Earthstone Energy, Inc.

Good morning and welcome to Earthstone Energy's conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. Joining us today from Earthstone are Robert Anderson, President and CEO, Mark Lumpkin, Executive Vice President and CFO, Steve Collins, Executive Vice President and COO, and Scott Thelander, Vice President of Finance. Mr. Thelander, you may begin.

Thank you and welcome to our second quarter 2022 conference call. Before we get started, I would like to remind you that today's call will contain forward-looking statements within the meaning of federal security laws. Although management believes these statements are based on reasonable expectations, they can give no assurance that they will prove to be correct. These statements are subject to certain risks, uncertainties, and assumptions as described in our annual report on Form 10-K for the year ended December 31st, 2021, the second quarter of 2022 earnings announcement, and in our Form 10-Q for the second quarter that we filed yesterday. These documents can be found in the investor section of our website, www.earthstoneenergy.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. The conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings announcement issued yesterday. Also, please note, information recorded on this call speaks only as of today, August 5th, 2022. Therefore, anytime sensitive information may no longer be accurate at the time of any replay listening or transcript reading. Today's call will begin with comments from Robert Anderson, our President and CEO, followed by remarks from Steve Collins, our COO, and Mark Lumpkin, our CFO, and then we'll have some closing comments from Robert. I'll now turn the call over to Robert.

Hey, thanks, Scott, and good morning, everyone. Thank you for taking the time to join us this morning and for those on the call as well as to those listening in on the webcast. Our strong second quarter results reflect the meaningful contributions of our acquisitions to date. which have considerably boosted our production and substantially increased our free cash flow generation, both to company record levels. In late June, we announced the Titus acquisition, which we expect to close this month, and which adds to our growing position in the Northern Delaware Basin. This acquisition is expected to increase our total daily production to a level approaching 100,000 BOE per day and will add to our high margin drilling inventory. We are acquiring a high return de-risk drilling inventory with 114 gross, 86 net operated locations, with 75% of these net locations along the state line trend area of New Mexico and Texas, which is considered by most in the industry as some of the best inventory in the country. As a quick reminder, with Titus, we will close on seven acquisitions, six of them being in the Permian since the beginning of 2021. Recall at that time we were producing somewhere around 15,000 BOE per day. We have spent $2.5 billion with consideration consisting of about 70% cash and 30% equity, while the proved developed value of those assets have a PV10 of $2.7 billion at the time of acquisition. So we gained more proved developed value than the combined consideration. Not only did we get to about 100,000 BOE per day with these acquisitions, the combination of all these acquisitions has provided us with close to 700 locations for free. With our largest two acquisitions closing in February and April of this year, we have had very substantial integration work in the first half of the year by all of our teams. On our most recent acquisition, which was the Bighorn Assets in the Midland Basin, we're pleased with opportunities operational transition and our efforts to optimize production and to reduce operating costs. The close proximity of this asset to our existing assets has allowed for synergies that we expect will be evident in operating cost efficiencies in the future. We also entered the Delaware basin with our acquisition that closed in February and have now been running a two rig drilling program for about five months and are seeing strong well results. Additionally, we've been able to improve on drilling and completion efficiency since taking over these operations. As a result of our operating procedures, we have cut a few days off of our drilling times and now expect to spud a few more wells in 2022 on these legacy Delaware Basin assets. This offsets some of the inflationary pressures we are facing, but also allows us to moderately accelerate our development pace in the Delaware Basin. Steve will provide some additional comments shortly. We anticipate picking up a fifth rig late in the third quarter as it is released from another operator, which will be used in the Delaware Basin. So for the fourth quarter, we expect to have three rigs in the Delaware while we continue to have two rigs in the Midland. This will add about $40 million to our capital expenditure guidance, which we have updated with our earnings release. And Mark will provide some more information. For the second half of the year, we expect to spend between $300 and $325 million which includes the additional rig, a few more legacy Delaware Basin wells getting spud, and incorporates inflationary impacts seen to date and expected for the balance of the year. As I mentioned last quarter, our near-term cash flow, free cash flow, will be allocated to paying down the outstanding debt under our credit facility. And we do expect to be well under our targeted one-time debt to last quarter annualized adjusted EBITDAX ratio by year end, including the impact of Titus. Now I'll turn the call over to Steve to provide an update on operations.