Crescent Energy Co (CRGY) 2024 Q3 法說會逐字稿

Good morning and thank you for joining Crescent's third quarter, 2024 conference call, prepared remarks today will come from our CEO David Rocke Charlie and CFO Brandi Kendall, our CAO Todd Falk and our EVP of investments Clay Rynd will also be available during Q&A today's call may contain projections and other forward-looking statements within the meaning of the federal securities laws.

These statements are subject to risks and uncertainties including commodity price, volatility, global geopolitical conflict, our business strategies and other factors that may cause actual results to differ from those expressed or implied in these statements and our other disclosures, we have no obligation to update any forward-looking statements after today's call. In addition, today's discussion may include disclosure regarding non-GAAP financial measures for reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measure. Please reference our 10-Q and earnings press release available under the investors section on our website. With that, I will turn it over to David.

Good morning and thank you for joining us yesterday. Crescent posted another solid quarter of financial and operating results before we get into the details. I want to begin with a few key points. I hope you take away from this call. First, our team continues to execute on our proven and consistent strategy of growing profitably through acquisitions and driving operational efficiencies.

Because of that, we have raised our outlook for the year for the third consecutive quarter, reaffirming our production guidance with more efficient capital spending and increased free cash flow.

Second, our integration of the Silver bow business is yielding significant synergies. Even beyond our initial expectations, we've already realized approximately $65 million of annualized synergies or the low end of initial expectations. Within just a few months of closing, we have successfully integrated the people, the assets and the best practices of both businesses ahead of schedule to drive incremental value.

We increased our target for total synergies by more than 20% and are confident in our ability to execute from here.

And finally, we see significant opportunity ahead.

This has been an active year for us with the Sbow acquisition and subsequent bolt on to our core, Central Eagle Ford footprint. The Crescent has never been better positioned. We've delivered profitable growth of both production and cash flow through disciplined investing and operations, and we have transformed the equity positioning of our business since becoming public.

I am confident in our ability to capitalize on recent success and continue executing towards our goal of becoming an investment grade company and delivering long term value for our shareholders.

Following those quick highlights, I will now discuss the quarter in a bit more detail.

We reported strong financial results this quarter with our advantaged low decline production base, generating significant free cash flow and our development program outperforming expectations. We had record production of 219,000 barrels of oil equivalent per day this quarter with only two months of silver bow contribution included in our numbers.

The strong execution by our team has allowed us to yet again improve our outlook for the remainder of the year with low performance synergy, capture and capital efficiencies allowing us to hit our production guidance with less capital generating incremental free cash flow for our investors.

In the Eagle Ford, we continue to build momentum as we drive improved capital costs and increase well performance across our entire position. We are seeing a meaningful year over year uplift in well productivity on both an oil and total volume basis.

This is a testament to the depth and quality of our inventory with improving performance on our assets versus industry trends and in be in basin peers that have seen a natural degradation in performance as we've acquired assets over time. A key part of our strategy is to improve operations through our ownership and you are seeing the direct result of this with our recent well performance on the capital side, we're seeing incremental savings versus the first half of the year, increasing returns and free cash flow by combining the strength and expertise of our newly integrated organization of talented people.

We've been able to drive further efficiencies across our program utilizing the latest available technology. For example, we're planning horseshoe U shaped wells in select areas to unlock meaningful inventory or land considerations may not have allowed for traditional development.

We've been able to bring simul frac completions to the Silverbow assets meaningfully increasing efficiency and driving down development costs.

We've also had great success to date working with our service providers to drive down costs alongside operating efficiencies which combined has lowered well costs 10% relative to the first half of this year. While the capital savings on the acquired assets are encouraging, they represent only a fraction of the synergies we've already achieved from the Silver to transaction.

When we originally announced the acquisition, we put forward what we believed were significant and ambitious synergy targets and we've been able to deliver far ahead of schedule with approximately $65 million of annualized uplift realized to date across capital overhead operating costs and interest expense. We've already hit our original target range as we've spent more time with the assets under our control. We believe there is more opportunity than we originally anticipated and we have increased our expected synergy range by more than 20%.

On the integration front. Our 2023 acquisitions in the Western Eagle Ford have also continued to drive strong free cash flow with a dramatic step change in well productivity versus the prior operator and approximately $70 million of annualized operational gains relative to our $850 million of combined purchase price through the hard work and dedication of our talented people. We've achieved all this in the 1st year under our operatorship by bringing industry best practices to the field. And we look forward to finding opportunities for further value across our scaled position in the basin in the UA.

We continue to see strong results from our development program which to date has remained largely focused on the proven and butte formation.

The UINTA is at an exciting stage of its evolution, and we are pleased to see incremental public activity and recognition of the impressive resource potential and advantaged economics in the basin.

We entered the basin in 2022 through a transaction at a discount to PDP value with any development potential, generating incremental returns for our investors.

While we remain focused on the most proven formations. With our current development program, we have begun to allocate prudent capital to incremental horizons now that other operators have spent meaningful capital to delineate and further prove the impressive potential across the play.

We've also been active seeking more creative and efficient pathways to de risk the full upside across our position and recently entered into a small joint venture to test the easternmost extent of our acreage with no upfront capital required.

While still early in our evaluation, our initial results have been encouraging but we will continue to monitor the data both from our wells and from offset operators and be patient as we limit risk and capture the substantial resource upside across our assets.

Our consistent ability to improve operations and generate meaningful synergies has given us further conviction on our growth through acquisition strategy and we see a significant market opportunity ahead of us.

Silverbow was the largest acquisition we have completed to date as a public company and we have followed our proven acquisition and integration playbook with great results.

And since we have had another successful closing and integration with our bolt on and the central eco fruit, the acquisition added incremental assets in a key operating area and represented a uniquely attractive opportunity with low decline, oil production, high return inventory and increased operating flexibility with minerals, midstream and substantial surface ownership.

We acquired the assets at a cost of capital, more typically representative of operated working interest opportunities but received the additional benefits of the minerals surface and midstream infrastructure which we were pleased to add to our portfolio.

We have a large pipeline of M&A opportunities ahead of us but we will remain prudent in our underwriting. We screen 100 and 50 to 200 potential transactions a year and have executed 0 to 3 each year. Consistently.

We are focused on compounding significant capital over time at attractive rates of return and we quickly pass on opportunities that don't meet our underwriting criteria despite recent volatility, the market remains active and with our increased scale, strong operating and financial performance and solid balance sheet, we are extremely well positioned for profitable growth and further value creation for our stakeholders over the remainder of 2024 and beyond.

With that, I'll turn the call over to Brandi to provide more detail on the quarter.

Thanks David presence results for the quarter filled on our impressive performance over the first half of the year with approximately $430 million of adjusted EBITDA and approximately 100 and $60 million in Leopard free cash flow. We had $211 million of capital expenditures during the quarter better than forecast as the team continues to generate incremental savings in the field.

We brought online 27 gross operated wells in the Eagle Ford and 10 gross operated wells in the UA, all of which are generating strong initial results with recent commodity volatility. We are focused on maintaining both operational and financial flexibility and generating attractive returns across our development program.

We optimized D&C activity on the silver bow assets. After taking over operatorship to target higher returning liquid weighted development to take advantage of relative commodity pricing.

Turning to our outlook for the remainder of 2024.

As David mentioned, we have enhanced our guidance for the third time this year and improved our second half capital outlook to 425 to $455 million. A 10% improvement from the initial guidance provided at the closing of the Silver Pro acquisition.

This updated outlook reflects five months of silver bow contribution and highlights the strength of our business and the impressive achievements of our operating team.

Looking into 2025 we expect to remain flexible around activity levels and capital allocation. If commodity volatility persist focusing on cash flow generation and attractive returns on the capital, we choose to invest.

Our balance sheet remains strong coming out of the quarter with net leverage of 1.5 times within our publicly stated range of 1 to 1.5 times.

We have $1.5 billion of liquidity with no near term maturities.

We've also been actively evaluating portfolio optimization opportunities and have divested approximately $50 million of non core assets this year generating an attractive return for our investors and also accelerating debt repayment.

While we are a growth through acquisition business, we bring an investor mindset to everything we do and are constantly evaluating our portfolio for potential divestures to maximize value to our shareholders alongside earnings. Yesterday, we announced another dividend of 12¢ per share and further were purchases under our active buyback program which is now 20% utilized year-to-date at a weighted average share price of $10.07.

Together. Our dividend and repurchases have equated to a peer leading 5% annualized yield.

We have dramatically transformed the equity positioning of our business since becoming public with a simplified and enhanced dividend framework and significantly increased float and trading liquidity highlighted by our recent addition to the S&P 600 index.

With that, I'll turn the call back over to David for closing remarks.

Thank you, Brandi. Before we wrap up, I want to reiterate a few key takeaways from this quarter.

First, our business continues to generate impressive results and significant free cash flow.

We've improved guidance for the third consecutive time this year, achieving our stated production targets with more efficient capital spend.

Our advantaged asset profile has consistently exceeded expectations and our operating team continues to find more and more efficiencies to maximize cash flow for our investors from both newly acquired and legacy assets.

Second application of our proven integration process on the Silverbow business has generated value beyond initial expectations, we've combined the strongest talent from both organizations to enhance operations across the business. We are ahead of schedule on synergy capture, achieving our initial target within just a few months of closing and we've increased our total synergy expectation by more than 20%.

Finding ways to capture value beyond our acquisition underwriting is a demonstrated strength of our platform.

And lastly, we see significant opportunity ahead of us to continue on our profitable growth trajectory.

We said last quarter that we are just getting started and that remains true today, we built this business with ambitious goals and despite our recent successes, we remain focused on operational execution, profitable growth and long term value creation for our shareholders.

We have the unique combination of operating and investing expertise required to execute on our growth through acquisition strategy and we will continue to do exactly what we've said. We're going to do. We believe Crescent offers a uniquely compelling value proposition in our sector and we are determined to prove it with that. I'll open it up for Q&A operator.

Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two. If you like to remove yourself from the queue for participants choosing the equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one at this time. One moment while we post our first question.

Our first question comes from Neal Dingmann with Truist Securities. Please proceed.

Morning all nice quarter. Guys, my first question is just on your upcoming quarter, regional focus. I wonder specifically, could you all speak to your ability? Right now, when you're looking at the Eagle for your ability to sort of target the liquids rich over gas development and just wondering how quickly you could switch to more gas when the prices dictate.

Hey, Neil, it's quite, yeah, certainly one of the benefits of the sortable acquisition was continuing to have optionality from a commodity mix perspective. And given the market environment today, you've seen our development be focused on the more liquid liquid way portfolio. I'd say we have plenty of flexibility, kind of to think through optionality around the portfolio. As we see changes in commodity prices. You know, you heard in the prepared marks, brandy highlight a focus on flexibility for us and given the acreage footprint we've created with largely held by production leases, you know, we think we have a ton of flexibility and a key focus for us.

No, that makes sense. And then just a second question on your capital efficiency specifically notable upside that you're seeing from some of fracs and other, you know, type of improvements. I'm just wondering what inning would you all consider sort of your current overall development plan now that you've added, you know, the Silver Bell another acreage. And I'm just wondering, is there still some low hanging fruit in the near term to benefit returns?

Yeah. Hey, it's David. If you don't mind, I'll change the basketball. It's my more favorite sport. But long story short, I think we, we still see a lot to do all that being said, teams working hard and delivering real value. So, you know, we're early days in the you know, getting the benefits of the integration and I think we've got, we've got plenty more to do, but we're, we're pretty pleased with where we are. We have made a lot of progress.

Thank you.

The next question comes from Tim Rezvan with Keybanc capital. Please proceed.

Good morning folks. And thank you for taking my questions. I think to start on the that you went to JB, you you summarized and prepared comments in the presentation. I was wondering if you could share any more specificity on maybe is this, you know, testing the eastern extent of known zones? Are, are there delineation to other areas? You know, maybe the duration of this JV and, and maybe, you know, kind of what the amount of wells that's been established that will be drilled, you know, any context you can, you can fill in would be helpful. Thank you.

Hey Ken, it's correct. Yeah. So, I think you have it on testing the Eastern Extension. We think it's, you know, important as we think about our capital allocation framework. We're not, we're trying to allocate capital to places that we feel very confident that returns, but we also recognize the resource potential in the UN to and are excited about it. So we've been focused on the ability to kind of bring for that opportunity set while allocating capital consistent with how we our framework. And so this JB I think is a great example of that of kind of bringing capital forward to allow us to accelerate delineation. You know, the focus is it's small in the near term three wells but focused on second secondary intervals in that Eastern extension. But we do think there's further opportunity to use kind of our capital allocation framework with our creativity to bring forward opportunities around further delineation on a resource pock position that we are excited about.

Okay, I appreciate that. And then I, guess it could that be expanded if, if the three wells lead to promising results or it's just sort of just a one time.

I think there's, there's definitely further opportunity to bring capital and delineation forward to the extent we're excited about it.

Okay? I appreciate that. And then as my follow up, I'm not sure if this is for David or Brandy. You know, you did mention some asset sales this year. Are there any formal processes, processes in place or if you have some sort of minimum threshold that you, you'd like to get to or are you just sort of letting the market know you're, you're open to, to getting calls from buyers. Just curious, the thoughts on as the sales.

Hey, Tim, it's Clay again, I, I think all of the above certainly we, we receive inbounds around the portfolio and we're a willing taker of those inbounds and thinking through whether the market's putting value on assets at a level above where we can value them or create value go forward. At the same time, we're also always kind of thinking through the portfolio and where we may see an opportunity to whether that's market and asset or reach out to logical counterparties where they could kind of bring a value forward to us. So, I think it's a kind of across-the-board approach. Nothing I would highlight today. Outside of that, we kind of continue to have a methodical approach around it where we've seen the ability to kind of monetize things and we certainly have a volatile market today, but I'd expect to see us continue to have that methodical approach to managing the portfolio.

Thank you for the comments.

The next question comes from Oliver J. Wang with TPH and company. Please proceed.

Good morning, David Brandy and team congrats on a solid quarter and thanks for taking my questions.

Just wanted to start out on maintenance Capex, any sort of color that you're able to kind of provide with respect to where maintenance type of Capex levels might now sit when contemplating the cost reductions that are flowing through the back half of the year outlook. Pro forma for Silverbow.

Oliver, it's, it's Brandi. So, I'll, start just with respect to we, we don't expect to provide formal 25 guidance until February alongside Q4 earnings. But at a high level, we view pro forma maintenance levels for the business post. The Silver Bow transaction is still about 240 to 2 50,000 barrels of oil equipment per day on that plus or minus a billion dollars of capital. So yes, I would say we're, we're excited about the operational efficiencies that we've seen to date. Our ability to continue to drive down D&C cost. And would expect to factor that into our 20 our formal 2025 plan but, but no change at a high level to the soft guide that I've previously shared.

Perfect and maybe just on a follow up to the UN. I was hoping that you all might be able to provide some color on how initial results on the LY, but seas have tracked relative to expectations given the historically, the dominant program. And also when we're kind of thinking about primary versus secondary zones, given the mix that we've seen year-to-date in that 7,525 ballpark. Is this considered a fairly optimal mix for capital allocation in the basin when we're kind of thinking about the next year or two?

Hey, stay that I'll start, which is I think it is the right way to think about it for crescent business plan. So as you know, we're much more focused on maintaining low decline, capital efficiency, strong free cash flow. We haven't been chasing any exploration or, or significant production growth as a strategy.

So, I think it's fairly standard and, and to be expected from us that we're going to be highly concentrated on the proven areas where we've got, you know, a lot of inventory when you look across both the UN and the Eagle Ford.

But at the same time, we think we hold tremendous resource potential. So we are watching, we are investing some of our own capital and then we also try to find capital, efficient ways to do that. So that that's maybe the simplest way to, to kind of highlight what you're seeing is just continued execution of, of what I would call a different and, and disciplined business strategy from us.

Perfect. Thanks for the time.

The next question comes from Michael Scialla with Stephens. Please proceed.

Morning everybody. David, you mentioned the large pipeline of M&A opportunities in front of. You just want to get an idea of when you're looking at future acquisitions, how you're thinking about oil markets versus gas markets longer term. Does that change your view on, on where you've been focusing in the Eagle Ford or do you continue to, to focus on the the wet gas and oil windows versus the Trigas areas?

Am I going to Clay? Listen, I think we're as, as you've seen us through the course of this year. You know, I think we're, we're willing to invest across both oil and gas. But I think for us, it's all about what the opportunity set is, you know, we do have a robust pipeline. I think the BAR is very high today.

We're excited about the execution on the acquisitions we completed and the integration. So we, we think there's a lot ahead of us but bar is high. You know, I just say if you look at the broader A&D markets, there's just been more transactions in oil than gas, gas, you know, with the Contango and the curve has been a harder place for the market to transact.

So I think you'll see us look at both commodities across the Eagle Ford. But I, I do think, realistically just given where the markets are, you, you'd probably expect there to be more transactions and oil as a broad market. And we'll just see where the opportunities lie for us, and our ability to execute.

Sounds good. And I wanted to ask about the, the centrally referred acquisition. You did hear recently any obvious changes you expect to make, drilling or completion wise designed there. And, I guess what kind of you expect, maybe relative to what you're seeing with the Silverbow assets and, and, any thoughts on the development plans there for the remainder of the year, is that a 2025 a development opportunity?

Hey, actually, that, asset was, unique for us and we highlighted in the prepared remarks but the ability to kind of acquire an asset in Eagle Ford that we thought was development ready but also had a low decline production base. I think that was driven by the historical nature of the operator who had been a kind of prudent developer of the asset.

Certainly, I think you're going to see us execute on the same types of DNC savings that we're seeing across the broader business. So being able to bring what, what, what we think is really kind of leading DNC execution to that asset is a huge benefit to us. We also think the asset is well set up, just offset our existing Central Eagle Ford acreage for near term development. So I would expect to see us kind of develop that asset, portions of that asset in 2025 and beyond. So, so really excited about that tuck in acquisition.

Very good. Thank you.

The next question comes from John Freeman with Raymond James. Please proceed.

Good morning, nice quarter. The first topic, you know, you've obviously done a great job of accelerating, you know, the synergy capture and driving the efficiency gains. The other aspect, you know, y'all historically done really well on is is the well out performance, you know, post acquisitions. And I'm just, I know it's still relatively early since you've gotten your hands on the Sorbo assets.

But if there's any anything that you're seeing from the way that Sorbo is completing the wells that you've identified that would provide opportunities like you've seen some of your prior acquisition, you know, property intensity, well spacing, just anything that's kind of jumped out at yell potential opportunities to, to improve well performance.

Yeah. Hey John, it's David. Great question. I'd say that we've intentionally been very strong about how pleased we are with the integration opportunities around synergies. That is an area where we would expect the overall portfolio to benefit from things that they were doing versus we were doing. I think the great thing though is, is I wouldn't highlight this is the number one area where there was any significant performance. Actually, both companies had a, had a history of making acquisitions and improving the outcome.

So, I think we will be better together. But we're, we're certainly able to talk about the immediate synergies around D&C costs and implementation and longer term. I think, you know, we've said this on prior calls, we would expect to get the benefit of improved performance on new drilling. And then secondarily improved performance on production optimization. Together the two companies have a huge production base now that overlaps pretty well. And I think as we're continuing to optimize, we just have more to apply it over and generate significantly more value.

Got it. And then my follow up, I, I believe legacy Crescent was doing about 50% simal fracs and, and obviously silver wasn't, wasn't doing any, I know that y'all aren't, you know, finalized on 2025 plans, but just kind of like rough numbers. Is there like a reasonable target that y'all would sort of think for a percentage of combined company activity and the Eagle Ford. That would be Srax next year.

Yeah, I wouldn't provide any direct guidance on that. Now, I would just tell you that in general, it's a land exercises as much as a development exercise. So, we're working through all those types of things now, but we clearly see significant out of it from final fracs. So I think what you can assume is we'll, you know, continue wanting to drive that percentage higher. But as of now, we're still in what I would call planning and flexibility phase looking forward into next year.

Got it. Thanks, David.

The next question comes from Arun Jayaram with JP Morgan. Please proceed.

Yeah, good morning. Your three key cost structure kind of came in below the low end of your $13 to $14 per BOE second half outlook. Any puts and takes on the cost structure going forward because it was, you know, almost 50¢ below the low end of the, of the range.

Hey, it's brandy. So we're really pleased with the performance, as you noted 1,257 below the low end of the like the guidance range that we published alongside announcement, I would say a couple of things just from a performance perspective, clear example. So, we've optimized our chemical program across a number of assets. We've been able to accelerate some synergies with respect to the Silver B acquisition. We've optimized the field both from an organizational and, and a route perspective.

So, again, really happy with what we've been able to pull forward from an operating cost standpoint. Go forward, I'd guide you to, you know where we printed Q3 to kind of $14, sorry Q3 to $13 per Poe. There's some of the, the cost in our cost structure that are indexed to oil and gas prices. So we'll bounce around a little bit quarter to quarter. But I think that's a good range.

Okay. That's helpful. I was wondering if you could help us just for our modeling. Provide a bridge to your thoughts on fourth quarter oil volumes. I just given a full quarter from Silver Bow and the impact from the Central Eagle Ford position. I think you printed 86,000 barrels a day. And in three, Q is wondering if you could help us think about what that could look like in four Q.

Yes. If we just from a oil cut standpoint on Q3, we 39% of our production was, was oil. I think it will be in a similar zip code for the fourth quarter. We also reaffirm production guidance. So if you just take the, the mid point of that range, you're in this kind of low to mid two 50s overall, that's where I go with a model standpoint.

And just 39% of that. It's a good number for four Q.

Yeah, that's right.

Okay. Thanks a lot. Brandy.

Next question comes from John Abbott with Wolfe Research. Please proceed.

Good morning and thank you for taking our questions. First question is really sort of a strategy question.

So, you can you've increased size and scale to acquisitions, you significantly increased your scale in the Eagle Ford.

You've talked about a long term about a potential pipeline of other opportunities in front of you.

How do you think about future acquisitions and maintaining your underlying decline rate?

I mean, in the past you have, you've had brought in conventional assets, but do those, are those still important as you sort of increase size and scale? How do you, so how do you think about that balance of increasing, do acquisitions and then your underlying decline on the client? Right?

Yeah. Hey, John, it's David and great question. And as a reminder which you hit on, we, we do believe we have a strong skill set in both conventional and unconventional. So definitely has been a history of the company, what I would say though is, is overall, we focus on decline rate no matter the asset. And as I mentioned earlier in the call and on prior calls, we do just have a different approach to the business, than, than others.

And so, for example, if you look back at, the history of acquisitions including Silverbow, some have been acquisitions of assets that were already low decline, whether they were, the, the Eagle for an acquisition we made last year in the Western side, or prior conventional assets a few years ago, we also, make acquisitions of assets that are on much higher decline and, and what we do is work to bring that into our business plan and style of operating. So, the Silver Bow business plan, prior to the acquisition was more of a growth-oriented business, higher production growth, higher reinvestment rate, lower free cash flow, and therefore a higher decline rate.

So, long story short, we would expect to bring those assets into our business plan and the overall business will maintain a lower decline rate that we'll settle out to over the next, you know, call it 6 to 12 months. So I think that's a fundamental strategy, whether we're buying high decline or low decline to, to make sure that the company's, attributes and, and portfolio decline rate stays, you know, stays in our targeted zip code.

I appreciate it. And then a quick follow up for me, it was already just mentioned earlier about the optionality between could be going between gas and oil and the Eagle Ford. So I guess the question right there, David is when you sort of think about that gas optionality, is it a price? Is it an, is an oil to gas ratio?

How do you think about when you, when you possibly might add additional activity towards the dry gas acreage in Webb County, what would you have to see, as I say, is it a price or is it an oil and gas ratio? How do you think about that?

Yeah, so fundamentally everything, as you know, this company is driven on returns on capital. So, you know, we need to see two times our money or better and the ability to get our capital back in an appropriate time frame in acquisitions that's five years or less and even shorter. So I would just say it's all capital return driven. But as you know, there, there are a number of different level levers that have to be working the right way to make that happen.

So in a low gas price environment, no matter how good you are, it's it's unlikely that you'll generate the return you want. So you're not allocating capital there in a higher price environment that can create that opportunity, but there also can be inflation or other things going on So we feel really good. When we look across the portfolio, we have really high quality inventory and given the ability to, to move rigs pretty efficiently that we're able to respond to both price signals but also capital input costs and and well performance to to make that happen. But long story short return on capital is the driver.

Appreciate it. Thank you very much for taking our questions.

The next question comes from Michael Furrow with Pickering Energy. Please proceed.

Good morning. Thanks for taking my questions and congratulations on closing the Silver Road deal.

Look, I appreciate all the detail on the improved drilling speeds and completion efficiencies that are translating to lower D&C costs. I noticed that the company moved from running 3 to 4 rigs in the Eagle Ford down to three. So, is this an output of improved cycle times, you know, allowing for the same number of turn lines, but with fewer rigs or should we view this as more of a structural activity change?

Yeah, a great question and, and another chance just to highlight both performance but also business plan. So if you look back at the history of the acquisitions we've made with higher decline rates, The the prior operators typically had more rigs running than we have. So, there's no change as a result of anything specific to this acquisition. But it's, you know, just a general trend with us, we're lower capital-intensive operators.

But I'd also say that we're gaining two things. We are. I'll call it faster and more efficient drilling than the typical peers we would acquire. And that, that is the case here. And secondly, we've got really important and, and meaningful acreage overlap that also allowed us to be more effective as a combined company. I'll call it to, to deliver similar types of activity with, with less equipment and, and less moves required around the basin. So, combination of both business plan and operating performance making that happen, but I'd say consistent with how we, you know, looked at all of our prior acquisitions as well.

Great. That's, helpful. So, I'd like to ask about the $7 million of share buybacks in the quarter, a small amount, but a little bit of a surprise given the, the near-term priority for debt reduction. So I was wondering if you could talk a little bit about sort of what goes into that decision to opportunistically repurchase shares and how the company balances that decision with debt reduction.

Hey Michael, good question. It's, it's brandi. So I would say no change fundamentally with respect to our capital allocation priorities being the balance sheet and the fixed dividend. I would say we like having the buyback is a tool to, to buy the stock right? When it's disconnected from intrinsic value. We bought back, you mentioned $7 million in this quarter at 1,268. To date, we bought back $30 million at 1,007. So again, it's a nice tool for us to have. But again, it will be relatively smaller for the time being, again, just given our, cap allocation priorities.

All right. Thank you very much. I'll turn it back.

The next question comes from Tarik Hamid with JP Morgan. Please proceed.

Hi, good morning. This is Nevi on for Ta Just a quick question on how you think about capital allocation between the Eagle Ford and the UA in the current environment.

Yeah, I think you've seen seen where we've been focused clearly as you've heard on the call. You've heard both sides, right? We're very excited about what we've been able to execute on in the Eagle Ford, we're seeing the benefits of scale and the synergies we've been able to create with the, the acquisition activity we've had there over the last a couple years.

We remain excited about the, the UA and the resource potential I think will be prudent in terms of how we operate there, how we kind of allocate capital and, and use other tools to continue to eliminate that position. So I think kind of more of the same for us from a capital allocation perspective. No real change versus what you've seen over the last, the last year.

Got it. Thank you.

Got it. Thank you.

Thank you. At this time, I would like to turn the floor back to Mr David Rocke Charlie for closing comments.

Great. Thanks again. I'd like to just say thank you to the all the great employees we have that have been doing a fantastic job on, on integration and delivering great results and thanks to the investors as well who continue to trust us and engage. So we look forward to keeping in touch and.