Q2 2025 Magnolia Oil & Gas Corp Earnings Call
Good morning everyone and thank you for participating in the Magnolia Oil and Gas, Corporation, second quarter, 2025 earnings conference. Call my name is Kim and I will be your moderator for today's call. At this time. All participants will be placed in a listen-only mode as our call is being recorded. I will now turn the call over to my Magnolias management for their prepared remarks, which will be followed by a brief question and answer session.
Chief executive officer and Brian Corrales senior vice, president and Chief Financial Officer as a reminder.
Today's conference call contains certain projections and other forward-looking statements within the meeting of the federal Securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.
Additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10-K filed with the SEC.
A full Safe Harbor can be found on slide 2 of the conference call. Slide presentation with the supplemental data on our website.
You can download Magnolias, second quarter, 2025 earnings, press release, as well as the conference. Call slides from the investor section of the company's website. At www.magnolia.com, I will now turn the call over to Mr. Chris sapos.
Thank you, Tommy. Good morning, everyone. We appreciate you joining us today for discussion of our second quarter, 2025 financial and operating results. I plan to highlight our second quarter results which Define another strong quarter of consistent, execution for Magnolia and 1. That's delivered in even more Capital efficient program than what we outlined earlier this year.
In addition to our strong results, second quarter results. I'll point out some small bolt-on Acquisitions that. We completed within the last month and emphasize how this continues to benefit, both our operational and financial performance.
Even through periods of product price volatility.
Brian will then review our second quarter Financial results in Greater detail and provide some additional guidance before we take your questions.
Turning to slide 3 of the investor presentation Magnolia delivered strong results across all Financial operational metrics. During the second quarter. Our total is Justin net income. For the quarter was 81 million with adjusted Iva tax of 223 million.
DNC Capital was only 95 million during the second quarter. Providing a reinvestment rate of just 43%, highlighting our asset quality. And the efficiency of our Capital program pre-tax. Operating margins were 34% in the quarter and our annualized return on Capital employed was 18%.
Magnolia generated free cash flow of $107 million, and we returned 72% — approximately $78 million — of that free cash flow to our shareholders through our growing base dividend and our share repurchase program.
The company achieved another record quarterly production rate with total volumes of 98.2 thousand, barrels of oil equivalent per day during the quarter, which was above our earlier guidance. And the result of continued strong wealth performance from both earlier Wells and some newer completions
This represents year-over-year production growth of 9%, with total production at Giddings showing growth of 11%.
Second quarter, total oil production of 40,000 barrels per day. Also, set a new company record and remained resilient representing 5% year-over-year growth
As a result of the continued strong performance throughout our asset base, we have raised our full year 2025 production growth guidance to approximately 10%, from the prior range of 7% to 9% growth.
Notably, because of the additional operational flexibility and higher growth afforded to us by the better well performance and capital efficiencies, we are continuing with our plan to defer and preserve several well completions into 2026. We are also maintaining our estimate of 2025 capital spending in the range of $430 million to $470 million.
It simply put are better than expected. Results. Seen during the first half of the Year allows us to spend less capital in 2025 while generating higher than expected production and advances. Our goal of being the most efficient operator best of class oil and gas assets and generating High Returns on those assets. While employing, the least amount of capital
second quarter results and or an ideal example of our team success and executing this strategy and with our recent Financial results, exhibiting this principle
We were able to use some of the excess cash generated by the business, to close on multiple oil and gas property Acquisitions from several small private operators, during late June, and early July totaling about $40 million.
These bolt-on transactions are shown on slide 4 added approximately 18,000 net. Acres in Giddings including roughly 500 barrels of oil. Equivalent per day of production,
The sacred is contiguous to our current getting position and adds new leases increases our working interest and existing leases. While also adding new royalty acreage
Current business.
We have regularly deployed, this similar approach in Giddings of appraised acquire grow, and further exploit, since since the company's Inception and leveraging off the significant subsurface knowledge and experience. We've gained while operating in the getting seal.
Our pursuit of this strategy has allowed us to increase the extent of our development acreage, in getting by an additional 20%, to 240,000 net Acres, which now represents more than 40% of our net acreage position in the area.
This increase includes approximately 30,000 net Acres from organic appraisal efforts, within our existing acreage.
And roughly 10,000 net Acres from the recent bolt-on deals.
The getting's area has a large amount of oil and gas in place and we will continue to appraise and learn more about this asset over time, feeling confident that our development acreage.
In the area, we will continue to grow.
Strong well, productivity Capital efficiencies and high operating margins are all features that are prevalent in our gettings acid area.
These high-quality attributes along with our continued Focus, Capital, discipline and competitive advantages gained throughout our accumulated knowledge. In the field are responsible for much of Magnolias overall success.
A core competency of Magnolia is acquiring bolt-on oil and gas properties that have similar attractive operational and financial characteristics to our existing core assets.
We will continue to look for additional opportunities, over time to expand our presence at footprint within the field.
For Magnolia, The crucial aspect around any acquisition. Is that it continues to provide us with the ability to execute our Pro proven business model. While maintaining the same successful recipe of balance sheet strength, Capital business discipline realizing High pre-tax operating margins generating, mid single digit, production growth, and returning. A significant portion of our free cash flow to our shareholders for our ongoing share of purchases and a safe sustainable and growing base dividend.
Magnolias operations, remain consistent and steady. And we continue to execute a differentiated focus and investible. ENT business model that is enduring.
Solid. Well performance continues to drive our overall production higher while supporting our disciplined Capital spend, that has been well below our self-imposed 55% reinvestment ceiling.
Ongoing Capital efficiencies has allowed us to generate consistent free cash flow throughout periods of product price volatility. Our top tier assets and focused strategy centered on fruit and reinvestment steady production growth and reliable. Free cash flow, should continue to drive shareholder returns over the long term.
I'll now turn off the turn, the call over to Brian to provide some further details on our second quarter, 2025 results and some additional guidance for the third quarter of this year.
Thanks, Chris and good morning everyone. Our review some items from our second quarter results and refer to the presentation slides found on our website.
Also provide some additional guidance for the third quarter of 2025 and the remainder of the year before turning it over for questions.
Starting on, slide 6, Magnolia delivered, an excellent quarter. As we continue to adhere to our different differentiated business model.
During the second quarter we generated total and adjusted net income of 81 billion or 42 cents per diluted share our adjusted Iva tax. For the quarter was 223 million but total capital capital associated with drilling completions and Associate facilities of 95 million representing 43% of our adjusted Iva tax.
Second quarter production volumes grew, 9% year-over-year to 98.2 thousand, barrels of oil, equivalent per day, while generating free cash flow of 107 million.
Looking at the quarterly cash flow waterfall chart on slide 7. We started the quarter with 248 million of cash, cash flow from operations before. Changing your working capital was 214 million with working capital changes and other small items impacting cash by 16 million.
During the quarter, we pay dividends of 29 million and allocated, 49 million toward share repurchases.
We had 16 million of small bolts on Acquisitions during the quarter comprised of acreage acreage editions working interest, in royalties, we incurred 100 million on drilling completions and Associated facilities as well as leasehold and ended the quarter with 252 million of cash.
Looking at slide 8, this chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in the second half of 2009.
Since that time we have repurchased 77.2 million shares leading to a reduction in weighted average diluted shares outstanding up 25%. Net of issuances.
Magnolias weighted average diluted share count declined by approximately 2 million shares. Sequentially. Averaging 192.1 million shares during the second quarter.
And the open market.
Turning to slide 9. Our dividend has grown substantially over the past few years, including a 15% increase announced earlier this year to 15 cents per share on a quarterly basis.
Our next quarterly dividend is payable on September 2nd and provides an annualized dividend payout rate of 60 cents per share.
Our plan for annualized dividend, growth is an important part of Magnolias investment proposition and supported by our overall strategy of achieving moderate and annual production growth, reducing our outstanding shares and increasing the dividend payout capacity of the company.
Magnolia has maintained a strong balance sheet and is a key principle of our business model. Our 400 million, senior notes, do not mature until 2032, including our second quarter ending cash balance of 252 million and our undrawn 450 million revolving credit facility. Our total liquidity is approximately 700 million
Our condensed balance sheet as as of June 30th is shown on slide 10.
during this slide 11 and looking at our per unit cash costs and operating income margins,
total revenue per Boe declined, approximately 13% year-over-year due to the decline in oil prices and partially offset by an increase in natural gas and NGO prices.
Our total adjusted cash operating cost including GNA, we're down 4% to $10.70 per Boe in the second quarter of 20125.
Eloise was exceptionally low during the quarter at 488 for Boe, due to lower work over expense in the quarter, we expect that to moderate in the back half of the year to approximately 525 per Boe.
Our, our operating income margin for the second quarter was 12.7 cents per Boe or 34% of our total revenue.
Turning to guidance, we are reiterating our 2025 drilling completion and Facilities Capital spending to be in the range of 430 to 470 million.
This includes an estimate of non-operated capital, that is about the same as 2024 levels.
We are increasing our full year production growth guidance to approximately 10% from a prior range of 7 to 9%.
This represents the second quarter in a row of increasing our production, guidance for 2025 with a capital budget that is approximately 5% below our initial Capital guidance in February.
Total production for the third quarter is expected to be approximately 999,000 barrels of oil, equivalent a day with third quarter. DNC Capital expenditures expected to be approximately 115 million.
Oil price differentials are anticipated to be approximately a 3 dollar per barrel, discount to, mellan East, Houston and Magnolia remains completely unhedged for all of its oil and natural gas production.
We expect our effective tax rate to be approximately 21% and with the passing of new Legislation. During the third quarter, we expect minimal cash taxes for the full year 2025 and assuming a similar price environment. Expect minimal cash taxes in 2026 and should benefit us going forward.
The fully diluted share count for the third quarter of 2025 is expected to be approximately 190.
19 191 million shares.
Lower than the third quarter of 2024 levels. We are now ready to take your questions.
We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad, if you were using a speaker-phone please pick up your handset before pressing the keys.
If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster.
Our first question comes from Carlos, Escalante with Wolfe research.
Yeah, good morning team. Thank you for taking my question this morning. Uh first of all, first of all, I'd like to to ask about your where you see free cash flow changing uh and let me frame the question real quick. So we we like to think that the value of an NP is relatively simple. It's free cash flow times duration. And the saves that, that you've taken this first out of the Year by racing production, guidance and lowering your Capital intensions, intensity use evidently run both
Do you think gives gives in first and and what do you prioritize out of those 2 items moving forward?
Hi, Carlos. Yeah, it seems reasonable I guess um I I don't know how much I want to get into 26 just yet. It's it's a little early but um it's it's all trending in the right direction.
You know, I've said this a number of times um, on on other calls. And so recall, we find ourselves in a position where we're in an older field and getting you know it's been operating for for decades
Uh with an enormous amount of oil and gas in place that and had not been developed with modern technology and completion. So,
when we started out, you know, from the beginning,
we viewed it. If if we were able to crack the code, uh, subsurface wise that there was a lot of upside potential in the field.
And this is exactly what we've experienced during the last several years. So,
What you've seen as a result of this are further Capital efficiencies creeping into our development program over time.
And as I mentioned in my remarks,
Are more gradual and and tactical way of approaching this has been to appraise acquire grow and further exploit. And so, as we as we further expand the getting's Footprints, which I'm confident that we will.
You know, simply by the nature of moving into newer areas you should likely pick up further efficiencies. So I I do see this over time, trending better for us. It'll it'll you know, it's an old field that it'll just continue to give and give and give and get better.
Um, and remember, as I said, mentioned this in many prior calls the goal for us. Um, it should be the goal I suppose for, for most go for us to show, show the best Wells with the least amount of capital as possible in order to generate the highest amount of free cash flow, which I think is where you're getting at. And that's your point.
It shouldn't go unnoticed that we began the Year by saying that this year by saying that we would spend about 475 million in capital and see production, growth of about 5 to 7%. So here we are in Late July.
And we plan to spend 5% less uh, or about 550 million of capital and we'll grow our production buys by 10%.
So hardly anything to complain about as far as I'm concerned. So I, I hope that gives you a little context.
Yeah, most definitely, thank you for for the incremental caller. I I guess I'll keep it on the on the same line of conversation from my follow-up. Um but perhaps folks more on product makes so there is clearly a ton of variability across your getting position, uh, just giving how the Austin shock is laid out, um, and the question that we we often get is, if you're incremental molecule in getting gas here. Now, you, you, you, you turned in line, some very good Wells, that had a lot of, uh, liquids but also a lot of gas earlier this year. So could you possibly perhaps frame, what you view your Capital allocation within, you're getting um and year in year out?
You know, the it's interesting. We, we get the question too. And I, I understand maybe a little bit of maybe the confusion, but at the end of the day, broadly getting whether it's
A little areas of that are a little bit maybe oilier or or certainly areas that that are gassy, they which I think is what you're getting at. The, the gas here, Wells and Giddings do come with a lot of liquids and and quite a bit of oil more often than not. And so
to, you know, to to to say that we're focusing on 1 particular area and getting
I mean, this is getting the way we see it, broadly. And our goal is to sort of drill.
Good Wells, and um, I don't know, maybe this is an odd way of putting it, but sort of do a tour around getting. We'll rotate around the field, and again, part of this is to learn more about it because we're at the relatively early stages of it, but we'll move around.
and,
you know, typically it it, um,
You know, on a broad basis it. The the well performance is quite strong.
The well returns are are very very strong. And so we don't, you know, this is pockets of general of of a little different different differentiation but at the end of the day, broadly we're seeing very good returns from uh, most of the wells that we we bring online.
Solid quarter again.
Thanks.
Our next question comes from Payton Dorne with UBS.
Hey, thanks, guys. This is Payton on from UBS. Um, quick question on Brian's side. I think I might have missed it in the prepared remarks, but you mentioned I think it was a minimal cash taxes as a result of the new budget bill. So just if you mind clarifying that and then any impact on taxes or forecasts for 26 and beyond that, you should be, we should be thinking about, thanks.
Yeah, the taxes for this year minimal, or maybe I would say negligible, uh, for 25.
Uh, for 26, as Brian said in his remarks and probably not all that different uh and and current product prices. So if that gives you, I mean I think the range that we had given and you know, prior to the bill was, you know, 6 789 in that vicinity.
Um,
this is quite quite different than that, um, quite quite a bit lower.
Negligible.
Yeah. Certainly um good to see extra free cash flow too and I guess just otherwise on the operating cost side, it was a nice Trend down for the LOE. Um I I know you attribute some of that to lower work over but just curious if there's any more juice to squeeze there or any other outlook on potential for declining costs, um, on the operating side in the back half of the Year, thank you.
Sure. You know, I we we definitely benefited from what I would call a lighter quarter of work over activity and
Maybe some lower surface facility expenses, uh, During the period, but I haven't said that we did, you know, if you recall we embarked on an effort to address field level operating costs more than a year ago, and we definitely experienced some broad improvements throughout our field operations. And and there are a lot of small smaller items that begin to add up. Um, I think we have, and will continue to see some of those improvements, uh, trickle into our field operating expenses. Um, you know, a couple of items that I'd mentioned that are either helping or will help uh, utilization of chemicals water hauling
Uh, and so you know, while lower work overs did pull things down quite a bit. Um, in the second quarter. Yeah, I we're seeing some broad improvements, um, but having said that, I think we'll, we'll normalize more towards, you know, 5 525 per Boe in that sort of
Frame. Um and we'll see where that goes. But that's still about 5% of where we were last 5% lower than where we were last year and I hope to do do better through the remainder of the year.
All right, great. Thanks for getting me on.
Sure.
Our next question comes from Zack. Parham with JP Morgan.
Hey, thanks for taking my questions. Um, I first just wanted to ask on oil production and the trajectory from here, y'all hit 40,000 barrels a day in 2 Q which you'd previously stated was kind of the goal for 4 q this year. Do you expect continued growth in in oil production in the second half of the year and as we go into 2026?
Yeah, I think that as I as I look at the program, um, how it play out from here on in for the year, you know, I I think
Similar to slightly higher than what we saw in the second quarter and I would tell you probably. Uh, and that would include the small amount of production volumes that we uh, we grabbed from those. Those bolt-on Acquisitions that little bit of volumes.
Um, so as I said, you know, maybe 99,000 a day. Um, you know, for the third quarter
Uh, and and oil should.
Sort of follow the same.
General trajectory on a, on a percentage basis. Um,
So, I think you'll get a little bit of, um,
Bump in, in both Total volumes and and oil for the rest of the year.
It's and then, as you go into 26, would you expect to grow oil, you know, at a similar rate as total or it's a bad grow, a little bit slower?
I I, I don't, I don't know for, for 26, in terms of total volumes. I, I would tell you right now, the plan would be, you know, to
Uh, but in terms of the split, you know, typically, with, as we've seen with Giddings, with more and more of the focus and capital.
Uh, and the business generally growing more. So there than, um, the rest of it, uh, you're going to see that, uh, be a little bit lower on oil. So I I would imagine that mid single digit growth on the total company basis would would be a little bit lower on oil.
Thanks. And then my follow-ups are just on the M&A outlook. You'll do $40 million in acquisitions this quarter, some of that really, you know, right on top of some of your core acreage there. Can you just talk about what you're seeing in the market going forward from an M&A perspective? From a bolt-on perspective, do you see the ability to continue to kind of add acreage in these core areas going forward?
I, I think we can, there's there's some um, you know, ongoing smaller opportunities and these these tend to be
Oftentimes, individuals, people, uh, families, um, for that matter. And that's not very different than what we experienced here with what we've just done.
uh, when you look at larger things, um those can tend to have other complications or complexities
be managed by by more like asset managers or financial managers that that um, you know, may may take a different View and just by the nature of its size. It's
it's
just generally more complex. Um,
and with with the fall away or fall off of of product prices that that adds another dynamic.
so, uh, you know, that's generally not their, um,
As much in some of the smaller opportunities. So I I think there's still things to be had.
Um, but on a smaller level.
Interest.
Our next question comes from Oliver Hang from Tudor, Pickering, and Holt.
Morning, Chris, and Brian, and thanks for taking the questions.
Maybe first off.
Hey Chris, uh, maybe first off just uh good to see success in the appraisal program. Driving the confidence to increase your house views on core, getting development acreage. I'm just trying to think through relative economics of the incremental 40,000 net acres being folded into the program, so hoping that you all could maybe talk a bit more on the criteria or any return thresholds you all typically look at when such a decision is made to shift acreage into that bucket.
well, I think if you, if you back out um any value for the, the production that we received, um the remainder of that, which is
Really the point um was was a very reasonable amount to pay?
Uh, for the, for the entry point.
Or tuck in, if you will of the additional acreage that is in our core area. Um, for the most part and is adjacent to to where we are and and could offer opportunities for lengthening. Laterals, or, you know, clearly, you know brand brand new wells and, and whatnot. So it's more about the upside potential and and, you know, the entry point the cost of the entry point, which is, I would view is very low.
Um, in terms of picking up the acreage. So I, you know, that's how I look at it.
Okay, makes sense.
And maybe just on a service cost as we kind of think about Trends there. The front end of the oil curve is certainly held in stronger than expected and does seem like there's potential for service companies softening their stance a bit here, but just kind of wondering how initial discussions have been and sort of expectations as we enter our the season.
yeah, I don't I don't want to speak for
for the service guys. Um,
You know, very, very specifically, but I will tell you it. It's, uh, it's obviously harder for them right now. I don't want to say that you're down to the bone, but they're certainly seeing bone as opposed to any fat or skin left on the bone. So it's, um, it's harder, you know, for them.
Uh, you know, but but things have come off. And you you've seen some, you know, ongoing deflation as activity is is rolled over a bit.
Oil rolled over.
and I think that that certainly spooked some operators, uh, where they've
You know, produced either reduced activity or just laid off.
Rigs, Etc. And so, as you continue to see that,
uh, which you very well may well see into, you know, towards the end of the year if you sort of sit around these prices um,
You know, you do have a little bit of ability to to nudge or push on it, um, somewhat but not a whole lot. I think what you're seeing is some, some improved benefits on offs.
uh, to Q3 and
Then you get into Q4 where there's, you know, more in the way of, um, steel inflation and octg items as a result of of tariffs. So that, that may start to, um, rub against it, if you will, and, and flatten it out.
um, but I would tell you, you know what, what we've seen is probably several
3.
Um,
A little bit more than what we saw in the first half of the year and, you know, maybe all in. I would tell you,
From the, from the exit of 24, you know, 67% something like that. Um, but then it sort of flattens out and, and May, in fact, uh, you know, depending on what happens with activity.
You might see a little bit of a, uh, soup bowl or the bottom of the soup bowl, and then you start to...
Perhaps trickle, higher, um, with activity ramping, as as operators, typically do into the, you know, beginning of next year, but we'll see. It's, um, It's A Hard 1 to call based on product prices and, and exact activity for operators right now.
Okay, that's helpful color. Thanks for the time, sure.
Our next question comes from Charles Meade, with Johnson rice.
Yes, good morning, Chris, Brian and Tom.
Morning morning. Um, Chris, I have to say you're you're cutting down to the bone that that that was quite a vivid metaphor that you offered for us. Um, I really just have 1 question. Chris. Uh, you mentioned that you prepare marks that uh, some of your uh, your recent completions have been um or I guess the stronger than you guys um stronger than you guys had expected or modeled, can you talk about where those are? And what I'm really curious about is, are those, some of those recent completions on?
Um, you know, this 30,000 Acres that you recently added to your Development Area.
Yeah. Um,
Probably.
You know, that's what what I said in my remarks you know tactically as you look at how you you exploit Giddings. It's
You know, it's moving around the field appraise acquire. Uh and and that's sort of this is an indication of the way we've done it. And so
Um, the real ideal or perfect example was...
In an area where we were drilling, you know, late last year into early this year, where the wells outperformed that was the exact uh way it panned out.
um, where we had appraised an area and then like to what we had seen, and then had an opportunity to acquire, um, much more of it, uh, which led to, you know, having
A bigger development, swap of development area. And so, you know, I I imagine that this is what this will lead to as well over time.
Um, same sort of concept.
Uh giving you precision as far as GPS location where it is I'm not going to do that. But anyway um
Got it. That's it for me. Thanks. Okay, thanks.
Our next question comes from Tim Moore with clear Street.
Thanks and nice consistent execution, along with the drilling Runway still a strong, you know, followed by your production growth guidance. Um what's my question is already answered but um said 2 remaining ones, you know, you mentioned, you know the uptick percentage and the getting's acreage edit since the original acquisition and you know as you explore and kind of exploit those Acres which is
Few months. Just any any 11 more color in getting? This is going so well.
yeah, no we we've done that throughout the you know the development um
Period time period of getting. So we've
You know as we uh, we we've we've looked at things like you know, down spacing we've looked at things like adding adding more Wells for pads um to optimize uh a Development Area once we know more about it. Um we've done that in some, you know, parts of that core Development Area. That's now that 240,000 Acres so over time.
uh, yeah, we we will continue to further optimize as we get to it because we haven't gotten to it obviously all yet, but as we get to it there will be more not just more efficiencies but um, you know,
Different ways to maximize UM and optimize the capital as we spend and further develop as we learn.
So, um, yeah.
There will be more more, more more improvements with with uh, the development know. That's, that's very helpful. And um, it's a really good Catalyst. Um, you just 1, quick, follow-up on, you know, the efficiency in eloe for Boe, was was very impressed with the quarter.
You know, I think you'd already given commentary while ago that you know, Gathering transport and processing expense per view, would go up this year. But um, do you envision you know the the transport you know Gathering processing side to maybe go down a little bit next year. Or do you think the run right now is really the level for next year?
It's going to be somewhat dependent.
Similar, I would say.
Okay, thanks a lot, Chris. And, uh, that's it for my questions.
Our next question comes from Foo.
Bam with Roth capital.
Hey, good morning James. Uh, thanks for asking me questions. So I just have a question about the getting expansions so we know that 70% expansion comes from the appraisal well so um, let's say, can you stop being more specific about like uh the number of a appraisal wealth, you drilled and and how does that compare to the possible quarters?
yeah, and then
On an ongoing basis. I would tell you, you know, if the appraisal program
Typically is is, maybe 10% of what we we do on an overall basis, um, plus or minus. Um, so we always try to, um, fold in some things that we'll look at, on a different type of, from a different angle, um, test some new Concepts,
uh, you know, so we're always looking to to pull in some opportunities to
you know, to to to examine the the the area for other types of opportunities, in a different way to do things where we're potentially more things will get folded into the um
Uh, the wrist area of the acreage. So um or improve our results over time.
Uh, I may lead to other bolt-ons uh, with that. So I I would tell you plus, or minus sort of 10%,
Yeah, you do.
Our next question comes from Noah Hunis with Bank of America.
Good morning. Um, just 1 from me, uh, I guess I was wondering the how many completions are being deferred at the 26th. If that number has changed from what you guys had talked about last quarter and then um, how are you thinking about killing that spare capacity? And uh, would would you consider maybe pulling some of that activity forward? And if so uh what would you need to see to feel comfortable doing that?
I guess the, the last portion of the question, I'll take first know, I don't right now, as a seed. I mean, we're sort of, if we pulled any of it Forward, we'd we'd grow at a, at a faster clip and the need to do that right now. I just don't see it. Things are performing better than what we had anticipated expected. So I don't see that right now. Um, 10% of growth is is just fine. Um,
The, the completions that were deferring that. That number didn't change. So, it's about a half a dozen, uh, that'll be deferred until next year.
Like, is that something that you think you would for sure use as part of your program? Or is that something that you think maybe you would want to, um, maybe save depending on the environment that you're seeing?
No. Well it it's going to depend but I mean if if you're sitting here in the environment that we're in, um
It'll, you know, since it's been drilled, it'll it'll be part of the program for next year.
um, with all likelihood, um,
you know, I if the, if this is sort of the, you know, commodity environment that we're in, it'll, it'll get it'll get completed.
Gotcha. It's very helpful stuff guys. Thank you. Okay, thanks.
Again, if you have a question, please press star. Then 1. Our next question comes from. Tim risvan with keybanc capital markets.
Hey, thanks for taking my questions folks. Um I wanted to ask about the the the really strong well results. We saw you all turn to sales and and the fourth quarter of 2024 um very sort of differentiated production profile, you know, mid-30s oil cut. But but they were so strong that the total oil was really comparable to to other vintages. So I was just curious. Did you all sort of expect that?
Um, production profile was that a a tactical decision into into winter, you know, with with gas rallying and just trying to think about how you can, you know, would be nimble with your drilling especially as we look at uh, the natural gas strip in contango in 2026. I know that's a few questions in 1, but just curious any insight on on what you did there. Thank you know, good, good question. Um, we as a I mean, we, we did say this at the time back in, in the, uh, in the may call.
Uh, it was a tactical decision, uh, to pivot a little bit more to what we believe to be a gassier area, uh, to try to capture some of what we thought would be some better pricing.
For gas and it it did work out just fine. In that sense what we didn't anticipate?
was the, um,
Prolific nature of the wells, strength of the wells, both on the gas and the oil side. So the wells were um, very high pressure, very good returns and
You know, even what we've seen since then, in terms of the, the Cadence of of the the productivity has been continues to be good and so it's it's it's been rather durable up to now. So I it's worked out very well. I would tell you that, you know we'll we'll plan we haven't done much since then in that area, but
Will go back to it. Um, you know, next year and revisit it. So I you know, if if that if anyone cares but we'll, we'll do that. We'll plan to do that.
Okay, that that's helpful. I appreciate the the insight there and then as my follow-up, um, you know, looking at where a commodity prices are shaken out. You seem to be somewhere around 48%, you know investment rate as a percentage of cat-backs this year, um you know, with with the underlever, balance sheet and sort of this larger sandbox of drift inventory and and you know you have 7 years of experience now and and getting um,
You know, why not grow a little more and where I'm going with that is like and then related question this sort of high single digit production growth. Kegger you've had, can you continue to do that the next couple years with 2 rigs or is kind of an increase of activity inevitable to sustain that?
Thanks.
so,
The, the model.
Has us um looking to grow mid single digits, as a defined at 4 5, 6 percent. Um, as you know,
if, if you were to stretch and try to reach beyond that and the more you, you sort of reach for growth, um, it it only
Usually, anyway, enhances your your rate of decline, it makes it more difficult thereafter and as you get larger, so you're you're pretty spot-on on the 48 percent. Um,
So, there's obvious uncertainties around the product price environment. Um,
You know, there's there's not a lot of focus optimistic out there on oil, but you know, current prices seem just okay to me. Um,
I, I don't see.
Needing to reach beyond what what the field and getting has provided us. Giddings is clearly the growth part of the business, the growth of your asset while the car's area has been more the the free cash flow generative piece of the business.
um,
Giddings is as far exceeded our expectations as far as what has been able to to generate in terms of growth. So almost every year year in year out, we've been we've overshot what we've anticipated or expected going into it in terms of our development plan. So the outcome of the growth has been really more better than expected. It. It wasn't the the
Plan. So we got more out of the wells.
pound-for-pound on a on a
Than what we had anticipated, broadly.
So um I I just continue to look for that sort of benefit. I'm not I'm not claiming that that's going to be the go forward case, but we'll continue to sort of do the best we can and
the plan, we'll try to squeeze as much as
we can out.
some of these newer areas where we're optimistic about, and
Plan is still mid single digit. If we exceed that great with the same amount of capital,
Okay, I appreciate the insight. Thanks, okay. Thanks, Tim.
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