Q1 2025 Riley Exploration Permian Inc Earnings Call

Thank you for standing by my name is Kim and I will be your operator today.

Operator: Thank you for standing by.

Tina: My name is Tina, and I will be your operator today.

Speaker Change: Hi, I would like to welcome everyone to the O'reilly exploration Permian Incorporated's first quarter 2025 earnings conference call.

Operator: At this time, I would like to welcome everyone to the Riley Exploration Permian Incorporated's first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you.

Speaker Change: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.

Speaker Change: Thank you I would now like to turn the call over to Philip Reilly CFO. Please go ahead.

Philip Riley: I would now like to turn the call over to Philip Riley, CFO. Please go ahead.

Speaker Change: Good morning, welcome to our conference call covering first quarter 2025 results I'm Philip Reilly CFO. Joining me today are Bobby Reilly, Chairman and CEO and John Suter C O L. Yes.

Philip Riley: Good morning.

Philip Riley: Welcome to our conference call covering first quarter 2025 results. I'm Philip Riley, CFO. Joining me today are Bobby Riley, Chairman and CEO, and John Suter, COO.

Philip Riley: Yesterday, we published a variety of materials which can be found on our website under the investors These materials and today's conference call contain certain projections and other forward-looking statements within the meaning of this federal securities law. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. We'll also reference certain non-GAP Reconciliations to the appropriate gap measures can be found in our supplemental disclosures on our website.

Speaker Change: Yesterday, we published a variety of materials, which can be found on our website under the investors section. These materials in todays conference call contains certain projections and other forward looking statements within the meaning of the federal Securities laws.

Speaker Change: These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements will also reference certain non-GAAP measures. The reconciliations to the appropriate GAAP measures can be found in our supplemental disclosures on our website.

Bobby Riley: I'll now turn the call over to Thank you, Philip. Good morning and welcome to our earnings call. Riley Permian has once again demonstrated capital efficiency with strong performance this quarter.

Bobby: Now I'll turn the call over to Bobby.

Bobby: Thank you Philip.

Bobby: Good morning, and welcome to our earnings call.

Bobby: Riley Permian has once again demonstrated capital efficiency with the strong performance this quarter.

Bobby Riley: Our modest capital investing during the first quarter allowed us to generate substantial free cash flow and further reduce debt, setting us up favorably for the year ahead.

Bobby: Our modest capital investing during the first quarter allowed us to generate substantial free cash flow and further reduce debt setting us up favorably for the year ahead.

Bobby: We're excited to announce that we have reached an agreement to acquire silverback exploration for $142 million in cash.

Bobby Riley: We're excited to announce that we have reached an agreement to acquire Silverback Exploration for $142 million in cash. This strategic acquisition involves a largely undeveloped asset base in New Mexico. which is contiguous and overlapping with Riley-Person's existing. Thereby extending our foot. The asset includes approximately $47,000 net working interest. and significantly enhances our long-term upstream development. It adds over 300 gross, incremental, undeveloped, horizontal locations to our image. along with around 50 overlapping gross undeveloped horizontal locations, which will increase Riley Permian's current working interests and existing. Notably, 98% of the acreage is held by production, providing flexibility.

Bobby: This strategic acquisition involves a largely undeveloped asset base in new Mexico, which is contiguous and overlapping with Riley and its existing position in the yea, so trend, thereby extending our footprint in the region.

Bobby: Yes that includes approximately 47000 net working interest acres and significantly enhances our long term upstream development potential.

Bobby: It adds over 300 gross incremental undeveloped horizontal locations to our inventory along with around 50 overlapping gross undeveloped horizontal locations, which will increase Riley Permian current working interest in existing units.

Bobby: Notably 98% of the acreage is held by production providing flexibility for future development.

Bobby: We anticipate further synergies from this acquisition in several areas.

Bobby Riley: We anticipate further synergies from this acquisition in several areas. Number one, Waterhead. The asset comes with existing water disposal infrastructure and SWD injection capacity to further support future hydrocarbon production. This is particularly important in New Mexico with the regulatory bodies making it difficult to get new SWD permits. Number two, gas takeaway. The undeveloped locations will bolster our previous decision to invest in midstream gas infrastructure. and number three, power generation. We plan to extend our proven processes from Texas to New Mexico. Enhancing Our Power Generation.

Bobby: Number one water handling.

Bobby: The asset comes with existing water disposal infrastructure and that's W. D injection capacity to further support future hydrocarbon production.

Bobby: This is particularly important in new Mexico, with the regulatory bodies, making it difficult to get new swg permits.

Bobby: Number two gas takeaway.

Bobby: Undeveloped locations will bolster our previous decision to invest in midstream gas infrastructure in the region.

Bobby: And number three power generation.

Bobby: We plan to extend our proven processes from Texas to new Mexico, enhancing our power generation capabilities.

Bobby Riley: Despite the current market volatility, we believe this acquisition is justified, giving our long-term outlook for both our industry and our This year, we are prioritizing the acquisition and preservation of high-quality inventory over the conversion of inventory to production. We believe Riley Permian is well positioned to succeed in the current market environment with our strong asset base. Discipline, Capital, Allocation, Philosophy. and Robust Hedging Program.

Bobby: Despite the current market volatility. We believe this acquisition is justified given our long term outlook for both our industry and our company.

Bobby: This year, we are prioritizing the acquisition and preservation of high quality inventory over the conversion of inventory to production.

Bobby: We believe Riley Permian is well positioned to succeed in the current market environment with our strong asset base.

Bobby: Disciplined capital allocation philosophy, and robust hedging profile.

Speaker Change: Now I'll turn the call over to John Suter, our COO to discuss operational results for the quarter, followed by Philip Riley, Our CFO, who will discuss the acquisition financing and forward guidance.

John Suter: Now I'll turn the call over to John Suter, our COO, to discuss operational results for the quarter, followed by Philip Riley, our CFO, who will discuss the acquisition financing and forward guidance. Thank you, Bobby, and good morning. Once again, Riley demonstrated excellence in operations through safe operating practice. The team achieved a total recordable incident rate of zero for the first quarter of 2025. We achieved 93% safe days in the first quarter, a metric requiring no recordable incidents, vehicle accidents, or spills over 10 barrels. This is a record percentage of safe days in a quarter. Congratulations to the entire team.

John Suter: Thank you Bobby and good morning.

Philip Riley: Once again Riley demonstrated excellence in operations through safe operating practices.

Philip Riley: The team achieved a total recordable incident rate of zero for the first quarter of 2025.

Philip Riley: We achieved 93% safe days in the first quarter.

Philip Riley: A metric requiring no recordable incidents vehicle accidents or spills over 10 barrels.

Philip Riley: This is a record percentage of safe days in a quarter for Riley.

Philip Riley: Congratulations to the entire team.

John Suter: Moving on to activity, you will remember that we dropped the one rig used in the 2024 campaign in late December. Our 2025 drilling campaign kicked off in Q1, sputting our first well for the year in late March. We plan to use the rig to drill a 10-well program this year, replenishing the ducts we've completed thus far in 2025. For Q1 2025, we drilled zero, completed 10, and turned in line zero gross operated well. Five of those completed wells are flowing back now and will begin production in May. The other five wells will come on in the second half, 2025, with minor infrastructure addition.

Philip Riley: Moving on to activity.

Philip Riley: You will remember that we dropped the one rig used in the 2024 campaign in late December.

Philip Riley: Our 2025 drilling campaign kicked off in Q1 splitting our first well for the year in late March.

Philip Riley: We plan to use the rig to drill a 10 well program. This year replenishing the ducks, we've completed thus far in 2025.

Philip Riley: For Q1, 2025, we drilled zero completed 10 and turned in line zero gross operated wells.

Philip Riley: Five of those completed wells are flowing back now and we will begin production in may.

Philip Riley: The other five wells will come on in the second half 2025 with minor infrastructure additions.

Philip Riley: Net production declined slightly from 1.46 to 1.41 million barrels of oil quarter over quarter in Q1.

John Suter: Net production declined slightly from 1.46 to 1.41 million barrels of oil quarter over quarter in Q1, but increased 9% compared to the same quarter last year. Equivalent production is up 19% compared to the same quarter last year, from 1.85 to 2.2 million barrels oil equivalent. Our average daily net production was 15.62 thousand barrels oil per day and 24.43 thousand barrels oil equivalent per day for the first quarter of 2025. All of this was accomplished without any new wells being added during the quarter. which is a testament to the high quality assets that we offer. This relatively flat quarter-over-quarter production outcome was achieved while lowering operating costs.

Philip Riley: But increased 9% compared to the same quarter last year.

Philip Riley: Equivalent production is up 19% compared to the same quarter last year from.

Philip Riley: From 185 to 2.2 million barrels oil equivalent.

Philip Riley: Our average daily net production was $15 62000 barrels oil per day, and 24.4 3000 barrels oil equivalent per day for the first quarter of 2025.

Philip Riley: All of this was accomplished without any new wells being added during the quarter.

Philip Riley: Which is a testament to the high quality assets that we operate.

Philip Riley: This relatively flat quarter over quarter production outcome.

Philip Riley: Was achieved while lowering operating costs.

John Suter: Our LOE per BOE for Q1 2025 was $8.34 per equivalent barrel. a 2% reduction from Q4 2024 and an 8% reduction from the first quarter a year ago. Our operations team prides itself on driving the best economic outcomes, no matter what the activity level. Service costs are a subject we're keeping a close watch on, particularly in light of uncertainty around current and future tariffs. That said, based on the recent activity, we see an average of 10% compression and many service costs over last year. While tariffs could have some offsetting impact on tangible costs, even factoring that in, our position remains strong.

Philip Riley: Our LOE per BOE for Q1, 2025 was $8.34 per equivalent barrel.

Philip Riley: A 2% reduction from Q4, 2024, and an 8% reduction from the first quarter a year ago.

Philip Riley: Our operations team provides prides itself on driving the best economic outcomes no matter, what the activity level.

Philip Riley: Service costs are a subject, we're keeping a close watch on particularly in light of uncertainty around current and future tariffs.

Philip Riley: That said based on the recent activity, we see an average of 10% compression and many service costs over last year.

Philip Riley: While tariffs could have some offsetting impact on tangible cost even factoring that in our position remains strong.

John Suter: We're very encouraged by how significantly tangible costs have come down pre-tariffs and even post-tariffs, we're still well positioned to lower overall well costs.

Philip Riley: We're very encouraged by how significantly tangible costs have come down pre tariffs and even post tariffs, we're still well positioned to lower overall well cost.

Philip Riley: Should we see a significant decline in rig counts such as 30 or 40 rigs in industry. We believe our cost compression in the range of 20% could be realized.

John Suter: Should we see a significant decline in rig count, such as 30-40 rigs in industry, we believe our cost compression in the range of 20% could be relevant.

Philip Riley: We're very excited about the silverback acquisition that Bobby just mentioned.

John Suter: We're very excited about the Silverback acquisition that Bobby just mentioned. It roughly doubles the size of our Yeso footprint in New Mexico, located adjacent to our Red Lake asset to the west-southwest and overlapping our acreage in many areas. Here are a few more details on some of the synergies that Bobby mentioned with this combination of acid. A large water disposal system with five SWDs that will augment Riley's already robust water operation by roughly 35 to 40 percent. Water disposal capacity in conjunction with gas takeaway are key facets to enabling development plans in this area. A combination of 2.6 million barrels of recycled water storage is located in two primary facilities.

Philip Riley: They roughly doubled the size of our <unk> footprint in new Mexico located.

Philip Riley: Adjacent to our Red Lake asset to the west southwest and overlapping our acreage in many areas.

Philip Riley: Here are a few more details on some of the synergies that Bobby mentioned with this combination of assets.

Philip Riley: A large water disposal system with five SW DS that will augment riley's already robust water operation by roughly 35% to 40%.

Philip Riley: Water disposal capacity in conjunction with gas takeaway are key facets to enabling development plans in this area.

Philip Riley: A combination of $2 6 million barrels of recycled water storage is located in two primary facilities.

Philip Riley: This could be a significant cost saving mechanism for Riley frac jobs.

John Suter: This could be a significant cost-saving mechanism for Riley Frackjob. and aligns us well with the current regulatory environment. With the acquisition of Silverback, increasing the magnitude of our New Mexico holding. The value and timing of our midstream project are key for development optionality between both assets.

Philip Riley: And aligns us well with the current regulatory environment.

Philip Riley: With the acquisition of Silverback, increasing the magnitude of our new Mexico Holdings.

Philip Riley: The value and timing of our midstream project are key for development Optionality between both assets.

Philip Riley: Let me update you on what we've accomplished so far with our project and describe our flexibility of completion.

John Suter: Let me update you on what we've accomplished so far with our project and describe our flexibility of completion. During Q1, we completed the first phase of our New Mexico Gathering and Compression Project with the commissioning of our Birdie Compressor Station on the west side of the Red Lake Athens. This was completed on time and on budget. We established roughly 15 million cubic feet per day compression capacity toward our existing gatherers high pressure system and in the process left additional low pressure capacity to fill in the entry. In the short term, this new station will increase our ability to deliver gas from this asset more consistently and reliably.

Philip Riley: During Q1, we completed the first phase of our new Mexico gathering and compression project with the commissioning of our birdie compressor station on the west side of the Red Lake assets.

Philip Riley: This was completed on time and on budget.

Philip Riley: We established roughly 15 million cubic feet per day compression capacity towards our existing gathers high pressure system and in the process left additional low pressure capacity to fill in the interim.

Philip Riley: In the short term this new station will increase our ability to deliver gas from this asset more consistently and reliably.

Philip Riley: It began initial flows to the purchaser on March 26.

John Suter: It began initial flows to the purchaser on March 26. Once our 20-inch high-pressure transmission line to Targa is completed in 2026, We will swing gas deliveries from this station to that outlet. We're currently finalizing the path and purchasing right-of-way as per our schedule through late summer. As mentioned earlier, we're keeping a close eye on cost. We have the flexibility to order pipe and begin construction at a time that makes economic sense with commodity pricing and cash flow considerations. This station is designed to be expandable to 100 million cubic feet per day. with additional compressors installed as Prior to completion of the high-pressure transmission line.

Philip Riley: Once our 20 inch high pressure transmission line to Targa is completed in 2026.

We will swing gas deliveries from this station to that outlet.

Philip Riley: We're currently finalizing the past and purchasing right of way as per our schedule through late summer.

Philip Riley: As mentioned earlier, we're keeping a close eye on costs.

Philip Riley: We have the flexibility to order pipe and begin construction at a time that makes economic sense with commodity pricing and cash flow considerations.

Philip Riley: This station is designed to be expandable to 100 million cubic feet per day.

Philip Riley: With additional compressors installed as needed.

Philip Riley: Prior to completion of the high pressure transmission line.

John Suter: Our goal is to maximize the utilization of the compressor station by focusing on near-term development plans approximately to the station. We continue to utilize our power generation station with a greater percentage of our existing Texas assets. 50 to 60% of our power needs provided by self-generation in Q1. We're evaluating the benefits of a similar installation in New Mexico. with the expanded size of our portfolio in New Mexico. and Infrastructure Improvements Planned with Gas and Water. The power generation support will more fully allow us to develop unconstrained.

Philip Riley: Our goal is to maximize the utilization of the compressor station by focusing on near term development plans proximally two the station.

Philip Riley: We continue to utilize our power generation station with a greater percentage of our existing Texas assets.

Philip Riley: With 50% to 60% of our power needs provided by self generation in Q1.

Philip Riley: We're evaluating the benefits of a similar installation in new Mexico.

Philip Riley: With the expanded size of our portfolio in new Mexico and.

Philip Riley: In infrastructure improvements planned with gas and water.

Philip Riley: Power generation support will more fully allow us to develop unconstrained.

Philip Riley: In summary for the quarter.

John Suter: In summary for the quarter. We are pleased with our delivery of relatively flat production at lower LOE. especially considering no new wells turned in line as per plan. We made significant midstream progress with the completion of our compressor station in Redland. all while delivering stellar safety metrics.

Philip Riley: We are pleased with our delivery of relatively flat production at lower L. O N E.

Philip Riley: Especially considering no new wells turned in line as per plan.

Philip Riley: We made significant midstream progress with the completion of our compressor station and Red Lake.

Philip Riley: All while delivering stellar safety metrics.

Philip Riley: We've picked up a rig and look forward to efficient and cost effective Q2 development.

John Suter: We've picked up a rig and look forward to efficient and cost-effective Q2 development.

Philip Riley: I want to congratulate the Riley Development and Operational Team for a very successful Philip, I'll turn it over to you. Thank you, John. Our first quarter financials are straightforward. We converted $54 million of operating cash flow before working capital to $39 million of upstream free cash flow on account of a lighter TAPEX quarter, reinvesting only 35% into upstream while keeping volumes mostly flat. We allocated upstream free cash flow as follow-up. 56% went to debt reduction and cash, lowering debt by $21 million, quarter over quarter, to 0.9 times less. Combined 23% was invested in our midstream and power project.

Philip Riley: I want to congratulate the Riley development and operational team.

Philip Riley: For a very successful quarter.

Philip: Philip I'll turn it over to you.

Philip: Thank you John our first quarter financials are straightforward, we converted $54 million of operating cash flow before working capital to $39 million of upstream free cash flow on a kind of a lighter capex quarter, reinvesting only 35% and upstream while keeping volumes mostly flat.

Philip: We allocated upstream free cash flow as follows 56% went to debt reduction and cash lowering debt by 21 million quarter over quarter to 0.9 times leverage.

Philip: Combined 23% was invested in our midstream and power projects and.

Philip Riley: And 21% was allocated to the I'll next describe some of the acquisition mechanics and funding estimates. With a transaction effective date of January 1st and an estimated closing date of July 1st. will benefit from six months of cash flow that will serve as an adjustment to the funds required to close. Current prices may amount to a $15 million reduction at closing, and after accounting for some transaction expenses, may result in a $130 million draw on the Revolve We do forecast a modest increase during the second quarter on a stand-alone basis, based on current estimates, from the impact of working capital.

Philip: And 21% was allocated to the dividend.

Philip: Next describe some of the acquisition mechanics, and funding estimates, but their transaction effective date of January 1st and an estimated closing date of July one will.

Philip: We'll benefit from six months of cash flow that will serve as an adjustment to the funds required at closing.

Philip: Current prices this may amount to a $15 million reduction at closing and after accounting for some transaction expenses may result in $130 million draw on the revolver.

Philip: We do forecast and modest debt increased during the second quarter on a standalone basis based on current estimates for the impact of working capital movements.

Philip Riley: By the third quarter, pro forma leverage. After the acquisition will increase, but to a level with which management and the board is comfortable. And we believe similar to levels where we were at the end of 2020. We'll focus on managing the leverage profile in the second half of the year, which will be impacted by market prices, cash flow, and spending. We have a track record of paying cash for an asset and subsequently deleveraging over time, and that's our plan here. We'll benefit from some novated hedges coming with the acquisition entity as well as additional hedges we've put on recent To the balance of 2025, on a pro-forma combined basis, we've hedged oil prices for 70 percent of forecasted P2P volumes and 57 percent of total oil volumes at a weighted average $67 downside price.

Philip: By the third quarter pro forma leverage after the acquisition will increase but to a level with which management and the board is comfortable and we believe similar to levels, where we were at the end of 2023.

Philip: We'll focus on managing our leverage profile in the second half of the year, which will be impacted by market prices cash flow and spending.

Philip: We have a track record of paying cash for an asset in separate subsequently deleveraging over time and that's our plan here.

Philip: We'll benefit from some novae hedges coming with the acquisition entity as well as additional hedges we've put on recently.

Philip: For the balance of 2025 on a pro forma combined basis, we've hedged oil prices for 70% of forecasted PDP volumes and 57% of total oil volumes at a weighted averaged $67 downside price for.

Philip Riley: For 2026, on a pro forma combined basis, we've hedged 67% of forecasted PDP volumes at a weighted average $59 downside price.

Philip: For 2026 on a pro forma combined basis, we've hedged 67% of forecasted PDP volumes at a weighted average 59 dollar downside price.

Philip: Okay.

Philip Riley: Let's now discuss our modified guidance. In March, we announced 2025 investing guidance calling for material investments across upstream, midstream, and power as we seek to build complementary assets in a self-reinforcing model. On our last call, we forecasted staying debt neutral for the year at around $70 WTI. Since then, both realized prices and the forage strip have been well below that level. Additionally, the silverback acquisition opportunity manifested, and we and our board decided that was worth pursuing even a volatile down market.

Philip: Let's now discuss our modified guidance.

Philip: In March we announced 2025 investing guidance, calling for material investments across upstream midstream and power as we seek to build complementary assets in itself reinforcing model.

Philip: On our last call, we forecasted staying debt neutral for the year at around $70 W. Ti.

Philip: Since then both realized prices and the forward strip had been well below that level.

Philip: Additionally, the silverback acquisition opportunity manifested and we and our board decided that was worth pursuing even a volatile down market.

Philip: Given the combination of these factors, we decided to adjust down our capex across each of upstream midstream and power.

Philip Riley: Given the combination of these factors, we decided to adjust down our capex across each of upstream, midstream, and power. On a stand-alone basis, before accounting for the acquisition and reinvesting any of its cash flow, we're reducing 2025 total investments by $105 million, or 50%. Including Upstream CapEx by 41%, Midstream CapEx by 71%, and the PowerJV investment by 25%. The impact on standalone upstream volumes is modest, with midpoint oil guidance only down 4%. still showing year over year. One way we're achieving this is by turning to sales already completed well. We plan to complete more wells than we're drilling, owing to the fact that we have an inventory of ducts to utilize.

Philip: On a standalone basis before accounting for the acquisition and reinvesting any of its cash flow, we're reducing 2025 total investments by $105 million or 50%.

Philip: Including upstream Capex by 41% midstream capex by 71% and the power JV investment by 25%.

Philip: The impact on Standalone upstream volumes is modest with midpoint oil guidance, only down 4% and still showing year over year growth.

Philip: One where we're achieving this is by turning to sales already completed wells.

Philip: We plan to complete more wells than were drilling owing to the fact that we have an inventory of ducks to utilize.

Philip: We also provide guidance combined with the acquisition showing the second half of 2025 for combined volumes and the full year averages, which only include a half year benefit from the acquisition.

Philip Riley: We also provide guidance, combined with the acquisition, showing the second half of 2025 for combined volumes and the full-year averages, which only include a half-year benefit from the average. At this point, we forecast only modest incremental development activity and reinvestment of the acquisition cash flow, perhaps two net incremental wells, given the currently depressed price outlook. On an inflation-adjusted basis, oil prices are at their lowest level in the past 20 years, aside from 12-month periods in 2015, 2016, and then again in 2020. We believe this is a better time to procure and preserve inventory.

Philip: At this point with forecast only modest incremental development activity and reinvestment of the acquisition cash flow, perhaps two net incremental wells given the currently depressed price outlook.

Philip: On an inflation adjusted basis oil prices are at their lowest levels in the past 20 years aside from 12 month periods in 2015, 2016, and then again in 2020.

Philip: We believe this is a better time to procure and preserve inventory as Bobby said.

Philip Riley: We're certainly excited about the long-term development potential of the assets, and while we believe break-even development prices are far below the current market, we believe more favorable market conditions will return for bringing on new prices. On the Midstream Project, John described how we're spinning selectively, while pausing for now on the order of the pipe material itself. This will help reduce the concentration of the project spend and spread more into 2020. Additionally, we may explore some financing alternatives for the midstream project.

Philip: We're certainly excited about the long term development potential of the assets and while we believe breakeven development prices are far below the current market. We believe more favorable market conditions will return for bringing on new production.

John Suter: On the Midstream project John described how we're spending selectively while pausing for now on the order of the pipe material itself. This will help reduce the concentration of the project spend and spread more into 2026.

John Suter: Additionally, we may explore some financing alternatives to the midstream project.

Philip Riley: There's a scenario where we elect to use entity-level financing and re-accelerate the project.

John Suter: There is a scenario, where we elect to use entity level financing and Reaccelerate the project or a report back next quarter.

Philip Riley: We'll report back next week. On power, we continue with good progress and foresee re-prioritizing a few elements. following the acquisition, including adding battery backup to the self-generation project in Texas, adding another self-generation project in New Mexico, and using the thermal generators from one of the five aircraft projects for that.

John Suter: On power, we continue with good progress and foresee re prioritizing a few elements.

John Suter: Following the acquisition, including adding battery backup to the self generation project in Texas, adding another self generation project in new Mexico.

John Suter: And using the thermal generators from one of the five aircraft projects for that.

Philip Riley: while finally deferring the battery generation aspect of the ERCOT project. Net Net, we forecast this reducing our power equity investment need in 2025 by $5 million or 25%.

John Suter: Finally, deferring the batter generation aspect of the aircraft project.

John Suter: Net net we forecast this reducing our power equity investment need in 2025 by $5 million or 25%.

Bobby Riley: I'll turn it back to Bobby for closing. Thank you, Philip. Once again, we appreciate your time and interest in Riley.

Bobby: I'll turn it back to Bobby for closing thank you.

Speaker Change: Thank you Philip.

Bobby: Once again, we appreciate your time and interest in Riley Permian, while we're pleased with our Q1 2025 results our focus remains firmly on the future.

Bobby Riley: While we're pleased with our Q1 2025 results, our focus remains firmly on the We are committed to building a long-term value through disciplined capital allocation. Strategic Infrastructure Investments and Operations. Our recent initiatives position us for sustained growth, and we believe our long-term strategy will continue to drive shareholder value well beyond this uptick. Thank you for your continued support.

Bobby: We are committed to building a long term value through disciplined capital allocation strategic infrastructure investments and operational excellence.

Bobby: Our recent initiatives position us for sustained growth and we believe our long term strategy will continue to drive shareholder value well beyond this upcoming year.

Bobby: Thank you for your continued support.

Bobby: Operator, you May now turn the call over for questions.

Operator: Operator, you may now turn the call over for questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will Pause for just a moment to compile the Q&A roster.

Speaker Change: At this time I would like to remind everyone. I wanted to ask a question Press Star then the number one on your telephone keypad.

Bobby: We want.

Speaker Change: Pause for just a moment to compile the Q&A roster.

Speaker Change: Our first question comes from the line of John White with Roth Capital. Please go ahead.

John White: Our first question comes from the line of John White with Roth Capital. Please go ahead. Good morning.

John White: Good morning.

Speaker Change: Good morning, good morning.

Philip Riley: Congratulations on the Silverback acquisition. It looks like a very nice transaction for you. I was going to ask about the held by production content, but you had, Bobby, addressed that in his opening remarks. What do you think the motivation for the seller was? Was it driven by private equity structure or something like that? What do you think?

Speaker Change: Congratulations on the Silverback acquisition, it looks like a very nice transaction for you.

Speaker Change: I was going to ask about the held by production content that you had Bobby address that in his opening remarks.

Speaker Change: What do you think the motivation for it.

Speaker Change: The seller was it driven by a private equity structure or something like that what do you think.

Philip Riley: Yeah, John, this is Philip. I'll take that. Yeah, the cellar here was one of the large a large private equity shops, and they often focus on kind of three to five billion type of entities and exits. While this is great scale for Riley Permian, you know, maybe eventually it was going to be just a bit too small for them. At the same time, there's a real strategic move and unlocking that we're doing here. A lot of the region has been constrained by some infrastructure, including gas, and there are some efforts being made by third party midstream companies to alleviate that, but probably insufficiently.

Philippe: Yes, John this is phillippe I'll take that.

Speaker Change: Yes, the seller here it was one of the large.

Speaker Change: The large private equity shops, and they often focus on kind of three to 5 billion type of <unk>.

Speaker Change: <unk> entities and exits.

Philip Riley: While this is great scale for Riley Permian.

Philip Riley: Maybe eventually it was going to be just a bit too small for them.

Philip Riley: At the same time.

Speaker Change: There is a real strategic.

Philip Riley: Move in unlocking that we're doing here.

Philip Riley: A lot of the region has been constrained by some infrastructure, including gas and there. There are some efforts being made by third party midstream companies to leave that but probably insufficiently. So the project that we started in the fall that we.

John White: So the project that we started in the fall that we announced there in January, building our pipe, really gives us a strategic advantage here. And we believe that we were really best positioned to unlock that, whereas somebody else really couldn't take advantage of that. Does that help? Yes, very helpful, and makes very good sense.

Philip Riley: We announced there in January building, our pipe really gives us a strategic advantage here and we believe that we were really best positioned to unlock that.

Philip Riley: Whereas somebody else really couldn't take advantage of that.

Philip Riley: Does that help.

Speaker Change: Yes, very helpful and.

Philip Riley: Makes it makes very good sense.

John White: Thanks for the extra detail, and I'll turn the call back over to the operator.

Speaker Change: Thanks for the extra detail and I will turn the call back over to the operator.

Speaker Change: And our next question comes from the line of Jeff Robertson with water Tower Research. Please go ahead.

Jeff Robertson: Our next question comes from line of Jeff Robertson with Watertower Research.

Jeff Robertson: Please go ahead. Thank you, Philip. To follow up on the midstream angle of the silverback transaction. Does the larger, essentially contiguous acreage position change the scope of your midstream project? And can you, are there any? issues with bringing their volumes into the system that you all plan to build? And would you be able to capture some additional economic enhancement by adding those volumes through the system that you originally designed?

Jeff Robertson: Thank you Philip to follow up on the midstream Angola, the silverback transaction.

Jeff Robertson: Does the larger essentially continue contiguous acreage position changed the scope of your midstream project and can you are there any.

Jeff Robertson: Issues with bringing their volumes into the system that you all plan to build and would you be able to capture some additional economic enhancement by adding.

Jeff Robertson: Those volumes through the system that you originally designed.

Jeff Robertson: Yes sure.

Philip Riley: Yeah, sure.

Philip Riley: I'll start off here and then pass it to John to add in here. In general, this acquisition absolutely supports our decision to invest in infrastructure. You can see the map. It's a beautiful map there with the complete adjacency and overlapping acreage. What we'd say is we can definitely take advantage of the pipe that we're building. We'll also need more, frankly. We'll have more. Sorry, we won't need another pipe, but we'll probably want some additional gathering and compression over time. It's not something we have to do.

John: Start off here and then pass it to John.

Jeff Robertson: Add in here.

In General this acquisition absolutely supports our decision to invest in infrastructure.

Jeff Robertson: You can see the map, it's a beautiful map there.

Jeff Robertson: With that complete adjacency and overlapping acreage.

Jeff Robertson: What we'd say is we can definitely take advantage of the pipe that we're building.

Jeff Robertson: We will also need more frankly.

Jeff Robertson: We'll have more we won't sorry, we won't need another pipe that will will probably want some additional gathering and compression over time, it's not something that we have to do that so John can speak to here.

John Suter: That's what John could speak to here. But it does absolutely offer some synergy. We're excited about that. I'm referencing gas here, but it's also water.

Jeff Robertson: But it does absolutely offer some synergy.

Jeff Robertson: We're excited about that I'm referencing gas here, but it's also water John talked about that.

Philip Riley: John talked about that. So yeah, Jeff, there's absolutely ability to take advantage of that from the upstream side for operations. And then if you put the midstream business hat on, this represents a substantial amount of additional volumes that can go through the system. It's slightly lower working interest, pretty similar to what we've got. But as we described on the prior earnings call, we can bill out to working wind.

Speaker Change: So yes, Jeff there is absolutely ability to take advantage of that from the upstream side for operations and then if you put the midstream business had on.

Speaker Change: This represents a substantial amount of additional volumes. It can go through the system at slightly lower working interest pretty similar to what we've got but as we described on the prior earnings call. We can bill out to working interest partners and.

Speaker Change: Most of the most of the royalty owners.

Speaker Change: This piece there and so this represents a win win John you want to add something there.

John Suter: John, you want to add something there? Yeah, I think we're really excited about this. This is an asset we've been interested in for quite some time. As it turns out, our west side compressor station that we just completed was really perfectly placed as it worked out in the end. It is just really proximately close to this asset, the east side of the Silverback asset. Like Philip said, there'll be some gathering systems to be put in to make full use of it over time, but we're in no rush with the HVP. There's several gatherers out there that are working fine for the moment that we'll work with, but in the long run, it makes perfect sense to be able to bring in additional gas to our line to Targa, so it really fits in well.

Speaker Change: Yeah, I think we're really excited about this and this is an asset we have.

Speaker Change: Been interested in for quite some time.

Speaker Change: As it turns out our west side compressor station that we just completed was was.

Speaker Change: Really perfectly placed as it worked out in the end.

Speaker Change: It is just really approximately close to this asset the east side of the.

Speaker Change: Silverback asset so like Philip said, though there'll be some gathering systems to be put in to make full use of that overtime, but we're in no rush with the H P. P. There's there's several gathers out there that.

Speaker Change: Our working fine for the moment that will work with.

Speaker Change: But in the long run it makes perfect sense to be able to bring in additional gas to to our line to targa.

Speaker Change: So it really fits in well if the compressor station had been on the east side of our assets.

John Suter: If the compressor station had been on the east side of our assets, it would have been a little bit more challenging to get anything over there, so it worked out well.

Speaker Change: It would've been a little bit more challenging to get to get anything over there so worked out well.

John Suter: John, does the ability to move gas more efficiently have an impact on your ability to produce oil. Absolutely. If you don't have gas and water takeaway, it really does constrain you. And so, you know, this puts us in good position to be able to, you know, to do things as we want when the timing's right. That's the nice thing about this company with the assets we have, with our size, and we're nimble. So when the market turns, we can ramp up, ramp down to take full advantage of it. But you got to have that infrastructure access, really more so than many other plays I've been involved with.

Speaker Change: John does the ability to move gas.

Speaker Change: More efficiently have an impact on your ability to produce oil.

Speaker Change: Absolutely if you.

Speaker Change: If you don't have gas and water takeaway.

Speaker Change: It really does constrain you.

Speaker Change: And so.

Speaker Change: This puts us in good position to be able to.

Speaker Change: Do things as we want when the Timing's right that that's a nice thought.

Speaker Change: Nice thing about this company with the assets, we have with our our size and.

Speaker Change: We're nimble so when when the market turns we can ramp up ramp down to.

Speaker Change: To take full advantage of it but you got to have that infrastructure access really more so than many other players I've been involved with.

John Suter: So being able to de-bottle that gas and the water situation allows you to move more oil, which represents more than 95%. Current Revenues, correct? Yes, it's just a necessary means to, you know, to get your, to be able to produce the oil, you've got to be able to handle the other byproducts. Right.

Speaker Change: So.

Speaker Change: So being able to debottleneck gas and the water situation allows you to move more oil which represents more than 95%.

Speaker Change: Current revenues correct.

Philip Riley: Yes, it's just a necessary means to to get your <unk> to be able to produce the oil you've got to be able to handle the other byproducts right Philip.

Philip Riley: Philip, can you talk about, maybe this is premature, but can you talk about what impact the silverback assets could have? on Riley's borrowing base when you come to your redetermination in the fall. Sure. So, I'd say that the PDP value here is probably half of the purchase price. This is a largely undeveloped asset, hence all the undeveloped locations we state. If you take that and then cut it in half again, maybe that gives you an indication of what we could get incremental on the borrowing base. So, we're not counting on anything, but we certainly expect to get something there.

Philip Riley: And Philip can you talk about maybe this is premature but can you talk about what impact the silverback assets could have.

John Suter: Riley's borrowing base when you come to your Redetermination in the fall.

Philip Riley: Sure.

Philip Riley: So I'd say that the the PDP value here is probably half of the purchase price. This is a largely undeveloped assets.

Philip Riley: Hence all the <unk>.

Philip Riley: Undeveloped locations we state.

Philip Riley: If you take that and then cut it in half again, maybe that gives you an indication of what we can get incremental on the borrowing base. So we're not counting on anything, but we certainly expect to get something there.

Philip Riley: We're going to get more probably just from some of the development that we've been doing recently and then in the interim between now and then.

Philip Riley: We're going to get more probably just from some of the development that we've been doing.

Philip Riley: Recently.

Philip Riley: And then in the interim between now and then.

Philip Riley: And are we kind of we Didnt Trump at this but it was buried in our earnings release that we just reaffirmed our borrowing base at $400 million, we're happy to get that done we might've been a little bit early for some others on the street and no doubt that there is a little bit of choppy water out there given the volatility with pricing and such.

Philip Riley: We didn't trumpet this, but it was buried in our earnings release that we just reaffirmed our borrowing base at $400 million. We were happy to get that done. We might have been a little bit early for some others on the street, and no doubt that there's a little bit of choppy water out there given the volatility with pricing and such. So, we'll see how pricing adjusts through the year. But yes, short, we'd like to see a little bit of benefit there.

Philip Riley: So we'll see how pricing.

Philip Riley: Adjust through the year.

Philip Riley: But yes short, we'd like to see a little bit of benefit there.

Philip Riley: spoke about hedging and laid in some swaps for 2026.

Philip Riley: You spoke about hedging and laid in some swaps for 2026 can.

Philip Riley: Can you just philosophically talk about how you how you are thinking about hedging downside risk? in Uncertain market environment that we're in right now. Yeah, you know, the way we think about hedging is as a risk management tool. There's a covenant compliance aspect, but then there's also the risk management perspective, which is more of the driving factor. We like to think of that ahead of the trouble times. And so we're fortunate that we did that. So we're not having to hedge now necessarily. Generally, how we treat this is that, you know, the more leverage we have, that might, and the more, you know, fixed costs that we see commitments that we see that we're going to want some more protection.

Speaker Change: Can you just philosophically talk about how you how you are thinking about hedging downside risk.

Philip Riley: In the <unk>.

Philip Riley: Uncertain market environment that we're in right now.

Philip Riley: Yeah.

Philip Riley: The way, we think about hedging as a risk management tool.

There's a covenant compliance aspect, but then there's also the risk management perspective, which is.

Philip Riley: The driving factor.

Philip Riley: We like to think of that ahead of the troubled times and so we're fortunate that we did that so we're not having to hedge now unnecessarily.

Philip Riley: Generally how we treat this as that.

Philip Riley: More leverage we have that might and the more fixed costs that we see commitments that we see that we're going to want some more protection.

Philip Riley: For example, we had some nice 60 by 80 collars for some of 2026, 60 downside, $80 upside, that we decided to convert to some swaps that provided an uplift of maybe five or six dollars when you converted it to a swap. And so that in turn led to say, a six or seven dollar premium to what the swap was at the time, which we're happy to do, which gives us just a little bit. Clear stream of cash flow there for for the upcoming year. So this year, we feel good about it. We have a smaller delta, perhaps between PDP and total volumes on our forecast, then sometimes we do just given where we're not spending a ton this year on the development, as I described earlier.

Philip Riley: For example, we had some nice <unk>.

Philip Riley: <unk> by 80 collars for summer 2026.

Philip Riley: 60, downside $80 upside that we decided to convert to some swaps that provided an uplift of maybe five or $6. When you converted it to a swap and so that in turn led to say.

Philip Riley: Six or $7 premium to what the swap was at the time, which we're happy to do which gives us just a little bit.

Philip Riley: Clear.

Philip Riley: <unk> cash flow therefore for the upcoming year. So this year, we feel good about it we have a smaller delta perhaps between PDP and dip total volumes on our forecast.

Philip Riley: And then sometimes we do just given where we're not spending a ton this year on the development as.

Philip Riley: I described earlier.

Philip Riley: And so that allows for a little bit easier edging profile as well.

Philip Riley: And so that allows for a little bit easier hedging profile as well.

Jeff Robertson: Thank you.

Philip Riley: Thanks Lastly on power are there any significant permitting differences between.

Jeff Robertson: Thanks.

Philip Riley: Lastly, on on power, are there any significant permitting differences between what you might need to do power wise in New Mexico versus what you've been doing in Texas. I can start. Maybe, John, you help me. But, yeah, there's the air permits a little bit more. It's just a functional item you add to the generator and SCR. And so what we're talking about for the behind the meter installation there, which I kind of hinted at there in my prepared remarks, that adds just a little bit of cost, but otherwise we're looking fine on the permitting and feel pretty good about it.

Philip Riley: What you might need to do power wise into Mexico versus what you've been doing in Texas.

Philip Riley: Yeah, I can start maybe Jon can you help me, but yeah theres. These.

Philip Riley: The air permits at a little bit more.

Speaker Change: It's just a functional item you added to the generator in SCR.

Philip Riley: And so what we're talking about for the behind the meter.

Philip Riley: Installation, there, which I kind of hinted out there in my prepared remarks.

Philip Riley: That adds just a little bit of cost, but otherwise we're looking fine on the on the permitting and feel pretty good about it.

Operator: Thank you. As a reminder, to ask a question, press star one on your telephone keypad.

Philip Riley: Okay.

Philip Riley: Thank you.

Speaker Change: As a reminder to ask a question press star one on your telephone keypad and our next question comes from the line of Derrick Whitfield. Please go ahead.

Derek Whitfield: And our next question comes from the line of Derek Whitfield. Please go ahead. Good morning, guys, and congrats on a strong update and transformational acquisition. Thank you. Morning.

Derrick Whitfield: Good morning, guys and congrats on a strong update and transformational acquisition.

Speaker Change: Thank you.

Derek Whitfield: Maybe starting first with the Silverback acquisition. It's clear the acquisition materially increases your net undeveloped locations and offers considerable synergy opportunities. Could you guys speak to how this asset competes for capital and the opportunity you see to create working interest across the position over time? Yeah, I think, especially the east side of this asset, the east half is, is Really, we think identical to reservoir quality that we already have. And so it's I think it's really going to revolve around the infrastructure, at least initially, we want to be able to develop maybe the east side of the Novo asset and the west side of the Riley asset as a starting point just to take advantage of that existing compression station and pipeline to Targa.

Speaker Change: Morning, maybe starting first with the Silverback acquisition, it's clear the acquisition materially increases your net undeveloped locations and offers considerable synergy opportunities could you guys speak to how this asset competes for capital and the opportunity you see to accrete working interest across the position over time.

Speaker Change: Okay.

Speaker Change: Yeah I think.

Speaker Change: Especially the east side of this asset the east half as is.

Speaker Change: Really we think identical to a reservoir quality that we already have.

Speaker Change: And so it's.

Speaker Change: I think it's really going to revolve around the infrastructure at least initially.

Speaker Change: We want to be able to.

Speaker Change: Develop maybe the east side of the Novo asset and the west side of the Riley asset.

Speaker Change: The starting point just to take advantage of that.

Speaker Change: Existing.

Speaker Change: Compression station and pipeline to targets, so that's kind of where we see it but as far as a.

Derek Whitfield: So that's kind of where we see it.

Derek Whitfield: But as far as an economic side, I would say those two areas are really similar.

Speaker Change: Economic side I would say those two areas are are really similar.

Speaker Change: Great and then maybe shifting over to the stand alone business, it's quite remarkable that production it only impacted by a 3% given the near 50% decreasing 225 capital as you guys think about the adjustments you're making to the capital plan for non D&C capital does that give you adequate runway. Once you are in a position to.

Philip Riley: And then maybe shifting over to the standalone business, it's quite remarkable that production is only impacted by 3% given the near 50% decrease in 2025 capital. As you guys think about the adjustments you're making to the capital plan for non-DMC capital, does that give you adequate runway once you're in a position to increase capital to the upstream business? Yeah, I can start. You know, it is a mix here of drilling and completions capital that we're cutting, but also some, some infrastructure, admittedly, that was part of the initial kind of 200 million dollar budget that we started with earlier this year.

Speaker Change: Increased capital to the upstream business.

Speaker Change: Yes, I can start.

Speaker Change: Yeah.

Speaker Change: It is a mixed here of drilling and completions capital that we're cutting but also some some infrastructure admittedly.

Speaker Change: That was part of the initial kind of $200 million budget that we started with.

Speaker Change: Earlier this year.

Philip Riley: That includes a variety of, you know, say, non power JV power installation, like a PME some water. We also had some growth capital in there, frankly, for some land acquisitions that we kind of earmarked. This is this acquisition is effectively, you know, just a giant land budget there. And so there's some things that we are cutting this year.

Speaker Change: That includes a variety of being I'll say.

Speaker Change: Non power JV power installation like a PMA.

Speaker Change: Water. We also had some growth capital in there frankly for some land acquisitions that we kind of earmarked. This is this acquisition is effectively just a giant land budget there.

Speaker Change: And so theres some things that we are cutting this year as far as D&C theres other things that were effectively deferring a bit that we're fine to defer.

Philip Riley: As far as DNC, there's other things that were effectively deferring a bit that we're fine to defer and we'll layer and smooth out over the coming 12 to 24 months or or longer.

Speaker Change: And we will layer and smoothed out over the coming <unk>.

Speaker Change: <unk> to 24 months or longer.

Speaker Change: Perfect Thats very very helpful. I'll turn it back to the operator.

Derek Whitfield: I'm sure if it gets very helpful, I'll turn it back to the operator.

Noel Parks: When our final question comes from the line of Noel Parks with Tui Brothers, please go ahead. All right, good morning. Morning. Morning, y'all.

Speaker Change: And our final question comes from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Noel Parks: Hi, good morning.

Speaker Change: Good morning.

Noel Parks: Just to add a few, just a housekeeping item, is there any assumed debt with the transaction? No. Okay, great. And and you did already comment on the hedges.

Speaker Change: Just have a few.

Speaker Change: Just a housekeeping item is there any assumed debt with the transaction.

Speaker Change: Yeah.

Speaker Change: Okay great.

Speaker Change: And.

Speaker Change: Uh huh.

Speaker Change: You did already comment on the hedges just curious about what the recent drill bit pace was.

Philip Riley: I'm just curious about what the recent drill bit pace was with Silverback. Had they been active or not? Yeah, they really haven't been too active drilling wise. I, to be honest with you, it's not because of the quality of what they have to develop. They just were really hamstrung with having a longer term access to infrastructure. I mean, that word keeps coming back up, but it's they were, they were kind of constrained in that area. They did drill, they have drilled some wells. but they weren't they weren't what I would call active.

Speaker Change: With silverback had they could be better active or not.

Speaker Change: Yes.

Speaker Change: Yeah, they they really havent been too active driller.

Speaker Change: Drilling wise.

Speaker Change: To be honest with you, it's not because of the quality of what they have to develop they just were really hamstrung with.

Speaker Change:

Speaker Change: Having a.

Speaker Change: Longer term access to infrastructure, I mean that that where it keeps coming back up but it's.

Speaker Change: They were they were kind of constrained in that area. They did drill that have drilled some wells.

Speaker Change: But.

They weren't they weren't what I would call active.

Speaker Change: It's been a year and a half since they drilled their last well.

Philip Riley: It's been a year and a half since they drilled their last well.

Speaker Change: Wow so.

Philip Riley: Wow, so as opposed to quite a few other PE exits we've seen over the years where they really ramp up the production to sort of pump up the valuation, this is not one of those cases, huh? Right. You could you could you could drill some wells individually, but you really can't drill to scale to be able to do that again. And that's that's kind of like we had on our last conference call where earnings call where they asked Bobby about that, that it really gives us a competitive advantage when when we hold kind of the key to the infrastructure.

Speaker Change: On wholesale.

Speaker Change: A few other P exits we've seen over the years, where they really ramp up.

Speaker Change: The production too.

Speaker Change: Or a pump up the valuation this is not one of those cases huh.

Speaker Change: Right.

Speaker Change: Yeah, you could you could drill some wells individually, but you really can't drill to scale to be able to do that.

Speaker Change: Again, and that's that's kind of like we had on our last conference call where.

Speaker Change: Earnings call, where they ask Bobby about that that it really gives us a competitive advantage when when we hold kind of the key to the infrastructure.

Philip Riley: that we believe would result in opportunities like this. So it's kind of played out to some degree.

That we believe.

Speaker Change: Would result in opportunities like this so it's kind of played out to some degree.

Noel Parks: Got it. And, um, and I guess I was just so curious, um, someone did ask about the seller's motivation, but, um, I'm, you mentioned that, um, you know, the opportunity was was clearly, you know, attractive, even in a weaker oil environment.

Speaker Change: Got it.

Speaker Change: And I guess I was just curious.

Speaker Change: Curious someone did ask about the seller.

Speaker Change: Motivation, but.

Speaker Change: You mentioned that.

Speaker Change: The opportunity was was quite a weak.

Speaker Change: Attractive.

Speaker Change: A weaker oil environment and.

Philip Riley: And, but, you know, when I saw the map of where the acreage location is, it's like, okay, you were obviously, obviously aware of, of this, you know, this position, this operation, I can't really think of a closer bolt on I've seen in a deal recently. So Did this sort of, I guess, was maybe the degree to which they're constrained, was that evident to you before you, you know, got into due diligence? And did it come together relatively quickly? Or is this something that has been on the back burner for a long, long time?

Speaker Change: But you know when I saw the map of where the acreage locations. It's like okay.

Speaker Change: Obviously, we are fully aware of.

Speaker Change: Good.

Speaker Change: This position with operation.

Speaker Change: Can't really think of a closer bolt on I've seen.

Speaker Change: In a deal recently so.

Speaker Change: Did this sort of.

Speaker Change: It was maybe the degree which they're constrained was evident.

Speaker Change: Can you before you.

Speaker Change: Got into due diligence.

Speaker Change: I'm glad to hear it came together relatively quickly or is this something that has been on the back burner for a long long time.

Philip Riley: You know, I can try to characterize it, Noel. You know, generally, people are aware of the regional constraints for gas takeaway in the Permian, both in the basin and even up on the Northwest Shelf. You can look simply at a Waha differential and see how much less valuable gas is here in the Permian versus the Haynesville or the Marcellus. So, that's not a secret.

Speaker Change: I can try to characterize it at all.

Speaker Change: Generally people are aware of the regional constraints.

Speaker Change: For gas takeaway in the Permian, both in the basin and and even up on the northwest shelf.

Speaker Change: You can look simply at our Oaxaca differential and see how much less.

Speaker Change: Valuable gasses here in the Permian versus the Haynesville or the Marcellus.

Speaker Change: So that's that's not a secret.

Philip Riley: As far as the deal coming together, you know, I'll say we did our best to make it happen. Obviously, we've worked through some volatility in the past six weeks, and we're happy to present to you today what we were able to achieve. Yeah, I think our technical, their technical team always, they're they're kind of carbonate. experts, I think, and so we're always looking up and down the shelf to see what opportunities are out there if the chance ever exists.

Speaker Change: As far as the deal coming together.

Speaker Change: You know I'll say, if we did our best.

Speaker Change: To make it happen obviously, we worked through some volatility in the past six weeks and we're happy to present to you today, we were able to achieve.

Speaker Change: Okay.

Speaker Change: Yes, I think our technical their technical team always.

Speaker Change: They're kind of carbonate.

Speaker Change: Uh huh.

Speaker Change: Experts I think Ken.

Speaker Change: So we're always looking up and down the shelf to see what opportunities are out there.

Speaker Change: The.

Speaker Change: Chance ever exist.

Noel Parks: Okay. Well, great.

Speaker Change: Okay well great.

Noel Parks: It's terrific to see such a high-quality acquisition. I was sort of under the impression that there wasn't a lot out there, that most of kind of what was coming to market was going to be sort of pitched over. So this is like a welcome surprise, so congratulations. Thank you.

Speaker Change: It's terrific to see.

Speaker Change: Such a high quality acquisition I was sort of.

Speaker Change: The impression that there wasn't a lot out there.

Speaker Change: That most of them kind of what was coming to market.

Speaker Change: Sort of pitched over so this is like a welcome surprise so congratulations.

Speaker Change: Thank you.

Speaker Change: Then we have one final question from the line of Jeff Robertson with water Tower Co research. Please go ahead.

Jeff Robertson: And we have one final question from the line of Jeff Robertson with Water Tower Research.

Jeff Robertson: Please go ahead. Thank you, Bobby or John, I just want to follow up on your comment around about the drilling activity and the silverback asset leading up to the sale. It sounds like from your comments, you're acquiring an asset base that has a relatively shallow decline, or at least it's not in a flush decline. Is that the right way to think about it? As you start to think about laying out a 2026 capital program, you're not really starting at a big deficit from a screaming decline? Exactly. It's like Philip said, it's been a year and a half since they drilled something.

Jeff Robertson: Thank you Bobby or John I, just wanted to follow up on your comment around about the drilling activity in the silverback asset leading up to the sale.

Jeff Robertson: It sounds like from your comments Youre acquiring an asset base that has a.

Jeff Robertson: It was relatively shallow decline or at least it's not in our flex decline.

Jeff Robertson: Is that the right way to think about it as you start to think about laying out a 2026 capital program Youre not really starting at a big deficit from a from a screaming decline.

Speaker Change: Exactly it's like Philipp said, it's been a year and a half since they drilled.

Speaker Change: Something so it's declines moderated and.

John Suter: So it's declines moderated and that won't be a big issue for us. So that will allow you to be more opportunistic with your capital as you think about deploying capital in whatever environment we'll be in. Absolutely. No, it's. You seldom get something like that where you aren't rushing to cover either the decline or the expirations, but we're in really good shape here where we can take advantage of some of the infrastructure they did have on the water side and kind of take our time and deploy money when it makes sense. And again, to take advantage of the new compression that kind of borders both of our assets.

Speaker Change: That won't be a big issue for us.

Speaker Change: So that will allow you to be more opportunistic because with your capital as you think about deploying capital in whatever environment will begin.

Speaker Change: Absolutely no.

Speaker Change: You seldom get something like that where you aren't rushing to to cover either the decline or the explorations, but.

Speaker Change: We're in really good shape here, where we can.

Speaker Change: <unk>.

Speaker Change: Take advantage of some of the infrastructure. They did have on the water side and kind of take our time and.

Speaker Change: Deploy money when it makes sense and again to take advantage of the.

Speaker Change: New compression that kind of borders both of our assets.

Speaker Change: Thank you.

John Suter: Thank you.

Operator: Ladies and gentlemen, that does conclude today's conference call. Thank you all for joining.

Speaker Change: Ladies and gentlemen that does conclude today's conference call. Thank you all for joining you may now disconnect.

Operator: You may now disconnect.

Speaker Change: Sure.

Speaker Change: Please wait the conference will begin shortly.

Operator: Please wait, the conference will begin shortly.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.