Northern Oil and Gas Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 30, 2024

There are 13 speakers on the call.

Operator

Greetings, and welcome to the NOG's First Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. The question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Evelyn Inferna, Vice President, Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Good morning. Welcome to NOG's Q1 2024 Earnings Conference Call. Earlier this morning, we released our financial results for the Q1. You can access our earnings release and presentation on our Investor Relations website atnoginc.com. Our Form 10 Q will be filed with the SEC within the next few days.

Speaker 1

I am joined this morning by our Chief Executive Officer, Nick O'Grady our President, Adam Durlam our Chief Financial Officer, Chad Allen and our Chief Technical Officer, Jim Evans. Our agenda for today's call is as follows: Nick will provide his remarks on the quarter and our recent accomplishments, then Adam will give you an overview of operations and business development activities, Chad will review our financial results and after our prepared remarks, the team will be available to answer any questions. Before we begin, let me cover our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward looking statements within the meaning of the Private Securities Litigation Reform Act. These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward looking statements.

Speaker 1

Those risks include, among others, matters that have been described in our earnings release as well as in our filings with the SEC, including our annual report on Form 10 ks 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. Reconciliation 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 get right to it with 4 key points. Number 1, coming out strong right out of the gates. We saw significantly better than expected results in the Q1 driven by 2 primary factors, strong well performance and a pull forward of activity with more wells turned in line than we expected.

Speaker 2

We had highlighted strong well performance last quarter as well, but it was less noticeable in Q4 results due to higher level of curtailments. With the ramp at Mascot in full swing, our other JVs performing well and higher oil prices, we are seeing organic activity accelerate, which bodes well for our 2024 production overall. The larger than expected till count increased our overall capital, but was more than made up for by higher cash flow and production that will benefit us as we head into the Q2. We expect modest additional pull forward in the Q2, though not to the same extent, as good pricing continues to bring value forward for our investors. This highlights one of the greatest facets of our non operated business model, which is the alignment with our operators.

Speaker 2

When prices are high, we typically see the economic incentives work their magic to bring forward value into the higher price periods like it did here. And additionally, as we talk about the asymmetry of hedging, we produce more barrels when prices are higher, leaving us more unhedged than we expected in a higher priced period. While we've seen development accelerate into the highest price period of the Strip for the year, boosting our profits for the quarter, our plans for all of 2024 remain largely unchanged with only very modest changes to the pace. Our hope would be to the extent that commodity prices stay robust that it warrants activity levels and returns that trend toward the middle or upper band of our guidance, which should translate into higher production as we exit the year and into 2025. With that said, we want to remain flexible with our capital as always to ensure we're earning significant returns.

Speaker 2

Chad will highlight it further, but despite the lower headline free cash flow number, under the surface we've made substantial progress on the working capital front and made better progress than we anticipated on our balance sheet year to date. After closing the last of our Q4 acquisitions, we paid about $40,000,000 in dividends, spent about $20,000,000 on share repurchases and still paid down about $50,000,000 worth of debt. All of this was during a period of hefty investment, so we expect our free cash flow pace to pick up even more meaningfully in the Q2 and continue as the year progresses. Number 2, waiting for the right opportunity. As we highlight nearly every year, our ground game business typically has a quiet Q1 and this one was no different.

Speaker 2

We characteristically see people aggressively spending their budgets early in the year. Additionally, strong crude prices can have an effect on risk taking from smaller competitors who may not have the wherewithal to invest in the down cycles. On the larger M and A front, we've been actively engaged. We've seen relatively wide bid ask spreads, negative rescue from high crude prices and asset quality that's kept us from being overly aggressive. The good news is that on the more scalable front, we continue to work on drilling partnerships, carve outs and true non op and JV front on larger more impactful and bespoke processes.

Speaker 2

We shied away from some of the less value added marketed processes that in our view have been both lower quality and saturated with returns that in many cases did not meet our thresholds. These market conditions ebb and flow and can change within a given year, so we stay active in all facets of business development to capture the right opportunity. Given the overall backlog, we're staying disciplined for the right transaction to grow our business and I have the utmost confidence that over time we will find great opportunities for growth. Number 3, dynamic capital allocation 101. With a pause in acquisitions and relative weakness of our equity performance early in the year, we did elect to dynamically direct our capital towards share repurchases and simplifying our capital stack.

Speaker 2

Dynamic capital allocation is just that, dynamic. Our flexible business model allows us to quickly adapt to changing circumstances. The contraction in our equity valuation in the Q1, as I highlighted in our last earnings call, provided a favorable time for share repurchases and we pounced on the opportunity at attractive prices. We also cleaned up the last tranche of our remaining equity warrants, which were issued as part of an acquisition in 2022 at lower prices than current in a net exercise style exchange. This simplifying transaction both reduces short pressure on our equity as well as long term dilution potential in another value added move.

Speaker 2

Most of those warrants were already accounted for in our diluted share count, but over time, the potential dilution from stock performance and dividend payments could have grown meaningfully and we're very bullish on our outlook. As we look forward, one of the primary goals for this year is to put the business in a position to have increased optionality as we head into 2025, whether that's to further increase the dividend, allocate more to buybacks or allocate more to growth prospects. The key to dynamic capital allocation is to make decisions that maximize total return. While dogmatic formulaic approaches may seem tempting, over time they are prone to missed opportunities. Given weak natural gas prices, high interest rates and an uncertain economic outlook in an election year, there is a high probability we will have market volatility events, which could potentially create great buyback, acquisition opportunities or chances to grow the dividend for us.

Speaker 2

We want you to know that as always, we are watching closely and are highly aligned with our shareholders to deliver. Number 4, confident for 2024 2025. We recently issued an updated and much improved ESG report and in it, I talk a lot about our philosophy of kaizen here at NOG. Kaizen is a Japanese term, which basically means continuous improvement and that's built into our culture here at NOG. After launching our AI powered data lake system, Drakkar, last year, we continue to enhance and expand its functionality And internally, we remain focused on improving data quality to further leverage our analytics, our underwriting and predictive capabilities to help grow our business.

Speaker 2

Not a week goes by where I don't hear that one of our departments is building out new capabilities to exploit our massive trove of data. What that data is showing us gives me tremendous confidence in the people at NOG, our assets and our outlook for 2024, 2025 and beyond. We continue to add systems, talent and new processes to get better and better at what we do. As with Kaizen, we're never satisfied with leaving well enough alone. For 2024 specifically, as I mentioned in my first point, our sound investment process and core tenant of focusing on high quality assets is time and time again proving itself out with better than expected well performance and our culture of conservatism has delivered the strong results we've seen today.

Speaker 2

While we reiterate our forecast for the year, we're working diligently to augment those results and find additional paths to growth.

Speaker 3

Before I hand it over

Speaker 2

to Adam, I'd like to thank the entire NOG team for their hard work and dedication for another great quarter and thank our analysts and all of you for your interest in our company today. Thanks also to our operators out there for their incredible field work and the great partnerships we forged. We've had another great start to the year and while it's early, the assets are performing exceptionally well as we convert a lot of the money in the ground from the past 6 months into production and cash flow this year. As 2024 progresses, I also expect we will see more growth opportunities emerge. And given what's in front of today, I remain confident that NOG remains a superior investment product to our peers and that our growth trajectory is unmatched in the upstream space.

Speaker 2

As a management team, we are aligned and incentivized to maximize total return for our investors year in and year out. That's because we are a company run by investors for investors. With that, I'll turn it over to Adam.

Speaker 3

Thanks, Nick. I'll open with some commentary on the Q1's operational highlights and then shift gears to provide some additional color on what we're seeing on the M and A front. The Q1 picked up where 23 left off with continued acceleration of development and marking the 5th consecutive quarter of record production for NOG. Production increased 4% quarter over quarter, driven by well productivity and a pull forward in the Permian, which accounted for 3 quarters of our well additions in Q1. Partnering with top tier operators across all of our respective basins with the likes of Mewbourn, Permian Resources, Ascent and Continental that helped drive the beat on production.

Speaker 3

Unpacking this further, we saw 2023's ground game investments had nearly 5,000 barrels a day of production over the Q4, while also seeing outperformance on our Novo and Utica assets. Turning lines topped expectations with 25.3 net wells added in Q1 as the Mascotte project pulled forward 2.4 net wells that were expected to come online in the 2nd quarter. The wells were added late in March and as they clean up, we expect to receive the production benefit in the second and third quarters of the year. With higher conversions in Q1, we had an expected draw to our wells in process and ended the quarter with 52.4 net wells in process, 40 of them in our oil weighted basins. The Permian now makes up 60% of our oil weighted wells in process and our exposure to top tier operators remains consistent across all of our basins.

Speaker 3

The pace of AFEs was as active as in the Q4 and we are seeing a healthy backlog of well proposals as we head into Q2. At the end of the quarter, well proposals not yet spud totaled 24.7 net wells. During the quarter, we were balloted with over 180 AFEs and elected to over 90% of the proposals on a net basis. January February kicked things off with robust gross activity on our organic acreage, offset by lower average working interests. Recently, we have seen that turnaround as March April had 3 times the net well activity than in January February.

Speaker 3

New well proposals are showing moderate signs of deflation as absolute and normalized costs in the Permian have declined and have been the lowest that we've seen in the last 12 months. Estimated well costs in the Williston also ticked down 5% quarter over quarter. All that said, we continue to remain conservative with our forecasts, especially in light of a higher priced commodity environment and accelerated development. Turning to the M and A landscape and our business development efforts, Q1 was frothy as competition leaned in with new budgets as is typical to start the year. And customarily, we are happy to let the bull run by and stay disciplined with our underwriting, waiting for the appropriate opportunities.

Speaker 3

Despite some elevated competition in our ground game, we were able to pick up over 1700 net acres of longer dated inventory and 0.6 net wells in process. In the Bakken, we also closed on a joint development agreement and we'll be kicking off development across 4 to 5 units in the 3rd quarter. We continue to get creative with structuring and we see significant upside with this project having the sight line to add up to 10 more drilling units to the program. There is no shortage of shots on goal as we evaluated over 120 transactions in Q1 and we're already seeing momentum in conversions through April. Shifting gears to the larger M and A landscape, we remain as busy as we've ever been evaluating opportunities for the right fit.

Speaker 3

In the first quarter alone, we reviewed over 30 potential transactions that the quality of properties had been variable at best. Quality has started to pick up and the mix of prospects have included non op packages, joint development programs, minority interest buy downs and the co purchasing of operated assets. Looking ahead, we are actively engaged in over 10 processes with asset values ranging from $100,000,000 to over $1,000,000,000 while continuing strategic discussions on other off market opportunities. We're encouraged with the conversations that are taking place, but any potential transaction will need to have the right fit at an asset level as well as from a risk adjusted return perspective. With that, I'll turn it over to Chad.

Speaker 4

Thanks, Adam. I'll start by reviewing our Q1 results and provide additional color on our operations. Average daily production in the quarter was more than 119,000 BOE per day, up over 5,000 BOE per day compared to Q4 and up 37% compared to Q1 of 2023, establishing a new NOG record. Oil production mix of our total volumes was in line with our guidance at just over 70,000 barrels a day and gas was a larger contributor as compared to the past, reflecting 2.3 net wells in Appalachia and a full quarter's contribution from the Utica acquisition. Adjusted EBITDA in the quarter was 387,000,000 dollars up 19% over the same period last year, but modestly lower than the last quarter, mainly due to lower average realized prices per BOE in the quarter.

Speaker 4

Free cash flow of $54,000,000 in the quarter was lower sequentially and from the same period last year due to the pull forward of activity in the quarter. But the peak of this growth capital should crest as we reach mid year. We anticipate an acceleration of free cash flow in the 2nd quarter as TILT come online and begin to contribute to production and revenue. Adjusted EPS was $1.28 per diluted share. Oil differentials were in line with our expectations at an average of $3.99 at the lower end of our guidance.

Speaker 4

Williston differentials range from a low of $6.60 in January to a high of $6.95 in February, While Permian differentials saw a market widening from $0.69 in January to $2.26 in February on the heels of higher production from areas with higher deducts within the basin. We still expect oil differentials to moderate and have begun to see some evidence of that in late March April. For natural gas, realizations were 118% of benchmark prices for the Q1 due to better winter NGL prices and in season Appalachian differentials. But we are still anticipating an erosion in gas realizations as we close out heating season. With Waha gas solidly negative combined with shoulder season gas and NGL pricing, we expect markedly lower realizations in the Q2, perhaps as low as the mid-seventy percent range.

Speaker 4

Overall for the year, however, we believe our guidance remains solid. Waha has been plagued by not only under capacity, but by maintenance driven outages and we expect things to modestly improve later in the year. It's also worth noting our net exposure to Waha is minimal with approximately $60,000,000 a day hedged through Waha basis and Waha gas swaps for the balance of 2024 at very attractive prices. LOE was flat sequentially at $9.70 per BOE, reflecting continued work over expenses, pickup in activity of our Mascotte project and a $2,300,000 firm transport charge in the Marcellus. The transportation expense should moderate to quarterly charge of approximately $1,500,000 per quarter through the end of Q1 2025.

Speaker 4

As we discussed on our Q4 call, we anticipate LOE per BOE to be relatively flat through the 2nd quarter before gradually declining its production ramps further in our Mascotte project and the transportation charge falls to a lower run rate. Production taxes were 9.6 percent in line with guidance as production ramped in the Permian, which has a higher production tax rate. On the CapEx front, we continue to experience a pull forward of organic activity driven by the strength in oil prices. This drove CapEx to $296,000,000 inclusive of ground gain capital and was a bit higher than anticipated for the Q1. Of the $296,000,000 68 percent was allocated to the Permian, 26% to the Williston and 6% to Appalachia.

Speaker 4

If we continue to see strength in oil prices, we expect to see CapEx trend toward the higher end of our guidance range for the year. With that said, the higher CapEx should be accompanied by higher production as our D and C list is actively converting tills and spuds and drawing down our working capital. Specifically on the working capital front, excluding the impact of derivatives, we have seen an improvement of approximately $40,000,000 in our working capital since the end of the year. At quarter end, we had over $1,000,000,000 of liquidity, price of $32,000,000 of cash on hand and $987,000,000 available on our revolving credit facility, which was expanded at the end of April as a part of our semi annual borrowing base redetermination. While our borrowing base remained constant at $1,800,000,000 we increased our elected commitments to $1,500,000,000 and added 3 high quality banks to our syndicate.

Speaker 4

At quarter end, net debt to LQA EBITDA was 1.25 times and we expect this ratio to trend down throughout 2024 barring significant cash M and A activity. As Dick discussed earlier, we're actively repurchasing shares in the Q1 despite the limited open window. We repurchased 549,000 shares for $20,000,000 of our common equity at an average price of $36.42 We are committed to allocating capital to share buybacks where there is a market divergence between our absolute and relative performance. And finally, before we go to Q and A, I'd like to address a few adjustments to guidance. We anticipate production of 117,500 to 119,500 BOE per day in Q2, flat versus Q1 given the pull forward in March.

Speaker 4

Buying continued pull forward should see CapEx down sequentially and a significant improvement in our free cash flow. Our Q2 expectation for oil volumes is also in line with Q1. We have tightened the range on production expenses, which are starting to come down as well as oil differentials which quarter to date appear to be approving. We may make further adjustments when we report Q2 as needed. With that, I'll turn the call back over to the operator for Q and A.

Operator

Thank you. We will now begin the question and answer session. And your first question comes from the line of Neil Dingmann of Chorus Securities. Please go ahead.

Speaker 5

Good morning, guys. Good details. Nick, maybe get right to my first question is just on what I guess I would classify as maybe cycle time. It seems like your capital on the ground maybe increased has increased a little bit, but the setup, I think as you and Adam, the guys described it, to me it sounds like the future setup is better than ever. Is this just a product of cycle time for some of the producers being a little bit longer or what's driving this?

Speaker 5

Because again, it does seem like I think your second half in 'twenty five look is good, if not better than ever. It seems like a little bit in Q4 and Q1, there was a little more in the ground. So if you can just maybe hit on that a little bit?

Speaker 2

Yes. I mean, look, this is a little bit of what we are and a little bit of how things are changing. We're a returns based organization. And obviously, as a non operator, the timing of capital expenditures can shift markedly. But as I said last quarter, and I'll say again, the total capital expenditures are the same.

Speaker 2

And to the extent it increases from 1 quarter to a next is because we're getting more activity. If we're getting more activity that meets our return holders, that's a good thing. What we've experienced in the last 9 months is an acceleration of development. I would tell you in the last 18 months, average spud to till timing has gone from 2 34 days to 110 days. That's a significant move and that's hard to perfectly model.

Speaker 2

I'd say the difference between last quarter and this quarter is that this quarter's acceleration also came with more tilts, which obviously translated into significantly more production. So you got a lot more cash flow and benefit from it than last quarter. So it was a little bit less obvious last quarter. But I'd also say because we're an accrual shop and because these accruals roll off over an extended period of time and as these invoices are received, it's not something that's done quarter to quarter. And we don't run the business quarter to quarter nor is the capital spent quarter to quarter.

Speaker 2

Spent over the life of the wealth. And so over a 12 month period, generally, the capital and the returns, as you can see from our standout corporate returns, tends to play out. And I want to be clear, this is a good thing. Corporate finance would tell you bringing capital forward is ultimately bringing net present value forward. That's capital that's Corporate Finance 101.

Speaker 2

We just brought forward significant production into the highest price part of strip. And yes, it brought forward some CapEx. The same CapEx that would have been spent later in the year at a backwardated strip. So I would argue this isn't a bad thing at all.

Speaker 5

Yes, great. Well said. And then just quick follow-up on capital allocation. Adam mentioned just the shots on goal and I continue to think you all have more opportunities than almost anybody. How do you balance that in shareholder return given you have more prospects than I think any company out there?

Speaker 2

Yes. I mean, I think I don't see them as I mean, I'd say the same thing we always would say is, I don't think we view them as mutually exclusive. And I think I would also add that we look at a lot of acquisitions as things that can enhance those shareholder returns. So most of the assets that we're looking at are generally cash flowing acquisitions. So a lot of the assets that we look at, we think can enhance our dividends over time.

Speaker 2

But I would tell you that specifically, we would weigh a stock buyback as an example versus and the potential long term benefits of that versus an acquisition. And we weigh those against each other every single day of the week. And there are times where one might look more attractive long term, but we're in the like we talk about it might sound cliche, but it's not. When we talk about maximizing total return, we really are serious about it and we're paid to be serious about it. And so we have to think about over a 3, 5, 7 year period of those decisions that we make today and what they're going what are the long term implications of those things and that's how for the equity.

Speaker 2

And what those acquisitions versus the decision to buy back stock today are going to make on that. But I would tell you, I think you can the answer is there's one for both. Adam, I don't know if you want to add to that. No.

Speaker 3

I mean, I think you touched on it in your prepared comments in terms of dynamic capital allocation. We're always actively managing the portfolio, reviewing what's in front of us, and we're going to allocate capital accordingly or what dislocations we're seeing. Yes.

Speaker 2

I mean, I think even as it pertains to the stock buyback and admittedly, we had a relatively narrow window in the Q1. We spent a lot of time about the mechanics and just with the Board of Directors about how we would do it and about what rules and regulations would be around it and what would be the nuances about that and how we would weigh that against potential M and A and just the opportunity cost and to make sure we left room for that. But I would just say this that we're not short of opportunities, that's for sure.

Operator

Your next question comes from the line of Phillips Johnston of Capital One. Your line is now open.

Speaker 6

Hey, guys. Thanks. So just to follow-up on the CapEx for the year possibly landing in the upper half of the range assuming oil prices and activity remains elevated. Chad, you sort of alluded to this in your comments, but would you think that your net well count and your production volume for the year might also be a little bit biased to the upper half of the ranges? Or do you think it's a little bit too early to tell just with the lag effects and whatnot?

Speaker 2

Yes, so this is Nick. I mean, I think I read your note and I have to object to one of the things you said. I think you misconstrued what we were saying. We're not suggesting that our CapEx assumes that oil prices will stay high for the rest of the year. It's quite the opposite.

Speaker 2

What we were saying was that since oil prices have increased, we've seen an increase of AFE activity on our acreage. And that AFE activity would translate into CapEx theoretically later in the 3rd and the 4th quarters of the year. And our comment was that we're returns driven, right? So our consent activity on those AFEs is driven by oil prices and underwriting those returns. So if oil prices stay high, we'll consent to that activity and ultimately then the CapEx would be higher, not the other way around.

Speaker 2

So we also know that we'd be flexible because our business model obviously inherently is more flexible than an operated one. And so to the extent that oil prices were to change, obviously, we pivot quickly. We're just suggesting that if things stayed as they are, we wanted to guide investors accordingly based on that status quo. So I would tell you that if oil prices stayed high, we would probably expect to see continued elevated AFE activity because what we noticed was that as oil prices rallied early in this year, we started to see a notable pickup in activity and that's going to translate particularly that activity you see today is really going to be activity that's going to translate into well proposals that are going to start to come online towards the end of this year and point towards 2025. And so it would be turning lines that would likely be towards the end of this year in Chatter.

Speaker 3

And that dovetails into your comments in terms of the spud to till timing, right? I mean, right now we're getting well proposals, especially with elevated work in the interest and depending on who those operators are and how they're developing it, whether it's a one 2 well development program or if it's a full cube development program, that's going to dictate the till timing. And so you're kind of on that tuck as we see things kind of socialize and development progresses, that's where we're at right now.

Speaker 2

Yes. We're not deciding to spend the money and hoping oil prices are going to stay high. We're saying that if oil prices stay high, we're likely to see that kind of activity. That's what we were suggesting.

Speaker 6

Okay. I appreciate the clarification there. Shifting over, I guess, to your views on the gas market. We've seen 25% and 26% strip prices actually creep up since you guys reported Q4, despite kind of super high inventories and weak comp prices. I saw your NYMEX gas hedges for '25 and 'twenty six are unchanged, excuse me.

Speaker 6

But are you tempted to sort of layer in any more activity, I guess, in the out years?

Speaker 2

Yes. I mean, I think it's been proven time and time again that contango is a bearish formation, right? And I think we will probably act accordingly. I mean, I think when the curve went into steep contango over 2024 last year, we began to hedge and I think you'll probably see us act accordingly. So I think the answer is yes.

Speaker 2

I mean, I think contango tends to give a perverse incentive to producers, right? So it will tell them to keep producing. I know you're seeing curtailments right now, but curtailments are not necessarily a panacea because ultimately you're just turning something off that you can turn right back on and you keep drilling. Like if you'll notice, most natural gas producers right now are not cutting CapEx. They're actually still drilling and curtailing production.

Speaker 2

So effectively, they're going to be able to turn it back on at a moment's notice. That's not healing the market in my opinion. And so to me, it does not make me feel overtly bullish on the you likely want to sell in that market. Look, do I think gas is going to be 1.80 you likely want to sell in that market. Look, do I think gas is going to be $1.80 or $2?

Speaker 2

No, that's not a sustainable price. But I think those high prices are likely and those are obviously very profitable levels for us. And so I think we'd be very happy to sell into those levels.

Speaker 4

Yes. Phillips, just on the hedging comment, I think we have been adding some calls, call options out in those years. So look at that in the 10 Q, but

Speaker 6

yes. Okay, great. Thanks guys. Appreciate it.

Operator

Question comes from the line of Scott Hanul of RBC. Please go ahead.

Speaker 7

Hey, all. Thanks. Look, I'm going to kind of come back to the CapEx conversation if we could, but take a little bit different angle on it. I guess correct me if I'm wrong, but your back half CapEx, the implied quarterly run rate is around $160,000,000 to $170,000,000 And could you just give us a high level view? I think your production probably is going to peak somewhere in that or 120 plus range in the Q3.

Speaker 7

And when you fundamentally think about like what CapEx run rate needs to occur to kind of maintain production by your non ops? Is $160,000,000 to $170,000,000 adequate? Or does that sort of create a little bit of a tail off in production heading into 2025?

Speaker 2

Well, our decline rate is moderating as we get here, Scott. So our overall maintenance capital is coming down too, right? So we feel like we're losing about, what Jim, flat points of decline rate throughout the year. So as the year progresses, our overall maintenance capital is coming down gainfully. So, the answer to your question is it's a little bit of a fuzzy number.

Speaker 2

But I'd say it really depends from a pull forward perspective in terms of the capital. But the answer is, we have not determined within the year exactly how obviously, we haven't determined where we want to go for 25 at this point in time. I mean, obviously, we have had we have a long and storied history of growing. So our and we're incentivized to grow. So I would make every assumption that we would plan to find ways and paths to grow as we move towards next year.

Speaker 2

But I think the answer to your question is that we as it pertains to this year from a path Jim, I'll open yes, I think the answer to this year is that yes, effectively through the path, our overall capital can step down throughout the year and then production would peak and then slightly decline in the Q4, but not meaningfully even though the capital falls off materially.

Speaker 7

Yes. No, no, I appreciate there's a lot of gives and takes with accruals and stuff like that and that all makes sense.

Speaker 2

And remember, but it's not a meaningful amount. It's just not.

Speaker 7

Got it. Okay. And then I'm sorry, go ahead.

Speaker 2

It's just not a meaningful step. It's not a meaningful amount.

Speaker 7

Okay. You all had discussed in some of your prepared comments that some of the stronger production results was due to some pull in of activity, but also some well outperformance. Can you be a little bit more specific on that? I mean, obviously have a couple of large joint ventures with Mascot and Novo. Can you kind of qualify or quantify what you're seeing with some of those wells?

Speaker 7

And is that what's really driven the performance? Or is it more broad based than that?

Speaker 3

I think it's a combination of the 2. As far as kind of the projects go, they're all at or above kind of expectations in terms of kind of the new development activity that we've been seeing Novo at the New Mexico assets, our Utica assets are outperforming. We've seen some meaningful performance in Williston as well with the likes of Continental and Conoco and exposure to Slauson and Marathon. And they're all kind of sticking into the core where we've got some outsized working interest. So it seems to be a combination of all of the above.

Speaker 6

Got it. Thank you.

Operator

Your next question comes from the line of Charles Meade of Johnson Rice. Please go ahead.

Speaker 8

Good morning, Nick, Adam and Chad. I want to pick up perhaps right where we just left off on the source of the production beat. But I wondered if you could look at it or try to answer it in this framework. In late February, you guys thought that there was going to be a slight decline. And so you came in with, call it, what, 4% growth on the quarter.

Speaker 8

So was there a specific I think this is I guess he already asked about the geographies. I guess what changed in March that led to that result that was different from what you guys saw at the end of February?

Speaker 3

Well, I think as you're talking about what changed in what we were seeing, I think it's going to be a combination of what wells came online in March as well as these wells are cleaning up in January February. You've got very limited data in terms of what you're seeing. And so you've got to let it play out over an extended period of time. And then Jim, I

Speaker 2

don't know if you want

Speaker 3

to comment on anything else in particular, but

Speaker 9

Yes, Charles. And obviously, we saw a full port of activity as well, right? So we had 3 extra net wells that we weren't really accounting for. So that added production there too. Like Adam mentioned, the Utica assets, they continue to clean up, perform better than we had expected at that time, as well as we have some new wells come online kind of mid February on the Noble asset that has significantly outperformed our expectations.

Speaker 9

So that's another driver

Speaker 2

as well. And then as

Speaker 9

we showed in the Williston, some new Continental wells have looked really good compared to our expectations. So just kind of the combination of all those things really kind of drove Q1 performance versus what we were modeling kind of that mid to late February timeframe.

Speaker 3

Yes. Frankly just a lag in information, right. I mean we might be getting this information on a daily depend on what your working interests are and going to depend on what your working interests are and the timing of that development and information.

Speaker 2

Yes. And there are certain things too Charles like from an assumption perspective, like using the freeze off event in the Williston. We were very concerned, not necessarily about the freeze off event in and of itself. We had a pretty good handle of that. But we were pretty concerned that it was going to push particularly a lot of the completions out.

Speaker 2

So we had scheduled the assumption that a lot of the completions will be pushed out multiple weeks. And then later on in February March came to find out that a lot of that stuff had actually come right on schedule, right. So then you're going back and rejiggering that as you actually get the well status and the reports in. So a lot of the stuff we had anticipated kind of getting delayed, one of not being delayed. So then ultimately, it's not just the TILs themselves having more TILs themselves, but even within the quarter things being more on time and being accelerated than you thought.

Speaker 2

So you're getting the benefit of time within a quarter, not just the actual additional activity on top of that.

Speaker 8

So Got it. That's all helpful incremental detail.

Speaker 2

Yes. And just I will tell you like there is and we mentioned this in my prepared comments, we are just seeing flat out better well performance. I mean, you saw that in our tumes. And you may not see it because obviously our Permian mix this year is more Midland based. So it is obviously maybe a bit lower than our average last year year to date, but it's certainly better than what our internal forecast have been.

Speaker 2

And so in general, we've been doing a bit better than we anticipated coming out of the gates.

Speaker 8

Got it. Got it. And then, Nick, another question on the CapEx. I want to I'm sure that and I want to get the benefit because I'm sure you participated in a lot of internal discussions. And I want to make sure I understand what you're saying and have I'm thinking about the right implications going forward.

Speaker 8

I mean, in 4Q, you guys had a big CapEx. It came in a lot higher than expected you pre release that. We got another one here this quarter. If I understood you correctly, the 2 main drivers appear to be increased cycle time or reduced cycle time, so increased pace and a higher oil price, which leads to more AFE proposals. And if that's correct, what is your are those 2 vectors, are they flat going forward?

Speaker 2

I'm not sure I follow, Charles.

Speaker 8

Hey, is Arrow pointed, I mean, are we do we still if those are the 2 big drivers and you can go different direction if you want. But the question is, as we look at 2Q and 3Q, are those arrows still pointed up? Are we going to have further decreased cycle times? And maybe the oil price isn't going up, but perhaps there is a is there a building wave of AFEs or is this kind of a spurt that's going to attend to?

Speaker 2

I got a question in like 2018 when I first started here being like, okay, is the productivity improvement in the Bakken done? Because well costs wells have gotten so much better and fracking has gotten so much better. And every single year, they found ways to make wells better. So and I got the same question last year and I got the same question the year before. And the answer is the industry is amazing.

Speaker 2

They found ways to go faster and faster and faster. And frankly, the onus is on us. But look, we have candidly struggled to keep up with the pace and we've been I mean, I don't view it necessarily as a bad thing, but the speed at which our operator has gone ahead obviously taken us by surprise to some degree. But at the same time, like I just I don't really see this as the total cat like you can see it in our weighted average cost of a well. We're not blowing through, not having inflationary pressures.

Speaker 2

If you look at the overall capital delta, we drilled 3 extra wells this quarter, right? So and you saw it in the top line results, right? So I don't again, like I don't really see a major disconnect here. The delta last quarter is masked by the fact that ultimately it's really a percentage of completion thing as opposed to additional tilt. But you're ultimately, yes, you're seeing cycle times.

Speaker 2

Can I predict if the operators are going to stop going faster? I don't know if I can make that prediction because that would be predicting something that I don't control. And I would say operators are incentivized to make more and more money. So I'd say there whether oil prices are going up or down, I'd say if oil prices go down, they're going to still try to find a way to make more money. So they're going to find a way to go faster and faster and make more money.

Speaker 2

So I would say no, they're going to still find ways to go faster.

Speaker 3

And it's just going to depend on the operator mix and the development mix and the working interest that we're getting in the door, right. And you don't necessarily have that view with AFEs because they might ballot to it AFEs 1 week and then they follow it up with 6 more and they all end up being on the same path. So those are things that we need to digest and truly understand. I think the AFE activity has picked up. We've seen that in March April and we would expect in this environment all things remain the same that development cadence and everything else will continue, but that can change on a dime.

Speaker 8

Got it. Thank you for that.

Operator

Question comes from the line of Garik Whitfield of Stifel. Please go ahead.

Speaker 6

Thanks. Good morning all.

Speaker 2

Good morning.

Speaker 6

Regarding the larger asset packages, how would you characterize the competition you're experiencing in that market at present? Aside from the quality and wider bid ask spreads you saw in Q1, is that still a robust market and opportunity for you?

Speaker 2

Yes. I mean, I haven't we haven't it's a larger package, Derek. I don't think we felt like there's a ton of I mean, we've certainly seen bankers try to make give the illusion of competition in a couple of cases, but we haven't really seen much competition in reality. I think where the challenge has been more that I think there's been a I think of late, it's been harder for us to find assets that we've really wanted to lean in on, meaning like where you knew the clearing price and would we really feel like they were assets that we will be willing to pay what you knew it was required to take it home, I guess is where I would Yes.

Speaker 3

I guess, framing it up in different way for you. I mean, we're certainly seeing more entrants from family offices, some private equity groups and some crossover from the minerals side, which is obviously validating in terms of other sources recognizing the power of the business model. But that's largely limited to smaller funds. And so where I think you're seeing maybe a little bit more of an elevation in competition is on the smaller ground game side. We're just we're playing in different sandboxes when you're starting to talk about asset packages that are north of $150,000,000 in terms of funds that are being raised and being able to handle potential concentration, those types of things.

Speaker 3

And so I think what we're seeing in that regard is generally state status quo. Obviously, that can also change, But based on kind of what we're seeing and the feedback that we're getting, I don't see a material change on the large.

Speaker 2

Yes. I mean, I'd say where we see people we've definitely seen buyers of PDP centric assets and that's we're very happy to see that because that's just not where we're generally focused.

Speaker 3

Yes. I mean from time to time, I think we see some groups that raise capital and deploy it in a meaningful way. There was one group that we saw that ended up paying north of 75% of where we were coming out at. And we're happy to let them have it. And frankly, they shot their 1 and only bullet and we haven't heard from them again.

Speaker 3

So, they can digest that for as long as they need to and then if they want to sell it and maybe at that point, we're taking another look at it, but not at those prices.

Speaker 2

Yes. I mean, I just I would just tell you this, I don't think there's been an asset that we've coveted yet that we really felt was very attractive to us that we haven't felt that we were outmatched for when we've really of the quality that you've seen us execute on, where we've really had to stretch or go out of our comfort zone for. And I think that that's a testament to where we are in the marketplace.

Speaker 6

Terrific. And as my follow-up, really think about Permian macro regarding the pipeline outages and tighter egress conditions that are expected until Matterhorn comes on

Speaker 2

in Q3. Are you guys

Speaker 6

expecting industry to adjust turn in line activity to match supply growth with egress growth?

Speaker 2

Yes. I mean, you're definitely seeing, especially for some of the smaller operators, they're going to have to they're having to navigate around it. I mean, I think we're blessed with the fact that most of our operators in the Permian are bigger operators with more integrated midstream systems and better access points. But even they have to navigate around these issues, Derek. So it's not a small issue and I don't want to sugarcoat it.

Speaker 2

And you can see that I think we for better or for worse, and I would like to say we were geniuses, but we basically have almost 0 Waha exposure this year, financially speaking at least. We effectively hedged all of it away. And I'd love to say we did it completely on purpose, but we just really were we were a little bit concerned coming into the year. And I think just had a heavy hand on it when we were hedging it and probably because we were so acquisitive last year. But I think that it's going to take some time.

Speaker 2

I mean, some of it is you rightly highlight, some of it is it's been made worse by maintenance. But I don't think it's necessarily going to get magically better this year. So I again next year, I don't think it's I think it's still going to be a wide issue for some time. I think it's going to take a couple of years. You're going to need more and more to be built out.

Speaker 2

So I do think it's going to limit some growth, particularly in the Delaware for the next year or so.

Speaker 6

Makes sense. Very helpful.

Operator

Your next question comes from the line of Donovan Shafer of Northland Capital. Please go ahead.

Speaker 10

Hi, guys. Thanks for taking the questions. So I want to ask about and I know we've already had a couple of people ask about the better than expected well performance. So this might feel like beating a dead horse, But I kind of want to get really so the core of it. So, in the sense of like to what extent should we care?

Speaker 10

So, was this and if we just talk, let's forget about the wells being pulled forward or whatever. If we're just talking about on like a well on well on for a given well, the performance of that well versus your own expectations, If we just focus on that, and you said, I think Nick, you said it's flat out better well performance. Who gets sort of the credit for that? Is it just a chance phenomenon and it just you just there's a statistical distribution and it just happens to be that the rolls of the dice were better at this time around? Or was it can you identify changes in sort of well design?

Speaker 10

Or do you feel like this supports strength with particular operators or is it alternatively like in a matter of conservative underwriting? Like that another way to put it is, should this be seen as an achievement of some kind somehow tied to, you know, like human agency? Or is this just a matter of chance? And if it's some sort of, like, achievement, you know, who gets that credit? Is it a reflection of your business model?

Speaker 10

Is it a reflection of your operators? Yes, that would be really great.

Speaker 2

I mean, I think I would certainly want to give credit to the operators for their great performance. I mean, I certainly they do all the hard work and I don't want to not give credit where credit is due. But to our engineering team, we work really hard to set a standard and underwrite accordingly and then try to meet and beat those expectations. And so I think that we try to under and then obviously for you guys to under promise and over deliver and it's not to lowball or anything like that, but you really do this is a risky business, right? It is a risky business and wells and I think it is the oil and gas business is filled with optimists, right?

Speaker 2

And I always joke that as a non operator, you really need to be pessimistic because there are you find out that many operators, they make a change in well design and they say see better IPs and they carry it forward and think everything going to be better or they do a one refrac is good and they think all refracs are going to be better and it turns out that it's locational, right? And so we try really hard to be take a skeptical lens and be conservative about this. And I think that's why generally our preserves have been conservative and we tend to do well. So, I want to give a lot of credit to our team that we tend to see better results than that, but it also it comes down to a philosophy and I talked about this in my prepared comments of assets and operating, which is that you can't engineer bad assets, which is that you can try to pay a high discount rate for really bad assets. But at the end of the day, those assets aren't going to be resilient.

Speaker 2

And it goes when I was a stock analyst back in the day, I would always rather pay a premium for a really good management team and a really good company then pay a low price for a really bad stock because the chances were over time that bad stock or that cheap stock, something bad was going to happen because it was a bad company and it was not going to be resilient. And it goes the same thing for oil and gas assets, which is that you buy really high quality reservoirs and really high quality operators and chances are they're going to

Speaker 6

do good

Speaker 2

things with them. And I think that that's what our team really focuses on here, which is that you focus on the best operators in the best areas and you tend to be pleasantly surprised. I don't know, Jim, if you want to add to that.

Speaker 9

Yes. I think the other thing you think about too is that operators are always trying to innovate and be more efficient. So it's not just about getting more EU or more reserves out of it. They're also trying to optimize their artificial lift operations. So that's constantly changing and we're constantly updating our type curves based on what the operators are doing.

Speaker 9

So some of it is they're just getting oil out faster, right. It's not necessarily that they're going to get more EUR over the life of it. They just found a way to get more out more efficiently through the 1st 12 to 18 months, which is a big driver of NPV and IRR, which is what we want. And so we're constantly taking that into account. And like Nick said, we want to make sure that more often than not that the wells outperform versus underperform.

Speaker 9

So that's just part of our culture here of how we look at things. And we do constant look backs on performance, how wells are doing versus what we originally underwrote. And over the last 3, 4 years, we've been less than 5% off in terms of that. So we feel very confident about our underwriting here. This is just kind of a pleasant surprise by some of our operators in really good areas and they found a way to just do better than what we expected.

Speaker 10

Okay, great. Thank you. That's very helpful. And then as a follow-up, so Nick, in your prepared remarks, you called out and I thought this was kind of a good thing to call out and kind of a good insight is the potential for increased volatility. And you're talking about with respect to your own positioning as a company and the importance of kind of financial flexibility because volatility gives you different levers or things to pull or opens up opportunities.

Speaker 10

But I'm curious kind of just specifically because I think you were saying, well, with such low gas prices and also you might I think maybe you mentioned just that it's an election year or maybe it's just other just sort of the geopolitical dynamics sort of. But it does seem like a setup that we could see more volatility between now November December. And so I'm curious, were you specifically talking about, like, in terms of thinking about what might happen with your own,

Speaker 3

you know, with the volatility of

Speaker 10

your own stock and like other securities you could potentially bring in? Or are you talking more broadly like commodity prices as well and the potential for any type of wild swings around anything like that. Like just I want to be clear because I thought that was good point, but I'm just curious what you're thinking. Are you talking what things are the volatility you're talking about price, commodities, stocks, bonds, all of it?

Speaker 2

Yes. I mean, I think look, I think I mean, I think volatility means volatility. I think that if you look at our track record over the last few couple of years, we bought our bonds, we bought our stock, we have bought assets, right? We bought gas assets. We bought oil assets.

Speaker 2

We've done a lot of, I would say, weird things during periods. We bought we spent $200,000,000 buying distressed assets during 2020, right? It was 90% of our capital, our organic capital basically went to 0 during 2020, right? And so I think during the there are periods you want to be in a position to be able to act if extreme events happen. Now obviously, you're at an extreme point in natural gas spot pricing.

Speaker 2

I'm not sure you're at an extreme point in terms of the strip or in terms of asset pricing or you haven't seen distress certainly in gas for the assets themselves necessarily yet. But I think the overall market, to the extent we see a change in interest rate cycle or things like that, we could definitely see things happen. And so I think we have to see what happens with the overall economy. Yes, it is an election year and typically you can see changes in policy and other things that could potentially happen. And so I think we just always want to be in a position to act.

Speaker 2

And I always use that term dynamic, and I think it's because we want to have the flexibility to make changes to those decisions. And that's why having a business walk softly and carry a big step, right? To have that cash flow, to be able to make those dynamic decisions and make changes, we've been able to buy our bonds in the low 90s. Now they trade at well north of par, right? You have those ability to make good decisions when the market gives them to you.

Speaker 10

Okay, very helpful. Thank you, guys.

Operator

Your next question comes from the line of Lloyd Fearing of Jefferies. Please go ahead.

Speaker 11

Hey, guys. Thanks for all the info. Let me come about the CapEx differently. It seems like there's a lot of concern, but if I look at the CapEx versus the TILs, it feels like the AFEs are either in line or coming down. And maybe you can comment on that.

Speaker 11

And then also, you talked about a little bit of deflation at Mascotte Novo. And so maybe you can just comment on that as well.

Speaker 3

Yes. Hey, Lloyd, this is Adam. I made some comments in my prepared remarks that we're definitely seeing it across the board both from an absolute and normalized on a lateral foot basis. And we've certainly seen that with our Mascot assets as well as our Novo assets. And I think that's both a function of what we're seeing in terms of drilling, as well as just kind of spud to tail timing as well.

Speaker 3

I think some of the tangibles casing those types of things are still pretty sticky. But operators are doing a pretty good job of being able to kind of pick away around the edges and see that persisting.

Speaker 11

Okay, thanks. And then, Nick, just remind us more free cash flow coming forward, debt targets?

Speaker 2

Yes. I mean, we still target around one time. And I think we were about 1.1 last quarter, we were about just over 1.2% this quarter and that's just a function that we closed our Northern Delaware acquisition. So we did that. We should see absent any material change.

Speaker 2

And again, we're already close to May here, a material step down this quarter again, absent some unforeseen change in commodity prices over the next couple of months. But just given the fact that CapEx is scheduled to step down some, so we should see a material step down in the revolver balances in the second quarter. Awesome. So we expect we should be right back on the trend within the quarter or 2.

Speaker 11

Thank you, guys.

Speaker 6

Yes.

Operator

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

Speaker 10

Thank you. Good morning. Thanks for taking my call. Just a quick one on the M and A purchase cadence. So you had a pretty good clip in Q1.

Speaker 10

Are you seeing the same type of opportunity given current pricing levels? And as you look forward through, what's expected to be a relatively volatile period in the market?

Speaker 2

Yes. I mean, there's certainly no shortage of opportunities. I think it's always about balancing the risk you, right? It's just about I think I would just tell you, I think the higher the the lower the price goes, I think our risk appetite increases. I think the higher the price of oil goes, probably the more wary we're going to become.

Speaker 2

So you have sort of a, I'd say, from a $65 to $85 range, it's probably a better range than above those, I'd say, below $70 I think you're going to find that sellers are probably going to dry up because they're going to feel that they're not getting good value for their assets. But I think that in that range, that's sort of a good enough environment from a pricing perspective. I think that we're in a relatively decent market. I think that, again, the beginning of the year is always kind of a tricky if you look at our pattern, generally, we've done less M and A in the first half of any year, historically speaking, for whatever reason. It's just if you go back, historically speaking, done very little stuff in the calendar going back my entirety of my time here.

Speaker 2

So it tends to be something that happens towards the middle or the back half of the year. So stay tuned. But I do think that we're not short opportunities. So I can tell you that much, Adam. I'll add to that.

Speaker 3

No, I mean, I think you nailed it. I think it's a function of banks and organizations bringing these packages to market and what the lead time is on a lot of that stuff. You've got the smaller competition kind of coming in with a bullish view on oil pricing, which creates some volatility in terms of the ground game. What I'd say, I mean, even just looking at some of our April activities, we've been making some pretty strong headway in that regard being able to pick things up across all three of our respective basins. And then to Nick's point, it's really just going to be a balance of what that quality looks like.

Speaker 3

Seller expectations and expectations can be wildly different, especially in a volatile commodity environment. And so if we're bouncing along at relatively static pricing for an extended period of time that generally level sets expectations and narrows that bid ask spread. But if you have a material step up or a material step down in the short term, that's going to just widen it.

Speaker 10

Understood. Thanks for the clarity. And just a quick follow-up. You've talked pretty at length about the productivity improvements on the oil side. Are you I mean, did you or what does your perspective sit on the nat gas side?

Speaker 10

I know it's a much smaller perspective or much smaller piece, but going forward, should we expect to see the kind of a similar cadence in your view?

Speaker 2

Yes. I mean, I would just say like our I mean, I just tell you from my perspective and I'm not the engineer here, but our Marcellus assets have outperformed really from the get go. They have outperformed our internal modeling literally every quarter since we've owned them. Literally, I think there's not a month, Jim, tell me I'm wrong, but they have done an excellent job. And I think we've had a little bit less development than we had initially modeled.

Speaker 2

But the decline rates have been shallower. They've just consistently outperformed. I mean, no wonder gas is 1.80 dollars right, because they just simply don't decline. I don't know if

Speaker 9

you want to add to that. Yes, that's right. EQT, they completely changed the design of these wells from when we originally bought the asset. They've widened the spacing, changed the completion design, changed the pullback methodology. So these wells just continue to hang in much better than we had expected.

Speaker 9

And obviously, there's not a ton of activity that's been happening out there. And so kind of our modeling is still kind of based on old methodology and we continue to update that as we go and we see more. But yes, like Nick said, the Marcellus stuff just continues to outperform and the Utica beat in the Q1 as well, those wells continue to clean up better than we had expected. So that was a nice outperformance there as well. Yes.

Speaker 2

And I mean, well, it's not huge for us. If you've actually model out our Appalachian asset and just how much cash flow it has generated for us over the life of its ownership, it has been an amazing investment for us. It is paid out in less than a year and then just continues to for very little capital investment continues even with low gas prices to generate significant cash flow for us. It's been a great investment.

Speaker 10

Good. Thanks for the clarity.

Operator

Your next question comes from the line of Noel Parks of Tuohy Brothers. Please go ahead.

Speaker 12

Hi, good morning. Just had a couple. I was wondering, do you have any sense of maybe where incremental service cost trends are heading in your basins? Feel like so far in earnings season, we've been getting sort of a mixed picture, just depending on location and type of service. So any thoughts you have would be great.

Speaker 2

I would say no, very modest deflation we've seen year to date, but I would imagine as oil prices have increased, I would guess that's a flattening trend.

Speaker 12

Great. Fair enough. And I was just wondering, you did mention what we've all seen with gas in the Permian

Speaker 10

and so

Speaker 12

forth. And I believe over time you've discussed that you are pretty vigilant about the state of infrastructure when you're looking at potential deals out there and look to steer clear of areas where you have any questions or doubts. I'm just wondering, are you getting deals brought to you that fall into that category these days?

Speaker 2

Yes. I mean, I think a lot of the specifically a lot of assets in parts of the Delaware, you have to be very wary around, particularly as you get parts of New Mexico and other parts where they might be cringy. They may not have access to might not have access to midstream systems and you have to understand that going into it. You need to know who your operator is. And so absolutely, I mean, all of that goes into the equation.

Speaker 10

You need

Speaker 2

to know who your operator is. Do they have firm access? Are they interruptible? Can they be kicked off the system? All that stuff.

Speaker 2

That's why we tend to you hear us talk a lot about this, but knowing who your operator is, knowing what kind of midstream access they're going to have is critical. I think as an issue overall, I think it's something that it's the Permian Basin. So it will over time get solved, but I think it's going to be chronic for some time. In the end, it's a minor economic annoyance, meaning it doesn't really destroy overall it doesn't destroy the economics of the wells. It's just it's something that we can model and then still make the wells economic, but it certainly doesn't help.

Speaker 3

That's right. You just need to make sure that you're modeling it. Yes. Right.

Speaker 2

From the

Speaker 3

cost as well as the development time extended.

Speaker 2

Yes. I mean, if I was

Speaker 10

if we were

Speaker 2

trying to buy something in Alpine High or something like that, it might be a different equation, but that's not.

Speaker 12

Great. Thanks a lot.

Operator

That concludes our Q and A session. I will now turn the conference back over to Nick O'Crani for closing remarks.

Speaker 2

Thank you all for joining us today. We appreciate your continued support and look forward to touching base with you in the coming weeks.

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Earnings Conference Call
Northern Oil and Gas Q1 2024
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