Speaker Change: One thing to highlight the consistency of how we're delivering.
Speaker Change: This program. So you can look at this as the last couple of years quarter in quarter out.
Speaker Change: Small and medium size acquisitions or capital.
To ask a question. Please ensure your device is Amit just likely a.
Speaker Change: Our job you really have to allocate this capital most efficiently our capital flowing to the highest rate of return opportunities.
Speaker Change: Our first question is from Neal Dingmann I'm curious securities.
Speaker Change: As you can tell by the statistics that we mentioned in the call. We've looked at hundreds of thousands of net royalty acres during the year and acquired 20000.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Good morning, guys.
Speaker Change: My first question just could you talk about your various marketed deals I'm just wondering how those compare spent a lot of market deals are for how that compares to the crisp number of deals that you already were complete.
Speaker Change: Throughout the entire year, that's because those are the highest rate of return opportunities and we've talked about IRR.
Speaker Change: IRR is around here because that is our north star in terms of what guide us on all of our investments Division.
Speaker Change: Good morning, Neil scripts.
Speaker Change: <unk>.
Speaker Change: Just a couple of comments on the M&A environment.
Speaker Change: For people on the outside of the company's the residents because.
Speaker Change: We don't have all the data we have so.
Speaker Change: They will be evaluated in the deals we did.
Perhaps it helps to share some more information around where that shows up.
Speaker Change: So it was a robust year from you'll close standpoint.
Speaker Change: <unk>.
Speaker Change: The company so it manifests itself in a couple of ways one of them.
One thing to highlight the consistency of how we're delivering.
Speaker Change: At the high cash flow yield on the deals we did this year as I mentioned in the call.
Speaker Change: This program. So you look at just the last couple of years quarter in quarter out make these small and medium size acquisitions or capital.
Speaker Change: Hello yield over 25% our next 12 month basis for the deals we did in 2025. The other places so it was up.
Speaker Change: Are you really have to allocate this capital most efficiently our capital flowing to the highest rate of return opportunities.
Speaker Change: As production per debt adjusted share.
Speaker Change: As you can tell by the statistics that we mentioned in the call. We've looked at hundreds of thousands of net royalty acres during the year and acquired 20000.
Speaker Change: We've been public.
Speaker Change: June of 2022 or.
Speaker Change: Our production per debt adjusted share and has grown by a compounded annual growth rate of about 20%.
Speaker Change: Throughout the entire year, that's because those are the highest rate of return opportunities and we've talked about.
Speaker Change: So when.
Speaker Change: IRR is around here because that is our north star in terms of what guides us on all of our investment decision.
Speaker Change: When we look at the 2024 program.
Speaker Change: Two.
Speaker Change: Of the deals we did out of 2016 were actual auctions.
Speaker Change: Hard for people on the outside of the company.
Speaker Change: We don't have all the data we have so.
Speaker Change: The remaining 2014 were based on relationships we have.
Speaker Change: Perhaps it helps to share some more information around where that shows up.
Speaker Change: And as it relates to the mineral owners and then.
Speaker Change: <unk>.
Speaker Change: Supported by our relationship we have with the operators, who occasionally certain information with us.
Speaker Change: The company so it manifests itself in a couple of ways one is.
Speaker Change: Look at the high cash flow yield on the deals we did this year as I mentioned in the call.
Speaker Change: Why does that activity, which helps underpin our underwriting so.
Speaker Change: Great great job on the theme. This year is to do I'm really proud of what everybody is not listed here on the acquisition program and the more.
Speaker Change: For yield over 25% next 12 month basis for the deals we did in 2025. The other places. So is that is in production per debt adjusted share since the time.
Speaker Change: More importantly growth looking forward is 2025 of every bit is promising.
Speaker Change: The opportunity is.
Speaker Change: We've been public.
Speaker Change: Is enormous.
Speaker Change: June of 2022.
Speaker Change: The sort of the art of the possible, but the actual tangible pipeline in front of US is large so we're working our way through it and we will continue to allocate capital towards the highest rate of return opportunities.
Speaker Change: Our production per debt adjusted share and has grown by a compounded annual growth rate of about 20%.
Speaker Change: So.
Speaker Change: When we look at the.
Speaker Change: <unk> 2024 program.
Speaker Change: And then.
Speaker Change: Two of the deals we did out of the 16 were actual auction properties. The remaining 14 were based on our relationships we have.
Speaker Change: This is the second most operators have plans out I'm just wondering what is it.
Speaker Change: It looks like for remainder of the year versus what you all were expecting thanks.
Speaker Change: And as it relates to the mineral owners and then.
Speaker Change: I'm, sorry, I had trouble hearing the question Neil.
Speaker Change: Supported by which we havent the operators.
Speaker Change: I'm just wondering you know most operators have their plans out and I am just wondering Chris based on sort of expectations, whether it's in the Permian DJ.
Speaker Change: Certain information with us on.
Speaker Change: Monistat activity, which helps underpin our underwriting so.
Speaker Change: What were your minerals are or.
Speaker Change: Great.
Speaker Change: But the theme this year is to do I'm really proud of what everybody accomplished year on the acquisition program and the more.
Speaker Change: As activity about as you were expecting.
Speaker Change: Sort of startup the year.
Speaker Change: Remainder of the year.
Speaker Change: More importantly, looking forward is 25 of every bit is promising.
Speaker Change: Good question, yes, so we've been watching our operator now closely.
Opportunities from it.
Speaker Change: Is enormous.
Speaker Change: And that does inform how are we looking at.
Speaker Change: The sort of the art of the possible, but the actual tangible pipeline in front of US is large so we're.
Speaker Change: At our guidance for 2025.
Speaker Change: The bulk of our guidance almost all of it is underpinned by the spud permit so activity that has already come in by the operators. So we don't have to believe a lot about what.
Speaker Change: Working our way through it and we'll continue to allocate capital towards the highest rate of return opportunities.
Speaker Change: And then just a second just most operators have plans out I'm just wondering what does it look like for remainder of the year versus what you all were expecting thanks.
Speaker Change: But theyre going to do with remaining inventory on our footprint.
Speaker Change: And most of the cases, they've already spent some capital dollars to initiate some kind of activity on our minerals. So.
Speaker Change: Sorry, I had trouble hearing the question Neil.
Speaker Change: I'm just wondering the most operators have their plans out and Im just wondering Chris based on sort of expectations, whether it's in the Perm TJ you think about where your minerals are or is activity about as you expected.
Speaker Change: The guidance, even months, which showed about a 3% growth year over year at the midpoint of our guidance is informed by not only the operator carman submission, but also by the actions. They are taking on studying new wells and permitting new wells.
Speaker Change: Sort of startup the year.
Speaker Change: The way that it looks good.
Speaker Change: The remainder of the year.
Speaker Change: Good question, yes, so we've been watching our operator.
Speaker Change: As you think about how it relates to our acquisition program, we don't we don't die.
Speaker Change: And that doesn't inform how we look at.
Speaker Change: Included in our guidance and contribution from acquisitions.
Speaker Change: At our guidance for 2005, the good news is the bulk of our gotten almost all of it is underpinned by the spud permit so activity that has already commenced by the operators. So we don't have to believe a lot about what.
Speaker Change: We do with our acquisition program in 2020 bonds will be over and above that that organic growth rate.
Speaker Change: That address your question Neal.
Speaker Change: Thank you.
Speaker Change: But theyre going to do with remaining inventory on our footprint.
Speaker Change: Okay.
Speaker Change: And most of the cases, they have already spent some capital dollars.
Speaker Change: Thank you.
Speaker Change: Question is from Derrick Whitfield from Texas Capital. Your line is now open. Please go ahead.
Speaker Change: You gave some kind of activity on our minerals.
Speaker Change: The guidance each month, which showed about a 3% growth year over year at the midpoint of our guidance is informed by not only the operator carman submission, but also by the actions, we're taking on starting new wells and permitting new wells.
Derrick Whitfield: Thanks, and good morning on congrats on a strong year end close and update.
Speaker Change: Or my error.
Speaker Change: My first question I wanted to build on Neal's question on guidance.
Speaker Change: As outlined in your <unk> guidance implies maintenance level activity versus Q4, while your line of site activity implies growth.
Speaker Change: As you think about how it relates to our acquisition program. We don't we don't guide for.
Speaker Change: Included in our guidance and contribution from acquisition.
Speaker Change: How would you frame your production trajectory.
Speaker Change: We do with our acquisition program in 2020 bonds will be over and above that that organic growth rate.
Speaker Change: Were there any outsized contribution from Miss in revenue or M&A that led to a stronger than expected Q4.
Neal: That address your question Neal.
Neal: Thank you.
Speaker Change: Yeah. Thanks, so the missing revenue. After we have is really to collect payments that were already owed we already show in our revenue line.
Neal: Okay.
Neal: Thank you.
Speaker Change: Next question is from Derrick Whitfield from Texas Capital. Your line is now open. Please go ahead.
Speaker Change: So that doesn't result in incremental revenue.
Speaker Change: Result in incremental cash that cover that we are owed.
Derrick Whitfield: Thanks, and good morning on congrats on a strong year end close and update.
Speaker Change: Oftentimes requires an extraordinary effort to recover.
Speaker Change: When we think about.
Speaker Change: Thanks Terry.
Speaker Change: We think about the 2025 production.
Derrick Whitfield: Kurt.
Speaker Change: My first question I wanted to build on Neal's question on guidance.
Speaker Change: We do see contribution from.
Speaker Change: As outlined in your <unk> guidance implies maintenance level activity versus Q4, while your line of site activity implies growth.
Speaker Change: Primarily the Permian some from the DJ basin as well a lot of activity we've done in recent years.
Speaker Change: How would you frame your production trajectory.
Speaker Change: DJ Basin has been skewed more towards line of site development.
Speaker Change: Were there any outsized contribution from missing revenue or M&A that led to a stronger than expected Q4.
Speaker Change: When we think about longer term and more duration. It really is the Permian is where the activity will largely come from.
When we look at our footprint there.
Yeah. Thanks, so the missing revenue. After we have is really to collect payments that were already owed we already show in our revenue line.
Speaker Change: If you just exclude.
Speaker Change: New Mexico, where we have a lighter footprint that's had some statistics that we can share with you on our on our percentage coverage now we talked about the entire Permian basin, we cover about 36% of the entire Permian basin.
Speaker Change: So that doesn't result in incremental revenue.
Speaker Change: Result in incremental cash that covered that we are owed.
Speaker Change: Oftentimes requires an extraordinary effort to recover.
Speaker Change: But then when you narrow it down to where our asset concentration within that.
Speaker Change: When we think about.
Speaker Change: There were some specific for US yes, so we had hoped for.
Speaker Change: Think about the 2025 production.
Speaker Change: We do see contribution from.
Speaker Change: Our acreage.
Speaker Change: Coverage more.
Speaker Change: Primarily the Permian some from the DJ basin as well a lot of activity we've done.
Speaker Change: And the second part of the Delaware Basin.
Speaker Change: Around 56%.
Speaker Change: And 16% in the Mexico.
Speaker Change: DJ Basin has been skewed more towards line of site development. So when we think about longer term and more duration. It really is the Permian is where the activity largely come from and if you look at our footprint there.
Speaker Change: With total basin coverage around 36%.
Speaker Change: Okay.
Speaker Change: Terrific and then maybe leaning in on your commentary on the robust deal flow for 2025. Your M&A focus in recent quarters has been as you noted on the Permian and DJ.
Speaker Change: You just exclude.
Speaker Change: New Mexico, where we have a lighter footprint.
Speaker Change: Some statistics that we can share with you on our on our percentage coverage, we talked about the entire Permian basin, we cover about 36% of the entire Permian basin.
Speaker Change: First kind of part of this question is does the more constructive natural gas backdrop changed the size of the opportunity set where our teams are focused.
Speaker Change: But then when you narrow it down to where our asset concentration within that.
Speaker Change: And then more broadly and thinking about the value of your differentiated AI driven asset management system.
Speaker Change: That comparison.
Speaker Change: That system change, how you think about buying diversified packages, where the market opportunity could be greater for the machine you built.
Speaker Change: For US yes, so we have that.
Speaker Change: Sure.
Speaker Change: Our acreage.
Speaker Change: Can charge more for parts.
And the second part of the Delaware Basin.
Speaker Change: Yeah. Thanks, So I think the market opportunity for the investments we've made in people and systems really lends itself to scale.
Speaker Change: Around 56%.
Speaker Change: And.
Speaker Change: Mexico.
Speaker Change: I don't think any particular advantage for greater geographic diversification. It really is an advantage of scale. So the investments we've made will pay off significantly as we continue to scale. This business, it's really remarkable.
Speaker Change: With total basin coverage around 36%.
Speaker Change: Okay.
Speaker Change: Terrific and then maybe leaning in on your commentary on the robust deal flow for 2025.
Speaker Change: Our M&A focus in recent quarters has been as you noted on the Permian and DJ.
Speaker Change: How we can just layer in more one zeros into our system that we've built that's almost infinitely scalable.
Speaker Change: First kind of part of this question is does the more constructive natural gas backdrop changed the size of the opportunities that where our teams are focused and then more broadly and thinking about the value of your differentiated AI driven asset management system does that system change, how you think about buying diversified packages, where the market opportunity could be.
Speaker Change: Yeah.
Speaker Change: I wanted to think about the natural gas backdrop I got those questions over E mail from a shareholder as well.
Speaker Change: It's pretty favorable when you look at.
Speaker Change: The gas macro so global gas demand and then you have domestic gas demand from increased power generation needs for electrification of everything and then.
Speaker Change: For the machine you built.
Speaker Change: Yes. Thanks.
Speaker Change: I think the market opportunity for the investments we've made in people and systems really the scale.
Speaker Change: Buzzword lately as data centers.
Speaker Change: And thats not a near term.
Speaker Change: It's probably several years away, but its a great macro tailwind for perpetual assets like ours and so we look at our portfolio. We don't we don't look at ourselves.
Speaker Change: Any particular advantage for greater geographic diversification. It really is an advantage of scale. So the investments we've made will pay off significantly as we continue to scale. This business, it's really remarkable.
Speaker Change: On natural gas because we do have quite a bit of a method that exposure in the Permian and to a lesser extent in the DJ basin, just given the relative size of those footprints Gerrit has them.
Speaker Change: How we can just layer in more one zeros into our system that we've built that's almost infinitely scalable.
Speaker Change: You might find interesting on.
Speaker Change: When I think about the natural gas backdrop I got this question over E mail from a shareholder as well.
Speaker Change: On the trends in natural gas in the Permian.
Speaker Change: Not a lot of people are talking about.
Speaker Change: It's pretty favorable when you look at.
Speaker Change: This is a reality so I'll turn over to Europe.
Speaker Change: The gas macro so global gas demand and then you have domestic gas demand from.
Eric: Yes, Eric.
Eric: One thing that we've been looking at recently as trends in percent oil.
Eric: The Permian over time, so we run these numbers internally and you also can find them at the short term energy outlook at the EIA. If you go back to around 2021, the Permian was around 63% oil and today its around 60% oil so youre seeing nearly 1% year a year of oil.
Speaker Change: Increased power generation needs.
Speaker Change: Specification of everything and then.
Speaker Change: Buzzword lately is data centers.
Speaker Change: And thats not a near term.
Speaker Change: Probably several years away, but its a great macro tailwind for perpetual assets like ours and so we look at our portfolio. We don't we don't.
Eric: Dropping in the Permian and its more pronounced in the Midland Basin.
Speaker Change: Look at ourselves white on natural gas because we do have quite a bit of a method that disclosure in the Permian and to a lesser extent in the DJ basin, just given the relative size of those footprints Gerrit has them.
Eric: So that's something that we're looking at not a lot of people are seeing and without having around half of our revenue from the Delaware Basin, which has less of this effect compared to the Midland.
Speaker Change: You might find interesting.
Speaker Change: On the trends in natural gas in the Permian, but.
Eric: That's good for us, but we obviously have exposure to the Midland basin. So we're looking at that not only from an asset management perspective, but also how we think about our.
Speaker Change: Not a lot of people are talking about.
Jarrett: It's a reality, so I'll turn over to Jarrett.
Jarrett: Yes, Eric.
Eric: One thing that we've been looking at recently as trends in percent oil.
Guidance. So that's why this year youll see a little bit.
Eric: Lastly, the oil percentage for the year and that's underpinned by the line of sight wells.
Permian over time, so we run these numbers internally and you also can find them at the short term energy outlook at the EIA. If you go back to around 2021, the Permian was around 63% oil and today its around 60% oil and so youre seeing nearly <unk>.
Eric: As well as what we're seeing on the PDP base that we already have.
Eric: And I think your other question you mentioned I was just kind of jump in here on the on.
Eric: On AI and how it effects of acquisitions.
Eric: Physician underwriting is not explicitly exposed to the tools that we built that utilize AI, but the great news about that is probably one of the funnest parts of our business is once we acquire something we're able to go back and recover revenue.
Eric: 1% year, a year of oil.
Eric: Oil dropping in the Permian and its more pronounced in the Midland Basin.
Eric: So that's something that we're looking at but not a lot of people are seeing and.
Eric: With us having around half of our revenue from the Delaware Basin, which has less of this effect compared to the Midland.
Eric: <unk> in dollars that the previous quarters were not actively managing missed.
Eric: That's good for us, but we obviously have exposure to the Midland basin. So we're looking at that not only from an asset management perspective, but also how we think about.
Eric: The asset management tools that we have a really great way too.
Eric: Improve the management of the acquisitions will be brought in house. That's currently that for every single acquisition that we do that.
Eric: Guidance. So that's why this year youll see a little bit.
Eric: Lastly, the oil percentage for the year and that's underpinned by the line of sight wells.
Eric: Enjoy working on and Derik, one other comment I'll make just on the natural gas pricing part of your question. We're really encouraged that the midstream companies really staying ahead of.
Eric: As well as what we're seeing on the PDP base that we already have.
Eric: And I think your other question you mentioned I was just kind of jumping here on on AI and how it effects acquisitions.
Eric: Yes.
Eric: The propensity for the Permian to see wider basis differentials. So we're thrilled to see Blackstone and warrior.
Eric: The underwriting is not explicitly exposed the tools that we built that utilize AI, but the great news about that is probably one of the funnest parts of our business is once we acquire something we're able to go back and recover revenue.
Eric: <unk> underway and expect to see more announcements like that.
Derek just walked through continue to manifest themselves into reality.
Eric: In dollars that the previous quarters were not actively managing it missed.
Eric: That's helpful. Thanks for your time.
Eric: The asset management tools that we have a really great way too.
Speaker Change: Thank you. Our next question is from Jared <unk> from Stephens. Your line is now open. Please go ahead.
Derrick Whitfield: Improve the management of the acquisitions will be bringing in house. That's currently that for every single acquisition that we do that we enjoy working on and Derik one other comment I'll make just.
Jared: Hey, good morning, guys and thanks for taking my question.
Jared <unk>: First one is another one in regards to natural gas.
Jared <unk>: Some of the Appalachia operators have provided guidance for increased gas production in the basin, whether it be this year over the next few years can.
Derrick Whitfield: Natural gas pricing part of your question, we're really encouraged that the midstream companies really staying ahead of.
Jared <unk>: Can you provide any color as to if you've looked at the mineral deals in Appalachia or what do you see the deal flow in that basin mix.
Derrick Whitfield: Yes.
Derrick Whitfield: The propensity for the Permian to see wider basis differentials. So we're thrilled to see Blackstone and warrior projects underway and expect to see more announcements like that.
Speaker Change: Yes. Thanks for the question, we used to own some assets in Appalachia.
Speaker Change: The particular assets that we own we're relatively mature compared to the rest of our portfolio and we had a pretty unique opportunity to make a high rate of return acquisitions. So again positioned as capital Allocators, we decided to part with those assets and use those proceeds to fund.
Derrick Whitfield: These trends.
Derrick Whitfield: Derek just walked through continue to manifest themselves into reality.
Speaker Change: That's helpful. Thanks for your time.
Speaker Change: Thank you. Our next question is from Jared <unk> from Stephens. Your line is now open. Please go ahead.
Speaker Change: The DJ Basin acquisition, we did close on April 4th of 2024, So we've been Appalachian before we think the world out of the region.
Jared: Hey, good morning, guys and thanks for taking my question.
Jared: First one is another one in regards to natural gas.
Speaker Change: Logic provinces, we're very very fortunate.
Jared: Some of the Appalachia operators have provided guidance for increased gas production in the basin, whether it be this year over the next few years.
Speaker Change: Country to have that resource and the enormous resource in place very healthy operators.
Speaker Change: Can you provide any color as to if you've looked at the mineral deals in Appalachia or what do you see the deal flow in that basin.
Speaker Change: In the region.
Speaker Change: As a mineral owner.
A unique set of challenges for owning minerals.
Speaker Change: Yes. Thanks for the question, we used to own some assets in Appalachia.
Speaker Change: In Appalachia.
Speaker Change: And a lot of it centers around the land situation I can Tony.
Speaker Change: The particular assets that we own we're relatively mature compared to the rest of our portfolio and we had a pretty unique opportunity to make a high rate of return acquisitions. So again positioned as capital Allocators, we decided to part with those assets and use those proceeds to fund.
James: Paul over to Britain, James from our Atlanta.
Speaker Change: Atlanta has described some of those.
Chris Jones: Chris Jones.
Speaker Change: But in trying to.
Speaker Change: Got it.
Speaker Change: Share information publicly.
Speaker Change: In terms of its offerings in states with their drilling plans in place to make it challenging for us.
Speaker Change: The DJ Basin acquisition, we did close on April 4th of 2024, So we've been Appalachian before we think the world out of the region.
Speaker Change: Going to happen in future development.
Speaker Change: Logic provinces, we're very very fortunate.
Speaker Change: Perfect. Thanks for the color.
Speaker Change: Country to have that resource and if theyre.
Speaker Change: And then my second one is <unk>.
Speaker Change: Could you give us some thoughts on the strategic priorities for free cash flow allocation in 2025, particularly regarding debt reduction dividends buybacks and investments in growth opportunities. Thank you.
Speaker Change: The enormous resource in place very healthy operators.
Speaker Change: In the region.
Speaker Change: As a mineral owner.
Speaker Change: The unique set of challenges for owning minerals in Appalachia.
Speaker Change: Sure Yes.
Speaker Change: And a lot of it centers around the land situation I can turn the call over to Britain James from our VP.
Speaker Change: First and foremost priority is returning capital to our shareholders. This is a really powerful business model that is capable of returning a lot of capital to shareholders. In fact, we've returned over $840 million to shareholders through dividends and buybacks just in the short time, we've been managing this company.
We have land to describe some of those yes.
Speaker Change: Yes.
Speaker Change: John we have one but im trying to.
Speaker Change: Got it.
Speaker Change: Share information publicly.
Speaker Change: And I would expect this year with the commodity price environment. We're in today for that number to exceed $1 billion.
Speaker Change: Oftentimes the latest offerings since space.
Speaker Change: Our drilling plans in place to make it challenging for us.
Speaker Change: So far we've returned approximately 30% of our market cap to our shareholders in a very short period of time, so it's a really powerful business model too.
Speaker Change: It's going to happen in the future development.
Speaker Change: Perfect. Thanks for the color.
Speaker Change: To be able to return that capital to shareholders that said there is also a very remarkable opportunity to reinvest as I mentioned.
Speaker Change: And then my second one is could you give us some thoughts on our strategic priorities for free cash flow allocation in 2025, particularly regarding debt reduction dividends buybacks and investments in growth opportunities.
Speaker Change: Acquisition opportunities that are in front of us present really compelling rate of return opportunities for reinvestment. So.
Speaker Change: Yes.
Speaker Change: We do look to use the <unk>.
Speaker Change: Sure Yes.
Speaker Change: <unk> capital for two purposes wanted to reinvest in high rate of return accretive acquisition and then also maintaining our very strong balance sheet.
Speaker Change: First and foremost priority is returning capital to our shareholders. This really powerful business model that is capable of returning a lot of capital to shareholders. In fact, we've returned over $840 million to shareholders through dividends and buybacks just in the short time, we've been managing this company.
Speaker Change: Want to note that our cost of capital, let's turn out to be an advantage for us and as we look at.
Speaker Change: I look at the bond market and.
Speaker Change: And I would expect this year with the commodity price environment. We're in today for that number to exceed $1 billion.
The investors there are speaking with the price action.
Speaker Change: So so far we've returned approximately 30% of our market cap to our shareholders in a very short period of time, so it's a really powerful business model too.
Speaker Change: You look at our yield on our existing bonds and it's close to 6%.
Speaker Change: And that's a really compelling cost of capital.
Speaker Change: To be able to return that capital to shareholders that said there is also a very remarkable opportunity to read that as I mentioned the acquisition opportunities that are in front of us present really compelling rate of return opportunities for reinvestment. So we do look to use the retained capital for two purposes wanted to reinvest.
Speaker Change: Relative to where we were and are not too long ago.
Speaker Change: Our existing notes back in <unk>.
Speaker Change: 2022 yielded an excess of 10%.
Speaker Change: Remarkable improvement in our cost of capital.
Speaker Change: And then finally literally over $400 million of liquidity are key.
Speaker Change: Cash interest expense per BOE is down 17% year over year.
Speaker Change: And high rate of return accretive acquisitions.
Speaker Change: Also maintaining.
Speaker Change: The maintenance of a really strong balance sheet is very important for us and reinvesting in high rate of return acquisitions is also important.
Speaker Change: Maintaining our very strong balance sheet is important to note that.
Speaker Change: Our cost of capital, let's turn out to be an advantage for us.
Speaker Change: We looked at.
Speaker Change: I look at the bond market and.
Speaker Change: Thanks for taking my questions.
Speaker Change: The investors there are are speaking with the price action.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Reminder, if you wish to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Look at the yield on our existing bonds and it's close to 6%.
Speaker Change: Our next question is from Tim <unk> from Keybanc. Your line is now open. Please go ahead.
Speaker Change: And that's a really compelling cost of capital.
Speaker Change: Relative to where we were and are not too long ago.
Tim: Hey, good morning folks and thanks for taking my questions first one was the housekeeping one I was curious if you could provide some color behind the cash G&A increase it looks like it's up about 25% year over year I don't know if thats, just elisa doing a good job with contract negotiations or if there's something more there.
Speaker Change: Our existing notes back in two.
Speaker Change: <unk> 2022, yielding in excess of 10%.
Remarkable improvement in our cost of capital.
Speaker Change: And then finally literally over $400 million of liquidity are.
Speaker Change: Cash interest expense per BOE is down 17% year over year.
Speaker Change: Color would be helpful. Thanks.
Speaker Change: The maintenance of a really strong balance sheet is very important for us and reinvesting in high rate of return acquisitions is also important.
Speaker Change: Thanks, Tim.
Speaker Change: I appreciate the question so to deliver.
Speaker Change: I think you've seen a couple of things one is we've made the investments in people and systems.
Speaker Change: Thanks for taking my questions.
Speaker Change: <unk> allows us to scale.
Speaker Change: Thank you.
Speaker Change: Larger than where we are right now.
Speaker Change: Thank you.
Speaker Change: The percentage that you mentioned and obviously that is a large percentage, but when we look at the absolute dollar increase year over year, you are talking about six or $7 million increase on a $4 billion enterprise. So I think youre talking the law of small numbers.
Speaker Change: If you wish to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Our next question is from Tim <unk> from Keybanc. Your line is now open. Please go ahead.
Tim: Hey, good morning folks and thanks for taking my questions first one was the housekeeping one.
Speaker Change: Another interesting factoid is that our cash G&A for the entire year is effectively paid for by the first three weeks.
Speaker Change: I was curious if you could provide some.
Speaker Change: Color behind the cash G&A increase it looks like it's up about 25% year over year I don't know if thats, just elisa doing a good job with contract negotiations or if there's something more there any color would be helpful. Thanks.
Speaker Change: Royalty revenue for the year so.
Speaker Change: It's a remarkably scalable business from a G&A standpoint, with the investments we've made we're very optimistic about the future.
Speaker Change: Okay, Okay that makes sense.
Speaker Change: Thanks.
Speaker Change: I appreciate the question.
Speaker Change: As my follow up.
Speaker Change: Melissa.
Speaker Change: We had pretty successful claims small bar with the non marketed deals.
With that I think you've seen a couple of things. One is we've made the investments in people and systems.
Speaker Change: And what's been interesting is you've had a willingness to go into kind of the DJ basin recognizes the strong economics. There when you have permitted wells, there's a large operator, there's been discussions about a potential mineral sale.
Speaker Change: <unk> allows us to scale.
Speaker Change: Larger where we are right now.
Speaker Change: The percentage that you mentioned, obviously, the even larger percentage, but when we look at the absolute dollar increase year over year, Youre talking about $6 million to $7 million increase on a $4 billion enterprise. So I think youre talking the law of small numbers.
Speaker Change: In that area.
Speaker Change: Chatter around $1 billion.
Speaker Change: So.
Speaker Change: Can you provide any comments on that on that news or your willingness to go that big for that for the right deal.
Speaker Change: Another interesting factoid is that our cash G&A for the entire year is effectively paid for by the first three weeks.
Speaker Change: Yes.
Speaker Change: Less about how big the deals.
Speaker Change: Royalty revenue for the year so.
Speaker Change: More of a bigger return box so risk adjusted returns haven't compensate us for capital.
Speaker Change: It's a remarkably scalable business from a G&A standpoint, with the investments we've made we're very optimistic about the future.
Speaker Change: Capital. So we look at large acquisitions, all the time and our existing basements and other basins, but the risk adjusted returns have just been better on these kind of deals we've executed on so that's how it's done.
Speaker Change: Okay, Okay that makes sense.
Speaker Change: As my follow up.
Speaker Change: Good pretty successful claims small bar within non marketed deals.
Speaker Change: The small deals that we've done in the DJ basin in particular have been heavily skewed towards existing production and spud wells and then permits that are within the caps.
Speaker Change: And what's been interesting is you've had a willingness to go into kind of the DJ basin recognizes.
Speaker Change: Economics, there when you have permitted wells, there's large operator, there's been discussions about potential mineral sale.
Speaker Change: So it's.
Speaker Change: From our standpoint.
Speaker Change: In that area.
Speaker Change: The risk adjusted return and then the Permian program looks a lot like what you've seen from us in prior years, but a good balance of existing production.
Speaker Change: Chatter around $1 billion.
Speaker Change: So.
Speaker Change: Can you provide any comments on that on that news or your willingness to go that big for that for the right deal.
Speaker Change: Well and.
Speaker Change: Yes.
Speaker Change: Years and years of remaining inventory a lot more duration on its ear anywhere else.
Speaker Change: Less about how big of a deal.
Speaker Change: More about how big the return box so risk adjusted returns have to compensate us for I think.
Speaker Change: Okay. Thanks, if I could just sneak a follow up and just to.
Speaker Change: Capital.
Speaker Change: We look at large acquisitions all the time.
Kind of close the loop on the acquisitions in the fourth quarter your oil SKU went down a bit.
Speaker Change: And basements and other basins, but the risk adjusted returns have just been better on these deals we've executed on so that's how we've done it.
Speaker Change: Can you just.
Speaker Change: It seemed like that was from those acquisitions is that what's driving that lower oil SKU you talked about the maturation of the Midland, but as that acquisition kind of the big driver of that.
Speaker Change: But the small deals that we've done in the DJ basin in particular have been heavily skewed towards <unk>.
Speaker Change: <unk> production and spud wells and then permits that are within the caps.
Speaker Change: <unk>.
Speaker Change: Yes that was one that was done.
Speaker Change: And a component of it but I think the important thing to note is that even without the acquisitions. We would have been we would have been right around the midpoint of the guidance on oil so.
Speaker Change: That proved so.
Speaker Change: No.
Speaker Change: From our standpoint proper.
Speaker Change: Proper risk adjusted return and then the Permian program looks a lot like what you've seen from us in prior years with a good balance of existing production.
Speaker Change: It's not like the.
Speaker Change: The oil volumes are coming through without acquisition.
Speaker Change: Well.
Speaker Change: Years and years of remaining inventory a lot more duration than it is anywhere else.
Speaker Change: We're exceeding on oil for the full year from our from our guidance, but we're exceeding by a wide margin.
Speaker Change: Okay. Thanks, if I could just sneak a follow up and just to.
Speaker Change: So gas for the dynamics that are at work there.
Speaker Change: Okay.
Speaker Change: Kind of close the loop on the acquisitions in the fourth quarter your oil SKU went down a bit.
Speaker Change: Okay. Thanks for the comments.
Speaker Change: Thanks, Tim.
Speaker Change: Can you just.
Speaker Change: Thank you. Our next question is from no parks in time for this investment. Your line is now open. Please go ahead.
Speaker Change: It seemed like that was from those acquisitions is that what's driving that lower oil SKU you talked about the maturation of the Midland, but as that acquisition kind of the big driver of that.
Hi, good morning, just.
Speaker Change: <unk>.
Speaker Change: Just a couple I apologize if you touched on this already but.
Yes that was definitely a component of it but I think the important thing to note is that even without the acquisitions. We would have been we would have been right around the midpoint of the guidance on oil so.
Speaker Change: The deal environment.
Speaker Change: Yes.
Speaker Change: If we did have ahead of us.
Speaker Change: Period of sustained higher prices.
Speaker Change: It's not like the.
Speaker Change: Oil and gas.
Speaker Change: Capital discipline persists and.
Speaker Change: The oil volumes are coming through without acquisition.
Speaker Change: Demand is good on the macro level and we wind up through.
Speaker Change: We're exceeding on oil for the full year from our from our guidance, but we're exceeding by a wider margin on natural gas for the dynamics that are at work there.
Speaker Change: Scared away from the higher end of of recent creating ranges.
Speaker Change: Is that helpful or more or more hurtful.
Brian: Brian has been asking and getting people do.
Speaker Change: Okay. Thanks for the comments.
Speaker Change: Thanks, Tim.
Speaker Change: Agreement on people.
Speaker Change: Thank you. Our next question is from no parks in time for this investment.
Speaker Change: It's a really good question because we've looked at this phenomenon of the interplay between commodity price environment or movement and.
Speaker Change: If I can please go ahead.
Speaker Change: And acquisition activity and sort of a gap between the.
Speaker Change: Hi, good morning.
Speaker Change: Just a couple I apologize if you touched on this already but.
Speaker Change: The bid and the ask on acquisition.
Speaker Change: The deal environment.
Speaker Change: What we found is the least constructive environment for us is a rapidly declining price environment that we find that sellers tend to hold onto price expectations from just recent history.
Speaker Change: Yes.
Speaker Change: If we did have ahead of us.
Speaker Change: Period of sustained higher prices.
Speaker Change: Oil and gas space.
Speaker Change: Capital discipline persists and.
Speaker Change: Stable prices are at.
Speaker Change: Demand is good on the macro level and we wind up true.
Speaker Change: A quick for us to transact and rising price environments are adequate as well so I'd say the only one unfavorable a rapidly declining price environment, but.
Speaker Change: Steadily at the higher end of of recent trading ranges.
Speaker Change: Is that helpful or more or more hurtful.
Speaker Change: As you mentioned for what we've seen for quite a period now where it's been it's been a.
Speaker Change: Sounds good asking and getting people do.
Speaker Change: Healthy stable environment, maybe trending upward on natural gas more than more than oil but <unk>.
Speaker Change: Agreement on people.
Speaker Change: It's a really good question because we've looked at this phenomenon of the interplay between commodity price environment or movement and.
Speaker Change: Supportive for M&A activity.
Speaker Change: Great. Thanks, Andrew.
Speaker Change: No.
Speaker Change: And acquisition activity and sort of a gap between the.
Speaker Change: But again from where we've seen more on the gas side.
Speaker Change: The bid and the ask on acquisition.
Speaker Change: Sure.
Speaker Change: Good environment.
Speaker Change: What we found is the least constructive environment for us is a rapidly declining price environment that we find that sellers tend to hold onto price expectations from just recent history.
Speaker Change: Seasonally this year for <unk>.
Speaker Change: As we look at those gassy operators reporting year over year numbers.
Speaker Change: It looks like.
Speaker Change: Much better.
Speaker Change: Stable prices are.
Much bigger comps compared to.
Speaker Change: Adequate for us to transact in advising price environments are adequate as well so I'd say the only one unfavorable as a rapidly declining price environment.
Speaker Change: Tough winter last year so.
Speaker Change: We definitely have seen also alongside capital discipline.
Speaker Change: This greater willingness to use curtailments as a way to to address volatility, especially downward volatility building box and so forth and.
Speaker Change: As you mentioned for what we've seen for quite a period now where it's been it's been a.
Speaker Change: Healthy stable environment, maybe trending upward on natural gas more than more than oil but.
Speaker Change: Can you sort of see just your diversification by basin by operator being the best defense against.
Speaker Change: Supportive for M&A activity.
Speaker Change: Great. Thanks, Andrew.
Speaker Change: Even increased lumpiness when when.
Speaker Change: No.
Speaker Change: Hum.
Speaker Change: Operators react to what they see.
Speaker Change: Again from where we've seen more on the gas side.
Speaker Change: And the price of Marine insurance.
Speaker Change: Good environment.
Speaker Change: Seasonally this year for <unk> and.
Speaker Change: Yes, we view the diversification and the strength of a lot of reasons, but if you just look at our revenue for 2024 about 84% of that was oil so with operators with that economic.
Speaker Change: As we look at those.
Speaker Change: The operators reporting year over year numbers.
Speaker Change: It looks like.
Speaker Change: Much better much.
Speaker Change: Screaming comps compared to.
Speaker Change: Tough winter last year so.
Speaker Change: Signal.
Speaker Change: There's almost not a gas price at which they would shut in there they're oily wells so.
Speaker Change: We definitely have seen also alongside capital discipline.
Speaker Change: This is greater willingness to use curtailments as a way to to address volatility, especially downward volatility building blocks and so forth and do you sort of see just your diversification by Nathan by operator being the best defense against.
Speaker Change: Yes, we're really not exposed the types of.
Speaker Change: Geographic regions, where operators would shut in production because of just the gas prices.
Speaker Change: Fluid like gas prices to be.
Speaker Change: Table and unhealthy for operators there too.
Speaker Change: Even increased lumpiness when when operators react to what they see.
Speaker Change: Produce but we are really not exposed to that kind of environment.
Speaker Change: And the price of Marine insurance.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: We view the diversification and the strength of a lot of reasons, but if you just look at.
Speaker Change: Thank you. This concludes our Q&A session. Consequently, today's call. Thank you for joining you may now disconnect your lines.
Speaker Change: Our revenue for 2024 about 84% of that was oil so with operators with that economic.
Speaker Change: Signal.
Speaker Change: There's almost not a gas price at which they would shut in there they're oily wells so.
Speaker Change: We're really not exposed the types of.
Speaker Change: Geographic regions, where operators would shut in production because of just the gas prices.
Speaker Change: Clearly, we like gas prices to be.
Speaker Change: Stable and unhealthy for operators there too.
Speaker Change: Produce but we're really not exposed to that kind of environment.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: Thank you. This concludes our Q&A session. Consequently, today's call. Thank you for joining you may now disconnect your lines.
Speaker Change: [music].