Q1 2025 Mach Natural Resources LP Earnings Call

Good morning, everyone. Thank you for joining today's call to discuss Mark natural Resources' first quarter 2025 financial and operational results.

Operator: Thank you for joining today's call to discuss Mach Natural Resources first quarter 2025 financial and operational. During this morning's call, the speakers will be making forward-looking statements that cannot be confirmed by reference to existing information. including statements regarding expectations, projections, future performance, and the assumptions underlying such statements. Please note, a number of factors will cause actual results to differ materially from their forward-looking statements. including the factors identified and discussed in their press release and in their SCC file.

During this morning's call the speakers will be making forward looking statements that cannot be confirmed by reference to existing information.

Including statements regarding expectations projections future performance and the assumptions underlying such statements.

Please note a number of factors could cause actual results to differ materially from their forward looking statements, including the factors identified and discussed in our press release and in our SEC filings for further discussion of risks and uncertainties that can cause actual results to differ from those in such forward looking statements. Please read the company's annual report on Form 10-K.

Operator: For a further discussion of risks and uncertainties that can cause actual results to differ from those in such forward-looking statements, please read the company's annual report on Form 10-K, which is available on the company's website or the SBA website. Please recognize that except as required by law, they undertake no duty to update any forward-looking statements, and you should not place under-reliance on such statements. They may refer to some non-GAAP financial measures in today's discussion.

K, which is available on the company's website or the Sec's website.

Please recognize that except as required by law. They undertake no duty to update any forward looking statements and you should not place undue reliance on such statements.

They may refer to some non-GAAP financial measures in today's discussion a reconciliation from non-GAAP financial measures to the most directly comparable GAAP measures. Please reference the press release and supplemental tables, which are available on box website, and our 10-Q, which will also be available on their website one filed today.

Operator: For reconciliation from non-GAAP financial measures to the most directly comparable GAAP measures, please reference their press release and supplemental tables, which are available on MOC's website, and their 10-Q, which will also be available on their website when filed.

Operator: Today's speakers are Tom Ward, CEO, and Kevin White, CFO. Tom will give an introduction and overview. Kevin will discuss Mach's financial results, and then the call will be open for questions.

Speaker Change: Today's speakers are Tom Ward, CEO, and Kevin and White CFO, Tom will give an introduction and overview, Kevin who will discuss <unk> financial results and then the call will be opened for questions.

Tom Ward: With that, I will turn the call over to Mr. Tom Ward. Thank you, Darren.

With that I will turn the call over to Mr. Tom Ward.

Tom.

Tom Ward: Thank you Darryl.

Tom Ward: Welcome to Mach Natural Resources first quarter earnings update. Each quarter, it is important to reiterate the company's four strategic pillars. These are, number one, maintain financial strength. Our goal is to have a long-term debt-to-EVDA ratio of one time or less. By maintaining a low leverage profile, we give ourselves opportunities when markets experience high volatility. Number two, disciplined execution. We acquire only cash-flowing assets at a discount to PDP, PB10 that are accretive to our distribution. Number three, disciplined reinvestment rate. We maintain a reinvestment rate of less than 50% of our operating cash. By keeping our reinvestment rate low, we optimize our distribution to unit holds.

Tom Ward: Welcome to natural resources first quarter earnings update.

Tom Ward: Each quarter. It is important to reiterate the company's four strategic pillars. These are number one maintain financial strength. Our goal is to have a long term debt to EBITDA ratio of one time or less.

Tom Ward: By maintaining a low leverage profile, we give ourselves opportunities when markets experienced high volatility.

Tom Ward: Number two a disciplined execution.

Tom Ward: Acquire only cash flowing assets at a discount to PDP PV 10 that are accretive to our distribution.

Tom Ward: Number three disciplined reinvestment rate we.

Tom Ward: We maintain a reinvestment rate of less than 50% of our operating cash flow by keeping our reinvestment rate low we optimize our distribution to unitholders.

Tom Ward: Number four, maximize cash distributions. We target peer-relating variable distributions. This pillar drives all of our decisions.

Tom Ward: Number four maximize cash distributions, we target peer leading variable distributions. This pillar drives all of our decisions.

Tom Ward: Yeah.

Tom Ward: I'd like to add additional color to each of the four pillars. Maintain financial strength. During the first quarter, we saw significant progress on reducing our already low leverage. We completed the refinancing of our debt, repaying $763 million on our term note, using proceeds from our new credit facility, our recent equity offering, along with cash from our balance sheet. We exited the quarter with $460 million drawn on our new credit facility. which reduced our net debt to EBITDA ratio from 1.0 times a year in 2024 to 0.7 times at the end of Q1. The refinancing of our debt provides significant savings, lowering our projected interest expense for 2025 by $22 million, while also eliminating quarterly amortization payments of $21 million.

Tom Ward: I'd like to add additional color to each of the four pillars.

Tom Ward: Maintain financial strength.

Tom Ward: During the first quarter, we saw significant progress on reducing our already low leverage we completed a refinancing of our debt repay and so repaying $763 million on our term notes using proceeds from our new credit facility.

Tom Ward: Our recent equity offering along with cash from our balance sheet, we exited the quarter with $460 million drawn on our new credit facility.

<unk> reduced our net debt to EBITDA ratio from 1.0 times at year end 2000, 24.7 times at the end of Q1.

Tom Ward: The refinancing of our debt provides significant savings lowering our projected interest expense for 2025 by $22 million, while also eliminating quarterly amortization payments of $21 million.

Tom Ward: These savings will ultimately manifest themselves through higher free cash flow and our ability to enhance distributions to our unit holders. We focus on maintaining financial strength in order for our company to be successful through various commodity cycles. The current market environment is challenging, with oil prices recently dipping in the 50s for the first time since early 2021, reflecting trade policy uncertainties and indications from OPEC plus on increased production. However, MACA is positioned well from a natural gas perspective with our volume mix, being 54% natural gas, 23% NGLs, and 23% oil projected in 2025. In fact, if we move to three rigs in Q4 from a projected two rigs in Q3 to the more natural gas-weighted deep Antarctic Basin, we will grow our natural gas production at the expense of our oil volume in 2025, but keep our overall barrel equivalent basically flat.

Tom Ward: These savings will ultimately manifest themselves through higher free cash flow and our ability to enhance distributions to our unit holders.

Tom Ward: We focus on maintaining financial strength in order for our company and to be successful through various <unk>.

Tom Ward: Commodity cycles are the current market environment is challenging but with oil prices recently that began in the fifties for the first time since early 2021, reflecting trade policy uncertainties and indications for all that plus an increased production.

Tom Ward: However market is positioned well from a natural gas perspective, with our volume mix being 54% natural gas, 23% Ngls and 23% oil projected in 2025 in fact, if we move to three rigs in Q4 from a projected two rigs in Q3 to the more.

Tom Ward: Natural gas weighted deep and Arco basin, we will grow our natural gas production expand at the expense of our oil volume in 2025, but keep our overall barrel equivalent basically flat.

Tom Ward: However, in 2026, we will experience double-digit growth on the back of the additional gas drilling. We believe the Deep Anadarka will be an exceptional area to drill for natural gas. The trick is to do this while keeping our reinvestment rate below 50% of operating cash flow. We project moving out of the Oswego drilling as of early June and down to two rigs during Q3 2025 with one deep rig in the deep gas area of Andarco Basin and the other drilling Red Fork Wells in western Oklahoma. We then project to move to three rigs in Q4 by adding a second deep gas rig.

Tom Ward: However in 2026, we will experience double digit growth on the back of the additional gas drilling.

Tom Ward: We believe the deep Anadarko will be an exceptional area to drill for natural gas. The trick is to do this while keeping our reinvestment rate below 50% of operating cash flow.

Tom Ward: We project moving out of the Australian drilling as of early June and down to two rigs during Q. During Q3 2025 with one deep rig and they are deep in the deep gas area of Anadarko basin and the other drilling Red Fork wells in Western Oklahoma. We then project to move to three rigs in Q4 by adding a second.

Tom Ward: Deep gas rig.

Tom Ward: If it appears that we need to delay that rig until Q1 2026 in order to meet our reinvestment rate of 50%, we will do so. As I mentioned, the increased drilling activity in the deep Andarco is predicated on keeping our investment rate below 50% of our operating cash flow. Our plan is to add operating cash flow during this down cycle, accrued through an acquisition accretive to our distribution, and giving us cash flow to enhance our drilling budget during 2026. Mach is unique in that we have the ability to utilize our over two million acreage inventory to change our drilling mix from one year ago when we drilled Oswego and stacked condensate wells to a completely different set of wells to maximize our return on capital invested.

Tom Ward: If it appears that we need to delay that Reagan till Q1 26 in order to meet a reinvestment rate of 50%. We will do so as I mentioned the increased drilling activity in the deep and arcos predicated on keeping our investment rate below 50% of our operating cash flow.

Tom Ward: Our plan is to add operating cash flow during this down cycle and crude through an acquisition accretive to our distribution and giving us cash flow to enhance our drilling budget. During 2026, Mark is unique in that we have the ability to utilize over our hour over $2 million a acreage inventory to change our drilling mix.

Tom Ward: One year ago, when we drilled oswego in stack condensate wells to a completely different set of wells to maximize our return on capital invested.

Tom Ward: Disciplined execution.

Tom Ward: Disciplined Execution. Our second pillar, Disciplined Execution, has always meant being prudent in how we acquire assets. Our strategy since the company's outset has been to purchase cash-flowing properties at bargain prices while paying little to nothing on the associated acreage and infrastructure. In January, we closed on a $30 million acquisition that fit our specific criteria and plan to begin exploiting that future drilling opportunities on its associated acreage. However, with the drop in crude prices, we have delayed drilling in the Ardmore Basin in favor of natural drilling. Our large inventory and associated drilling opportunities are only hampered by keeping our reinvestment rate under 50%, which is why we are always intently focused on acquisitions of cash-flowing properties that can accelerate our development plan.

Tom Ward: Our second pillar disciplined execution has always meant being prudent in how we acquire assets our strategy since the company's outset has been to purchase cash flowing properties at bargain prices, while paying little to nothing on the associated acreage and infrastructure in January we closed on a $30 million acquisition.

Tom Ward: That fit our specific criteria and plan to began exploiting that future drilling opportunities on its associated acreage. However, with the drop in crude prices, we have delayed drilling in the ardmore basins in favor of natural gas drilling our large inventory and associated drilling opportunities are only hampered by keeping our.

Tom Ward: Reinvestment rate under 50%, which is why we are always intently focused on acquisitions of cash flowing properties that can accelerate our development plans. The X T. O acquisition now gives us another million acres. They have an inventory to use when needed in fact, we will move a rig onto our newly acquired X Geo acreage in <unk>.

Tom Ward: The XTO acquisition now gives us another million acres to have an inventory to use when needed. In fact, we will move a rig on to our newly acquired XTO acreage in June 2025, drilling Red Fork Wells. The XTO acquisition is very unique, given the huge acreage footprint across northwest Oklahoma and western Kansas. This extra million acres also came to us free of cost while maintaining our stated purpose of buying cash flowing assets at discounts to PDP PV10.

Tom Ward: June 2025 drilling Red Fork wells. They are still acquisition is very unique given the huge acreage footprint across northwest, Oklahoma and Western Kansas. This extra million acres also came to us free of cost while maintaining our stated purpose of buying cash flowing assets at discounts to PDP PV 10.

Tom Ward: Disciplined reinvestment rate, our third our third pillar of maintaining a disciplined reinvestment rate focuses on spending only 50% of our cash flow on our development costs, allowing us to optimize our distributions to our unit holders.

Tom Ward: Disciplined reinvestment rate. Our third pillar of maintaining a disciplined reinvestment rate focuses on spending only 50% of our cash flow on our development costs, allowing us to optimize our distributions to our unit holders. The development of our inventory is focused on stabilizing our production decline and bolstering our bottom line through high rate of return projects, typically of at least 50%. Our expectation for 2025 is to spend between $260 million and $280 million. Please remember that our CAPEX program is fungible and depends on our success of adding additional operating cash flow to keep our reinvestment rate in check.

Tom Ward: The development of our inventory is focused on stabilizing our production decline and most bolstering our bottom line through high rate of return projects typically have at least 50%.

Tom Ward: Our expectation for 2025 is to spend between $260 million and $280 million.

Tom Ward: Please remember that our Capex project program is fungible and it depends on our success of adding additional operating cash flow to keep our reinvestment rate and check.

Tom Ward: Our change in drilling is due to natural gas prices moving up while oil prices have fallen. In a $70 environment, we would like to have at least one rig running in our Oswego program that delivered actualized 66% returns in 2024. This field is a hallmark of MOC, where we have drilled more than 225 wells since 2021. For example, our Oswego DNC costs in 2024 averaged only $2.6 million, or $202 per lateral foot. We achieved medium payout periods of 15 months, assuming a flat $70 WTI and $3.50 Henry Hub price. According to Inveress, this compares to 14 months in the core Delaware and 15 months in the core Midland Basins, where purchasing locations can cost more than $10 million each.

Tom Ward: Our change in drilling is due to natural gas prices moving up while oil prices have fallen.

Tom Ward: In a $70 environment, we would like to have at least one rig running in our Oswego program that delivered actualized, 66% returns in 2020 for this field is a hallmark of Mark well, we have drilled more than 225 wells since 2021 for example, our off.

Tom Ward: We go D&C costs in 2024 averaged only $2 $6 million or $202 per lateral foot.

Tom Ward: We achieved median pay payout periods of 15 months, assuming a flat $70 W. T I and $3 50, Henry hub price.

Tom Ward: According to invoice. This compares to 14 months in the core Delaware and 15 months and the core Midland basins, where purchasing locations can cost more than $10 million. Each all of these statistics add up to unmatched cash returns for our unit holders over the last five years in the next five years. However.

Tom Ward: All of these statistics add up to unmatched cash returns for our unit holders over the last five years and the next five years. However, it is prudent to take our first pause in the Oswego Program until crude prices recover and not waste this valuable resource when natural gas locations provide superior rates of return. We eagerly await adding an Oswego rig when crude prices recover. The Woodward Condensate and Ardmore Basin locations are also on hold until crude prices rise to a point where they compete with natural gas drilling in the deep and the dark. Mach is in an enviable position of having too many good locations to drill, thus the need to increase our operating cash flow during a time of lower crude prices.

It is prudent to take our first pause in the Oswego program until crude prices recover and not waste despite valuable resource when natural gas locations provides superior rates of return.

Tom Ward: We eagerly await adding in Australia go rig when crude prices recover.

Tom Ward: The Woodford condensate and Ardmore basin locations are also on hold until crude prices rise to a point, where they compete with that till gas drilling in the deep Anadarko.

Tom Ward: <unk> is in an enviable enviable position of having too many good locations to drill thus the need to increase our operating cash flow during a time of lower crude prices suffice. It to say we are on the hot for cash flowing PDP assets to be able to drill more in the mid con.

Tom Ward: Suffice it to say, we are on the hunt for cash-flowing PDP assets to be able to drill more in the mid-continent.

Tom Ward: Maximizing Distributions. Our fourth pillar is one that drives all of our decisions, maximizing distribution. We are disciplined in our execution and capital strategy, and by reinvesting 50% into our development program, we leave significant amounts of cash available for distribution that can be passed on to unit holders through our quarterly distribution. These quarterly distributions are variable and will rise and fall with changes in pricing. However, we are proactive in managing our risk where possible and hedge 50 percent of oil and natural gas production on a rolling one-year basis and 25 percent during the second year. Over the next 12 months, our hedge volumes are an average price of $69.31 for oil and $3.77 for gas.

Tom Ward: Maximizing distributions.

Tom Ward: Our fourth pillar is one that drives all of our decisions maximizing distributions. We are disciplined in our execution of capital strategy and by reinvesting 50% into our development program. We leave significant amounts of cash available for distribution that can be passed on to unit holders through our quarterly distribution.

Tom Ward: <unk>.

Tom Ward: These quarterly distributions are variable and will rise and fall with changes in pricing. However, we are proactive in managing our risk where possible and had 50% of oil and natural gas production on a rolling one year basis and 25% during the second year.

Tom Ward: Over the next 12 months or hedge volumes or an average price of $69.31 for oil and $3 77 for gas or distribution focused approach has been rewarding to our owners. We have distributed we have distributed over $1 billion back to unit holders since our inception.

Tom Ward: Our distribution-focused approach has been rewarding to our owners. We have distributed over $1 billion back to unit holders since our inception. Our upcoming distribution of 79 cents per unit results in an LTM yield of 20%. Mach's cash return on capital invested over the last five years is 32 percent. These industry-leading cash returns have been facilitated through a series of opportunistic acquisitions of cash-flowing properties throughout a variety of commodity cycles. We continue to see success in buying Midtron assets with our most recent acquisition closing just last week. The $60 million XGO acquisition fits perfectly with what we have done since inception of the company in 2017.

Tom Ward: <unk>.

Tom Ward: Our upcoming distribution of 79 cents per unit results in an LTM yield of 20%.

Tom Ward: <unk> cash return on capital invested over the last five years is 32%. These industry, leading cash returns have been facilitated through a series of opportunistic acquisitions of cash flowing properties throughout a variety of commodity cycles.

Tom Ward: We continue to see success in buying mid con assets with our most recent acquisition closing just last week.

Tom Ward: The $60 million ex G O acquisition fits perfectly with what we have done since inception of the company and in 2017.

Tom Ward: We found an asset that delivers free cash flow while also giving us free land to develop at a distressed purchase price. The XGO acquisition is primarily natural gas with a mix of production of 79% natural gas, 7% NGLs, and 14% oil. We continue to see the best value in acquisitions that are at or below $100 million, but they do add up. We were already approaching $100 million of acquisitions in 2025. We made 21 acquisitions and have spent just over $2 billion since early 2018. This approach is important because we stay away from large, well-capitalized competitors to buy assets that are less expensive.

Tom Ward: We found an asset that delivers free cash flow, while also giving us free land to develop at a distressed purchase price the extra acquisition.

Tom Ward: <unk>, primarily natural gas with a mix of production that 79% natural gas, 7% Ngls and 14% oil we continue to see the best value in acquisitions that are at or below $100 million, but they do add up.

Tom Ward: We were already approaching $100 million of acquisitions in 2025, we made 21 acquisitions and spent just over $2 billion. Since early 2018. This approach is important because we stay away from large well capitalized competitors to buy assets that are less expensive. This formula has served us well.

Tom Ward: This formula has served us well. During this period of uncertainty in crude markets, we'd also like to find a larger acquisition that continues to fit our basic business model. We believe that if crude prices remain under $60 for very long, we'll have the opportunity for a seller to merge into a larger, well-capitalized company. This type of acquisition will allow us to expand our operating cash flow and maintain a robust drilling schedule on the more than 2 million acres of land that we have held by production. The key to any acquisition is that it must be accretive to our distribution.

Tom Ward: During this period of uncertainty in crude markets. We would also like to find a larger acquisition that continues to fit our basic business model. We believes that if crude prices remain under $60 for very long, we will have the opportunity for a seller to merge into a larger well capitalized company. This type of acquisition.

Tom Ward: Would allow us to expand our operating cash flow and maintain a robust drilling schedule on the more than $2 million 2 million acres of land that we have held by production.

Tom Ward: The key to any acquisition is that it must be accretive to our distribution.

Tom Ward: mock us off to a solid start in 2025. We've averaged total net production of 80.9 MBOE per day, even though we only use 37% of our operating cash flow during the quarter. This did result in a lower oil volume than we projected due to deferring drilling in the Ardmore Basin. that we projected to start in Q1. Our lease operating costs remain low at $6.69 per BOE, and we expect that to continue into Q2 with the acquisition of the XCO assets. In the 21 acquisitions we have made, we have averaged approximately a 30% decrease in LOE.

Tom Ward: Mark is off to a solid start in 2025, we've averaged total net production of 89 Boe per day, even though we only used 37% of our operating cash flow during the quarter.

Tom Ward: This did result in a lower oil volume than we projected due to deferring drilling and they are more basin.

Tom Ward: That we projected to start in Q1, our lease operating costs remained low at $6.69 per Boe and we expect that to continue into Q2 with the acquisition of the X T O assets in the 21 acquisitions. We have made we have averaged approximately a 30% decrease in out of the way.

Tom Ward: We expect the same in this acquisition. Markets change and the most successful companies need to be able to react to change quickly.

Tom Ward: We expect the same in this acquisition.

Tom Ward: Markets change and the most successful companies need to be able to react to change quickly.

Tom Ward: I want to reemphasize that Mach is an acquisition company. Our industry-leading cash returns have been made through opportunistic acquisitions. This is our primary lever of growth. Our expectation is to continue making acquisitions that are accretive to our distribution in 2025, just as we have over the last seven years in 21 deals.

I want to reemphasize, the Mark as an acquisition company and our industry, leading cash returns have been made through opportunistic acquisitions. This is our primary lever of growth. Our expectation is to continue making acquisitions that are accretive to our distribution in 2025, just as we have over the last seven years and 21 deals.

Tom Ward: Mark is a peer leading PDP decline and reinvestment rate.

Tom Ward: Mach has a peer-leading PDP decline and reinvestment rate. Our next 12 month PDP decline is projected to be 20% while reinvestment rate in 2024 was only 47%. Both of these statistics are number one in a group of 16 peer companies. We have exceptionally strong asset coverage with total approved coverage of 3.9 times, net debt to enterprise value of 21 percent, and PDP PV 10 to total debt of 3.3 times. Our LOE averaged $6.69 per BOE in Q1 2025, and our 2024 free cash flow was $8.43 per BOE. We also have moved our net DATBDOT down to 0.7 times.

Tom Ward: Our next 12 month PDP decline is projected to be 20%, while our reinvestment rate in 'twenty 'twenty four was only 47%.

Both of these statistics are number one in a group of 16 peer companies. We are exceptionally strong asset coverage with total proved coverage of three nine times net debt to enterprise value of 21% and PDP PV 10 to total debt of 3.3 times morale OE averaged $666 69 per Boe.

Tom Ward: In Q1, 2025, and our 'twenty 'twenty four free cash flow was $8 43 per Boe.

Tom Ward: We also have moved our net debt to EBITDA down to <unk> seven times ensure in short <unk>.

Tom Ward: In short, Mach is in perfect position to grow during a time of unease in our industry. Over the past seven years, our very best acquisitions have come when oil prices were down. In fact, we bought Alta Mesa through a 363 bankruptcy process in 2020 when oil was at $20 per barrel. I do not know how long OPAC Plus will increase production or how long the trade war will continue or if we'll go into a global recession. But I do know that if we keep our balance sheets strong and stick to our four pillars, that we can weather any storm and can build an even stronger foundation for the future when prices rebound.

Tom Ward: Mark is in perfect position to grow during a time of unease in our industry over the past seven years, our very best acquisitions have come when oil prices were down in fact, we bought Alta Mesa, two or $3 63 bankruptcy process in 'twenty 'twenty when oil was at $20 per barrel I do not know how long <unk>.

Tom Ward: <unk> plus will increase production or how long of a trade war will continue or if we'll go into a global recession, but I do know that if we keep our balance sheet strong and stick to our four pillars that we can weather any storm and can build an even stronger foundation for the future when prices rebound.

Tom Ward: I also believe that prices ultimately do rebound as the world looks to the U.S. to provide stability and energy to the 7 billion people striving to be as wealthy as the lucky 1 billion of us.

Tom Ward: I also believe that prices ultimately do rebound as the world looks to the U S to provide stability and energy to the 7 billion people striving to be as wealthy as the Lucky 1 billion of US I'll now turn the call over to Kevin to discuss our financial results.

Kevin White: I'll now turn the call over to Kevin to discuss our financial results. Thanks, Tom. For the quarter, our production of 81,000 BOE per day was 24% oil, 53% natural gas, and 23% NGLs. Our average realized prices were $70.75 per barrel of oil, $3.56 per MCF of gas, and $27.33 per barrel of NGLs. Of the $253 million total oil and gas revenues, the relative contribution for oil was 49%, 33% for gas, and 18% for NGLs. On the expense side, our lease operating expense of $49 million was equivalent to $6.69 per barrel. Cash G&A was slightly less than $9 million, resulting in about $1.20 per BOE.

Kevin White: Thanks, Tom for the quarter, our production of 81000 BOE per day was 24% oil, 53% natural gas and 23% Ngls, our average realized prices were $70.75 per barrel of oil $3 50.

Kevin White: Six per Mcf of gas and $27.33 per barrel of Ngls as the 250 mid 53 million total oil and gas revenues of relative contribution for oil was 49%, 33% for gas and 18% for Ngls on the expense.

Side, our lease operating expense at $49 million.

Kevin White: Equivalent to $6 69 per barrel cash G&A was slightly less than 9 million.

Kevin White: Resulting in about $1 20 per Boe.

Kevin White: We ended the quarter with $8 million in cash, $460 million drawn on the $750 million revolver. As of today, after closing the XTO acquisition, we have $530 million drawn on the RBL. Total revenues including our hedges and midstream activities totaled $227 million, adjusted EBITDA of $160 million, and $143 million of operating cash flow.

Kevin White: We ended the quarter with $8 million in cash 460 million John on the $750 million revolver as of today. After closing Dx T. O acquisition, we have $530 million drawn under our B L.

Kevin White: Total revenues, including our hedges in midstream activities totaled $227 million adjusted EBITDA of $160 million and $143 million of operating cash flow. After the development capex of $52 million, which was 37% of the operating cash.

Kevin White: After the development CapEx of $52 million, which was 37% of the operating cash flow, we generated over $94 million of cash available for distribution, resulting in an approved distribution of $0.79 per unit, which will be paid out on June 5th to record holders as of May 22nd.

Kevin White: Flow, we generated over 95 $4 million of cash available for distribution, resulting in an improved distribution of 79 cents per unit, which will be paid out on June 5th to record holders as of May 22nd and with that brief overview Darrel I'll turn the call back.

Operator: And with that brief overview, Daryl, I'll turn the call back to you to open up the call for questions. Thank you.

Speaker Change: T to open up the call for questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.

Operator: We will now be conducting the question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the question. You may press star 2 to remove yourself. participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. One moment please for your first...

Speaker Change: Darkies one moment. Please for your first question.

Speaker Change: Our first questions come from the line of Charles Meade with Johnson Rice. Please proceed with your question.

Charles Meade: Our first questions come from the line of Charles Meade with Johnson Rice. Please proceed with your questions.

Charles Meade: Good morning, Tom and Kevin and the rest of the Mark team there.

Charles Meade: Good morning, Tom and Kevin and the rest of the Mach team there. Tom, I want to ask about this acquisition, I have to say, in some ways it's, this slide 13 that you have here, it's Stunning and I feel like maybe you're being a bit coy about this and I'm trying to figure out is it because this is a... me, you've doubled the acreage position of the company with a $60 million deal. I just want to try to get you to see if you're willing to talk a little bit more about, I think you gave us the production split, but the total production, the...

Charles Meade: Good morning, Tom Tom I wanted to ask about this this acquisition and I have to say I in some ways. It's it's up this slide 13 that you have here it's it's.

Charles Meade: It's stunning and I feel like maybe either.

Charles Meade: Maybe we're being a bit coy about this but I'm trying to figure out is it because this is a.

Charles Meade: I mean, you you double the acreage acreage position of a company with a 60 million dollar deal.

Charles Meade: I'm just trying what I tried to get you see if you're willing to talk a little bit more about I think you gave us the production split but the total production the.

Charles Meade: The the total production the EBITDA from the asset base and also it looks to me that obviously, you've got some great Anadarko basin stuff here, but it looks to me like you're you've picked up a big big chunk of the Hugoton field. There. So could you just talk more about it.

Tom Ward: the total production, the EBITDA from the asset base, and also, it looks to me that obviously you've got some great InterNarcoBase and stuff here, but it looks to me like you've picked up a big chunk of the Hugueton field there. So could you just talk more about it? Sure. You know, it's a small acquisition, so what, 1,600 BOE a day, so it's not that it produces so much, it does carry, as you said, a lot of acreage, so 85% is in the Greater Andorra Coal Basin. 38% of that Greater Andarco Basin is in the Hugoton, so southwest Kansas, Texas, Cimarron, and Beaver Counties of Oklahoma, 34% is in Major County, Oklahoma, so that's more northwest Oklahoma, southwest Kansas, 7% in Elk City, which is Deep Andarco, Beckham, and Washtaw Counties, 6% in Woodward, Woods, and Ellis, so more northwest Oklahoma, and then 15% in a frontier play that's been producing for years in Wyoming in the Green River Basin.

Charles Meade: Sure.

Charles Meade: It's a small acquisition, so what 6800 BOE a day.

Charles Meade: So it's not that it produces so much it does carry as you said a lot of acreage as of <unk>.

Charles Meade: 85% is in the greater and Arco basin.

Charles Meade: 38% is of that greater and Arco basins in the Hugoton, So southwest, Kansas, Texas Cimarron in Beaver County.

Charles Meade: Oklahoma.

Charles Meade: <unk> 34 per sits in major county, Oklahoma, So that's more northwest, Oklahoma Southwest, Kansas, 7% in Elk City, which is a deep and Darko Beckman watchdog counties, 6% and Woodward Woods analysis more in northwest, Oklahoma, and then 15% in the frontier.

Charles Meade: Play that's been producing for years and in Wyoming in the Green River Basin.

Tom Ward: So that consists, so if you have, well, that comes with 1400 operated wells. So a lot of wells, 500 non-operated wells. 1100 Royalty Only wealth. And then, as you mentioned, 990,000 net acres across 40% in Oklahoma, 57% in Kansas, and 3% in Wyoming. So. It's not, I don't think people would look at this and say it's in the heart of the Anadarko Basin, or it's not like buying core Permian or Eagleford assets, but I can guarantee you the acreage isn't worthless. So, you get a million acres of land, we already have proposals being brought up to us to do reworks and drill new wells in southwest Kansas.

Charles Meade: So that consists so if if you well.

Charles Meade: That comes with 1400 operated wells so a lot of wells 500 non operated wells.

Charles Meade: 1100 royalty only wells.

Charles Meade: And then as you mentioned 990000 net acres across 40 per cent in Oklahoma City to 7% in Kansas and 3% in Wyoming.

Charles Meade: So.

Charles Meade: It's not I don't think people would love this and say it's in the heart of the Anadarko basin or is not by buying core Permian or Eagle Ford assets, but I can guarantee you the acreage isn't worthless. So you get a million acres of land we already have.

Charles Meade: Proposals being being brought up to us to do rework sudden and drill new wells in southwest, Kansas, We're planning to drill some wells in northwest, Oklahoma and for $60 million that it just seems like a good deal and that's that's why I believe it is a good deal.

Tom Ward: We're planning to drill some wells in northwest Oklahoma, and for $60 million, it just seems like a good deal, and that's why I believe it is a good deal. The ability for our team in the Anadarko Basin in southwest Kansas, we already have teams in place. I think we'll do a good job of lowering it, so I think we'll increase production and be able to make this a very good acquisition. But keeping in mind, it is a pretty small amount in our overall company, so it's not going to move the needle tremendously, but if we keep on doing these types of acquisitions, they add up, and that's what we've done since 2018.

Charles Meade: The ability for our team and in the Anadarko Basin in southwest, Kansas, We already have teams in place.

Charles Meade: I think we'll do a good job of lowering L O N E.

Charles Meade: The the asset I don't think is says been worked.

Charles Meade: As hard as maybe we'll take a look at it and so I think we will increase production.

Charles Meade: And and be able to make this a very good acquisition, but keeping in mind. It is a pretty small amount in our overall company. So it's not going to move the needle tremendously, but if we keep on doing these types of acquisitions, they add up and that's what we've done since 2018. This is the type of deal.

Tom Ward: This is the type of deal that we've made over and over and over as a company, and there's a reason that we can stay at a 50% reinvestment rate and still keep our production flattish. It's not easy to do, and most don't, so it takes a rare company to be able to do that. I think this is just an example of why we can and why we are able to do what we do. It's not going to change our company dramatically, but really, very few. Outside of Paloma, there's very few deals that have, so I just look at it as another good acquisition in the line of hopefully many more to come.

Charles Meade: L. A that we've made over and over and over again that just slowly builds the company and and you know there's a reason that we can stay at a 50% reinvestment rate and still keep our production flattish, it's not easy to do and most don't.

Charles Meade: So it takes a rare company to be able to do that I think this is just an example of why we can and why we are able to do what we do it's not going to change our company dramatically, but really very few outside of Paloma. There theres very few deals that have.

Charles Meade: Just look as a another good acquisition and a line of hopefully many more to come.

Charles Meade: Got it that's helpful. Tom and then if I could go back to your prepared comments when you were talking about the optionality or the.

Charles Meade: And then, if I could go back to your prepared comments You know, the leverage you have to stay under that 50 percent cap, I believe I heard that you said you drop your third rig if you needed to to stay below 50 and that would probably be on an oily asset. Did I understand that correctly? Yeah, so we're gonna we're at four rigs today. Those two of those are leaving in June, the first part of June. So right, but basically say, June 1, the two Oswego rigs will be leaving. Okay, that leaves us with two rigs running, one in the Woodford condensate and one in the deep gas area of the Anadarko Basin.

Charles Meade: The.

Charles Meade: The the levers you have to stay under that 50% cap I believe I heard that you said you you drop your third rig if you needed to to stay below 50 and in that that would probably be on on all.

Charles Meade: While the asset did I did I understand that correctly.

Charles Meade: Yeah. So we're gonna we're at four rigs today are those two of those are leaving in June was the first part of June so right basically to say Oh.

Charles Meade: June 1st two Oswego rigs you'll be leaving.

Charles Meade: That leaves us with two rigs running and one in the Woodford condensate and one in the deep gas area of the Anadarko Basin.

Tom Ward: And the deep gas area we talked about, the reason we clarified as deep gas is these are 15,000 feet TBD, 15,000 foot laterals, so very deep, very long laterals, and they take more capital, obviously, to drill. And so that what we, but with that, we get it with the highest rates of return we can have in our company or in that area. So what we plan to do then is move post-June, we'll be at two rigs. And the Woodford condensate, as of today, is going to move to the Red Fork Sands area, starting in Major County, working down through Custer.

Charles Meade: And you know this the deep gas area, we thought or the reason we've clarified as deep gas is these are 15000 feet TBD 15000 foot lateral so very deep very long laterals and.

Charles Meade: They take more capital, obviously to drill and so that what we but with that we get with the highest rates of return we can have in our company or or in that area. So what we plan to do then is move post June we'll be at two rigs.

Charles Meade: The Woodford condensate as of today is going to move to the Red Fork Sands area, starting in major county, working down through caster.

Charles Meade: That.

Charles Meade: That leaves the second rig, and then we'll, right now, we project to add a third rig back to the deep gas area of the Anadarko Basin in the, basically, September-October. Got it. Thank you for taking me out on that. And so we've done that in the past, and also you should know that the first quarter we only spent 37% of our reinvestment rate. We still project that we'll spend closer to 50% in the overall 2025. So we look at our reinvestment rate on a yearly basis, not a quarterly basis. Got it. Thank you for all that detail, Tom.

Charles Meade: That leaves us the second rig and then well right now we project to add a third rig back to the deep deep gas area of the Anadarko basin.

Charles Meade: In the basically September October.

Charles Meade: Got it.

Charles Meade: Thank you for joining me.

Charles Meade: But that all is the I'm sorry, it's all predicated on staying below a 50% reinvestment rate.

Charles Meade: And so had we done that in the past of it and also you should know that the first quarter. We only spent 37% of our reinvestment rate, we still project that will spend closer to 50%.

Charles Meade: And the overall two.

Charles Meade: 2025, so we look at our reinvestment rate on a yearly basis, not a quarterly basis.

Speaker Change: Got it thanks for all that detail Tom.

Charles Meade: You bet.

Tom Ward: You bet. Thank you.

Speaker Change: Thank you our next questions come from the line of Derrick Whitfield with Texas Capital. Please proceed with your questions.

Derek Whitfield: Our next questions come from the line of Derek Whitfield with Texas Capitol.

Derek Whitfield: Please proceed with your Good morning all and thanks for your time and great acquisition. Maybe going back to Charles's point, just on the shift in development activity, I wanted to lean in on your prepared comments on the Oswego. While there are a few variables at play, including oil-to-gas ratio and service prices, is there a forward oil-to-gas ratio that we should think about that drives more gas versus oil development, or is it simply 70-50? Yeah, it's just the Oswego's 80% oil reservoir, and it's a superior oil reservoir than any place I've drilled, but it is limited in how much gas we can get out of it.

Derrick Whitfield: Good morning, all and thanks for your time and Great acquisition.

Speaker Change: Thank you.

Speaker Change: Maybe going back to Charles's point, just on the shift in development activity.

Speaker Change: Wanted to lean in in your prepared comments on them DSV go well there are a few variables at play including oil and gas ratio in service prices is there for an oil to gas ratio that we should think about that drive some more gas versus oil development or is it simply 70 for the Oswego.

Speaker Change: Yeah. It's just the Oswego is that 80% oil reservoir and there's it's a superior oil reservoir than any place I've drilled up.

Speaker Change: But it's it is limited in how much gas, we can get out of it and so anytime you have this tremendous move with gas going up and oil going down the rates of return just move away.

Tom Ward: And so anytime you have this tremendous move with gas going up and oil going down, the rates of return just move away from being able to drill Oswego's. We can still have a good rate of return today in the Oswego. Last year it was 66% IRRs, and we could still be north of 30% right now. However, we target at least 50% rates of return in order to drill, and the other areas we're looking at that are higher, and the Oswego's not. So that is just a very simple rate of return-driven decision.

Speaker Change: Away from being able to drill outs. We goes we can still have a good rate of return today and in the Oswego last year It was 66% IRR.

Speaker Change: They are ours, and we could still be north of 30% right. Now. However, we can you know we target at least 50% rates of return in order to drill in and the the other areas. We're looking at are at that or higher.

Speaker Change: And the Oswego is not so that it's just a very simple rate of return driven decision. If we had more operating cash flow, we would probably add rigs are either either more into natural gas or it would be flexible in being able to move back and forth. The other thing that our operating team does very good app is very good at.

Kevin White: If we had more operating cash flow, we would probably add rigs either more into natural gas or be flexible in being able to move back and forth. The other thing that our operating team is very good at is keeping our rig cadence in a place where we're only 30 days out from being able to move rigs around. So we can release a rig in a month's notice and go to a different area, and I think that's very important for us to maintain that. I don't know if that answered your question or not. It did, so thanks for the clarity there.

Speaker Change: Is keeping our our rig cadence in a place where we're only 30 days out from from being able to move rigs around so we can release, a rig and a month's notice and go to a different area and that that would take us very important for us to maintain that.

Speaker Change: I don't know if that answered your question or not.

Speaker Change: So thanks for the clarity there and then again, we're making these changes here on the fly this morning with our model, but it does appear full year guidance for oil remains intact based on Q1 stream and on our numbers. It looks like there could be some upside on the boat side based on productivity that we're seeing and the deepness development.

Derek Whitfield: And then, again, we're making these changes here on the fly this morning with our model, but it does appear full-year guidance for oil remains intact based on Q1 strength. And on our numbers, it looks like there could be some upside on the BOE side based on productivity that we're seeing as deep misdevelopment. Not necessarily your wells today, but what we've seen across. Is that kind of a fair way to think about it? I know that you talked about 2026 being more upside to gas, but these are highly prolific wells that you guys are bringing. Yeah, I think this Kevin, Derek, I think that is a solid way to look at it.

Speaker Change: So your wells today, but what we've seen across the industry is that does that kind of a fair way to think about it I know that you talked about 2026 being more upside to gas, but nature of highly prolific wells that you guys are bringing on.

Speaker Change: Yeah, I think this Kevin Derik I think that is at a solid way to look at it yeah.

Kevin White: In 2026, our gas production just grows fairly dramatically if we can put two rigs to work in the deep end of Dark Hill. I think that play is just getting started. I think you'll see others joining us very quickly.

Speaker Change: And in 2026 are our gas production just grows fairly dramatically.

Speaker Change: If we can put two rigs to work isn't in the deep EDA Darko.

Speaker Change: Thanks, guys.

Speaker Change: Just getting up to that I think that plays just getting started.

Speaker Change: Thank you will see others, joining us very quickly.

Speaker Change: Perfect. Thanks, guys.

Derek Whitfield: Perfect. Thanks, guys. Thank you.

Speaker Change: You bet.

Speaker Change: Thank you. Our next question is coming from the line of Michael CLO with Stephens. Please proceed with your questions.

Michael Scialla: Our next questions come from the line of Michael Scialla with Stevens.

Michael Scialla: Please proceed with your Morning, Tom. Morning, Kevin. I want to see if you could talk about the turn in lines you had in the first quarter, looked like about nine operated wells there. Were those all Oswego, or do you have a breakout of those wells? Somebody have a breakout? So it's seven Oswego's and the other two were Woodford Condensate.

Michael CLO: Good morning, Tom morning, Kevin I wanted to see if you could talk about then.

Michael CLO: Turning lines you had in the first quarter it looks like about nine operated wells there.

Michael CLO: Were those all Oswego or do you have a breakout of those wells.

Michael CLO: Somebody have a breakout so they.

Michael CLO: It's also seven Oswego and that so the other two were Woodford condensate.

Michael CLO: Okay. So no results in a deep Anadarko, yet I guess can you talk about the first the first wells being drilled right now and in the vertical section.

Tom Ward: Okay, so no results in the deep Anadarko yet, I guess. Can you talk about what you... No, no. The first well is being drilled right now in the vertical section. Gotcha, and can you talk about what you're expecting there in terms of well costs and recoveries? Oh, sure. The wells are expensive, the cost around. $13 million. Thank you. We think we can find basically 5 BCF a section and, you know, we're going to have rates return north of 50%. Great, and if you do keep that, so that's a rig. And Mike, those are three-mile laterals, so 15,000 feet of lateral length.

Michael CLO: Got you and can you talk about what you're expecting there in terms of well costs and recoveries.

Michael CLO: Oh sure there the wells are expensive, though the cost around that.

$13 million.

Michael CLO: We think we can find basically five Bcf a section and we're gonna have rates of return north of 50%.

Michael CLO: Great and if you do keep that Oh, that's a rig and Mike those are those are our three mile laterals, so 15000 feet of lateral length.

Tom Ward: Right. The risk to the play, I don't think, is the gas. The gas is in place. The risk will be costs. And so we have to watch closely what inflation does, where gas prices are. There's a reason that this gas has always been known to be there. So deep-and-dark oak gas is nothing new. It's that Oklahoma has never really been explored horizontally for natural gas, where the gas is, because gas prices since 2008 have basically been a price that you couldn't explore for it. So there's a tremendous amount of natural gas left to be explored.

Michael CLO: Right.

Michael CLO: And if you do keep that the risk the risk to the play I don't think is that the gas. The gas is in place the risk will be cost and so you know we have to watch closely what inflation does what you know where where gas prices are are there. There's a reason that this gas is all.

Michael CLO: He has been known to be there is a deep Anadarko gas is nothing new it's that Oklahoma has never really been explored horizontally for natural gas, where the where the gas is because gas prices. Since 2008 have basically been a price that you couldn't explore for it. So there's a tremendous amount of natural gas left to be.

Michael CLO:

Michael CLO: Discovered or brought online it's actually been discovered.

Tom Ward: discovered or brought online, it's actually been discovered in western Oklahoma, and it has good access to marketing to get to the hub. So it's a great place to drill if prices are right. You give me a 350 strip, we can bring you, you give me a 350 strip, we'll bring you the gap. Yep.

Michael CLO: And in Western Oklahoma, and it has good access to to marketing.

Michael CLO: To get to the hub. So it's a great place to drill if prices are right.

Speaker Change: You gave me.

Michael CLO: We can bring you.

Speaker Change: Give me a 350 strip will bring into the gas.

Speaker Change: Yeah, I just wanted to see if a follow up to that if you could you you talked about you know how it was set up 2026 to where you'd basically grow.

Michael Scialla: I just wanted to see if a follow-up to that, if you could, you talked about, you know, how it would set up 2026 to where you'd basically grow your gas volumes at the expense of oil. Could you get maybe a little bit more specific, if you do keep that second rig active in the fourth quarter, what could your production mix look like next year? You said it was 54% right now gas. What might that look like for 2020? Yeah, we'll be growing, I guess. basically over 20% and crude oil would be falling. basically in 26-5.

Speaker Change: Gas volumes at the expense of oil could you get maybe a little bit more specific if if you do keep that second rig active in the fourth quarter what could your production mix look like next year. You said it was 54% right now gas what might that look like for 2026.

Speaker Change: Yeah, it will be growing our gas.

Speaker Change: Yeah.

Speaker Change: So basically over 20%.

Speaker Change: And crude oil would be falling.

Speaker Change:

Speaker Change: Basically in 'twenty six.

Speaker Change: Bye.

Speaker Change: Less than 10%.

Tom Ward: less than 10%. Okay, great. Thank you, Tom. Thank you.

Speaker Change: Okay, great. Thank you Tom.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is coming from the line of John Freeman with Raymond James. Please proceed with your questions.

John Freeman: Our next questions come from the line of John Freeman with Raymond James. Please proceed with your Good morning, guys. Very nice acquisition. I just want to follow up, Tom, on one point you said earlier regarding the reinvestment rate. So just to be clear, because that really low reinvestment rate you had in 1Q, at the current strip, your reinvestment rate on the current plan, we'll call it $270 million at the midpoint of the CapEx, that would still be at about a 50% reinvestment rate. Is that right? That's correct. Okay, so the the oil strip would have to weaken from here for you to not add that that second rig that was going to go to the uh the deep or the gas.

John Freeman: Good morning, guys.

Speaker Change: Good morning Shannon.

Speaker Change: I just wanted to follow up Tom on one point, you said earlier regarding the reinvestment rates are just to be clear.

Speaker Change: Because that really low <unk> at the current strip.

Speaker Change: Your reinvestment rate on the current plan, we'll call. It 279 at the midpoint of the Capex.

Speaker Change: It would still be at about a 50% reinvestment rate is that right.

Speaker Change: That's correct.

Speaker Change: So the the oil strip would have to weekend from here. So you did not add that second rig was going to go too deep.

Speaker Change: The deep gas.

Speaker Change: Or the gas strip on the gas turbine.

John Freeman: Or the gods of the egg. Perfect.

Correctly.

Speaker Change: Perfect and then on the M&A topic, I mean, I know last quarter, you talked about how you'd love the buyer oil off that stuff always was in the sixties or lower.

Tom Ward: And then on the M&A topic, I mean, I know last quarter, you know, you talked about how you'd love to, you know, buy oil assets if oil was in the 60s or lower. And you talked about, you know, on this call, really wanting to look at some larger deals. Just maybe talk to, I would imagine in this volatile market, the bid-ask spreads are pretty wide. Maybe you can just speak to that. You know, do we have to be at this kind of level oil price for a while for those spreads to narrow? Yeah, it's in, you know, we're usually not the seller of the buyer of choice for a seller.

Speaker Change: And you talked about on this call really wanted to look at some some larger deals.

Speaker Change: Just maybe talk to I would imagine in this volatile market.

Speaker Change: Spreads are pretty wide, maybe you can just speak to that you know do we have to be at this kind of level oil price for a while for those spreads to narrow just what you're seeing.

Speaker Change: Yeah, it's in.

Speaker Change: We're usually not the seller or the buyer of choice for a seller.

Speaker Change: They're they're probably needs to a bit of a failed process of some kind that in order to get down to a place to where you know there you have a distress sale.

Tom Ward: There probably needs to have been a failed process of some kind in order to get down to a place to where, you know, you have a distressed cell. So, I think it does take time, and it's really nothing new. We always are on the look for larger deals that would bring, we could use equity here to bring in and increase our distribution per unit. So, it's really not a new concept. It just is, it seems like we're getting closer in areas outside of the mid-con than we have in the past. We've been the high bid on a couple of deals that did not transact because the seller chose to pull them.

Speaker Change: So yeah I think it does take time and it's really nothing new we always are on the look for the larger deals that that would bring I, we could use equity here to bring in in and increase our distribution per unit at <unk>.

Speaker Change: It's really not a new concept. It just is it seems like we're getting closer in areas outside of the mid Con then than we have in the past. We've we been the high bid on a couple of treads deals that did not transact because the the seller chose to pull them but.

Tom Ward: But I can tell you that in Eagleford or the Permian, in the past, we've never been the high bid. So, you know, things are moving our way. And just because you're close to the core Permian doesn't mean you're in it. And just because you're close to the core Eagleford doesn't mean you're in it. And that doesn't mean you can always have the amount. Just because it has that zip code doesn't mean that it brings the same as those other type of assets. Those are the type of assets we'll look for. Thanks, Tom.

Speaker Change: But I can tell you that in the Eagle Ford or the Permian in the past we've never been the hot bed. So things are moving our way and I.

Speaker Change: Just just because of Europe.

Speaker Change: You're close to the core Permian doesn't mean, you're in it and just because you're close to the core Eagle Ford doesn't mean, you read it and that doesn't mean you can always have the the the amount just because it has that ZIP code. It doesn't mean that it brings the same as those other types of assets. Those are the type of assets will look.

Four.

Tom: Thanks, Tom Nice quarter.

John Freeman: Nice quarter. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you our next questions come from the line of Jeff J with Daniel Energy Partners. Please proceed with your questions.

Geoff Jay: Our next questions come from the line of Geoff Jay with Daniel Energy Partners.

Geoff Jay: Please proceed with your Hi, guys. I'm just curious. You know, given the cost of the deep Anadarko wells, sort of, where does this trip need to be for you to add that second rig? In other words, where do you feel like the rate of return becomes less attractive at what gas price? I think, Geoff, that if we stay above a 350 strip, it's really more about operating cash flow. So the wells are going to have plenty of rate of return. It's just that we have stipulated that we can't go over a 50% reinvestment rate. That's what I want as an investor.

Speaker Change: Hi, guys I'm just curious.

Speaker Change: Given the cost of the deep Anadarko wells.

One part is the part of the strip need.

Speaker Change: And to add that second rig in other words do you feel like the winter returned my problems less attractive.

Speaker Change: Gas price.

Speaker Change: Yeah, I think Jeff that it if we stay above the 350 strip.

Speaker Change: It just it's really more about operating cash flow. So the wells are going to have plenty of rate of return. It's just that we have stipulated that we can't go over 50% reinvestment rate. So that's what I want as an investor and I think that's what makes us unique and it just keeps us from being able to.

Tom Ward: And I think that's what makes us unique. And it just keeps us from being able to meet all the locations we have. I don't think it's going to be, if gas prices stay anywhere near where they are today, or even fell, the project would be fine. It's that we don't have enough operating cash flow to do both.

Speaker Change: To meet all the locations we have so I don't think it's going to be if if if gas prices stay anywhere near where they are today.

Speaker Change: Or even fail the project will be find it's a we don't have enough operating cash flow to do both.

Speaker Change: Got it and then I'd be remiss, if I didn't ask if you're incrementally more bullish or less bullish on natural gas for the remainder of this year.

Geoff Jay: Got it.

Geoff Jay: And then I'd be remiss if I didn't ask if you're incrementally more bullish or less bullish on natural gas for the remainder. Then last quarter, I'd say less bullish. I think that we are in a period of time through the summer, then the refill season, that we're still kind of a half a BCF or so tight. I think that the timing as we come into the fall and winter of the two pipes that are coming on in Haynesville or can get Haynesville gas out, that you have LNG demand kind of front running that, but then I see, at least from our perspective, is that we have a pretty balanced 2026.

Speaker Change: And then last quarter I'd say less bullish I think that we are in a period of time through the summer that then the refill season that we're still kind of a half a bcf or so tight and that I think that the the timing as we can.

Speaker Change: Some into the fall and winter of the two pipes that are coming on and in the haynesville or can get haynesville gas out there.

Speaker Change: They have LNG demand kind of front running that so, but then I see at least from our perspective is that we have a pretty balanced 2026, and so then you tell me if we're gonna go into recession or or you have a demand from.

Tom Ward: And so then, you know, you tell me if we're going to go into recession or you have demand from any number of areas that demand is changed through the, I guess, the political system that we're going through. So just as I don't know, I would look, though, at, I guess, probably for the first time since we've started doing these calls, I see natural gases got fairly balanced in the year out instead of being extremely bullish. Right.

Speaker Change: Any number of.

Speaker Change: Of areas that demand it is changed through our through the I guess the political system that we're going through so just as I I don't know I would look though at but I guess probably for the first time since we've started doing these calls I'd see natural gas has got it.

Speaker Change: Fairly balanced in the year out instead of being extremely bullish.

Speaker Change: Right well that's helpful. Thanks, Tom.

Geoff Jay: Well, that's helpful.

Geoff Jay: Thanks, Tom. Thank you, Geoff.

Speaker Change: Thank you Jeff.

Speaker Change: Thank you. Our next question is come from the line of Simon Acura with Stifel. Please proceed with your questions.

Tim: Thank you.

Tim: Our next questions come from the line of Salman Akyol with Stiefel. Hi, good morning. This is Tim on.

Tim Arnie: Hi, Good morning, this is Tim Arnie.

Tim: Congrats on the quarter and the acquisition. Going back to the acquisition, you guys. Well, in the PowerPoint, there was some midstream and other infrastructure. Just wondering, kind of, is this mostly within the midtown, or is some of this also up in Wyoming? No, it's really in the, the midstream is in the Ringwood Field in Major County, Oklahoma, and then at Hugueton Basin. So the, but I mean, they're very small. So really doesn't add too much to the overall project. Okay, got it. I was just curious. lowering some costs there and then For lease operating expense, the queue had called out some higher costs related to saltwater disposal.

Speaker Change: Congrats on the quarter and the acquisition.

Speaker Change: I'm going back to the acquisition you guys mentioned Hum in the Powerpoint there was some midstream and other infrastructure I'm. Just wondering kind of is this mostly with in the midtown or or is it some of this awesome up in Miami.

Speaker Change: No. It's it's really in the the midstream is in the Ringwood field in major County, Oklahoma and then.

Speaker Change: Hugoton basin.

Speaker Change: So the but I mean, they're very small.

Speaker Change: Really.

Speaker Change: Doesn't add too much to the to the overall project.

Speaker Change: Okay got it I was just curious on potentially lowering some costs there.

Speaker Change: And then.

Speaker Change: For lease operating expense the Q had called out some higher costs related to saltwater disposal. Just curious what you guys are broadly seeing on the waterfront in the mid con or if this was more of a one off item.

Rick: Just curious what you guys are broadly seeing on the waterfront in the MidCon, or if this was more of a one-off.

Speaker Change: Yeah. This is Rick I would say stepping outside of that where we have infrastructure go into drilling.

Rick: Yeah, this is Rick. I would say stepping outside of where we have infrastructure going and drilling, you know, the Anadarko Basin, we do have infrastructure there, but it's third party. So, our costs have gone up some there compared to drilling within our Oswego area. So, that would be the thought there. Got it. Thank you guys for your time. Thank you.

Speaker Change: Darko Basin, we do have the infrastructure there, but it's third parties or costs have gone up some there compared to drilling within or else. We go.

Speaker Change: So.

Speaker Change: That would be the.

Speaker Change: A lot there.

Speaker Change: Got it. Thank you guys for the time.

Speaker Change: Thank you.

Speaker Change: Thank you we have reached the end of our question and answer session and with that I would like to bring the call to a close we do appreciate your participation. Today you may now disconnect your lines enjoy the rest of your day.

Operator: We have reached the end of our question and answer session.

Operator: And with that, I would like to bring the call to a close. We do appreciate your participation today. You may now disconnect your lines.

Operator: Enjoy the rest of your

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.