Q4 2024 Vital Energy Inc Earnings Call
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Jericho: Good day, ladies and gentlemen, and welcome to Vital Energy, Inc.'s 4th Quarter 2024 Earnings Conference Call. My name is Jericho, and I will be your operator for today. At this time, all participants are in listen-only mode. We will be conducting a question and answer session after the financial and operations report.
Jericho: As a reminder, this conference is being recorded for replay purposes.
Speaker Change: It is now my pleasure to introduce Mr. Ron Hagood, Vice President, Investor Relations. You may proceed, sir.
Speaker Change: Thank you and good morning. Joining me today are Jason Pigott, President and Chief Executive Officer, Brian Lemmerman, Executive Vice President and Chief Financial Officer.
Speaker Change: Senior Vice President, Chief Operating Officer, as well as additional members of our management team.
During today's call, we will be making forward-looking statements.
Speaker Change: Press release and presentation can be accessed at our website at www dot tidal energy Dot com.
Speaker Change: I'll now turn the call over to Jason Pigott, President and Chief Executive Officer.
Jason Pigott: Good morning, and thank you for joining us.
Jason Pigott: LNG again delivered outstanding results this quarter.
Jason Pigott: The results would not have been possible without a relentless pursuit to improve the quality of our assets over the last five years.
Jason Pigott: Prior to taking your questions. There are four areas I would like to review.
Jason Pigott: First our fourth quarter 2024 results.
Jason Pigott: Second our significant inventory additions and how they will enhance our capital efficiency going forward.
Jason Pigott: Third our 2025 outlook, which combines disciplined investments and our focus on generating free cash flow.
Jason Pigott: Finally, however, reduce debt and maintain a strong balance sheet.
Jason Pigott: Let's talk about the fourth quarter.
While energy had strong financial and operating results this quarter.
Jason Pigott: Consistent with our performance all year in 2024 results were driven by production that exceeded the top end of guidance for both total and oil production. We benefited from strong production from our point energy assets acquired last September.
Jason Pigott: Total investments were a little higher than guidance.
Jason Pigott: This was primarily due to increased working interest in a carried interest on some bolt on acquisitions that we've developed during the quarter.
Jason Pigott: This impacted D&C capital by about $17 million and increased our net production from the package.
Jason Pigott: We continue to make significant sustainable progress, reducing operating costs our acquired properties.
Jason Pigott: This was our first full quarter operating the point assets and we are very happy with our results.
Jason Pigott: Outperformed our LOE guidance by 5%.
Jason Pigott: At cost of 889 per Boe.
Some projects were deferred to capture cost efficiencies and won't bring our first quarter LOE, a little higher but both quarters together are expected to average around $9 20 per Boe.
Jason Pigott: We continue to be on track to reduce LOE below $9 per Boe.
Jason Pigott: At the end of 2025.
Jason Pigott: Financial performance beat expectations, as we delivered strong EBITDAX and adjusted free cash flow.
Jason Pigott: Some timing nuances are shifting the resulting debt pay down into the first quarter.
Jason Pigott: Typically a $75 million increase in accounts receivable related to the closing of the point acquisition and $20 million and non budgeted acquisitions.
Jason Pigott: January net debt was already down $15 million below year end levels, and we expect total <unk> debt pay down to be approximately $100 million.
Jason Pigott: Now, let me talk about the significant and positive move in our oil weighted inventory.
Jason Pigott: Since early 2024, we have increased our total inventory by more than 10%.
We now have approximately 925 oil weighted locations representing more than 11 years of drilling at our current development pace.
Jason Pigott: Recent inventory additions are related to the delineation of deeper targets and lateral length increases that provided sustainable drilling cost efficiencies.
Jason Pigott: I will drill a little deeper on these changes and provide some additional color.
Jason Pigott: First the average lateral length of our inventory is now 12800 feet.
Jason Pigott: The 16% increase over last year and.
Jason Pigott: In total we have increased future developable lateral footage by approximately 30%.
Jason Pigott: These changes have been instrumental in improving the quality of our inventory and reducing our average breakeven oil price to approximately $53 per barrel WC.
Jason Pigott: Even as we extended out our inventory life.
Jason Pigott: This makes our wells more price resilient and supports our ability to maintain current levels of capital efficiency well into the future.
Jason Pigott: Next week.
Jason Pigott: We derisked significant inventory and deeper horizons.
Jason Pigott: In 2024, retailed 16 wells in the Wolfcamp C. The Wolfcamp D and the Barnett.
Jason Pigott: These tests gave us a robust understanding of productivity and the newer formations the wolfcamp C and the Barnett, allowing us to add inventory in those formations for the first time.
Jason Pigott: Our Wolfcamp D wells had an average lateral length of more than 15000 feet, giving us confidence to book additional long lateral locations in the Wolfcamp D.
Jason Pigott: Third we have new operational competencies and have successfully used shaped well bores to extend lateral lengths that stranded resources and enhance returns.
Jason Pigott: Inventory now consists of approximately 120 horseshoe shaped wells that convert to 5000 foot wells and to 110000 foot well improving break evens by 15% to $20 per barrel <unk>.
We are now taking this concept another step drilling J shaped wells that convert 310000 foot wells into 215000 foot wells.
Jason Pigott: We're drilling our first package later in 2025 with the opportunity to convert approximately 130 straight wells to around 90, J shaped wells, reducing break evens on those wells by around $10 per barrel of UTI.
Jason Pigott: Novel way, we have combined leasing and shape well bores is through our eight mile project, which we are about to begin drilling.
Jason Pigott: We acquired a stranded section in the heart of the Midland Basin that would've been developed with 5000 foot laterals utilizing.
Jason Pigott: Utilizing horseshoe shape, well designs, we will drill 12 10000 foot wells that we estimate to have an average WTO breakeven of around $40 per barrel.
Jason Pigott: Paid approximately $11 million for the section and with the additional carry will have acquired these wells for an estimated $1 2 million per well and an area where operators consistently pay three to four times that amount.
Jason Pigott: In addition to the 925 wells. We currently have in inventory we have identified an additional 250 wells that can be added in the future with further delineation.
Jason Pigott: Now turning to more details on our 2025 outlook, we expect to deliver 135 to 140000 barrels of oil equivalent per day.
Jason Pigott: Including 62, 5% to 66 5000 barrels of oil per day.
Jason Pigott: Full year 2025 oil production expectation is about 2000 barrels per day less than our initial 2025 outlook.
Jason Pigott: This is due to the underperformance of a package of wells in Upton County.
Jason Pigott: Came online in late 2024 and included tests focused on delineating future development inventory as well as delays in our drilling program.
Jason Pigott: These delays pushed out the completions and turn in line timing for a few packages of wells, which will defer production until later in the year.
Jason Pigott: Total capital investments, excluding non budgeted acquisitions are expected to be $825 million to $925 million.
Jason Pigott: Current commodity prices, we expect our plan to deliver adjusted free cash flow of approximately $330 million at $70 oil.
Jason Pigott: We have continued to optimize our capital costs expecting to invest less in 2025, while shifting more capital to the Delaware basin and completing the same amount of net lateral feet as 2024.
Jason Pigott: Efforts to high grade our development plan and extend laterals is expected to drive a significant improvement in capital efficiency in 2025 versus 2024.
Our focus today is squarely on optimizing our existing assets and maximizing cash flow for our investors.
Jason Pigott: As a result, we will deemphasize potential large scale acquisitions and allocate substantially all free cash flow to reduce our net debt.
Jason Pigott: Thanks again for joining us. This morning, operator, you can now open the line for questions.
Jason Pigott: Thank you and we will now begin the question and answer session.
Speaker Change: Lynn I would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Jason Pigott: To withdraw your question simply the best in our one again.
Speaker Change: Our first question comes from the line of.
Jason Pigott: England.
Jason Pigott: Security. Please go ahead.
Jason Pigott: Good morning, Jason and thanks for you and the team for all the details. My My first question was just dropping straight to the early point energy activity that Youll see this typically results here just looking at a couple of slides and things, but the results appear to be as good I would call. It if not better than I was at least that was expected I'm. Just wondering could you will you Katie.
Speaker Change: The team maybe discuss how youre thinking about the early results versus your prior estimates.
Jason Pigott: What you're doing to drive this upside.
Speaker Change: Good morning, Neil and I will turn that over to Katy.
Katy: We love that that there's a few areas that we're outperforming early that the integration has been really smooth, we're seeing better than expected downtime on the base. While some of the early new wells are coming online stronger than expected, we've already been able to drive down some of the low cost and are seeing some capital efficiency thats going to carry on the 25.
Katy: Talking about the performance in Q4 like you start outperforming our initial expectations.
Speaker Change: Awesome, Okay, and then just secondly, Jason just said that you got into a little bit.
In your prepared remarks, just around the recent up did well Upton County, well delineation activity just in the few of the wells as you mentioned, we're a little bit under your expectations I'm. Just wondering could you discuss there also what what might be the potential issues.
Speaker Change: Would you call this sort of just limited to an isolated area.
Speaker Change: Yes. Thank you.
Speaker Change: The Upton County Wells are just a core part of our program. This year, we took a core on the location, it's actually what that's fostered us drill a barnett well out there.
Speaker Change: Primary issues were related to Wolfcamp, a and lower sprayberry wells. These were newer formations, we had traded data with an offset operator, where performance was great and.
Speaker Change: And we wanted to test. These wells. These are kind of the east east edge of the play and we wanted to test. These zones before we incorporate them into full development as we move west.
Speaker Change: They just the worst wells were not as strong as we would've liked.
Speaker Change: Done multiple test in other zones that we highlighted we drilled 16 wells in the Barnett Wolfcamp C. Wolfcamp D last year and our production was outperforming each quarter challenges. These these were coming online right as we gave guidance and when wells come on that are disappointing earlier in the year. It just takes a little time to.
Speaker Change: Catch up and what Youll see in our program as these capital efficiencies. We've highlighted we will continue to grow production.
Speaker Change: Throughout the year, we'll go through a little dip and then grow production back.
Speaker Change: Unfortunate, but we had a lot of successes and if you think of the 140 wells that we added in these deeper targets or just part of the business, but unfortunate timing for us.
Speaker Change: No no plans to.
Speaker Change: Complete any other wells in that area. This year of the rigs are moving to.
Speaker Change: Other Midland areas and then the Delaware Basin focused primarily on point all of our inventory that we highlighted this morning has taken.
Speaker Change: Into account those impact.
Speaker Change: That sounds good at that slide that shows the.
Speaker Change: 25 locations in the $2 50 up upside that's not impacted them.
Speaker Change: No Sir there are adjusted for it.
Speaker Change: Thank you.
Speaker Change: Thank you Neil.
Speaker Change: Our next question comes from the line of Zach on ahead of Jpmorgan.
Speaker Change: Go ahead.
Good morning inventory.
Speaker Change: Inventory slide you added 140 locations the deeper zone that you talked about earlier could you just give us a little more detail on those locations really just looking for a bit more color of as though the geographic areas where those wells.
Speaker Change: Yes, so I'd say on slide nine in our deck.
Speaker Change: We highlight.
Speaker Change: All of the tests that we've done are some of the tests that were used to inform these decisions to Adam. So we've gotten really good results from Wolfcamp D. C. As we've talked about lateral length, how that helps us in these areas because they are deeper zone.
Speaker Change: The team is able to drill longer laterals, which really enhances the economics in those areas and I would say that again.
Speaker Change: Well additions are kind of sprinkled evenly among those different formations.
Speaker Change: Thanks, Jason and then my follow up you added the core acreage in Midland County at a very low cost you mentioned $1 2 million per location.
Speaker Change: You all seem to be a little bit further along in drilling the horseshoe laterals than some of your peers do you see more of an opportunity set to add these kind of stranded single section acreage block in core areas is that something youll could potentially take advantage of.
Speaker Change: Yes, it's something the team is very focused on this year I mean, there's really when we think of A&D theres only two types of things that we're focused on and that is white space next to our acreage position, where we can make 10000 foot wells 15000 foot wells and things like this the team was did a great job of being flexible.
Speaker Change: A lot of times these opportunities come because the leases are expiring and things like that.
Speaker Change: We jumped through a few hoops to because we bought this in December and we're going to be drilling it here pretty soon.
Speaker Change: To move it into the schedule and then.
Speaker Change: Economics work for us because <unk> got taken.
Speaker Change: Normal operator would have 5000 foot wells, we make them 10000 foot wells.
Speaker Change: On the Diamondback releases, they paid much more per well than we pay for this it just us being just over $1 billion.
Speaker Change: So I really think our team does a great job of thinking outside the box.
Speaker Change: To create incremental value and be flexible with rig schedules to be able to incorporate things like this.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from line of Noah.
Speaker Change: From Bank of America. Please go ahead.
Noah: Good morning, everyone.
Speaker Change: For my first question I was just wondering on the impact of steel tariffs. If we see these tariffs last more than 12 months, what kind of impact do you think that would have on your capex budget.
Speaker Change: Whereas they carried out through most of 'twenty five on CTG, and Thats really where we see the most exposure to potential tariff if it extends out into 'twenty six we have a little bit less contracted I think that there is opportunity probably for some of the service providers start to pass through some of those.
Speaker Change: Cost that very little exposure to this year.
Speaker Change: Got you and then for my second question.
Speaker Change: How should we think about the decision tree between.
Speaker Change: Debt paydown versus the small acquisition that you guys have done and how could we think about debt pay down moving forward if more of these deals do pop up.
Speaker Change: So we're going to be.
Speaker Change: Entirely focused on debt pay down as the number one thing it takes opportunities like this eight mile I think to get us off of that strategy. So we're really trying to put substantially all of our free cash flow to debt pay down this year, but when you have an opportunity to bring in.
Speaker Change: $40 breakeven wells at a relatively low cost per well, we'll do those every day and then the lateral additional the other thing we're really looking at is just lateral extensions.
Speaker Change: When we go from a 10000 foot lateral to 15000 foot lateral that.
Speaker Change: It takes I think 500.
Speaker Change: Sorry to beat the equal a 5% improvement in well costs. So when you look on an extra 5000 feet you reduce breakeven by $5 or more so those are real ways that we can improve the quality of our inventory. When you. When you look at our inventory we have a long length of inventory and our focus is how do we.
Speaker Change: Take our length of inventory and improve the quality of the average well in that stack of inventory Thats, what youre seeing from the team is this push to increase lateral length.
Speaker Change: To improve the quality of our inventory.
Speaker Change: Great. Thanks, so much.
Speaker Change: And our next question comes from the line of John <unk> from Wolfe Research. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: Just curious so when you.
Speaker Change: It's really about your drilling program this year.
Speaker Change: You were testing some new zone in Upton for some new the new Mayor is there when you think about your drilling program how much of your drilling program is actually aimed towards testing.
Speaker Change: Zones and new potential.
Speaker Change: And then my second question is a follow up with like we've talked about these 250 upside location. How do you think think about the time progression in terms of Derisking those.
Speaker Change: Hi, Good morning, John when we look at the 25 program the bulk of our capital early in the year is dedicated to the point asset really high return high confidence locations in the second half of the year, we have a mix between the rest of the southern Delaware and Midland very little of our capital and 25.
Speaker Change: Going towards risks or appraisal opportunities we've done a good job over the last couple of years proving out inventory and at this stage are really and co development mode. As we look at the upside a 250 locations that you mentioned, we're not in a rush to delineate that are in these zones, we have high confidence in them.
Speaker Change: Some of the 140 that we've added that have direct offset direct subsurface control. So we have an opportunity to really work our way through that deliberately and it's not a substantial portion of the outlook in 'twenty five or in 'twenty.
Speaker Change: I think that kind of multi year effort that it would take to start to pull that 250 end of the quarter.
Speaker Change: I appreciate it if I can squeeze just one really quick other question there.
Speaker Change: I mean do you plan to catch up in the second half of this year.
Speaker Change: Any idea what the exit rate would be for this year by year end for.
Speaker Change: Oil.
Speaker Change: Okay.
Speaker Change: Hi, <unk> I think is where we expect to be we're going to the shape of the production profile. This year, it's kind of a V shape. So we'll have a little bit of low mid year, and then kind of ramp up at the end of the year.
Speaker Change: Alright, Thank you very much.
Speaker Change: Alright. Thanks.
Speaker Change: There are no further questions.
Speaker Change: I'm sure Ron I will turn the call back over to you.
Ron: Thank you very much for joining us for our call. This morning, we appreciate your interest in vital energy and this concludes our call.
Ron: This concludes today's call. Thank you for joining you may now disconnect.
Ron: Please wait the conference will begin shortly.
Ron: Yeah.
Ron: [music].
Jacqueline LD: Good day, ladies and gentlemen, and welcome to the vital Energy Inc. 's fourth quarter 2024 earnings Conference call. My name is Jacqueline LD or operator for today.
Ron: This time, all participants are in listen only mode.
Speaker Change: We will be conducting a question and answer session. After the financial and operations report.
Speaker Change: As a reminder, this conference is being recorded for replay purposes.
Speaker Change: It is now my pleasure to introduce Mr. Ron Hagen.
Ron Hagen: Hagen Vice President Investor Relations you May proceed Sir.
Speaker Change: Thank you and good morning, joining me today are adjacent market, President and Chief Executive Officer, Brian Lieberman Executive Vice President and Chief Financial Officer.
Speaker Change: He held senior Vice President Chief operating officer, as well as additional members of our management team.
Speaker Change: During today's call, we'll be making forward looking statements.
Speaker Change: These statements, including those describing our beliefs goals.
Speaker Change: Dictations forecast and assumptions are.
Speaker Change: Are intended to be covered by the safe Harbor provisions under the private Securities Litigation Reform Act of 1095, our actual results may differ from these forward looking statements for a variety of reasons.
Speaker Change: Cable, which are beyond our control.
Speaker Change: In addition, we will be making reference to non-GAAP financial measures.
Speaker Change: Conciliations to GAAP financial measures are included in the press release and presentation, we issued yesterday afternoon.
Speaker Change: Press release and presentation can be accessed at our website at www dot tidal energy Dot com.
Speaker Change: I will now turn the call over to Jason Pigott, President and Chief Executive Officer.
Speaker Change: Good morning, and thank you for joining us.
Speaker Change: Total energy again delivered outstanding results this quarter the.
Speaker Change: The results would not have been possible without a relentless pursuit to improve the quality of our assets over the last five years.
Speaker Change: Prior to taking your questions. There are four areas I would like to review.
Speaker Change: First our fourth quarter 2024 results.
Speaker Change: Second our significant inventory additions and how they will enhance our capital efficiency going forward.
Speaker Change: Third our 2025 outlook, which combines disciplined investments and our focus on generating free cash flow.
Speaker Change: Finally, however, reduce debt and maintain a strong balance sheet.
Speaker Change: Let's talk about the fourth quarter.
Speaker Change: While energy had strong financial and operating results this quarter.
Speaker Change: Consistent with our performance all year in 2024 results were driven by production that exceeded the top end of guidance for both total and oil production.
Speaker Change: We benefited from strong production from our point energy assets acquired last September.
Speaker Change: Total investments were a little higher than guidance.
Speaker Change: This was primarily due to increased working interest in a carried interest on some bolt on acquisitions that we've developed during the quarter.
Speaker Change: This impacted D&C capital by about $17 million and increased our net production from the package.
Speaker Change: We continue to make significant sustainable progress, reducing operating costs on our acquired properties.
Speaker Change: This was our first full quarter operating the point assets and we are very happy with our results.
Speaker Change: Outperformed our LOE guidance by 5%.
Speaker Change: At cost of 889 per Boe.
Speaker Change: Some projects were deferred to capture cost efficiencies and won't bring our first quarter LOE, a little higher but both quarters together are expected to average around $9 20 per Boe.
Speaker Change: We continue to be on track to reduce LOE below $9 per Boe.
Speaker Change: At the end of 2025.
Speaker Change: Financial performance beat expectations, as we delivered strong EBITDAX and adjusted free cash flow.
Speaker Change: Some timing nuances are shifting the resulting debt pay down into the first quarter.
Speaker Change: Typically a $75 million increase in accounts receivable related to the closing of the point acquisition and $20 million and non budgeted acquisitions.
Speaker Change: January net debt was already down $15 million below year end levels, and we expect total <unk> debt paydown to be approximately $100 million.
Speaker Change: Now, let me talk about the significant and positive move in our oil weighted inventory.
Speaker Change: Since early 2024, we have increased our total inventory by more than 10%.
Speaker Change: We now have approximately 925 oil weighted locations representing more than 11 years of drilling at our current development pace.
Speaker Change: Recent inventory additions were related to the delineation of deeper targets and lateral length increases that provided sustainable drilling cost efficiencies.
Speaker Change: I will drill a little deeper on these changes and provide some additional color.
Speaker Change: First.
Speaker Change: The average lateral length of our inventory is now 12800 feet.
Speaker Change: A 16% increase over last year and.
Speaker Change: In total we have increased future developable lateral footage by approximately 30%.
Speaker Change: These changes have been instrumental in improving the quality of our inventory and reducing our average breakeven oil price to approximately $53 per barrel WC I, even as we extended out our inventory life there.
Speaker Change: This makes our wells more price resilient and supports our ability to maintain current levels of capital efficiency well into the future.
Speaker Change: Next week.
Speaker Change: We derisked significant inventory and deeper horizons.
Speaker Change: In 2024, retailed 16 wells in the Wolfcamp C. The Wolfcamp D and the Barnett.
Speaker Change: <unk> gave us a robust understanding of productivity and the newer formations the wolfcamp C in the Barnett.
Speaker Change: <unk> to add inventory in those formations for the first time.
Speaker Change: Our Wolfcamp D wells had an average lateral length of more than 15000 feet, giving us confidence to book additional long lateral locations in the Wolfcamp D.
Speaker Change: Third we have new operational competencies and have successfully used shaped well bores to extend lateral lengths desk stranded resources and enhanced returns.
Speaker Change: Inventory now consists of approximately 120 horseshoe shaped wells that convert to 5000 foot wells and to 110000 foot well improving break evens by 15 to $20 per barrel <unk>.
Speaker Change: We are now taking this concept another step drilling J shaped wells that convert 310000 foot wells into 215000 foot wells.
Speaker Change: We'll be drilling our first package later in 2025 with the opportunity to convert approximately 130 straight wells to around 90, J shaped wells, reducing break evens on those wells by around $10 per barrel W. Ti.
Speaker Change: Novel way, we have combined leasing and shape well bores is through our eight mile project, which we're about to begin drilling.
Speaker Change: We acquired a stranded section in the heart of the Midland Basin that would have been developed with 5000 foot laterals utilizing.
Speaker Change: Utilizing horseshoe shape, well designs, we will drill 12 10000 foot wells that we estimate to have an average WTO breakeven of around $40 per barrel.
Speaker Change: Paid approximately $11 million for the section and with the additional carry will have acquired these wells for an estimated $1 2 million per well and an area where operators consistently pay three to four times that amount.
Speaker Change: In addition to the 925 wells. We currently have in inventory we have identified an additional 250 wells that can be added in the future with further delineation.
Speaker Change: Now turning to more details on our 2025 outlook, we expect to deliver 135 to 140000 barrels of oil equivalent per day.
Speaker Change: Including 62, 5% to 66 5000 barrels of oil per day.
Speaker Change: For full year 2025 oil production expectation is about 2000 barrels per day less than our initial 2025 outlook.
Speaker Change: This is due to the underperformance of a package of wells in Upton County.
Speaker Change: Came online in late 2024 and included tests focused on delineating future development inventory as well as delays in our drilling program.
Speaker Change: These delays pushed out the completions and turn in line timing for a few packages of wells, which will defer production until later in the year.
Speaker Change: Total capital investments, excluding non budgeted acquisitions are expected to be $825 million to $925 million.
Speaker Change: Current commodity prices, we expect our plan to deliver adjusted free cash flow of approximately $330 million at $70 oil.
Speaker Change: We have continued to optimize our capital costs expecting to invest less in 2025, while shifting more capital to the Delaware basin and completing the same amount of net lateral feet as 2024.
Speaker Change: Purchase to high grade our development plan and extend laterals is expected to drive a significant improvement in capital efficiency in 2025 versus 2024.
Speaker Change: Our focus today is squarely on optimizing our existing assets and maximizing cash flow for our investors.
Speaker Change: As a result, we will deemphasize potential large scale acquisitions and allocate substantially all free cash flow to reduce our net debt.
Speaker Change: Thanks again for joining us. This morning, operator, you can now open the line for questions.
Speaker Change: Thank you and we will now begin the question and answer session.
Speaker Change: Lynn I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Speaker Change: To withdraw your question simply the best number one again.
Speaker Change: Our first question comes from the line of Neil Dingmann.
Speaker Change: England.
Speaker Change: I'm curious security. Please go ahead.
Jason Pigott: Good morning, Jason and thanks for you and the team for all the details My My first question really just dropping straight to the early point energy activity that Youll see this typically results here.
Speaker Change: A couple of slides and things.
Speaker Change: The results appear to be as good I would call. It if not better than I was at least that was expected I'm. Just wondering could you all you Katie the team maybe discuss how you're thinking about the early results versus your prior estimates.
Speaker Change: What youre doing to drive this upside.
Speaker Change: Good morning, Neil and I will turn that over to Katy Hi, Good morning, Neil.
Speaker Change: I Love is that there's a few areas that we're outperforming early that the integration has been really smooth, we're seeing better than expected downtime on the base well some of the early new wells are coming online stronger than expected, we've already been able to drive down some of the alloy costs and are seeing some capital efficiency thats going to carry on to 'twenty five.
Speaker Change: Sorry about the performance in Q4, he thought outperforming our initial expectations.
Speaker Change: Awesome, Okay, and then just secondly, Jason just said that you got into a little bit.
Speaker Change: In your prepared remarks, just around the recent uptick well Upton County, well do an Asian activity just in the few of the wells as you mentioned, we're a little bit under your expectations I'm. Just wondering could you discuss there also what what might be the potential issues.
Speaker Change: Would you call this sort of just limited to an isolated area.
Speaker Change: Yes. Thank you.
Speaker Change: The Upton County Wells are core part of our program. This year, we took a core on the location, it's actually what that's fostered us drill a barnett well out there.
Speaker Change: The primary issues were related to Wolfcamp, a and lower sprayberry wells. These were newer formations, we had traded data with an offset operator, where performance was great.
Speaker Change: We wanted to test. These wells these are kind of the east east edge of the play and we wanted to test. These zones before we incorporate them into full development as we moved west.
Speaker Change: And then just the worst wells were not as strong as we would've liked.
Speaker Change: We've done multiple test in other zones that we highlighted we drilled 16 wells in the Barnett Wolfcamp C. Wolfcamp D last year and our production was outperforming each quarter. The challenges. These these were coming online right as we gave guidance and when wells come on that are disappointing earlier in the year. It just takes a little time to.
Speaker Change: Catch up and what Youll see in our program as these capital efficiencies. We've highlighted we will continue to grow production.
Speaker Change: Throughout the year, we'll go through a little dip and then grow production back.
Speaker Change: Unfortunate, but we had a lot of successes and if you think of the 140 wells that we added in these deeper targets or just part of the business, but unfortunate timing for us.
Speaker Change: No no plans to.
Speaker Change: Any other wells in that area. This year rigs are moving to.
Speaker Change: Other Midland areas in the Delaware Basin focused primarily on point all of our inventory that we highlighted this morning has taken into account those impacts.
Speaker Change: That sounds good on that slide that shows that.
Speaker Change: 925 locations in the $2 50 up upside that's not impacted them.
Speaker Change: No Sir there are adjusted for it.
Speaker Change: Thank you.
Speaker Change: Thank you Neil.
Speaker Change: Our next question comes from the line of Zach on or ahead of Jpmorgan.
Speaker Change: Go ahead.