Q1 2025 Granite Ridge Resources Inc Earnings Call

Yeah.

Speaker Change: Good morning, and welcome to the Granite Ridge Resources' first quarter 2025 earnings Conference call. Currently all participants are in a listen only mode.

A question first.

Speaker Change: And we will.

Speaker Change: Will follow the formal presentation to ask a question simply press star followed by the number one on your telephone keypad to withdraw your question Press Star One again I will now turn the call over to James Masters.

James Masters: Industrial relations representative for granite Ridge.

James Masters: Thank you, operator. Good morning, everyone. We appreciate your interest in Granite Ridge Resources. We will begin our call with comments from Luke Brandenberg, our President and Chief Executive Officer, who will review the quarter's results and company strategy. We will turn the call over to Tyler Farquharson, our Chief Financial Officer, who will review our financial results in greater detail. Luke will return to provide some closing comments before we open the call up for questions. Today's conference call contains certain projections and other forward-looking statements within the meaning of Federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements. We would ask that you also review the cautionary statement in our earnings release.

James Masters: Thank you operator, and good morning, everyone. We appreciate your interest in granite Ridge resources.

James Masters: We will begin our call with comments from Luke Brandenburg are president and Chief Executive Officer, who will review the quarters results and company strategy.

James Masters: He will then turn the call over to Tyler Parkerson, Our Chief Financial Officer, who will review our financial results in greater detail.

James Masters: Luke will then return to provide some closing comments before we open the call up for questions.

James Masters: Today's conference call contains certain projections and other forward looking statements within the meaning of federal Securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements. We would ask that you also review the cautionary statement in our earnings release.

James Masters: Granite Ridge disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and our filings with the Securities and Exchange Commission. This conference call also includes references to certain non-GAAP financial measures. Information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures is available in our earnings release that is posted on our website. Finally, as a reminder, this conference call is being recorded. A replay and transcript will be made available on our website following today's call. With that, I will now turn the call over to Luke.

James Masters: Granite ridge disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.

James Masters: Accordingly, you should not place undue reliance on forward looking statements.

James Masters: These and other risks are described in yesterday's press release, and our filings with the Securities and Exchange Commission.

This conference call also includes references to certain non-GAAP financial measures.

James Masters: Information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures is available in our earnings release that is posted on our website.

James Masters: Finally, as a reminder, this conference call is being recorded a replay and transcript will be made available on our website following today's call.

Luke Brandenburg: With that I will now turn the call over to Luke.

Luke Brandenberg: Thank you, James, and thank you all for joining us today. This morning, I plan to cover the key highlights from the Q1, discuss the recent market volatility, and review our current 2025 budget along with the flexibility we have within it. I will then share thoughts on the outlook for the rest of 2025 before passing it over to Tyler. Kicking off with the quarter, I'm pleased to share that Granite Ridge had an outstanding Q1 in 2025. We achieved a production rate of over 29,000 barrels of oil equivalent per day, reflecting a 23% increase compared to the same period last year. Additionally, we generated $91 million of Adjusted EBITDAX, surpassing our internal projections. These impressive results highlight the success of our strategic focus on geographic and hydrocarbon diversity.

Luke Brandenburg: Thank you James and thank you all for joining us today.

Luke Brandenburg: Morning, I plan to cover the key highlights from the first quarter discuss the recent market volatility and a review of our current 2025 budget along with the flexibility we have with that.

Luke Brandenburg: I will then share thoughts on the outlook for the rest of 2025 before passing it over to Tyler.

Luke Brandenburg: Kicking off with the quarter I'm pleased to share that granite Ridge had an outstanding first quarter in 2025.

Speaker Change: and 1000 barrels of oil equivalent per day, reflecting a 23% increase compared to the same period last year. Additionally, we generated 91 million dollars of adjusted EBITDAX surpassing our internal projections.

Speaker Change: These impressive results highlight the success of our strategic focus on geographic and hydrocarbon diversity, currently a balanced 50-50 split between oil and gas and a partnership with the top tier operators.

Luke Brandenberg: Currently a balanced 50/50 split between oil and gas and our partnership with top-tier operators. Our outperformance in the Q1 was primarily driven by traditional non-op wells that came online earlier than anticipated or outperformed their expected type curves throughout the quarter. A standout performer continues to be our operated partnership program, where we are excited to see substantial growth in volumes over the past year. Our partner in the Delaware Basin has increased gross daily operated oil production by 400% from 2,500 barrels of oil per day to approximately 10,000 barrels of oil per day, with interest in over 50 producing wells.

Speaker Change: Our outperformance in the first quarter was primarily driven by traditional non-op wells that came online earlier than anticipated or outperformed that expected type curves throughout the quarter.

Speaker Change: A standout performer continues to be our operated partnership program where we are excited to see substantial growth and volumes over the past year.

Speaker Change: Our partner in the Delaware Bay Sun has increased gross daily operated oil production by 400% from 2500 barrels of oil per day to approximately 10,000 barrels of oil per day with interest in over 50 producing wells.

Luke Brandenberg: With every dollar we invest in this business, we are targeting full-cycle returns of greater than 25%. We are pleased that the results to date align with those expectations. For the quarter, we turned 13.7 net wells to sales, increased oil volumes by 39%, and natural gas volumes by 10%, with robust initial production from new wells, primarily in the Permian Basin. One area I am particularly proud of is our cost structure, which continues to improve on a per-unit basis as we scale the business. As the denominator grows, our efficiency improves. In the Q1, we reported LOE of $6.17 per BOE, 13% lower than last year. On an operating margin basis, we improved from 83% in the Q1 of last year to 87% this year. These are not one-time savings.

Speaker Change: But every dollar we invest in this business we are targeting full cycle returns of greater than 25% and we're pleased that the results today align with those expectations.

Speaker Change: For the quarter, we turned 13.7 net wells to sales, increased oil volumes by 39% and natural gas volumes by 10% with robust initial production from new wells primarily in the Permian Basin.

Speaker Change: One area I'm particularly proud of is our cost structure which continues to improve on a per unit basis as we scale the business as the denominator grows our efficiency improves. In the first quarter, we reported L-O-E of $6.17 per B-O-E, 13% lower than last year.

Speaker Change: On an operating margin basis, we improved from 83% in the first quarter of last year to 87% this year. These are not one-time savings. They are repeatable cost structure improvements thanks to increased scale that will continue to drive enhanced cash flow and shareholder returns.

Luke Brandenberg: They are repeatable cost structure improvements, thanks to increased scale that will continue to drive enhanced cash flow and shareholder returns. Turning to the macro environment, while volatility has been a prevailing theme lately, Granite Ridge remains well-positioned with a diversified asset base. Our production is approximately 75% hedged through 2026, and we maintain a leverage ratio of just 0.7 times net debt to Adjusted EBITDAX. This combination preserves our expected cash flows and provides significant optionality as we look to capitalize on opportunities in this environment. Our diversification, in particular, proves incredibly valuable during times of volatility. After 2 years in the doldrums, it is great to see the macro picture improve for natural gas, and we are pleased with both the production and operating margin growth of our natural gas assets.

Speaker Change: Turning to the metro environment, while volatility has been a prevailing theme lately, Granite Ridge remains well-positioned with a diverse fight asset base.

Speaker Change: Our production is approximately 75% hedge through 2026, and we maintain a leverage ratio of just 0.7 times net debt to adjust to EBITX. This combination preserves our expected cash flows and provides significant optionality as we look to capitalize on opportunities in this environment.

Speaker Change: Our diversification in particular proves incredibly valuable during times of volatility. After two years on the doldrums, it is great to see the macro picture improved for natural gas. And we are pleased with both the production and operating margin growth of our natural gas assets.

Luke Brandenberg: Year over year, while gas volumes grew by 10%, our revenue from gas more than doubled to $31 million, thanks to realized prices of $3.97 per Mcf, compared to just $1.84 per Mcf a year ago. We continue to evaluate opportunities to accelerate capital deployment in response to today's improved gas pricing, particularly in the Haynesville and Dry Gas Eagle Ford. Moving to our 2025 budget. During our last call, I mentioned the possibility of an accelerated CapEx scenario of approximately $380 million. However, due to recent market volatility, we've decided to proceed with our base case of $310 million. This approach is projected to achieve a 16% production growth at the midpoint. Let's take a quick look at our sources and uses for 2025.

Speaker Change: Year over year, while gas volumes grew by 10% are revenue from gas more than double to $31 million. Thanks to realized prices of $3.97 per end compared to just $1.84 per end a year ago.

Speaker Change: We continue to evaluate opportunities to accelerate capital deployment in response to today's improved gas pricing, particularly in the Hainesville and Dragass Eagle Fords.

Speaker Change: Moving to our 2025 budget, during our last call, I mentioned the possibility of an accelerated capex scenario over approximately $380 million.

Speaker Change: However, due to recent market volatility, we've decided to proceed with our base case of $310 million. This approach is projected to achieve a 16% production growth at the midpoint.

Speaker Change: Let's take a quick look at our sources and uses for 2025. Using round numbers, the uses include the $300 million budget for CAPEX, about $60 million for dividends, and $25 million for interest in other costs, totaling $395 million.

Luke Brandenberg: Using round numbers, the uses include the $300 million budget for CapEx, about $60 million for dividends, and $25 million for interest and other costs, totaling $395 million. On the sources side, while production growth does not directly translate to cash flow, with gas prices up, oil prices down, and hedges in place, it serves as a reasonable proxy. Starting with $291 million of 2024 EBITDA and applying a 16% increase at the production guidance midpoint, we estimate about $335 million. This leaves us with $60 million in incremental debt. I walked through this for a couple of reasons. First, to assist those of you who model Granite Ridge. We appreciate you. Second, to highlight that in the current hydrocarbon price environment, our plan puts us roughly cash flow neutral, excluding the dividend. I recognize that excluding the dividend is a lightning rod for some.

Speaker Change: On the sources side, while production growth is not directly translated cashflow, but gas prices up, oil prices down and hedges in place, it serves as a reasonable proxy.

Speaker Change: Starting with $291 million of 2024 EBITDA and applying a 16% increase at the production guidance midpoint, we estimate about $335 million. This lays us with $60 million in incremental debt.

I walk through this for a couple of reasons.

Speaker Change: First, to assist those of you who want to Granite Ridge, we appreciate you.

Speaker Change: Second, the highlight that in the current hydrocarbon price environment, our plan puts us roughly cash-flow neutral excluding the dividend. I recognize that excluding the dividend is a lightning rod for some. In this environment, where oil and gas stocks trade more like assets than businesses, people often take the negative and criticize us for borrowing to pay the dividend.

Luke Brandenberg: In this environment, where oil and gas stocks trade more like assets than businesses, people often take the negative and criticize us for borrowing to pay the dividend. I would like to offer a different perspective. We believe we can fund our dividend and achieve mid to high single-digit production growth out of cash flow. As we continue to find accretive opportunities, even in this price environment, we are taking on conservative leverage to generate mid-teens production growth and accelerate cash flows. As we consider budget flexibility, our focus on full-cycle returns and efficient operating cost management has enabled us to maintain a low leverage profile while achieving significant asset growth. In the face of an uncertain market, these priorities remain crucial. We are confident in our assets and balance sheet's ability to withstand fluctuations in hydrocarbon prices, and our capital program is designed to adapt to various price scenarios.

Speaker Change: I would like to offer a different perspective. We believe we can fund our dividend and achieve mid-to-high single-digit production growth out of cash flow.

Speaker Change: As we continue to find a creative opportunities even in this price environment we are taking on conservative leverage to generate mid teams production growth and accelerate cash flows.

Speaker Change: As we consider budget flexibility, our focus on full cycle returns and efficient operating cost management and enable us to maintain a low-leveraged profile while achieving significant asset growth.

Speaker Change: In the face of an uncertain market, these priorities remain crucial. We are competent in our assets and balanced sheets ability to withstand fluctuations in hydrocarbon prices. And our capital program is designed to adapt to various price scenarios.

Luke Brandenberg: Like our peers in oil and gas industry, we are closely monitoring hydrocarbon prices and will continue to adjust our budget accordingly if oil remains below $60 per barrel. As recently as this week, we have non-consented well proposals that do not meet our return threshold and identified approximately $30 million in CapEx within our operated partnerships that we can swiftly cut or defer with additional flexibility if market conditions require. Our guiding principle for capital allocation remains a focus on full-cycle returns combined with conservative leverage. Production growth is merely a result of this strategy. With estimated maintenance capital accounting for less than two-thirds of our 2025 budget, we have substantial flexibility to make decisions that enhance long-term shareholder value. To review, we've had an outstanding quarter with performance exceeding expectations across the board.

Speaker Change: Like our peers in oil and gas industry, we are closely monitoring hydrocarbon prices and will continue to adjust our budget accordingly if oil remains below $60 per barrel.

Speaker Change: As recently as this week, we have non-concentrated well proposals that do not need our return threshold and identified approximately $30 million in cat-backs within our operated partnerships that we can swiftly cut or defer with additional flexibility if market conditions require.

Speaker Change: Our guiding principle for capital allocation remains a focus on full cycle returns combined with conservative leverage.

Speaker Change: Production growth is merely a result of this strategy with estimated maintenance capital accounting for less than two-thirds of our 2025 budget. We have substantial flexibility to make decisions that enhance long-term shareholder value.

Speaker Change: To review, we've had an outstanding quarter with performance exceeding expectations across the board. Our balance sheet remains in great shape at just 0.7 times leverage, and our hedging program is solid, covering roughly 75% of current production through 2026. We are growing responsibly with increased margins and lower capital reinvestment rates and ever before.

Luke Brandenberg: Our balance sheet remains in great shape at just 0.7 times leverage, and our hedging program is solid, covering roughly 75% of current production through 2026. We are growing responsibly, with increased margins and lower capital reinvestment rates than ever before. Strategically, where are we? After a decade of building a significant non-op portfolio with diversified interest across six premier oil and gas basins in the United States, our current focus on operated partnerships brings balance to the portfolio. This focus adds control over the timing of CapEx and cash flows while partnering with some of the highest quality operating teams in the country. We have built Granite Ridge on the principles of diversification and strict underwriting standards to generate steady returns for our shareholders. Our approach remains rooted in capital stewardship, with disciplined allocation following close behind.

Strategically, where are we?

Speaker Change: After a decade of building a significant non-op portfolio, but diversified interest across six premier oil and gas basins in the United States, our current focus on operated partnerships brings balance to the portfolio. This focus adds control over the timing of cathex and cash flows while partnering with some of the highest quality operating teams in the country.

Speaker Change: We have built Granite Ridge on the principles of diversification and strict underwriting standards to generate steady returns for our shareholders.

Luke Brandenberg: Over the past two and a half years as a public company, we have ensured that our intent to grow and add scale has not come at the expense of financial prudence. I'm proud of our efforts. The growth we have experienced is due to sound capital allocation strategies, always with good rocks and outstanding partners. Looking ahead to the rest of 2025, we are focused on three key priorities. First, developing our operated partnership program. We currently have 2 operating partners and have agreed to terms with a third, all targeting the Permian Basin. Earlier this year, we were running 2 rigs in the Delaware Basin, but have since scaled back to 1 rig. We are pleased with the results we have achieved so far and maintain total control and flexibility to adjust the program according to the hydrocarbon price environment.

Speaker Change: I'm proud of our efforts. The growth we have experienced is due to sound capital allocation strategies always with good rocks and outstanding partners.

Speaker Change: Looking ahead to the rest of 2025, we're focused on three key priorities.

First, developing our Operated Partnership Program.

Speaker Change: We currently have two operating partners and have agreed to terms with the third all targeting the Permian Basin.

Speaker Change: Earlier this year, we were running two rigs in the Delaware Basin, but has since scaled back to one rig. We're pleased with the results we've achieved so far and maintain total control and flexibility to adjust the program according to the hydrocarbon price environment. This program will account for about 60% of our capital this year, up from 50% in 2024.

Luke Brandenberg: This program will account for about 60% of our capital this year, up from 50% in 2024. Second, maintaining a careful balance between growth and returns. We continue to guide to a 16% production growth while maintaining our $0.11 per share quarterly dividend, which at current prices offers almost a 9% dividend yield. Finally, preserving our financial flexibility. With the support of our banking partners, we successfully increased our borrowing base in April by $50 million to $375 million, providing enhanced pro forma liquidity of $141 million as of 31 March. Leverage stands at just 0.7X net debt to EBITDAX. This conservative approach has served us well through multiple cycles. With that, let me turn it over to Tyler to walk through the numbers in more detail. Tyler?

Speaker Change: Second, maintaining a careful balance between growth and returns. We continue to guide to a 16% production growth while maintaining our 11 cent per share quarterly dividend, which at current prices offers almost a 9% dividend yield.

Speaker Change: Finally, preserving our financial flexibility. With the support of our banking partners, we successfully increased our borrowing base in April by $50 million to $375 million, providing enhanced pro-formal liquidity of $141 million as of March 31st.

Speaker Change: Leverage stands at just 0.7x net debt to eat the X. This conservative approach has served as well through multiple cycles. With that, let me turn it over to Tyler to walk through the numbers in more detail. Tyler?

Tyler Farquharson: Thanks, Luke. Good morning, everyone. I'll begin with an overview of our income statement. We generated $122.9 million in total revenue this quarter. That's up nearly $34 million from the same period last year, with realized prices of $69.18 per barrel and $3.97 per Mcf. Our adjusted net income was $28.9 million, $0.22 per share, an 89% increase year over year. That strong performance translated into $86.7 million of operating cash flow before working capital changes. On costs, I want to highlight two items. First, as Luke mentioned, we reduced LOE to $6.17 per BOE. Second, G&A came in at $2.84 per BOE, down 5% from last year as we continue to benefit from scale. Turning to capital allocation, we invested $71 million in drilling and completions capital, with the majority directed toward our Permian operated partnerships.

Tyler Parkerson: Thanks, Luke, and good morning everyone. I'll begin with an overview of our Income Statement.

Tyler Parkerson: We generated 122.9 million total revenue this quarter. That's up nearly 34 million from the same period last year. We've realized prices of $69.18 per barrel and $3.97 per MCF.

Tyler Parkerson: Our adjusted net income was 28.9 million, 22 cents per share, and 89 percent increase year over year. That strong performance translated into 86.7 million of operating cash flow before working capital changes.

Luke Brandenburg: On costs, I want to highlight two items. First, as Luke mentioned, we reduced LLE to $6.17 per BLE. Second, G&A came in at $2.94 per BLE, down 5% from last year as we continue to benefit from scale.

Luke Brandenburg: Turning to capital allocation, we invested $71 million in drilling and completions capital with the majority directed toward our Permian operative partnerships. In addition, we deployed $34 million on acquisitions.

Tyler Farquharson: In addition, we deployed $34 million on acquisitions, securing 12 net high-quality locations at an average cost of $2.1 million each. Total capital for the quarter was $101 million, compared to consensus expectations of $87 million. The difference primarily reflects the timing of a $14 million opportunistic acquisition completed during the quarter, reflecting our ability to remain flexible and capitalize on attractive assets when they arise. Our balance sheet remains a real strength. We ended the quarter with $250 million of debt outstanding, just 0.7x net debt to EBITDAX, and with our recent borrowing base increase, we now have $140.8 million in total liquidity, which positions us well to capitalize on future opportunities. Our hedge book also provides significant protection. For oil in 2025, we have 2.4 million barrels hedged, with floors at $61.86 and ceilings at $77.89.

Luke Brandenburg: Securing 12 net high quality locations at an average cost of 2.1 million each.

Luke Brandenburg: Total capital for the quarter was 101 million compared to consensus expectations of 87 million.

Luke Brandenburg: The difference primarily reflects the timing of a $14 million opportunistic acquisition completed during the quarter, reflecting our ability to remain flexible and capitalize on attractive assets when they arise.

Luke Brandenburg: Our balance sheet remains a real strength. We entered the quarter with 250 million of debt outstanding just .7x net debt to EBITDAX and with our recent borrowing base increase we now have 140.8 million in total liquidity which positions us well to capitalize on future opportunities.

Our head book also provides significant protection.

Luke Brandenburg: For oil in 2025, we have 2.4 million barrels hedged with floors at $61.86 and ceilings at $77.89. On the gas side, we protected 7.3 BCF at floors of $3.43 and ceilings of $4.23 and have swapped an additional 8 BCF at $3.67. These hedges lock in substantial cash flow through 2025.

Tyler Farquharson: On the gas side, we protected 7.3 Bcf at floors of $3.43 and ceilings of $4.23, and have swapped an additional 8 Bcf at $3.67. These hedges lock in substantial cash flow through 2025. Based on this strong start to the year, we're reaffirming all aspects of our 2025 guidance. We continue to expect production between 28,000 and 30,000 BOE per day, with oil making up 52% of volumes. On costs, we're now tracking toward the low end of our LOE guidance range of $6.25 to 7.25 per BOE. Looking ahead, we anticipate Q2 production will remain consistent with Q1 levels, followed by a modest increase in the H2 of the year. Capital spending in Q2 is expected to be broadly in line with Q1 levels, with a more measured pace of investment planned for the H2 as we maintain our focus on capital efficiency.

Luke Brandenburg: Based on this strong start to the year, we're reaffirming all aspects of our 2025 guidance. We continue to expect production between 28,000 and 30,000 B.O.E. per day with oil making up 52% of volumes.

Luke Brandenburg: On costs, we're now tracking toward the low end of our LOE guidance range of $6.25 to $7.25 per BOE.

Luke Brandenburg: Looking ahead, we anticipate Q2 production will remain consistent with Q1 levels followed by a modest increase in the second half of the year. Capital spending in Q2 is expected to be broadly in line with Q1 levels with a more measured pace of investment planned for the second half as we maintain our focus on capital efficiency.

Tyler Farquharson: Back to you, Luke.

Back to you, Luke.

Luke Brandenberg: Thank you, Tyler. I have the privilege of working daily with some of the most talented, driven, and creative professionals in the industry. My partners built this business from the ground up, and over the past dozen years, we have established a remarkable track record of consistently achieving the goals that great oil and gas companies strive for. We have prudently allocated capital to grow asset value while maintaining conservative leverage, continuously reduced our cost structure, and replaced an increased inventory with an intense focus on quality. Our commitment to delivering value for shareholders is evident through both cash returns and asset appreciation. Our journey has not been without challenges, as we have navigated several significant downturns. However, through discipline, teamwork, and an unwavering focus on our investors, we have continually demonstrated our ability to adapt and drive value across cycles. While macroeconomic conditions may fluctuate, our commitment remains steadfast.

Thank you Tyler

Speaker Change: I have a privilege of working daily with some of the most talented, driven, and creative professionals in the industry.

Speaker Change: My partners built this business from the ground up and over the past dozen years we have established a remarkable track record that consistently achieving the goals the great oil and gas companies strive for it. We have prudent the allocated capital to grow asset value while maintaining conservative leverage continuously reduced our cost structure and replace an increased inventory with an intense focus on quality.

Speaker Change: Our commitment to delivering value for shareholders is evident through of cash returns and asset appreciation.

Speaker Change: Our journey has not been without challenges as we have navigated several significant downturns. However, through discipline, teamwork, and an unwavering focus on our investors, we have continually demonstrated our ability to adapt and drive value across cycles.

Speaker Change: While macroeconomic conditions may fluctuate, our commitment remains steadfast. We focus on what we can control, building a resilient business capable of adapting to any environment and maintaining a laser focus on delivering returns for our investors.

Luke Brandenberg: We focus on what we can control, building a resilient business capable of adapting to any environment and maintaining a laser focus on delivering returns for our investors. Over the long term, the market will ultimately reward consistent earnings, E, with price, P. We invite you to join us on this journey. With that, operator, please open the line for questions.

Speaker Change: Over the long term, the market will ultimately reward consistent earnings E with price P.

We invite you to join us on this journey.

Operator: At this time, I would like to remind everyone, if you would like to ask a question, simply press star followed by the number 1 on your telephone keypad, and we'll pause for just a moment to compile the roster. Our first question comes from the line of Phillips Johnston with Capital One. Please go ahead.

Speaker Change: At this time, I would like to remind everyone, if you would like to ask a question, simply press star, followed by the number one on your telephone keypad, and we'll pause for just a moment to compile the roster.

Speaker Change: Our first question comes from the line of Phillips, Johnston, with Capital One. Please go ahead.

Phillips Johnston: Hey, guys. Thanks for the time. Can you maybe give us some color as to how much production came in the door from the 10 acquisitions that you closed in Q1, and maybe what the split is in terms of Delaware versus Utica and what the oil and gas mix looks like?

Phillips Johnston: Hey guys, thanks for the time. Can you maybe give us some colors to how much production came in the door from the 10 acquisitions that you closed in Q1 and?

Phillips Johnston: Maybe what the split is in terms of Delaware versus Utica and what the oil and gas mix kind of looks like.

Luke Brandenberg: Yeah, you got it. Good morning, Phillips. That acquisition, we closed that earlier this year. We think it's about 450 barrels for the year, 2025. I don't know, $9 million, if I had to put a number to it, about 450 barrels is how I would look at it. That's all Delaware production. In fact, that asset acquisition that Tyler mentioned, that was the only thing that we bought that had any production associated with it.

Phillips Johnston: Yeah, you got it. Good morning, Phillips. That acquisition. So we closed that earlier this year. We think it's about 450 barrels for the year 25. You know, I don't know, $9 million if I put a number to it, but about 450 barrels is how we look at that. That's all Delaware production. In fact, that asset acquisition that Tyler mentioned. That was the only thing we bought that had any production associated with it.

Phillips Johnston: Okay. Was there any material contribution to Q1 volumes or was the close late in the quarter, and it's a Q2 through Q4 impact?

Speaker Change: Okay, and was there any material contribution to Q1 volumes or was the closed kind of late in the quarter and it's kind of a Q2 through Q4 impact.

Luke Brandenberg: Yeah, I'd call it the latter. It was later in the quarter, I think you'll see that show up later. Not necessarily much of an impact in Q1.

Speaker Change: Yeah, I call it the ladder. It was later in the quarter and so I think you'll see that show up later. Not necessarily much of an impact in Q1.

Phillips Johnston: Okay, perfect. Tyler, you touched on LOE in your prepared comments. Nice to see Q1 was below the low end of the range. It sounded like we should be steering towards the low end of the range for the year. Is that what I heard?

Speaker Change: Okay, perfect. Tyler, you touched on Halloween or prepared comments. Nice to see Q1 was below the low end of the range. It sounded like we should be staring towards the low end of the range for the year. That what I heard.

Tyler Farquharson: Yeah, correct. Morning, Phillips. Yeah, as production's starting to scale on those operated partnerships, we're starting to see those LOE per unit move down towards the lower end of our guidance. That's our current expectation is to be at that low end.

Yeah, correct. Morning Phillips. Yeah, as we're

Speaker Change: Productions starting to scale on those operating partnerships. We're starting to see those Eloy per unit move down towards the lower end of our guidance. So that's our current expectation is to be at that low end.

Phillips Johnston: Okay, great. Thanks, guys.

Okay, great. Thanks, guys.

Tyler Farquharson: Awesome. Thank you, Phillips. Have a good weekend.

Awesome, thank you for all of the good work out.

Phillips Johnston: You too.

You too.

Operator: Our next question comes from the line of Derrick Whitfield with Texas Capital. Please go ahead.

Speaker Change: Our next question comes from the line of John Anis with Texas Capitol. Please go ahead.

Derrick Whitfield: Hey, good morning, guys, and thanks for taking my questions.

Good morning guys and thanks for taking my questions.

Luke Brandenberg: Good morning.

Derrick Whitfield: For my first one, maybe following up on your prepared remarks on the strong well performance from your non-op wells, can you elaborate on which specific basins are outperforming? Are there any specific factors that you would attribute this outperformance to?

Speaker Change: For my first one, maybe pulling up on your prepared remarks on the strong well performance from your non-op wells, can you elaborate on which specific basins are outperforming and are there any specific factors that you would attribute this outperformance to?

Luke Brandenberg: Yeah. Hey, good morning, Derrick Whitfield, great question. I appreciate that. Probably should have given some more color on that in the prepared remarks. If I think about really our, quote, beat compared to internal, I'd group it into 2 buckets. One is from acceleration, wells that came on sooner than we thought, existing wells that outperformed. I'll hit each of those separate. Acceleration was probably a third of the beat. That's just one of those games where on the traditional non-op space, we don't know exactly when those are going to come online, we're generally a bit conservative on it, we like to be pleasantly surprised.

Speaker Change: Yeah, hey, good morning, Johnny. Great question. I appreciate that. Probably should have given some more color on that in the prepared remarks. So if I think about...

Speaker Change: It really our, you know, quote, beat compared to internal, I'd group into two buckets. So one is from acceleration, so wells that came on sooner than we thought. And then the existing wells that outperformed it, so I'll hit each of those separate. Acceleration was probably a third.

Speaker Change: of the beat. You know that's just one of those games where on the traditional not off space.

Speaker Change: We don't know exactly when those are going to come online and so we're generally a bit conservative on it and we'd like to be pleasantly surprised so the wells that I'd have really had an impact.

Luke Brandenberg: The wells that I'd say really had an impact, was one pad in particular in the Delaware Basin that came online sooner than we thought, and that made a big impact. We had a couple pads in the Utica, Encino-operated pads that came online earlier, and we've been real pleased with what those guys are doing up there. Cats and dogs here and there, just small working interests in the DJ and Midland Basin that were a bit sooner than we thought. Let's call it a third of it. The other two-thirds was really existing wells. This is one as well where I love how we underwrite. We've got a great team over here on the underwriting side, and they take a very practical approach to these.

Speaker Change: was one pad in particular in the Delaware basin that came online sooner than we thought and that made a big impact. We had a couple of pads in the Utica and seen no operator pads that that came online earlier and moved them.

Speaker Change: is a real place with what those guys are doing up there. And then, you know, cats and dogs here and there, just small working interests in the DJ and Midland Basin that were a bit sooner than we thought. So that's called a third of it. The other two thirds was really existing wells. And so...

This is one as well where I love.

Speaker Change: How we underwrite. We've got a great team over here on the underwriting side and they take a very practical approach to these. And so one thing that we saw on some existing wells are some of those that were shut in for offset frack.

Luke Brandenberg: One thing that we saw on some existing wells, are some wells that were shut in for offset frack. Again, we don't really benefit by being aggressive on when they come back online. We like to be a bit conservative. We had some wells come online sooner than we thought that had a pretty significant contribution. The biggest point that I'll mention that I'm encouraged about, now we'll see how this changes in the current market environment, but we had a pretty big pad for us, in the Delaware Basin that had been constricted, primarily because of gas prices late last year. As gas prices ramped, it's again, a Delaware pad, but it has a strong gas contribution.

Speaker Change: And so again, we don't really benefit by being aggressive. I'm going to come back online. We like to be a bit conservative. And so we had some wells come online sooner than we thought. That had a pretty significant contribution. That.

Speaker Change: Biggest point that I'll mention that I'm encouraged about. Now we'll see how this changes in the current market environment but we had a pretty big pad for us.

in the Delaware Basin.

Speaker Change: that had been constructed primarily because of gas prices late last year and it's gas prices ramped. It's again a Delaware pad but has a strong gas contribution. They started opening the jokes a little bit as prices improved not just at HUD but also at Waha.

Luke Brandenberg: They started opening the chokes a little bit as prices improved, not just at Hub, but also at Waha. So we had some increased production as they increased the chokes and bumped production a bit. I'm curious to see if that continues, now that oil prices have been a little bit tougher over the past month or so. I think that was certainly exciting to see at the time. Again, we'll see if that trend continues.

Speaker Change: And so we had some increased production as they increased the chokes and bomb production a bit curious to see if that continues now the little prices have been a little bit tougher over the past month or so. But I think that was certainly exciting to see at the time and again we'll see if that trend continues.

Derrick Whitfield: Terrific. I appreciate all that color. For my follow-up, maybe leaning into your comments on natural gas, how do you evaluate the relative attractiveness of each basin, just given the softening in oil and strengthening in gas? Does this dynamic change your appetite for increasing or decreasing exposure in certain basins, either from a non-op or operated partnership basis?

Terrific. I appreciate all that color. For my following up.

Speaker Change: Maybe leaning into your comments on natural gas. How do you evaluate the relative attractiveness of each base and just given the softening and oil and strengthening gas and does this dynamic change your appetite for increasing or decreasing exposure and certain basins either from a non-op or operated partnership basis?

Luke Brandenberg: Yeah, that's a great question, too, because look, you're talking capital allocation at the end of the day, and that's our primary role is capital allocation. What we always say is that every opportunity has to compete for capital. We're in six basins. Deals in each of the six basins have to compete. As we know, wells aren't just oil or just gas in a lot of places. They certainly are in, say, the Haynesville or South Texas Eagle Ford. Take the Delaware Basin. That's been such an interesting one where oil prices have come down, but gas has come up. We have to look at just a full cycle basis across both hydrocarbons.

Speaker Change: Yeah, that's a great question to because look, you're talking capital allocation at the end of the day. And that's our primary role is capital allocation. But we always say is that every opportunity has to compete for capital. And so we're in six basins deals and each of the six basins have to compete.

Speaker Change: As we know oil, you know, wells aren't just oil or just gas in a lot of places that they certainly are. You know, say the Hainesville or South Texas Eagle for a bit, but take the Delaware basin.

Speaker Change: You know, that's been such an interesting one where, you know, all price have come down, but gas has come up.

Speaker Change: And so we have to look at just a full cycle basis across both hydrocarbons. So what really has led us to do right now?

Luke Brandenberg: What really it's led us to do right now, on our traditional non-op side, we have some inventory in some gas-weighted basins, primarily the Haynesville and Dry Gas Eagle Ford. A lot of the operators we're talking to there are either looking at wells that have been DUC, some cases for a year or more, that they're looking to turn online. Some have at least hinted that they may accelerate development on some of those. In that case, it's less of us making a decision. It's more of the well proposal comes in, and we determine if we're going to participate, but we continue to make that compete for capital. I really like the diversification we have in these environments. I just think that's a big one.

Speaker Change: On our traditional non-opside, we have some inventory and some gas way to basins, primarily the Hainesville and dry gas, so you go for a lot of the operators we're talking to there are either looking well so they've been ducked some cases for a year or more that they're looking to turn online, some of at least.

Speaker Change: Hinted that they may accelerate development on some of those, you know, in that case, it's less of us making a decision that's more of the well proposal comes in, and we termed a brand of participate, but we continue to make that compete for capital.

Speaker Change: I really like the diversification we have in these environments. I just think that's a big one. I'm with 50% gas production.

Luke Brandenberg: With 50% gas production, we really are seeing the benefit of that right now in spite of challenges on the oil side. I'm not really hitting your question head-on, Derrick Whitfield, and it's not intentional. I'm not trying to evade it. It's more of everything competes for capital. We see what comes in the door. As I mentioned, we had wells just this week that we were non-consenting because they didn't hit the return hurdle. We're going to stay disciplined, and we'll see where it goes. Our operated partnerships are all currently in the Permian, and so they're that blend of oil and gas. We don't have any in a pure gas basin that we can really push right now, but again, we've got some great non-op partners, and we're excited to see what they do this year.

Speaker Change: We really are seeing the benefit of that right now in spite of challenges on the wall side. So I'm I'm not really hitting your questions It's not intentional. I'm not trying to evade it. It's more of

Speaker Change: Everything repeats for capital we see what comes on the door and as I mentioned you know we had well just this week that we are non consenting because they didn't hit return her all so we're going to stay disciplined and will. Thank you very much.

Speaker Change: See where it goes. Our operative partnerships are all currently in the Parmin and so they're that the line of boiling gas. We don't have any in the pure gas basin that we can really push right now, but we've got some great non-partners and we're excited to see what they do this year.

Derrick Whitfield: Makes sense. Thanks, guys.

Speaker Change: Makes sense. Thanks, guys. Thank you. Hope you have a good weekend.

Luke Brandenberg: Hey, thank you. Hope you have a good weekend.

Operator: Our next question comes from Noah Hungness with Bank of America. Please go ahead.

Speaker Change: Our next question comes from Noah Huntness. With Bank of America, please go ahead.

Luke Brandenberg: Morning, Noah. You may be muted. I can't hear you if you're talking.

Morning, Noah.

Speaker Change: You may be muted, I can't hear you if you're talking.

Noah Hungness: Oh, can you hear me now?

Speaker Change: Can you hear me now? I can hear you now. Okay, sorry about that. Could you give us idea of how we should think about oil cut kind of trending through the rest of the year. Just kind of noting maybe one key was a little lower than what we were expecting.

Luke Brandenberg: I can hear you now.

Noah Hungness: Okay. Sorry about that. Could you give us an idea of how we should think about oil cuts kind of trending through the rest of the year? Just kind of noting maybe Q1 was a little lower than what we were expecting.

Luke Brandenberg: Yeah, it's a good question. I'd say that we were actually just talking about that this morning. It's a dynamic where we were basically in line with what we thought on oil production, but gas production was higher than we thought. You end up in the scenario where oil cut is a bit lower, but oil production was darn near spot on, and gas was just higher, so gas outperformed. This is one we battle a lot, Noah, and I'm glad you hit on it because as these wells get older, they get gassier. GOR is increasing, but it's challenging to make a curve on an increasing GOR, what you really want to assume. Generally speaking, I've found that we've been pretty darn consistent on oil and slightly outperform on the gas side just due to that rise in GOR.

Speaker Change: Yeah, it's a good question. I'd say that we were actually just talking about that this morning. You know, it's a dynamic where we were basically in line with what we thought on oil production, but gas production was higher than we thought, and so you end up in the scenario where you know, we'll cut. It's a bit lower, but it. Again, oil production was.

Speaker Change: Darn your spot on and gas was just higher so gas performance. That's...

Speaker Change: This is one with that a lot in the body hit on it because

Speaker Change: As these wells get older, right? They get gasier. GRR is increasing, but it's challenging to to make a curve on an increasing GRR, you know, what you really want to assume. And so, generally speaking, I've found that we've been pretty dark consistent on oil.

Speaker Change: and slightly outperform on the gas side just due to that rise in GOR. So right now we're leaving guidance intact at the 51 to 53. I think that if we

Luke Brandenberg: Right now, we're leaving guidance intact at the 51 to 53. I think that if we were to quote miss, I would say that it's a miss because gas production was better than we thought. In a weird way, it's a positive miss. That's one that a lot of these wells, especially these higher working interest wells and some of these wells in deeper zones, right? We're drilling some Wolfcamp Bs and Cs that have a higher gas content. As they continue to outperform, makes it a bit tougher to model the gas side. We view that oddly as a positive, given that oil production was pretty darn close, and gas production was just a beat.

Speaker Change: were to quote miss I would say that it's a miss because gas production was better than we thought so in a weird way it's a positive miss but that's one that we

Speaker Change: It's a lot of these wells, especially the tire working address wells and some of these wells in deeper zones, right? We're drilling some Wolf Camp B's and C's

Speaker Change: that have a higher gas content as they continue to outperform, makes it a tougher model to gas side. But again, we view that, oddly as a positive given that oil production was pretty darn close and gas production was just a beat.

Noah Hungness: Yeah, no, that's very helpful color. For my second question, how can we think about or maybe you could add a little bit of color around the non-op versus partnership capital split. I think you guys are allocating more capital to the partnership. Could you maybe talk about some of the moving parts there and your decision behind that?

Speaker Change: Yeah, no, that's very helpful color. And then for my second question, how can we think about the or maybe you could add a little bit of color around the non op versus partnership capital split. I think you guys are allocating more capital to the to the partnership. Could you maybe talk about some of the moving parts there and your decision behind that.

Luke Brandenberg: Yeah, you got it. Right now, I think our operated partnership capital will be roughly 60% of our total CapEx for the year. The neat thing is we have full control over that. We have the ability to defer some of that if the price environment doesn't make sense. A really neat thing about that model is we have some great partners that we're just absolutely thrilled to have. They mean a lot to us. We've created structures that we really are aligned there. This isn't us dictating down from an ivory tower, we got to cut back. It's a conversation, and we've created real financial alignment there. While it's 60% of the capital, that's an easy one to move, and we can do that. Fortunately, we are aligned with our partners in that case.

Speaker Change: Yeah, you got it so right now I think our operated partnership capital will be roughly 60% of our total cap ex for the year.

Speaker Change: and that the neat thing is we have full control over that.

and so we have the ability to

Speaker Change: to defer some of that at the price of arm, it doesn't make sense. A really neat thing about that model is we have some great partners that we're just absolutely thrilled to have the mean a lot to us and we've created structures that we really are aligned there and so this is a day, you know, us dictating town from an hybrid tower. We've got to cut back into conversation and we've created real financial alignment there. So while it's 60% of the capital that's an easy one to move and we can do that unfortunately we.

Speaker Change: or aligned with our partners in that case. You know, the traditional lawn upside is

Luke Brandenberg: The traditional non-op side is we have a well-by-well election, right? We can always elect not to participate in a well, but we have less control over driving activity there. Again, we non-consented some wells this year that just didn't hit the return hurdle. The 60/40 is, I'd say, more of an output than an input in the sense that we didn't start the year saying, I want to allocate 60% of capital to operated partnerships. We just let the deals compete for capital. We've really been pleased with what we've been able to capture on the operated partnership side. Again, we've got just some great groups that continue to surprise us in what they're able to capture. Even in this environment, we're continuing to find creative opportunities.

Speaker Change: We have a well-by-well election, right? We can always elect not to participate in a well, but we have less control over driving activity there. But again, we non-consented some wells this year that just didn't hit the return hurdle. So the 6040 is I'd say more of an output than an input.

Speaker Change: In the sense that we didn't start the year saying I want to allocate 60% of capital to operate a partnerships we just.

Speaker Change: Let the deals compete for capital and we've really been pleased with what we've been able to capture on the operator partnership side again we've got just just great groups that are continue to surprise us and what they're able to capture.

Speaker Change: and you know even in this environment we're continuing to find a creative opportunities now.

Luke Brandenberg: Now, they may not be as easy to find, but we've been in Midland for over a decade with capital, right? There are deals that we see that I'm confident that the whole world doesn't see. We may not be the only one, but we're one of a small few, so we've demonstrated that we're a trustworthy counterparty. That adds value on both the operative partnership side and the traditional non-ops side. Again, similar to Derrick's question, I'm not sure that I hit it dead on because it is more of an output than an input. We do have full control over both. I mentioned in the prepared remarks that we're watching hydrocarbon prices like a hawk.

You know, they might not be.

That may not be as easy to find, but...

Speaker Change: Yeah, we've been, we've been in Midland for over a decade with Capitol, right? There are deals that we see them.

Speaker Change: I'm confident that you know the whole world doesn't see it may not be the only one that put one of the small fuse which demonstrated that we're trustworthy counter party and so that.

Speaker Change: That adds value on both the operator partnership side and the traditional line-up side, so...

Again, similar to John's question, I'm not sure that I...

Speaker Change: I hit it dead on because it is more of an output than an input.

Speaker Change: But we do have full control over both. I mentioned in the prepared remarks that we will we're watching Patrick Arn process like a hawk and you know we are quick to say hey we need to slow down CapEx or quick to say hey we're not going to participate in that it may be a burden the hand but it's not returning you know meeting or return thresholds and we're going to lay off on that for now.

Luke Brandenberg: We are quick to say, Hey, we need to slow down CapEx, or quick to say, Hey, we're not going to participate in that. It may be a bird in the hand, but it's not meeting our return thresholds, and we're going to lay off on that for now.

Noah Hungness: That all makes sense. Great stuff, guys. Thank you.

Does that all make sense? Good, soft guys. Thank you.

Luke Brandenberg: Thank you, Noah. Have a good one.

Thank you now, have a good one.

Operator: Our final question comes from the line of Michael Scialla with Stephens. Please go ahead.

Speaker Change: To their final question comes from the line of Michael Stiella with Stevens. Please go ahead.

[inaudible]

Michael Scialla: Hey Luke, hey Tyler. I want to see if you could talk a little bit more on the partnership wells, how those are performing. You said you'd scale back to 1 rig. Is that the plan for the remainder of the year? Maybe just in terms of production, you talked about the 10,000 BOE a day of gross production from the partnership. Where do you see that going for the remainder of the year?

Speaker Change: Okay Tyler I want to see if you could talk a little bit.

More on the partnership wells.

Speaker Change: How those are performing and you said you scale back to one rig. Is that the plan for the remainder of the year? And maybe just in terms of production, you talked about the 10,000 BOE a day of gross production from the partnership. Where do you see that going for the remainder of the year?

Luke Brandenberg: Yeah, good question, Mike. That's the biggest piece of what we're doing, so I'm glad you asked about it. I'll hit those in maybe varying orders. On the production side, the 10,000 is a gross number. I'd say we expect our operative partnerships to be roughly a quarter of our production this year. Right now, it's probably a bit less than that as they're continuing to grow. I'd think about a quarter for the year of our production will be from our operative partners. As I think about well performance, we've continued to be really pleased with what we're seeing. I'll tell you, one of the most impressive things is just the D&C side of things. They continue to do an incredible job executing. I think that's something that is often misunderstood, and I'm glad you asked because it gives me a chance to hit it.

Speaker Change: Yeah, good question Mike. Um, you know, that's that's the biggest piece of what we're doing. So I'm glad you asked about it. Um, I'll hit those and maybe varying orders, you know, in the production side. I, you know, the 10,000 is a, there's a gross number. I'd say we expect.

Speaker Change: Our operator partnerships to be roughly quarter of our production this year right now is probably a bit less than that as they're continuing to grow. But I think about a quarter for the year our production will be from our operator partners.

Speaker Change: As I think about well performance we've continued to be really pleasurable we're seeing. I'll tell you one of the most impressive things is just the DNC side of things they continue to do an incredible job executing. I think that's something that

Speaker Change: It's often misunderstood and I'm from glad you ask because it gives me a chance to hit it. You know, the DNC side of things and the drilling days that we're seeing. I mean, they're competitive with the best operators in the face and I think there's a.

Luke Brandenberg: The D&C side of things and the drilling days that we're seeing, I mean, they're competitive with the best operators in the basin. I think there's a view out there, potentially, that smaller operator, smaller scale is just going to cost a lot more. That's just not necessarily true. We've continued to hang with some of the best operators in the basin in terms of performance. In an inflationary environment, sure, you're going to pay more for pipe and that sort of thing, because you don't have a yard full of it. Fortunately, in the relatively stable price environment we've seen over the past 6, 12 months, we've really done a great job on the D&C side continuing to beat expectations. On the performance side, prices are always at play, but productivity has been good.

Speaker Change: of view out there potentially the smaller operator, you know, smaller.

You know scale is just going to cost a lot more.

Speaker Change: And that's just not necessarily true. We've continued to to hang with some of the best operators in the face and in terms of performance you know in an inflationary environment sure you're going to pay more for pipe and that sort of things you don't have a yard full of it. But fortunately in the relatively stable price environment we've seen you know over the past.

I don't know, 6-12 months.

Speaker Change: We've really done a great job on the DNC side, continuing the beta expectations on the performance side. You know, prices are always applied, but productivity has been good. Well, all prices have been...

Luke Brandenberg: While oil prices have been less than they were when we drilled these wells or made the decision to drill, the gas prices have really helped, so that's keeping the return intact. We talked on the last call, I think we looked at our first five projects with these guys. We're targeting 25% rate of return. We were right about that, 24% rate of return as of the last call. They continue to execute. We continue to want to deploy capital. Now, as I did mention, we are watching the markets like a hawk. We will be quick to react. That was a part of the going from 2 rigs to 1 is just a conversation of, Hey, should we be thoughtful? Should we maybe defer some of this inventory? We're having conversations about where we should drill wells, waiting for a better price environment.

Lesson

Speaker Change: They were when drilled these walls are made the decision to drill the gas prices have really helped so that's keeping their return intact You know we talked on the last call. I think we looked at our first five projects with these guys and you know we're targeting 25% rate of return We were you know ride about that 24% rate of return as of the last call They continue to execute and we continue to want to deploy capital now as I did mention we're

Speaker Change: and watching the markets like a hawk and we will be quick to react. That was a part of the going from two rigs to one is just a conversation of, hey, should we be thoughtful? Should we maybe defer some of the cemetery rather than conversations about where we should duck wells waiting for a better price environment?

Luke Brandenberg: What did I miss? You had a couple of good pieces in there. I want to make sure I hit them all.

Speaker Change: What did I miss? You had a couple good pieces in there. I want to make sure I hit them all.

Michael Scialla: I think you got them all. Appreciate that. I wanted to follow up on the other part, the Midland Basin partnership. I think you had been kind of back and forth on whether to start drilling that around mid-year, I guess. Where does that stand now? Maybe some of the industry results up in that part of the Midland Basin, how those are impacting maybe your plans there, and is that impacting the ability to add acreage in that area as well?

Speaker Change: I think you got them all appreciate that. I wanted to follow up on the other part of the Midland Basin partnership.

Speaker Change: I think he had been kind of back and forth on the weather to start drilling that around mid-year. I guess where does that stand now? And maybe some of the industry results up in that part of the Midland basin, how those are impacting maybe your plans there and is that impacting the ability to add acreage in that area as well.

Luke Brandenberg: Yeah. I'm laughing because you hit the nail on the head with that one. The price of poker's going up as the results in the Northern Midland Basin. It seems like every month, Oil and Gas Investor has another article about the strong results up there, which is great. We love to see it. It doesn't necessarily help on the ability to capture additional inventory side. I think all in, we're happy to see that. From our operating perspective, we're still looking at probably this summer starting. Now, I'd say that's a real-time conversation based on what we've seen over the past month. The plan has been this summer to start development. We're looking at potentially a 4-well pad up there. It's a smaller working interest initially based on our deal that we structured. That's the plan that we're looking at now.

Speaker Change: Yeah, I'm laughing because he hit the nail on the head with that on the price of poker is going up as the results in the northern middle of basin, you know, it seems like every month.

Speaker Change: Well and gas investor has another article about strong results up there which which a great love to see it done necessarily help on the ability to capture additional inventory side. But I think all end would be.

Speaker Change: We're happy to see that. But from our operating perspective, we're still looking at probably this summer.

Speaker Change: Starting now I'd say that's a real-time conversation based on what we've seen over the past month.

Speaker Change: But the plan has been you know this summer to start development. We're looking at

Speaker Change: potentially a four-well pad up there. It's a smaller working interest initially based on the other we structured. But that's the plan that we're looking at now. But that is one of the easiest to defer. And so, in a scenario where we...

Luke Brandenberg: That is one of the easiest to defer. In a scenario where we decide, hey, if it makes sense, it'd be more prudent to hold off on this, that's an easy one to look at, is Northern Midland Basin project.

Speaker Change: The side, hey, if it makes sense, it'd be more prudent to hold off on this. That's an easy one to look at as Northern Middle Basin Project.

Michael Scialla: Got it. Appreciate it, Luke.

Got it. Appreciate it, Luke.

Luke Brandenberg: Absolutely. Thank you.

Absolutely. Thank you.

Operator: This concludes today's conference call. Thank you all for joining. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you all for joining. You may now disconnect.

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Speaker Change: [music].