Q1 2026 Northern Oil and Gas Inc Earnings Call

April 29, 2026

Operator 1: Greetings, and welcome to the NOG's Q1 2026 Earnings Conference Call. It is now my pleasure to introduce your host, Evelyn Infurna, Vice President, Investor Relations. Thank you. You may begin.

Operator: Greetings, and welcome to the NOG's Q1 2026 earnings conference call. It is now my pleasure to introduce your host, Evelyn Infurna, Vice President, Investor Relations. Thank you. You may begin.

Speaker #2: If you would like to ask a question during this time, simply press star one on your telephone keypad. And if you would like to draw your question, please press star one again.

Speaker #2: As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Evelyn Infurna, Vice President, Investor Relations. Thank you, you may begin.

Speaker #2: Good morning. Welcome to NOG's first quarter 2026 earnings conference call. Yesterday, after the close, we released our financial results. You can access our earnings release and presentation in the Investor Relations section of our website at noginc.com.

Evelyn Infurna: Good morning. Welcome to NOG's Q1 2026 earnings conference call. Yesterday after the close, we released our financial results. You can access our earnings release and presentation in the investor relations section of our website at noginc.com. We will be filing our 31 March 2026 Form 10-Q with the SEC within the next few days. I am joined this morning by our Chief Executive Officer, Nicholas O'Grady, our President, Adam Dirlam, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, James Evans. Our agenda for today's call is as follows. Nicholas will provide introductory remarks, followed by Adam, who will share an overview of NOG's operations and business development activities. Chad will 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.

Evelyn Leon Infurna: Good morning. Welcome to NOG's Q1 2026 earnings conference call. Yesterday after the close, we released our financial results. You can access our earnings release and presentation in the investor relations section of our website at noginc.com. We will be filing our 31 March 2026 Form 10-Q with the SEC within the next few days. I am joined this morning by our Chief Executive Officer, Nicholas O'Grady, our President, Adam Dirlam, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, James Evans. Our agenda for today's call is as follows. Nicholas will provide introductory remarks, followed by Adam, who will share an overview of NOG's operations and business development activities. Chad will 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.

Speaker #2: We will be filing our March 31st, 2026 10Q with the SEC within the next few days. I'm joined this morning by our Chief Executive Officer, Nico Grady, our President, Adam Dirlam, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, Jim Evans.

Speaker #2: Our agenda for today's call is as follows: Nick will provide introductory remarks followed by Adam, who will share an overview of NOG's operations and business development activities.

Speaker #2: And Chad will 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.

Speaker #2: 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.

Evelyn Infurna: 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 of 1995. 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 we have described in our earnings release, as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I'll turn the call over to Nick.

Evelyn Leon Infurna: 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 of 1995. 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 we have described in our earnings release, as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I'll turn the call over to Nick.

Speaker #2: 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.

Speaker #2: Those risks include among others matters that we have described in our earnings release, as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10Q.

Speaker #2: We disclaim any obligation to update these forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures. Including adjusted EBITDA, adjusted net income, and free cash flow.

Speaker #2: Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I'll turn the call over to Nick.

Speaker #2: Thank you, Evelyn. Welcome and good morning, everyone. And thank you for your interest in our company. I'll be very brief this quarter by highlighting nine key points.

Nicholas O'Grady: Thank you, Evelyn Infurna. Welcome and good morning, everyone, and thank you for your interest in our company. I'll be very brief this quarter by highlighting nine key points. Number one, business activity remains stable with few observable changes since we last reported. Number two, potential changes to activity in 2026 remain a TBD for us as the effect of the Iran war is only now going to be potentially seen in AFE activity. We will update our investors accordingly throughout the year. Number three, the higher long-dated pricing stays, the more likely we see a sustained change in activity, especially as we head into 2027. Number four, in the meantime, we've seen a reversal of curtailments in the Williston, and this will drive better capital efficiency throughout 2026.

Speaker #2: Number one, business activity remains stable with few observable changes since we last reported. Number two, potential changes to activity in 2026 remain a TBD for us as the effect of the Iran war is only now going to be potentially seen in AFE activity.

Speaker #2: We will update our investors accordingly throughout the year. Number three, the higher long-dated pricing stays, the more likely we see a sustained change in activity, especially as we head into 2027.

Speaker #2: Number four, in the meantime, we've seen a reversal of curtailments in the Williston and this will drive better capital efficiency throughout 2026. Number five, it was a banner first quarter for our ground game with an incredible 41 deals done while overall capital remains controlled.

Nicholas O'Grady: 5, it was a banner Q1 for our ground game with an incredible 41 deals done while overall capital remains controlled. 6, the current geopolitical storm is showing some key benefits and a few negatives to the business. We are seeing wide swings in oil differentials, which are likely benefiting our realizations materially, some in the Permian, but particularly in the Williston. On the gas front, Permian production remains hamstrung by limited takeaway for the time being, but we remain financially well insulated with significant basis hedges at less than $1 off Henry Hub. 7, our leasing program remains materially underappreciated, as through this effort we've added over 70 net locations in the last year. Free Cash Flow yields aren't free when comparing us to peers that are just depleting away their inventory.

Nicholas O'Grady: Five, it was a banner Q1 for our ground game with an incredible 41 deals done while overall capital remains controlled. six, the current geopolitical storm is showing some key benefits and a few negatives to the business. We are seeing wide swings in oil differentials, which are likely benefiting our realizations materially, some in the Permian, but particularly in the Williston. On the gas front, Permian production remains hamstrung by limited takeaway for the time being, but we remain financially well insulated with significant basis hedges at less than $1 off Henry Hub. seven, our leasing program remains materially underappreciated, as through this effort we've added over 70 net locations in the last year. Free Cash Flow yields aren't free when comparing us to peers that are just depleting away their inventory.

Speaker #2: Number six, the current geopolitical storm is showing some key benefits and a few negatives to the business. We are seeing wide swings in oil differentials, which are likely benefiting our realizations materially, some in the Permian but particularly in the Williston.

Speaker #2: On the gas front, Permian production remains hamstrung by limited takeaway for the time being, but we remain financially well insulated with a significant basis hedges at less than $1 off Henry Hub.

Speaker #2: Number seven, our leasing program remains materially underappreciated. As through this effort, we've added over 70 net locations in the last year. Free cash flow yields aren't free when comparing us to peers that are just depleting away their inventory.

Speaker #2: Number eight, while all eyes are on Iran and the wide swings in spots prices, it is the longer-dated strip that matters. The improvement in the 2027 and 2028 strip are what drive growth in undeveloped activity, and in asset prices, and these improvements should help stabilize activity going forward, lubricate the M&A market, reduce bid ask spreads, and drive up our competitiveness.

Nicholas O'Grady: Number eight, while all eyes are on Iran and the wide swings in spots prices, it is the longer-dated strip that matters. The improvement in the 2027 and 2028 strip are what drive growth in undeveloped activity, and in asset prices. These improvements should help stabilize activity going forward, lubricate the M&A market, reduce bid-ask spreads, and drive up our competitiveness. We have several exciting large-sized package prospects in evaluation and more coming as the M&A market heats up. The backlog has improved in both size and quality, which is highly encouraging for our business model. Number nine, regardless of what happens in Iran, we believe things have been set in motion that will materially improve the long-term strips outlook, absent significant economic turmoil. That bodes well for activity, acquisitions, and for our investors.

Speaker #2: We have several exciting, large-sized package prospects in evaluation, and more coming, as the M&A market heats up. The backlog has improved in both size and quality, which is highly encouraging for our business model.

Speaker #2: Number nine: Regardless of what happens in Iran, we believe things have been set in motion that will materially improve the long-term strip's outlook, absent significant economic turmoil.

Speaker #2: That bodes well for activity, acquisitions, and for our investors. Given our hefty free cash flow generation, despite adding inventory, our improved balance sheet and our reputation in the marketplace, there is a huge opportunity for our business to find meaningful growth paths.

Nicholas O'Grady: Given our hefty Free Cash Flow generation, despite adding inventory, our improved balance sheet and our reputation in the marketplace, there is a huge opportunity for our business to find meaningful growth paths. Again, thank you for your interest in our company. We remain focused on growing our enterprise the right way. As always, our company run by investors, for investors. With that, I'll turn it over to Adam Dirlam.

Speaker #2: Again, thank you for your interest in our company. We remain focused on growing our enterprise the right way, and as always, our company run by investors, for investors.

Speaker #2: With that, I'll turn it over to Adam.

Speaker #3: Thank you, Nick. As a whole, Q1 activity was in line with expectations. Production was strong, particularly in Appalachia where we continue to see promising results from our growing asset base, and with our Q1 program right on plan, showing strong IPs.

Adam Dirlam: Thank you, Nick. As a whole, Q1 activity was in line with expectations. Production was strong, particularly in Appalachia, where we continued to see promising results from our growing asset base and with our Q1 program right on plan, showing strong IPs. The Williston also outperformed as multiple operators contributed meaningful return to sales volumes from prior curtailments, along with performance gains from recent IPs. The Uinta and Permian rounded out the quarter with performance in line with expectations. We ended the quarter with 43.7 net wells in process and 9.2 net AFEs, with the Permian representing roughly a third of our wells in process and approximately 60% of AFE inventory. Well proposals have held steady at 216 consents, squarely in the 200 to 230 range we saw throughout 2025.

Speaker #3: The Williston also outperformed as multiple operators contributed meaningful return to sales volumes from prior curtailments, along with performance gains from recent IPs. The UNTA and Permian rounded out the quarter with performance in line with expectations.

Speaker #3: We ended the quarter with 43.7 net wells in process and 9.2 net AFEs. With the Permian representing roughly a third of our wells in process and approximately 60% of AFE inventory.

Speaker #3: Well proposals have held steady at 216 consents, squarely in the 200 to 230 range we saw throughout 2025, and based on our conversations with operators, our forward activity view is unchanged from what we laid out on the fourth quarter call.

Adam Dirlam: Based on our conversations with operators, our forward activity view is unchanged from what we laid out on the Q4 call. However, the next few months will be instructive for activity changes as it pertains to the expectations for the remainder of the year and 2027. On the ground game, we set a new quarterly record with 41 transactions in Q1, adding over 5,100 net acres and 6 net wells. Our Appalachian leasing program continues to perform well, but we were also able to close deals across all of our respective basins. Most transactions occurred early in the quarter ahead of rising commodity prices, and our pipeline continues to deliver as we diligently evaluate opportunities. Our ground game will stay central as we leverage NOG's proprietary infrastructure to grow our portfolio through smaller acquisitions and evaluate further joint development opportunities.

Speaker #3: However, the next few months will be instructive for activity changes as it pertains to the expectations for the remainder of the year, and 2027.

Speaker #3: On the ground game, we set a new quarterly record with 41 transactions in Q1, adding over 5,100 net acres and 6 net wells. Our Appalachian leasing program continues to perform well, but we are also able to close deals across all of our respective basins.

Speaker #3: Most transactions occurred early in the quarter, ahead of rising commodity prices, and our pipeline continues to deliver as we diligently evaluate opportunities. Our ground game will stay central as we leverage NOGs proprietary infrastructure to grow our portfolio through smaller acquisitions and evaluate further joint development opportunities.

Speaker #3: Larger M&A opportunities have also picked up, and we are evaluating over $10 billion in assets across eight transactions that are currently in the market.

Adam Dirlam: Larger M&A opportunities have also picked up. We are evaluating over $10 billion in assets across eight transactions that are currently in the market. As expected in this environment, there's a fair amount of variability in asset quality. It has been encouraging to see higher quality assets coming to the forefront. Given the consistent number of opportunities afforded to us, we remain discerning and as always, we'll prioritize packages that are resilient in any commodity environment and those that create long-term value. With that, I'll turn it over to Chad.

Speaker #3: As expected in this environment, there's a fair amount of variability in asset quality, but it has been encouraging to see higher quality assets coming to the forefront.

Speaker #3: To give him a consistent number of opportunities afforded to us, we remain discerning and, as always, will prioritize packages that are resilient in any commodity environment and those that create long-term value.

Speaker #3: With that, I'll turn it over to Chad.

Speaker #2: Thanks, Adam. In the interest of time and to avoid repeating standard financial metrics available in our release and presentation, I will focus my comments on the overall performance drivers and outliers encountered in the quarter.

Chad Allen: Thanks, Adam. In the interest of time and to avoid repeating standard financial metrics available in our release and presentation, I will focus my comments on the overall performance drivers and outliers encountered in the Q1. Our Q1 financial results and production cadence were largely in line with internal expectations with no major disruptions. Despite the persistent macro volatility faced by the industry, NOG's diversified and scaled platform continued to deliver, outperforming internal estimates on production and EBITDA for the Q1. Q1 total average daily production was over 148,000 BOE per day, up 6% sequentially, a record for our company. Our oil to gas ratio was an even 50/50 split as our Appalachian JV reached its peak in terms of well deliveries. GAAP net income was impacted by two non-cash items.

Speaker #2: Our first quarter financial results and production cadence were largely in line with internal expectations, with no major disruptions. And despite the persistent macro volatility faced by the industry, NOGs diversified and scaled platform continue to deliver, outperforming internal estimates on production and EBITDA for the quarter.

Speaker #2: First quarter total average daily production was over 148,000 BOE per day, up 6% sequentially, a record for our company. Our oil to gas ratio was an even 50/50 split as our Appalachian JV reached its peak in terms of well deliveries.

Speaker #2: Gap net income was impacted by two non-cash items. The first was a non-cash mark-to-market loss on derivatives of approximately $521 million. Which was the result of a huge run-up in oil prices during the quarter due to the war in Iran.

Chad Allen: The first was a non-cash mark-to-market loss on derivatives of approximately $521 million, which was the result of a huge run-up in oil prices during the quarter due to the war in Iran. Hedges settled in the quarter was only $17.6 million loss, comprised of an $11 million gain in natural gas hedges, offset by a $28 million loss on our oil hedges. The second item impacting net income was a non-cash impairment charge of $268 million. As we have discussed on prior calls, NOG accounts for its assets under the full cost method as opposed to the successful efforts method, which does not perform historical price-based asset tests. We are one of the only companies among our peers that utilize the full cost method.

Speaker #2: Hedges settled in the quarter was only 17.6 million loss. Comprised of an $11 million gain in natural gas hedges, offset by a $28 million loss on our oil hedges.

Speaker #2: The second item impacting net income was a non-cash impairment charge of $268 million. As we have discussed on prior calls, NOG accounts for its assets under the full cost method, as opposed to the successful efforts method.

Speaker #2: Which has not performed historical price-based asset tests. We are one of the only companies among our peers that utilize the full cost method. I should mention, given the recent change in oil prices, if they stay at current levels, this should be the last impairment charge for the year.

Chad Allen: I should mention, given the recent change in oil prices, if they stay at current levels, this should be the last impairment charge for the year. We also continue to evaluate a potential shift to successful efforts longer term to avoid such optics. Moving on to pricing. Natural gas realizations have continued to be weak in Q1, coming in at 72% of benchmark prices, reflecting ongoing Waha market weakness due to constraints in the Permian. We expect gas realizations, specifically in the Permian, to remain weak for at least the next couple of quarters until planned infrastructure projects come online in H2 2026.

Speaker #2: We also continue to evaluate a potential shift to successful efforts longer term, to avoid such optics. Moving on to pricing, natural gas realizations have continued to be weak in the first quarter, coming in at prices.

Speaker #2: Reflecting ongoing Waha market weakness due to constraints in the Permian. We expect gas realizations, specifically in the Permian, to remain weak for at least the next couple of quarters until planned infrastructure projects come online in the back half of 2026.

Speaker #2: I do want to point out that inclusive of our Waha basis hedges, our gas realizations in the Permian were 53% or $1.86 per MCF versus a negative 1% or negative 2 cents per MCF that are included in our corporate gas realizations.

Chad Allen: I do want to point out that inclusive of our Waha basis hedges, our gas realizations in the Permian were 53% or $1.86 per Mcf versus a -1% or -$0.02 per Mcf that are included in our corporate gas realizations. We are well-insulated from a risk management perspective for the rest of the year. CapEx in the quarter, excluding non-budget acquisitions and other, is $270 million, which includes the success we had in our ground game. The $270 million of capital was very balanced, with 31% to the Permian, 27% to Appalachia, 24% to the Williston, and 17% in the Uinta Basin. Approximately $227 million of the total spend in the quarter was allocated to organic development capital.

Speaker #2: So we are well insulated from a risk management perspective for the rest of the year. CapEx in the quarter, excluding non-budget acquisitions and other, was $270 million.

Speaker #2: Which includes the success we had in our ground game. The $270 million of capital was very balanced. With 31% to the Permian, 27% to Appalachia, 24% to the Williston, and 17% in the Uinta Basin.

Speaker #2: Approximately $227 million of the total spend in the quarter was allocated to organic development capital. We still expect CapEx cadence to track in approximately 60/40 split between the first half and the second half of the year, subject to change with activity behavior from our operating partners.

Chad Allen: We still expect CapEx cadence to track in approximately 60/40 split between H1 and H2 of the year, subject to change with activity behavior from our operating partners. After closing our joint Utica acquisition during the quarter, we exited the quarter with debt well within our comfort zone, and our balance sheet remains in a healthy spot. Our leverage and liquidity were further enhanced by the nearly $230 million equity offering we completed late in Q1. We currently have over $1.2 billion of liquidity available to us, with an additional $175 million of untapped liquidity. Given all the work we've done on the maturity wall last year, we have plenty of runway to execute for years to come.

Speaker #2: After closing our joint UNIC acquisition during the quarter, we exited the quarter with debt well within our comfort zone, and our balance sheet remains in a healthy spot.

Speaker #2: Our leverage and liquidity were further enhanced by the nearly $230 million equity offering we completed late in the first quarter. We currently have over $1.2 billion of liquidity available to us, with an additional $175 million of untapped liquidity, and given all the work we've done on the maturity wall last year, we have plenty of runway to execute for years to come.

Speaker #2: With respect to our 2026 guidance, we have not made any updates given the significant level of volatility in commodity prices, our industry, and in the macro generally.

Chad Allen: With respect to our 2026 guidance, we have not made any updates given the significant level of volatility in commodity prices, our industry, and in the macro generally. Directionally, we are currently trending towards the higher end of the low activity scenario we laid out last quarter, but we still got a wide range of potential outcomes for the year. I'd anticipate that we'll be able to start tightening those ranges and narrowing our 2026 guidance by our Q2 call. That concludes our prepared remarks. Operator, please open up the line for Q&A.

Speaker #2: Directionally, we are currently trending towards the higher end of the low activity scenario we laid out last quarter. But we still got a wide range of potential outcomes for the year.

Speaker #2: I'd anticipate that we'll be able to start tightening those ranges and narrowing our 2026 guidance by our second quarter call. That concludes our prepared remarks.

Speaker #2: Operator, please open up the line for Q&A.

Speaker #1: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press the star one (*) on your telephone keypad to raise your hand and join the queue.

Operator 1: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star 1 again. Your first question comes from the line of Neal Dingmann with William Blair. Please go ahead.

Operator: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star 1 again. Your first question comes from the line of Neal Dingmann with William Blair. Please go ahead.

Speaker #1: If you would like to read by your question, please press the star one again. And your first question comes from the line of Neil Dingman with William Blair.

Speaker #1: Please go ahead.

Neal Dingmann: Morning, guys. For all the details, Nick O'Grady, my first question is just on incremental activity. Specifically, you all mentioned in your prepared remarks and release that you suggested operating activities remain flat, but I am just wondering, based on your recent conversations and what you have seen sort of happen historically, both in this quarter and prior, what, in addition to the 12-month now surpassing $80, do you think has to happen in order to see what I would call more sustainable change in activity? And, you know, when and if this happens, do you believe it occurs sort of equally in your Bakken, Permian, and Appalachian plays?

Speaker #3: Morning, guys, for all the details. Nick, my first question is just on incremental activity, specifically you all mentioned in your prepared remarks and release that you suggested operated activities remain flat, but I'm just wondering, based on your recent conversations and what you've seen sort of happen historically, both in this quarter and prior, what in addition to the 12-month now surpassing $80 do you think has to happen in order to see what I'd call more sustainable change in activity and if it when and if this happens, do you believe it occurs sort of equally in your BOC and Permian and Uinta place?

Speaker #2: Yeah. Thanks, Neil. Good morning. I'd say this. One, when you think about our original guidance, it didn't contemplate a war, right? And so it really it comes into the fact that we're seeing obviously a huge surge in short-term prices, a decent surge in the long-term strip.

Nicholas O'Grady: Yeah. Thanks, Neal. Good morning. I'd say this. One, you know, when you think about our original guidance, you know, it didn't contemplate a war, right? It really comes into the fact that we're seeing obviously a huge surge in short-term prices, a decent surge in the long-term strip. Because it's being driven by geopolitical things, I think you're seeing a little bit more caution than you normally would from operators. One of the reasons we haven't made any substantive changes to guidance just yet is just that there is a lag factor, which is that, you know, I do think, you know, as I mentioned in my prepared comments, it's likely that we will see, you know, an increase in activity over time.

Speaker #2: But because it's being driven by geopolitical things, I think you're seeing a little bit more caution than you normally would from operators. One of the reasons we haven't made any substantive changes to guidance just yet is just that there is a lag factor, which is that I do think, and as I mentioned in my prepared comments, it's likely that we will see an increase in activity over time.

Speaker #2: And that's really going to be driven by the long-term strip. The average spud to sales time is it can be faster, but I'd say on average it's sometimes around 150, 160 days.

Nicholas O'Grady: That's really gonna be driven by the long-term strip. You know, the average spud to sale time is, it can be faster, but, you know, I'd say on average, it's sometimes around 150, 160 days. When you're making that decision today to pick up a rig to drill an additional pad, you're not capturing the $100 spot oil, right? You have to make those decisions based on the future. I think nobody from our operators, they don't wanna have egg on their face and commit to a bunch of new activity, sign up a bunch of stuff, and then have some resolution in the Gulf, and suddenly they feel like they're falling on their face.

Speaker #2: And so, when you're making that decision today to pick up a rig to drill an additional pad, you're not capturing $100 spot oil, right? You have to make those decisions based on the future.

Speaker #2: And I think nobody from our operators, they don't want to have egg on their face and commit to a bunch of new activity, sign up a bunch of stuff, and then have some resolution in the Gulf, and suddenly they feel like they're falling on their face.

Speaker #2: That being said, as we continue to draw oil out of storage, I think what's inevitable is that the long-term strip is going to have to reflect that, right?

Nicholas O'Grady: That being said, as we continue to draw oil out of storage, I think what's inevitable is that the long-term strip is gonna have to reflect that, right. You know, as it's around $70 on a 2-year basis today, I think the reality is, that's probably enough in order to certainly incentivize activity, M&A, all those sort of things. I think you may see it creep higher, just to really give people a buffer to ensure they can feel good about making those investments, 'cause that's really what drives that. You know, for us, I think frankly, just right now, you know, what happened in early March really only starts to affect us, not right now.

Speaker #2: And so, as it's around $70 on a two-year basis today, I think the reality is that's probably enough in order to certainly incentivize activity, M&A, all those sorts of things.

Speaker #2: But I think you may see it creep higher just to really give people a buffer to ensure they can feel good about making those investments because that's really what drives that.

Speaker #2: For us, I think, frankly, just right now, what happened in early March really only starts to affect us right now. We really just asking for some grace to really see over the next several months of how this plays out.

Nicholas O'Grady: We're really just asking for some grace to really see over the next several months of how this plays out. I do think, you know, look, I think we've talked about this from a guidance perspective. I think we're certainly confident in the high end of the low end. I think from there, you know, I think we just want a little bit more time in order to narrow that band. I think we'll certainly get it done by call it the Q2.

Speaker #2: I do but I do think, look, I think we've talked about this from a guidance perspective. I think we're certainly confident in the high end of the low end.

Speaker #2: And I think from there, I think we just want a little bit more time in order to narrow that band. But I think we'll certainly get it done by call at the second quarter.

Speaker #3: Dude, that's more than fair. And then my second question just on typical on capital allocation. Specifically, I know talking to some of the operators, they seem to simply look at a lot oftentimes just sort of mid-cycle pricing assumptions.

Neal Dingmann: Yeah, that's more than fair. My second question, just on capital allocation. Specifically, I know, you know, talking to some of the operators, they seem to simply look at oftentimes just sort of mid-cycle pricing assumptions as what I'd call a primary driver between, you know, deciding if they're just leaning into share buybacks or, you know, more, you know, I guess, ground game and M&A. Again, you all seem unique because you seem to have more ground game opportunities than most. Again, I'm just thinking when it comes to capital allocation, you know, is it simply looking at a mid-cycle price and how cheap your shares are or, you know, versus a ground game return, or what's involved in that?

Speaker #3: As what I'd call a primary driver between deciding if they're just leaning into share buybacks or more I guess ground game and M&A. But again, you all seem unique because you seem to have more ground game opportunities than most.

Speaker #3: So again, I'm just thinking when it comes to capital allocation, is it simply looking at a mid-cycle price and how cheap your shares are or versus a ground game return or what's involved in that?

Speaker #2: Yeah, that's right. I mean, I think what I would tell you is that we have to manage a bunch of things, right, which is that at the end of the day, a share buyback is a higher return proposition, especially when prices were low and we did do some buybacks at the end of last year.

Nicholas O'Grady: Yeah, that's right. I mean, I think what I ought to tell you is that, you know, we have to, we have to manage a bunch of things, right? Which is that, like, at the end of the day, a share buyback is a higher return proposition, especially when prices were low, and we did do some buybacks at the end of last year. I'd also tell you that one of our goals as a company, one of the long-term goals is you have to grow your business over time, and it's not what a share buyback does, right? You just now own more of the same thing.

Speaker #2: But I'd also tell you that one of our goals as a company, one of the long-term goals is you really have to grow your business over time.

Speaker #2: And it's not what a share buyback does, right? You just now own more of the same thing. And so ultimately, the opportunity when prices are low countercyclically to acquire assets, which is why we were really so busy in January and February ultimately can provide some of the best long-term value when you talk about that mid-cycle.

Nicholas O'Grady: Ultimately, the opportunity when prices are low countercyclically to acquire assets ultimately can provide some of the best long-term value when you talk about that mid-cycle, you know. I mean, I think oil was $57 in January or February, right? That's certainly below what we would view as a mid-cycle oil price, and so anything you're acquiring during that period of time is likely to deliver a really high return. As do buybacks, and I think it can all be part of the mix, but it's really about that balance.

Speaker #2: I mean, I think oil was 57 in January or February, right? That's certainly below what we would view as a mid-cycle oil price. And so anything you're acquiring during that period of time is likely to deliver a really high return.

Speaker #2: As do buybacks. And I think it can all be part of the mix, but it's really about that balance.

Speaker #3: You got it. Thanks, Nick, for much.

Rachel Smith: You got it. Thanks Nick, very much.

Neal Dingmann: You got it. Thanks Nick, very much.

Speaker #2: You bet.

Nicholas O'Grady: You bet.

Speaker #1: And the next question comes from the line of Jan Davenport with Johnson Rice, please go ahead.

Operator 2: The next question comes from the line of John Davenport with Johnson Rice. Please go ahead.

Operator: The next question comes from the line of John Davenport with Johnson Rice. Please go ahead.

Speaker #3: Hey, good morning. And thanks for taking my question. So from the previous quarter, you guys kind of beat on natural gas pricing specifically in Appalachia.

John Davenport: Hey, good morning, and thanks for taking my question. From the previous quarter, you guys kind of beat on natural gas pricing, specifically in Appalachia. I was just curious if that's gonna be an ongoing trend, both for next quarter and H2. I know the strip for natural gas hasn't looked all too strong in, you know, the past couple months, so just curious what your thoughts are on that.

Speaker #3: I was just curious if that's going to be an ongoing trend both for next quarter and the second half of the year. I know the strip for natural gas hasn't looked all too strong in the past couple of months.

Speaker #3: So just curious what your thoughts are on that.

Speaker #2: Yeah. Yeah. Well, as a two-stream reporter, it's a little bit different, right, because our NGL yields in there. So what I would tell you is that as it pertains specifically to Appalachia, certainly and some of our Appalachian gas is getting kind of on water NGL prices, right?

Nicholas O'Grady: Yeah, yeah. Well, as a two-stream reporter, it's a little bit different, right? Our NGL yield's in there. What I would tell you is that as it pertains specifically to Appalachia, you know, certainly, and some of our Appalachian gas is getting kind of on water NGL prices, right? We're certainly getting a huge benefit there. Appalachian differential is the bulk of our prices at TETCO M2. TETCO M2 has certainly been better. I mean, it's one of the few basis areas where we're actually losing money on our hedges. TETCO M2 has been sort of tighter, and it appears even, you know, it obviously tends to dip seasonally, it certainly, it's certainly been better than what the averages have been for the last several years. We're definitely seeing an improvement there.

Speaker #2: So we're certainly getting a huge benefit there. Appalachian differentials, the bulk of our prices at M2 and M2 has certainly been better. I mean, whereas one of the few basis areas where we're actually losing money on our hedges, and so M2 has been sort of tighter.

Speaker #2: And it appears even it obviously tends to dip seasonally, but it certainly been better than what the averages have been for the last several years.

Speaker #2: And so we're definitely seeing an improvement there. In terms of our overall differentials, I think Chad talked a little bit about this in guidance, but I would tell you that we're seeing likely significantly better than expected oil differentials, which is really the biggest driver to our revenue given it's about 80% of our revenue.

Nicholas O'Grady: In terms of our overall differentials, you know, I think Chad talked a little bit about this in guidance, but I would tell you that we're seeing likely significantly better than expected oil differentials, which is really the biggest driver to our revenue, giving us about 80% of our revenue. We're seeing in aggregate worse gas differentials, and that's 100% driven by Waha pricing. At the financial level, it's not having as much of an effect at the bottom line because of our hedge position. At the end of the day, at the actual spot realizations, I think there's probably downward pressure in the short term. Obviously, you know, I think there's something like 4 Bcf a day of expansions going on in the Permian.

Speaker #2: And then we're seeing, in aggregate, worse gas differentials. And that's 100% driven by Waha pricing. At the financial level, it's not having as much of an effect at the bottom line because of our hedge position.

Speaker #2: But at the end of the day, at the actual spot realizations, I think there's probably downward pressure in the short term. Obviously, I'm not I think there's something like four BCF a day of expansions going on in the Permian.

Speaker #2: So I think it certainly will improve from some of the doldrums we've seen in April. But that's going to take some time this year.

Nicholas O'Grady: You know, I think it certainly will improve from some of the doldrums we've seen in April, but that's gonna take some time this year.

Speaker #3: Okay. Yeah, perfect. And I was also curious, you mentioned y'all are evaluating call it $10 billion in potential large M&A transactions. Curious where what the locations of those might be along with just give us some characteristics that you guys are looking for on those opportunities.

John Davenport: Okay. Yeah, perfect. I was also curious, you mentioned y'all are evaluating, call it $10 billion in potential large M&A transactions.

Nicholas O'Grady: Yeah.

John Davenport: -curious where, you know, what the locations of those might be, along with, you know, just give us some characteristics that you guys are looking for on those.

John Davenport: Curious where, you know, what the locations of those might be, along with, you know, just give us some characteristics that you guys are looking for on those.

Nicholas O'Grady: Yeah

John Davenport: -opportunities.

Nicholas O'Grady: I'll set the table. I'll let Adam finish it, but I'd say this. One, it's been, and consistent with the last several years, it's definitely more diversified. There's stuff all over the place. As our capabilities have expanded, obviously we see more than we ever have from, you know, call it Canada to every single sub-basin in the US. What I would tell you is that we are seeing Typically, people are willing to sell PDP-laden properties even in low price environments, especially in the days of ABS and things like that, where they view they're getting relatively good prices for them. When the long-dated strip was $57 coming into this year, if you think about a DCF exercise, that's what drives the value of undeveloped inventory.

Speaker #2: I'll set the table. I'll let Adam finish it. But I'd say there's one it's been and consistent with the last several years, it's definitely more diversified.

Nicholas O'Grady: I'll set the table. I'll let Adam finish it, but I'd say this. One, it's been, and consistent with the last several years, it's definitely more diversified. There's stuff all over the place. As our capabilities have expanded, obviously we see more than we ever have from, you know, call it Canada to every single sub-basin in the US. What I would tell you is that we are seeing typically, people are willing to sell PDP-laden properties even in low price environments, especially in the days of ABS and things like that, where they view they're getting relatively good prices for them. When the long-dated strip was $57 coming into this year, if you think about a DCF exercise, that's what drives the value of undeveloped inventory.

Speaker #2: There's stuff all over the place. And as our capabilities have expanded, obviously, we see more than we ever have from, call it Canada, to every single sub-basin in the US.

Speaker #2: What I would tell you is that we are seeing, typically, people are willing to sell PDP-laden properties even in low-priced environments, especially in the days of ABS and things like that, where they view they're getting relatively good prices for them.

Speaker #2: When the long-dated strip was 57 coming into this year, people that if you think about a DCF exercise, that's what drives the value of undeveloped inventory.

Speaker #2: And so assets with strong undeveloped inventory, which are the characteristics we're looking for, really we're starting to dry up on the oil side. That has obviously inverted completely.

Nicholas O'Grady: Assets with strong undeveloped inventory, which are the characteristics we're looking for, really were starting to dry up on the oil side. That has obviously inverted completely. We're seeing higher quality Permian assets in particular coming to market. I think for us, you are right now. It might seem counterintuitive given how high spot prices are, but with the strip closer to what we would view as a mid-cycle price today, it really does help the long-dated M&A. My point would be if oil prices went from $100 to $75 in the spot market today, it's not gonna have as much of an impact on the value of those assets versus that long-dated stripping. Stickier. Adam Dirlam, I don't know if you wanna add to that.

Speaker #2: We're seeing higher quality Permian assets in particular coming to market. And so I think for us, you are right now at a little bit of a it might seem counterintuitive given how high spot prices are, but with the strip closer to what we would view as a mid-cycle price today, it really does help the long-dated M&A.

Speaker #2: And so my point would be if oil prices went from $100 to 75 in the spot market today, it's not going to have as much of an impact on the value of those assets versus that long-dated stripping stickier item.

Speaker #2: I don't know if you want to add to that.

Speaker #3: That's right. I mean, I think the biggest difference that we're seeing between kind of 2025 and where we stand today has been kind of a pivot from the gas-weighted quality assets that we were looking at last year to more of the oil-weighted, which is obviously expected.

Adam Dirlam: That's right. I mean, I think the biggest difference that we're seeing between kind of 2025 and where we stand today has been, kind of a pivot from, you know, the gas-weighted, you know, quality assets that we were looking at last year, to more of the oil-weighted, which is obviously expected. I think you've got a number of, you know, operators, post-consolidation now starting to kind of socialize their assets. You've got private equity groups, that are obviously taking a look at the strip and coming to market. Based on my prepared remarks, you're certainly seeing a fair amount of variability, but the quality is starting to improve, especially on the oil side.

Speaker #3: I think you've got a number of operators close consolidation, now starting to kind of socialize their assets. You've got private equity groups that are obviously taking a look at the strip and coming to market.

Speaker #3: And so based on my prepared remarks, you're certainly seeing a fair amount of variability but the quality is starting to improve, especially on the oil side.

Speaker #3: All right. Excellent. Thank you guys for taking my question. That's all from me.

John Davenport: All right. Excellent. Thank you guys for taking my question. That's all for me.

Speaker #1: Thank you. And the next question comes from the line of Paul Diamond with CD, please go ahead.

Operator 2: Thank you. The next question comes from the line of Paul Diamond with Citi. Please go ahead.

Operator: Thank you. The next question comes from the line of Paul Diamond with Citi. Please go ahead.

Paul Diamond: Thank you. Good morning, all. Thanks for taking the call. I'm just wanting to quickly touch on you guys' hedge book. Looking forward to the curve and, you know, the big, I guess big slug of swaps you guys hold. How should we think about any strategic shifts for the rest of the year given the volatility and as you said before, the war that no one expected?

Speaker #4: Thank you. Good morning, all. Thanks for taking the call. I'm just wondering if we touch on you guys' hedge book. Looking forward to the curve and the big, I guess, big glug of swaps.

Speaker #4: And did you guys hold? How should we think about any strategic shifts for the rest of the year given the volatility? And as you said before, the war that no one expected.

Speaker #2: Yeah. I don't think that you'll see much in terms of fireworks in terms of the swaps. We don't really have that many swaps remaining.

Nicholas O'Grady: Yeah. I don't think that you'll see much in terms of fireworks in terms of the swap options. We don't really have that many swap options remaining this year to be candid. What few ones we have will either, you know, be exercised or rolled forward. I wouldn't expect any major shifts to our hedge book specifically for this year. For next year, you know, we've started hedging, Paul, but not in a significant fashion at this point. I think it's just we're just trying to be patient as we go through. You know, we really wanna see the conclusion of what happens in the Middle East before we really make a call on 2027.

Speaker #2: This year, to be candid, and what few ones we have will either be exercised or rolled forward. But I wouldn't expect any major shifts to our hedge book specifically for this year.

Speaker #2: And then for next year, we've started hedging Paul, but not in a significant fashion at this point. And I think it's just we're just trying to be patient as we go through the we really want to see the conclusion of what happens in the Middle East before we really make a call in 2027.

Speaker #4: Got it. Makes perfect sense. And then, as you guys talked about the net wells in process, the current split is, I guess, a third Permian, a third Williston, and then split for you when we have otherwise.

Paul Diamond: Got it. Makes perfect sense. As you guys talked about the net wells in process, the current split is like a third Permian, third Williston, and then Spraberry even we have otherwise. Any reason to think with what you see in the, I guess, downrange right now that that shifts? Should we think about that as more locked in for the next year or so?

Speaker #4: Any reason to think with what you see in the, I guess, down range right now that that chips or is that kind of should we think about that as more locked in for the next year or so?

Speaker #2: I mean, I suppose the.

Nicholas O'Grady: I mean, I suppose-

Adam Dirlam: Yeah, I mean, I guess what I would be looking towards is probably more like the election activity, right? If you look at that, you're seeing about two-thirds, you know, related to the Permian, and you're starting to see, you know, a fair amount of Williston acceleration as well. I would expect, you know, kind of the Permian and the Williston to be the front runners. Obviously we've got a fair amount of activity in Appalachia, and that'll also be dependent on, you know, obviously the transaction that we just closed as well as the, you know, the ground game leasing program that we've got in place. The Uinta is really just kind of steady as it goes. Permian and Williston is probably where I'd be looking to.

Speaker #3: Yeah, I mean, I guess what I would be looking towards is probably more like the election activity, right? And so if you look at that, you’re seeing about two-thirds related to the Permian, and you’re starting to see a fair amount of Williston acceleration as well.

Speaker #3: And so I would expect kind of the Permian and the Williston to be the frontrunners obviously. We've got a fair amount of activity in Appalachia and that'll also be dependent on obviously the transaction that we just closed as well as the ground game leasing program that we've got in place.

Speaker #3: And then the Uinta is really just kind of steady as it goes. So, Permian and Williston is probably where I'd be looking to.

Speaker #2: Yeah. And I'd say I think my guess would be just given the gas situation in the Permian right now that the acceleration you see there really is probably later in the year just as you get closer to a resolution there.

Nicholas O'Grady: Yeah. I'd say, I think my guess would be just given the gas situation in the Permian right now, that the acceleration you see there really is probably later in the year, just as you get closer to a resolution there. On the Uinta, I think there are some options for some accelerations, but we'll have to see where we're at.

Speaker #2: And on the Uinta, I think there are some options for some accelerations, but we'll have to see over time.

Speaker #4: Got it. Appreciate the time, Paul, to be there.

Paul Diamond: Yeah. Got it. Appreciate the time. Over there.

Speaker #1: Thank you. And the next question comes from the line of Noel Parks with Tule Brothers, please go ahead.

Operator 2: Thank you. The next question comes from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Operator: Thank you. The next question comes from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Speaker #5: Hi. Good morning. I was wondering, and it's definitely interesting to hear about the different parties, the private side, coming to the table. And so forth.

Noel Parks: Hi, good morning. You know, I was wondering, and it's definitely interesting to hear about the different parties, the private side coming to the table and so forth. Sorry, one moment. I was wondering for operators, where do you think things stand now around sort of basin rationalization, you know, in the wake of some of the big transactions of the last year or so now being fully digested? I guess I'm just curious if you think overall across your basins, you're seeing operators more inclined to sort of expand their footprints or sort of, you know, core up and narrow them down right now.

Speaker #5: And sorry, one moment. But I was wondering, for operators, where do you think things stand now around sort of basin rationalization, in the wake of some of the big transactions of the last year or so now being fully digested?

Speaker #5: And I guess I'm just curious if you think overall across your basins, you're seeing operators more inclined to sort of expand their footprints or sort of core up and narrow them down right now?

Speaker #2: Yeah, no, I don't know if I want to speak for them completely. I would say this: Adam had talked extensively last year about how he thought that, post a lot of this consolidation, we would see rationalization.

Nicholas O'Grady: No, I don't know if I wanna speak for them completely. I would say this, that, you know, Adam Dirlam had talked extensively last year about that he thought that post a lot of this consolidation, we would see rationalization. We are starting to see that. We're seeing several large companies put packages of non-core assets, sometimes in good basins to sale. I do think we're seeing some rationalization. We're seeing that in the Permian, the Eagle Ford. I'm trying to think of where else. I think there's a large Williston package coming at some point this year. We're definitely seeing that to some degree. I think, look, consolidation is a trend that I think continues. It both benefits and hurts us sometimes.

Speaker #2: We are starting to see that. So we're seeing several large companies put packages of non-core assets, sometimes in good basins to sale and so I do think we're seeing some rationalization.

Speaker #2: We're seeing that in the Permian, the Eagle Ford, I'm trying to think of where else I think there's a large Williston package coming at some point this year.

Speaker #2: And so we're definitely seeing that to some degree. I think, look, consolidation is a trend that I think continues. It both benefits and hurts us sometimes, obviously.

Nicholas O'Grady: Obviously, it tends to hurt us in the sense that, you probably have less aggregate activity, but it helps us from a cost efficiency and from a returns perspective. I don't know if you wanna add to that, Adam.

Speaker #2: It tends to hurt us in the sense that you probably have less aggregate activity, but it helps us from a cost-efficiency and from a returns perspective.

Speaker #2: And so I don't know if you want to add to that. I don't know.

Adam Dirlam: Yeah. I mean, going back to your initial question, I would just say that two things can be true at the same time. Ultimately it's gonna be, you know, dependent on the philosophical approach from the operator, right? Who did they consolidate with? Where are those positions? Then ultimately, what does that integration, you know, difficulty look like? Because, you know, from our experience in talking with our operator, operating partners who have, you know, gone through this, some can go very smoothly and others cannot. So I think you're gonna see, you know, some large asset packages, you're also gonna see, you know, other operators that might take small pieces, you know, non-op and kind of, you know, just kinda layer that out into the market kinda as they go.

Speaker #3: Yeah. I mean, going back to your initial question, I would just say that two things can be true at the same time. And ultimately, it's going to be dependent on the philosophical approach from the operator, right?

Speaker #3: And who did they consolidate with? Where are those positions? And then ultimately, what does that integration difficulty look like? Because from our experience in talking with our operator operating partners who have gone through this, some can go very smoothly and others cannot.

Speaker #3: And so I think you're going to see some large asset packages, but then you're also going to see other operators that might take small pieces non-op and kind of just kind of layer that out into the market, kind of as they go.

Speaker #3: So I think you're going to see a little bit of everything.

Adam Dirlam: I think you're going to see a little bit of everything.

Speaker #4: Got it.

Noel Parks: Got it. I'm just wondering, are you seeing anything happening kind of in the sort of off the beaten path gas plays? I'm thinking a little bit about MidCon, Rockies, just as people looking ahead to longer-term supply and sort of thinking about, you know, underutilized infrastructure and so forth, and maybe some capital finding its way there.

Speaker #5: And I'm just wondering, are you seeing anything happening kind of in the sort of off-the-beaten-path gas plays? I'm thinking a little bit about Midcon, Rockies, just as people look ahead to longer-term supply lines or thinking about underutilized infrastructure and so forth and maybe some capital, finding its way there.

Speaker #3: Yeah. I mean, look, there have been some major consolidations on the private side in Rockies Gas and some of the legacy assets and there have been some companies that have put together some really good assets.

Nicholas O'Grady: Yeah. I mean, look, there have been some major consolidations on the private side in like Rockies Gas and some of the legacy assets, and there have been some companies that have put together some really good assets. You know, in some cases, some of the wild swings and differentials out there over the last couple of years have made those really, really sound investments. I'm not sure that's necessarily something for us per se. I say I'm not sure, we really haven't evaluated a ton of it. You know, things like the San Juan Gas Basin or the Piceance, we just, we've never really evaluated them at any extent. I can't really speak to them.

Speaker #3: And in some cases, some of the wild swings and differentials out there over the last couple of years have made those really, really sound investments.

Speaker #3: I'm not sure that's necessarily something for us per se. And I say I'm not sure we really haven't evaluated a ton of it, so we don't things like the San Juan get basin or the peanuts.

Speaker #3: We've never really evaluated them at any extent. So I can't really speak to them. I'd say this in general, though, if you think about the lifecycle of shale, and this is consistent with my public comments everywhere, in general, there is more life in the core basins of gas in the US than there is in the core basins in oil.

Nicholas O'Grady: I'd say this in general, though, if you think about the life cycle of shale, and this is consistent with my public comments everywhere, in general, there is more life in the core basins of gas in the US than there is in the core basins in oil. I think the necessity to really step out isn't quite there. You know, we have decades of gas inventory internally here alone. We don't really. Right? In our core basins. I don't know if you'd want to add to that.

Speaker #3: And so I think the necessity to really step out isn't quite there. We have decades of gas inventory internally here alone. We don't really write in our core basins.

Speaker #3: I don't know if you'd want to add to that.

Adam Dirlam: No, I think the only other thing I would add is, I mean, obviously seeing kind of the ABS market come into play with maybe some more PDP-heavy type assets, you know, MidCon, Eagle Ford, things like that.

Speaker #5: No, I think the only other thing I would add is, I mean, you obviously have seen kind of the ABS market come into play with maybe some more PDP-heavy type assets, Midcon, Eagle Ford, things like that.

Speaker #5: And typically, not the sandbox that we play in, but we're always having conversations about how we could potentially be helpful there. So, I think we'll continue to explore it, so.

Nicholas O'Grady: Yeah.

Adam Dirlam: Typically not the sandbox that we play in, but we're always having conversations about how we could potentially be helpful there.

Nicholas O'Grady: Yeah.

Adam Dirlam: I think we'll continue to explore it.

Speaker #2: Yeah. We've done a number of—as you know, we don't have any assets in the Midcon. We've done dozens of evaluations to this point.

Nicholas O'Grady: Yeah. I mean, we've done a number. As you know, we don't have any assets in the MidCon. We've done dozens of evaluations at this point. It's just a more complex area. It's not really.

Speaker #2: And it's just a more complex area. It's not really it's not really as uniform. And so it doesn't mean it's bad, but I think we'd have to be really highly selective if we ever entered that basin, just given and most likely we would do it with an operating partner.

James Evans: Yeah

James Evans: It's uniform, and so it doesn't mean it's bad, but I think we'd have to be really highly selective if we ever entered that basin.

James Evans: Yeah

Nicholas O'Grady: ... most likely we would do it with an operating partner.

Speaker #3: And then what are we looking at relative to what's in our own backyard?

James Evans: What are we looking at relative to what's in our own backyard?

Speaker #2: Correct. And so far, it has sort of lost in the tug of war from a return on capital perspective that doesn't mean it will forever.

Nicholas O'Grady: Correct. So far it is sort of lost in the tug-of-war from a return on capital perspective.

James Evans: Yeah.

James Evans: That doesn't mean it will forever, it's just we have yet to find an asset that really, you know.

Speaker #2: We have yet to find an asset that really competed, that's right.

James Evans: Compete

Nicholas O'Grady: Competed. That's right.

Speaker #4: Terrific. Thanks a lot.

Rachel Smith: Terrific. Thanks a lot.

Noel Parks: Terrific. Thanks a lot.

Nicholas O'Grady: You bet, Noel.

Speaker #2: You bet, Noel.

Speaker #1: And the next question comes from the line. Phillips Johnston with Capital One. Please go ahead.

Operator 2: The next question comes from the line of Phillips Johnston with Capital One. Please go ahead.

Operator: The next question comes from the line of Phillips Johnston with Capital One. Please go ahead.

Speaker #5: Hey, thanks for the time. Just wanted to follow up on the earlier question about the oil swaptions and just ask about some of the accounting nuances for those swaptions.

Phillips Johnston: Thanks for the time. Just wanted to follow up on the earlier question about the oil swap options and just ask about some of the accounting nuances for those swap options. I think most of us understand that the vast majority of those swap options that expire at the end of this year are required to be listed for 2026, even though the majority of them would actually turn into swaps for 2027 or even beyond, rather than this year if they're ultimately exercised. I guess I understand that nuance, but I just kinda wanted to square that with the makeup of the hedge liability on the balance sheet, where it looks like close to 65% of the hedge liability is classified as current.

Speaker #5: I think most of us understand that the vast majority of those swaptions that expire at the end of this year are required to be listed for 2026, even though the majority of them would actually turn into swaps for '27 or even beyond rather than this year if they're ultimately exercised.

Speaker #5: So I guess I understand that nuance, but I just kind of wanted to square that with the makeup of the hedge liability on the balance sheet where it looks like close to 65% of the hedge liability is classified as current.

Chad Allen: Yeah. That's because of the expiry, right? Just as you stated, Phillips, right? Because of when that expiry is being, in some instances or most instances, 31 December 2026, it's gotta sit into the current, the current bucket there.

Speaker #3: Yeah. That's because of the that's because of the expiry, right? Just as you stated, Phillips, right? We have to because of when that expiry is being in some instances, or most instances, 12/31/2026, it's got to sit in the current bucket there.

Speaker #5: Okay. Yeah. Okay. So that makes sense. It's basically the same.

Phillips Johnston: Okay. Yeah. Okay. That makes sense. It's basically the same.

Chad Allen: But again-

Speaker #3: Again. Yeah. Yeah. For accounting purposes, it's got to be treated for the bank's counterparty election date.

Phillips Johnston: Yeah.

Chad Allen: Yeah. Yeah. For accounting purposes, it's gotta be treated on.

Phillips Johnston: Yeah

Chad Allen: as for the bank's counterparty election date.

Speaker #2: It's not really how it works.

Nicholas O'Grady: It's not really-

Phillips Johnston: Yeah

Nicholas O'Grady: how it works.

Phillips Johnston: Yeah

Nicholas O'Grady: how it works.

Chad Allen: It's, that's not how it works, no. What you'll see in our 10-K or 10-Q, sorry, updated disclosures with respect to kinda how.

Speaker #3: It's not how it works. No. And what you'll see in our you'll see in our 10-K or 10-Q, sorry, some updated disclosures with respect to kind of how the swaptions roll out.

Phillips Johnston: Yeah

Chad Allen: ... how the swap options roll out. Again, like what we’ve mentioned before, Phillips, we certainly actively manage this portfolio.

Speaker #3: But again, like what we've mentioned before, Phillips, we certainly we actively manage this portfolio.

Nicholas O'Grady: Yeah. It's a nothing burger.

Speaker #2: Yeah, it's a nothingburger, to be candid.

Chad Allen: Yeah

Nicholas O'Grady: To be candid.

Chad Allen: It is.

Speaker #3: It is.

Speaker #5: Okay. Cool. Just checking on that. Thanks very much, guys. Makes sense.

Phillips Johnston: Okay, cool. Just checking on that. Thanks very much, guys.

Chad Allen: Yep.

Phillips Johnston: Makes sense.

Speaker #3: Thanks.

Nicholas O'Grady: Yes.

Speaker #1: And I'm showing no further questions at this time. I would like to turn it back to Mr. Nico Guidi for closing remarks.

Operator 2: I'm showing no further questions at this time. I would like to turn it back to Mr. Nicholas O'Grady for closing remarks.

Operator: I'm showing no further questions at this time. I would like to turn it back to Mr. Nicholas O'Grady for closing remarks.

Speaker #2: Thanks very much for your time. This morning, we look forward to talking to you in the coming weeks. Appreciate it.

Nicholas O'Grady: Thanks very much for your time, this morning. We look forward to talking to you in the coming weeks. Appreciate it.

Operator 2: Thank you. Ladies and gentlemen, this concludes today's call. You may now disconnect.

Operator: Thank you. Ladies and gentlemen, this concludes today's call. You may now disconnect.

Q1 2026 Northern Oil and Gas Inc Earnings Call

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