Q3 2025 Northern Oil & Gas Inc Earnings Call

Greetings and welcome to the NOG second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host, Evelyn Infurna, Vice President of Investor Relations.

Thank you. You may begin.

Good morning. Welcome to nog's third quarter 2025 earnings conference call.

Yesterday after the clothes, we released our financial results.

you can access our earnings release and presentation and the investors relations section of our website at noog inc.com,

We'll be filing our September 30th at 10:00 with PCC within the next few days.

I'm joined this morning by our chief executive officer, Nico. Grady, our president, Adam Derlin, our Chief Financial Officer. Chad Alan and our chief technical Officer Jim Evans.

Our agenda, for today's call is as follows.

It will provide introductory remarks, followed by Adam, who will share an overview of NOG's operations and business development activities. Chad will then review our financial results.

After our prepared remarks, the team will be available to answer any questions.

Before we begin, let me remind you of our Safe Harbor language.

Please be advised that our remarks today, including the answers to your questions. May include forward-looking statements within the meaning of the private Securities. Litigation Reform Act.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations, contemplated by our forward-looking statements.

Those risks include among others matters that have been described in our earnings release as well, as, in our filings with the FCC including our annual report on form 10K and our quarterly reports on form 10q. We disclaim any obligation to update these forward-looking statements,

During today's call, we may discuss certain non-gaap Financial measures including adjusted. Evita adjusted net income and free cash flow.

Of these matters to the closest Gap. Measures can be found in our earnings release with that. I'll turn the call over to Nick.

Thanks Evelyn. Welcome and good morning everyone and thank you for your interest in our company.

I will, as usual, provide you with some highlights on our outlook and five quick points.

Number 1, the business remains very solid.

Our activity remains stable, our DNC list has continued to march on with high quality, low Break Even activity and we remain on target for the year and expect a strong exit into 2026.

Number 2, we and many of our operators have been cautious and disciplined with our billing capital.

We have explained that being returned driven versus growth, driven means we will react accordingly and be judicious with how we allocate our capital.

So far, given the commodity complex, this strategy has proven to be sensible.

This allows us to preserve our growth inventory and capital for periods where we can maximize value for our investors and ramp aggressively when it's appropriate in the cycle.

Yet we've also grown our gas volumes into a stronger backdrop as we allocate capital accordingly.

Number 3, it also means we can focus some of our capital for long-term value creation.

We have never been busier on the BD front ever.

We have been clear that our priorities are focused on creating long-term value. And we believe that disciplined long-term, strategic opportunities are best suited in this environment to create value.

Our recent minerals and royalty deal typifies. This strategy adding long-term growth low-risk assets into the portfolio that will prove highly resilient to short-term Generations in the commodity Market.

Number 4. We've been purposely tactical in regards to our Capital stack.

The balance sheet management. We have undertaken, may not be fully appreciated yet, but it is critical to how we navigate the current Marketplace.

With attack onto our convert earlier this year, our recent Bond and tender transaction, and the recent extension of our bank facility, we will see some substantive benefits to the corporation and the current Pace. We will exit 2025 with potentially more than 300 million dollars of additional liquidity as compared to the beginning of 2025.

We will also see a further reduction in interest rates with our new rbl terms.

We've entered into interest rates swaps to further reduce those rates and can increase this amount if warranted.

The extra cash flow. This is substantial increase in liquidity and the longer tenure of our debt maturities continues to set us up to pounce on counter cyclical Investments as we intend to

Number 5.

We continue to actively manage other risks such as commodity exposure. You'd be hard pressed to find, a better hedge company than ours. This actively managed hedge program allows us to better navigate the typical commodity cycle.

This practice is another factor that protects our business and allows us to continue to take the offensive through trough periods.

In summary the business remains solid as a rock inorganic opportunities are more robust than ever, and we've taken substantial steps on the risk in Capital Management front to ensure our ability to take advantage of any cycle.

We firmly believe that energy has more growth and value creating prospects than the bulk of the Upstream sector and we look forward in the coming quarters and years to proving this thesis to our investors.

Thank you for your interest in our company. And with that, I'll turn it over to Adam.

Thank you, Nick.

I'll touch briefly on the operational results for the quarter and then turn to our ongoing Business Development efforts

Operationally our assets continue to outperform internal expectations. And we saw this across all of our respective basins.

As a result, we've increased annual production guidance, while tightening capex for the year.

While expected turn-in lines came in slightly under forecast, as certain wells were deferred to the fourth quarter, production outperformance was driven by a number of different factors.

Notably in the UA upside completion, designs having increased overall productivity relative to internal estimates.

While in the Williston, we've seen outperformance on recent Hills and much better execution on refracts as operators, continue to refine designs.

As a pertains to the activity levels. The puran accounted for about 2/3 of our organic activity, while the Williston and Appalachia evenly made up the remainder of Wells that were brought online,

Drilling and development activity was also consistent. Slightly building our wells and process adding additional low Break Even backlog and setting up for a strong finish into year end.

000 process. Well, the Appalachia Williston and Uintah each make up, roughly 20% of the total.

New. Well, proposals and election activity have also remained consistent as we received over 200. Well, proposals and consented to over 95% of the afp's validated in the quarter.

Year to date. We have seen 160 more proposals than what was balloted through the same period during 2024.

Expected returns remain well above our hurdle rate, further bolstered by a 10% increase in lateral lengths, driving down normalized AFB costs by nearly 5%.

In addition to the longer laterals mg's operators continue to see downward pressure on service costs for both Drilling and completing which has been encouraging.

We should see those operation efficiencies materialized through Q4 and into 2026.

Turning to our business development efforts, Q3 was one of the busiest periods in company history. As we screened more than 14 large asset transactions and over 200 ground game opportunities, this was up over 20% relative to the second quarter.

Well, our scaled business model provides more acquisition opportunities than any other. In the ENT space. We remain focused on only the highest quality assets and will strictly adhere to our stringent underwriting requirements.

As we previously announced in August NG closed on a royalty and mineral interest acquisition in UA that included 1,000, net royalty, Acres across 400 plus gross locations, excluding the additional inventory that is not currently in our development plan.

This is a prime example of how NG leverages its proprietary database and asymmetric knowledge to capitalize on opportunities in an inefficient Market.

This acquisition increased Energy's average effective NRI from 80% to 87%, covering the entirety of our uni position and further lowering our break-evens. And what are the fastest-growing basins in the lower 48?

Our ground game remains as active as ever closing. 22 transactions. Executing on 3 trades at high-graded, our acreage position in signing a joint development agreement that covers 7 additional extended lateral spacing units.

As a result, we added over 2500 net, acres and an additional 5.8 net Wells during the quarter. Bringing year-to-date ground game editions to over 6,000 net, acres and 11.6 net Wells across 50 plus transactions in all of our respective basins.

NG's diverse Holdings across both oil and gas as provided ample opportunity to deploy capital in both near-term drilling opportunities as well as longer dated inventory.

This is giving us the ability to navigate the dynamic competitive pressures that have changed throughout the year.

While the broader m&a Market has been relatively stagnant across the sector in a lower commodity environment. Our unique position counters, that thesis. And we do not see things slowing down for energy.

However, the landscape has changed from historical trends.

In the past, the large majority of opportunities were concentrated in the Permian. While we continue to see those prospects, we are seeing a myriad of high-quality potential deals spread across a greater number of basins.

Currently, we are screening 8, transactions with a combined value of over, 8 billion dollars across operated non-operated and Joint development structures.

Additionally, we've been able to approach a number of these assets with various structures. Providing optionality to the seller. That also works for us.

Regardless of the environment, we will remain steadfast in our approach to underwriting and focused on high-quality assets. That will generate superior returns for our investors and stakeholders.

With that, I'll turn it over to Chad.

Thanks Adam.

Dogs diverse and scaled platform continues to deliver in the face of a challenging macro environment. And while performance continues to exceed internal expectations across all of our basins,

Third quarter, total average. Daily production was approximately, 131,000 Boe per day.

8% versus Q3 of 2024 and down 2% from Q2 2025 as expected.

Reflecting the low point for net. Well additions in 2025 at 16.5

It is important to note that a third of those net Wells came online. Late in the quarter, providing momentum into the fourth quarter.

Oil production was approximately 72,000 barrels of oil per day.

Up 2% from Q3 2024 and down 6% sequentially.

Gas production continues to ramp as our gas joint drilling program is on a consistent monthly till pace.

Once again, we had record gas volumes of approximately 352 mmcf per day, up 15% from Q3 2024 and up 3% from Q2 2025.

With expectations of adding between 23 and 25 net wells in the fourth quarter.

Heavy late, net. Well additions and well out performance in Q3

We have increased our annual production guidance to a range of 132,500 to 134,000 Boe per day.

Moving on to our financial results adjusting even in the quarter was 387.1 million and free cash flow was 118.9 Million marketing. Our 23rd consecutive quarter of positive free cash flow exceeding 1.9 billion over that time period.

Reporter. The net loss of 129 million in the quarter.

Which reflects the previously disclosed non-cash impairment charge of 319 million?

Are adjusted. Net income was 102 million or 103 cents per diluted share in the quarter.

Oil differentials. Average 3.89 cents per barrel.

as we saw improved differentials across all of our oily basins,

Natural gas realizations were 82% of benchmark prices.

Consistent with Q2 2025 to the ongoing waha Market weakness and was also impacted by lower nmax, natural gas prices.

Lease operating costs per barrel were down marginally from Q2 2025, despite lower oil volumes.

we did see some relief on saltwater, disposal costs.

But we are still seeing steady expense pressure from work overs.

Given the higher run rate year to date and the expectation of continued work overs.

We have increased annual guidance on LOE.

We have also revised guidance on production taxes to a lower run rate, given year to date, actuals and anticipated production, mix in the fourth quarter.

Got back to the quarter, including non-budget Acquisitions and other was 272 million.

Reflecting an active quarter on the ground game as discussed by Adam earlier.

Overall, the 272 million was allocated with 49% to the peryam.

25% to the Williston.

5% of the year went to and 21% in the Appalachian basin.

Approximately 212 million of the total spend in the quarter was allocated toward organic development capacity.

With the history of 3. Quarters behind us. We have tightened our full year capex guidance to a range of 950 million to 1.025 billion.

At the end of the quarter, we were maintaining the 1.2 billion in liquidity.

Consistent at 32 million in cash and over 1.1 billion available on a revolving credit facility.

We have been actively managing our balance sheet throughout 2025, including since quarter-end.

In October, we raised 725 million of notes maturing in 2033 with a coupon of 7 and 7/8 percent.

We use those proceeds to retire nearly all of our notes maturing in 2028 that have a coupon of 8 and 8%

Earlier this week we amended and restated our revolving credit facility which extended the tenor to 2030 and markedly improved. Our pricing grid by 60 basis points.

Significantly reducing future interest costs.

The credit facilities and elected commitment amount and borrowing, base remained unchanged.

These transactions together extended the weighted average maturity on our debt from approximately 3 years to 6 years.

Importantly, we have no major maturities until 2029.

That concludes our prepared remarks operator. Please open up the line for Q&A.

At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad,

We will pause for just a moment to compile the Q&A roster.

G team there.

I would Nick you you I guess approached uh, you know, the outlook for 2026 and your prepare comments, but I wondered if you could, uh, you know, just elaborate a little bit more on what you're seeing and and I mean, I suppose if you'd wanted to give 26 guidance, you would have given it. But um, I'm really curious to hear what you're seeing because you you sample. So many different operators across, you know many, you know, or most of the important um, producing areas in the uh, in the lower 48. So what uh, maybe you could offer what you think the industry uh, you know, Baseline is going to be and then perhaps uh uh a Delta for for what NG might be versus that industry. Baseline?

Yeah, I mean I think what you see in the industry is probably what you'll see for us at this point. I mean, I think we haven't seen much change in activity since uh the prior quarter which has been relatively flat

Um, and I think that's generally what we would expect as we head into next year. You know, the activity's been very, very stable,

um,

you know, I think, uh, the commodity Outlook may change and that may change that. And I think that that's why I think things certainly can change as we head into next year. And I think that's why we we tend to wait later to guide because I think frankly the, you know, I think, uh, if oil prices were to change materially between now and next year, obviously activity may change as well. Um, but I think as it stands today, I think, um,

You know what we've said and I'd say would be consistently would be that, you know, to maintain uh, an Outlook I think, on the oil side, similar to where we are this year, for our annual guidance, uh, it would require a budget lower. I think in any, uh, scenario, um, and I'm referring to oil guy volumes. I think we're going to see material gas growth next year. Um, I think if we spent a budget similar to this year, we would see probably growth in in both um, both commodities.

Um and so I think that the question will really be um, what's appropriate, right? And I think, you know, obviously we're we're watching, uh, the commodity Outlook. And as I mentioned in my prepared comments, we're very much return driven, uh, and I think it's going to be a combination of operator, Behavior, Uh, projects, uh, optionality and uh, things that we see on the ground and and where we want to allocate our Capital accordingly. I don't know Adam if you want to add to that. Yeah, I mean obviously everything is going to be driven by break evens. If we're looking at kind of what our backlog looks like here. We've got a healthy you know, per

Backlog. I think the interesting thing that we've seen in the corner especially with the afbs was on the Williston side. You're seeing kind of weighted average, AFP lateral lengths, you know, almost 14, 15 thousand feet and that's spread across a multitude of of different operators. And so I think that's obviously helping bolster some of the expected rates of return.

that we're seeing their lowering normalized uh well costs and and

Helping again, to to bolster the expected rate of returns in the base. And so, yeah, and I guess the only other thing I would add to it is that, you know, as I mentioned the commodity Outlook could change. I think, you know, depending on what happens with the gas environment next year as well. I think, in any, I mean, based on where we are today, I think we're going to see substantial growth in gas next year, 1 way or the other. Um, but that could grow even further. Obviously, if if, if the gas market, you know, explodes next year, we're going to see additional organic growth on, on our, on our assets. And so, um, that's another source of capital that could could change. And we then proactively could obviously on the ground, um, allocate additional Capital there as well.

Got it that is that is helpful call around your thinking and then if I could just focus in on on 4 q your um, 4q, 25, your annual guide suggests that you guys are going to um are going to be um we're going to see sequential growth in in in 4 weeks. In chat. I think I heard you say on your on your prepare comments that you've got 23 to 25 uh net web.

Are supposed to be online in 42. So, uh, I wonder if you could just give us an update, you know, you know, we're here in whatever the the first week of November. How many of those Wells have already come online and are, are those are those Wells or those tills going to front end? Loaded evenly, loaded back, and loaded, just talk about where you are in that process is is um you know to give you confidence on that implied 4q volume bump.

I think Charles where we are right now, we're right on track. I'd also add that, you know, a good portion of remember

well, completions are well, takes

an IP.

October you know its contribution to the quarter is is important. But it's not, you know massive. Um a good portion of you know, it's a lot of the late uh Q3 tills are going to have some of the biggest impact for Q4 and that's the driving confidence for us in this quarter. So the early uh Q4 and uh, late Q3 Wells, uh, which we've all many, which have already transpired are really, what drove, uh, our guidance increases. Well as the base, the base production Outlook, which is really the Big Driver of our production, increase for the year, and for the bass volume increases we had. And so we're going to have really strong Productions. We head into early next year.

That's great detail. Thank you.

Yep.

Your next question comes from the line of Scott handled with RBC please. Go ahead.

Yeah, excuse me, thanks. Uh, good morning. Um, you know, Nick, I I'd say that you had a pretty strong view on on what you're seeing on m&a and ground game and, you know, obviously very encouraging and and, you know, frankly I think it's 1 of the most robust, you know, comments um, to that effect. I've heard from you from a while. Um, and can you kind of compare and contrast what you're seeing in the markets? Um, for that view today, relative to say a few years ago, when um you you did a number of large Acquisitions and you know, how do you think about funding, you know, both, you know, ground game and and larger transactions? If it if it does meet your hurdle rates

Um well uh let's see here. I mean in terms of the robustness of the backlog I'd say um the 1 comment I make is it it's a lot broader than it's been, you know, I think if you go back a few years ago it was very permanent Centric Scott. It was very much.

Driven by um privacy firm life and you had a lot of assets being monetized after a long period.

Um, you know, and so I think that now, you're seeing what we see now is a really broad, uh, and robust backlog of really multibase.

Um, I'm not sure if y'all can hear me, but it's the call cut out here.

Hello everyone.

Your next question comes from.

I don't know if that's me, but I, I can't hear any anything on the line.

Hello, everyone. This is Bella.

Due to technical difficulty. This meeting will be passed for a short moment. Please give standing by, thank you for your patience.

Your next question comes from the line of Neil Dingman. Please go ahead.

Morning. Can you all hear me fine?

Yes, Neil Neil, yeah, sorry, I don't know. Nice update, guys. My question, Nick is, uh, centered on your continued activity specifically. Um, you all have talked about. I'm just wondering given the notable changes we've seen and, you know, oil prices now still sub 60 and natural gas. Now, uh, you know, nearly 450 uh, are you all getting the sense of things beginning to change into 26 meaning, you know, are you seeing some oily, uh activity uh continue to to to slow down? And are you seeing maybe potentially

Some gas activity picking up or you know, have you all noticed anything different uh with prices. Now, in these ranges for, I guess, now a few weeks,

I mean, nothing, nothing imminent, Neil. Nothing different than we've seen all year. And I'd say what. I, what I, what I said in my previous, I I'm sorry, I'm not really sure our phone dropped. So I'm not really sure where our last comments got cut off.

Um, but uh, the answer to your question is, um, we haven't really seen much of a change in activity. Uh, overall since last quarter, we've seen oil activity, roughly flat and stable, we have seen um, gas activity, stable to Growing. But that's a trend that we've been seeing all year.

Uh Adam. Yeah that's right. I think the Williston in the UA has kind of been coming along and then you know from more of an in inorganic standpoint, we've been focused on you know, deploying Capital within Appalachia and then you know, looking at more near-term drilling opportunities. That's largely been focused in in the Permian based on break evens

Well said, thanks Adam. And then just um, Nick for you. Adam just to follow up on on m&a, I 2 questions on m&a. First, seems like, you know, you have a fair amount of assets that I don't know if you're getting full credit for. You know, are you always considered as part of the m&a strategy? Um is monetizing anything is that is that you know, in the game plan I haven't asked you that um in a long time and then secondly with the opportunities you're seeing out there. You talked about, hey.

You know, ground game or deal flow looks as good as ever. Is it a mix? You know, are you seeing the potential for large deals? Uh, you know, like the SM Vital deals that you've done in the past for all these more mostly small deals. What are, you know, what are the types of opportunities you're seeing?

So I think on the latter, uh, it's all of the above, I think we're, you know, obviously, you know, you saw our our recent royalties deal was, you know, relatively modest in size around 100 million dollars. Um, you know, we've seen everything from 100 million dollars to a billion dollars obviously, um, the, um, billion dollar transaction has a much higher standard than, uh, you know, in terms of the bars is extremely high for something like that from a finance ability perspective. Um, and I think in in general, you know, we're seeing transactions all across the board. Um,

On our tool boxes that we can approach a handful of these transactions with different structures, right? You can buy down an undivided interest and make a non-op interest out of anything. And so if we're thinking about, you know, Co purchases, could you also approach that, you know, from a, a joint development agreement perspective. Uh, so I think there's a handful of different ways that we can kind of shape these assets. Um that, you know, others might not otherwise be able to

Well said, thanks guys. Appreciate it.

Your next question.

Go ahead. Yeah, thanks for getting me back in the queue and and you know, Nick I I guess to my first m&a question, I think we're a cut off as you know, when you were differentiating between now and and you know, see a few years ago you you were mentioning it was broader and I guess this to, you know, finish off that. That, um, that question I guess would be the funding. How you think about funding for that and then I'll have my follow-up after that. Yeah, I mean, I I think, yeah, I you, I guess, uh, uh, I think my rant got cut off but I would just say this. Look in terms of funding Scott. You know, we've answered this question publicly many times before we, we'll find it no differently than we ever have, you know. Uh if you believe that we have a relatively sophisticated understanding both of the board and the managerial level of corporate finance 1 would assume will finance any transaction. If and only if it's beneficial to our stakeholders,

And only in a way that would be beneficial to them for the long term, and in a risk-positive way.

Um, but suffice it to say, as I mentioned in my prepared comments, we have an incredible amount of liquidity at Advantage, costs called sub 6%.

And multiple other avenues. Should we need to tap those sources? But we'll only do it if it makes sense to

okay, understood. Thanks to that. And then my follow-up question is, is, you know, Adam you were talking about lateral links, um, you know how they're how they're increasing and and could you all just give some kind of context for us on, you know how broadly you're seeing that lateral. Length increase and and you know what, how does that impact your Capital efficiency and decline rates? Um, moving forward.

It. Yeah, I can kick it off and then hand it over to Jim in terms of decline, rate commentary there. But it, it's across the board with our respective basins. Um, as I mentioned earlier, the Williston and Q3 with they have to use, we're seeing in 1415 thousand.

You know, um, foot lateral lengths and and that would spread across, you know, 5 plus operators with, you know, 80 plus AFS that we received during the quarter, we're seeing the same thing and Appalachia, and even in the UA, uh, with the partnership with us and we're we're starting to lengthen lateral lengths there as well. Uh, and and even with the perak, we're seeing some of the longest, average lateral, links that we've seen today. That obviously puts downward pressure

On weighted average AFE, normalized AFE cost there. And then, you know, further bolsters, expected returns. I think the, the biggest takeaway that we've seen after observing this over, you know, an extended period of time, is, is really been, you know, oh, they've accessed the reservoir. And that's probably where I'll get it to give it to the engineer. Yeah, I think so. Yeah, you know, like we said, we're, we're seeing operators continue to refine their completion designs. You know, more effectively stimulates the, the total of the well and be able to draw down the pressure.

Uh what you'll see is you know, they're not going to overdesign the facilities. So you're not going to see a straight ratio going from a 2 mi to a 3 Mile. Where the IP is going to go up by 50%, it's going to go up a little bit. What you're going to find is you're going to find that the uh well it's going to stay flat for much longer and then have shallower declines. Now we typically are a little bit more conservative. And so what we'll see is that when we see that IP rate, we'll continue to maintain our prior decline rates, until we have more information, you know, that might take 6 to 9 months. And so what we're seeing now is that these Wells are holding in there a little bit flatter for a little bit longer. So they're starting to exceed our expectations, from what we initially expected. So as we continue to get more information, we'll continue to refine our our expectations and our decline curves, um, moving forward.

Your next question comes from the line of John Freeman with Raymond James. Please go ahead.

Thank you. Good morning. Uh, just following up on the, uh, the nice progress on the, uh, the afes dropping the 8006. A foot this quarter versus the, uh, the 841 last quarter, uh, can you give us kind of like you did last quarter, where the, uh, the well cost stands on your your current DNC list on a, on a profit basis?

Looking at the AF.

list from last quarter, that's going to largely translate to um, you know,

What we're seeing on the DNC list now. So, you know, the expectation. I don't have the information in front of me so I can follow up with you John, but would expect that it's, you know, slightly higher Jim was able to pull it up and it looks like it's coming in. Kind of average at 8:21 give or take

Okay. Perfect. Thanks. And then, uh, my, my top question, um, you know, y'all mentioned in the uh, the slide deck, you've still got obviously the significant shedding and deferred volumes and I'm just curious like where where that number stands right now. And if if it's been continuing to grow,

2 to 4 uh, is kind of what we're seeing and you know, operators particularly the private ones tend to cycle that, right? From at least maintenance standpoint and so I I don't think we necessarily see that appreciably changing um at this point.

Got it. Thanks Adam.

You bet.

Your next question comes from the line of Paul Diamond with City. Please go ahead.

Uh I think you good morning all thanks for taking the call just uh wanted to quickly touch on afvs, you talked about a 5% sequential well, cost reduction noting lateral links but was there anything else in those numbers? And I guess uh, any

Any other contributions. And any opportunity sets you see for kind of continuing that trend

Yeah. I mean, Paul, our observation has been that the bulk of cost Savings of late. Have been through that lateral length. Inefficiencies, we haven't seen a huge step down in service costs. In fact, um, you know, as we've talked about in LOE, I think in general as a trend, you know, inflation is is real. Um, right. And so, you know, that there you're combating that um, with um, you know, drilling you know, shaving days and and drilling longer laterals as a way to try to cut costs. Um, I think in order to see material savings uh, at the well level and to see huge cuts. Uh, my personal opinion is you're going to have to have another step down and overall activity. So if um, you know, God forbid oil prices, take another, you know, material step down in prices and we see a another drop in the rate count. I would think you're going to see big concessions. Um, the 1 thing, I will tell you, as we've had conversations with

Some of our really large operators and a lot of them are talking about, um, for lack of a better term vendor management and what they're doing is, you know, generally, they have allowed their field teams, you know, at an individual Basin level to manage their to manage, you know, which vendors they use. And they're now looking to sort of centralize that and and go to, you know, say 9 vendors instead of the 50 or 60 that they have, as a way to try to, uh, get bargaining power, uh, that as that filters through that may be another story of cost reductions over time, but time will tell. Yeah. And you're going to see that on a rolling basis, right? And it's going to be spread across the operators, cuz you know, they've obviously got to see these contracts through and then once they roll off, then that's going to be your window. Yeah. And this is, you know, we are going into budgeting season, we are going into a new year and which theoretically contracts would be turning. And so it may be a period in which we start to see some cost relief. But again, what time will tell

Got it. That makes sense. Just a quick follow-up from more on the more holistically we talked a bit about refra. Um can you talk about any shift in activity here? You've seen over the last several quarters or that's on the horizon. It's been pretty tough to go as a play.

Yeah. I mean as far as the refracts go, that's primarily been concentrated within the Williston and, you know, I think historically operators have you know deployed those refracts and and it's been a bit of a learn as you go. And so I think you know this quarter um we we saw some appreciable uplift and so I think it's, you know, maybe still early days as far as you know, what we would look to change our underwriting and and expectations there, but it seems like operators are moving up into the right.

Got it. I appreciate the clarity. I'll leave it there.

Your next question, and final question, comes from the line of Noah Hung, with Bank of America. Please go ahead.

Morning. Um, for my first question, I was wondering if you could talk about what's driving the continued, build and wells in progress. Uh and when you think that number will start to decline and if the higher till count for 4 q versus 3, Q would ultimately result in a draw down on the walls and progress.

I think it's going to, I mean, that's a, that's a difficult question to answer. Now, I mean, I think in the sense that, you know, as it stands now, we've seen very, very steady AAP activity. And so if it, if activity continues as it is, we would expect it to be relatively stable. Um, I think to the extent that we see, um,

You know, a material change in commodity prices. Uh, we could see it potentially dip down. I think, I don't know. Yeah, I think the other variable that you got to think about, right? Because you've got growth activity levels, but then you need to think about, you know, average working interest on those afes. And and and that can certainly be variable. Um, so you know, from a growth perspective, you know, everything's been kind of humming along but, you know, from a, a net level that that can vary from quarter to quarter. And so, if you're

Looking at just activity, quarter over quarter, that that can fluctuate. Yeah, but I mean, I if, if the question is, do we see that imminently changing? The answer is, no, but could it, of course, I think really is going to be dictated by the environment and so, um, I think if if, you know, certainly our view would be that if prices have a material change from here, we would expect activity to change. Uh, if write 1 way or the other? Yeah, the only other thing. I guess I'd add is you know, stack pay code development, you know. Are you drilling 2 Wells on a pad or are you drilling 12? And it's about the sales timing, it's going to be wildly different

Situation, cause those 2 scenarios.

No, that that that's helpful color. Um, and for my second question, um based on 3 key results in the updated 25 guide, going back to kind of thinking about a implied, uh, 4 q, oil production. The the range is pretty wide. So, could you help us think about maybe some of the moving Parts there that could, uh, put you at the midpoint or, uh, below or above, um, in that range.

Yeah, it's just really timing of of completions and I think, you know, look we as a non-operator we're always going to give ourselves some Grace uh in terms of that that timing and so it it is obviously uh timing. I would think we we certainly you know uh will likely tighten that up as the as you know the year goes on. Um but what I would say is regardless we would expect to see you know, a materially, you know, a material step up as we exit the year and and uh what I would say as well, um, is that we have seen, you know? And I think, you know, we we did talk about this in our prepared comments. But um, you know, as base production has improved and overall declines of moderated. It has really set us up for, um, a really nice start to the first half of next year and I think, you know, to your prior point, I think the question will really come down to, you know, how much Capital uh, both do our operators deploy and how much Capital do we want to discretionary on a discretionary basis? We want to deploy next year in in terms of what

Types of activity, are we targeting? And that's really going to drive the the results for next year, as we go into, and I think that's really a return based decision.

It's tough. Thanks guys.

Yep, you bet.

That concludes our Q&A session. I will now turn the call back over to Mr. Grady, CEO for closing remarks

Thanks everyone. Uh energy is well positioned to navigate through the current market volatility. Our assets are performing very well. Our liquidity is abundant and our investment opportunity grows every single day. We're really grateful for being aligned with strong and capable partners, and we look forward to keeping you informed on all our activities and achievements in the coming weeks. Thanks again for your interest in our company. This is the way.

Ladies and gentlemen, that concludes today's call, thank you all for joining everyone. Have a great day.