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 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 Chief Executive Officer, Mark Lumpkin, Executive Vice President and Chief Financial Officer, Steve Collins, Executive Vice President and Chief Operating Officer, and Scott Thelander, Vice President of Finance. I'll now turn the call over to Clay Johnson, Director of Investor Relations. Please go ahead.

Thank you, and welcome to our fourth quarter and full year 2022 earnings conference call. Before we get started, I'd like to remind you that today's call will contain forward-looking statements within the meaning of federal securities law. Although management believes these statements are based on reasonable expectations, they can give no assurances 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 31, 2022, and the fourth quarter and full year 2022 earnings announcement. These documents can be found in the Investors 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. This conference call also includes references to certain non-GAAP financial measures. Reconciliation 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, March 9, 2023. Therefore, any time-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 turn the call over to Robert.

Thanks, Clay. And good morning, everyone. Appreciate you all taking time to join the call or listen via the web. Over the past few years, even prior to COVID, Earthstone's board and management team recognized the importance of scale, and we have been on a mission to strategically position the company as a significant operator in the Permian Basin, and as you all know, the most prolific and lowest break-even onshore basin in the United States. We went down a targeted path of identifying, evaluating, and executing upon strategic opportunities to grow our business prudently. Our success in these efforts, including during this past year where we invested over $2 billion, directly reflects our outstanding employees' hard work and perseverance. I'm also excited about the many opportunities we see that will allow us to continue growing our business for our shareholders' immediate and long-term benefits. However, to be clear, we are not targeting a particular size or production level, but rather we are focused on creating additional value. I'm exceptionally proud of the company we've built over the last few years and the entire team we have assembled who have been responsible for the success we saw in 2022 and will lead us into the future. Our focused consolidation efforts have materially repositioned the company and provided our shareholders with an investment in a much larger entity underpinned by a solid asset base with more than 10 years of future drilling locations and a substantial operating footprint in the Permian Basin. Not only during the fourth quarter, but throughout 2022, our team has outperformed expectations and achieved new company heights. This includes record full-year production levels, record adjusted EBITDAX, and a generation of over $500 million of free cash flow. The success our team achieved in 2022 was clearly amazing. Hearthstone continues to demonstrate that we are a proven acquirer with the ability to integrate these substantial assets and put up great performance metrics quarter after quarter. As I mentioned, 2022 was a transformational year for our company, with the closing of three significant acquisitions totaling more than $2 billion. And I'm pleased to report that we have successfully integrated all of those assets into our business. These three acquisitions have delivered over 575 high quality, high return locations. The quality and productivity of this recently acquired inventory are clearly apparent in our fourth quarter oil production levels. Our production has increased to almost 105,000 barrels of oil equivalent per day in the fourth quarter of 2022, which is an increase of approximately 250% year over year. The record-setting production level was driven by a number of significant new wells that came online and supported our strong fourth quarter performance. The oil component of our fourth quarter production topped 46,700 barrels per day, which exceeded the midpoint of our oil guidance range by 9%. Steve will highlight several wells that drove our strong quarterly outperformance. As a result of strategic acquisitions and targeted development activities on our existing acreage, we saw an approximate one-and-a-half time increase in our year-over-year approved reserves. Reserves increased to about 368 million barrels of oil equivalent under SEC guidelines with approved developed component of about 72 percent. The value of those approved reserves stands at $4.6 billion at strip pricing, and the approved developed component alone is valued at more than $3.6 billion. which is more than our current enterprise value of about $3 billion. In addition to driving value from our asset base, we always look for additional opportunities to create value per share. In early October, we returned approximately $44 million to our shareholders through the proactive repurchase of 3 million shares of our Class A common stock from Warburg Pincus, reducing our share count by about 2%. The private equity investors in Earthstone have continued to support our consolidation strategy. They will continue to focus on the remaining shares they own while seeking to maximize the value of their investment. As Warburg has done previously, we expect them to manage future sales in the same prudent manner. NCAP, as our largest shareholder, has been with us now on three separate occasions, and with their current investment in Earthstone, they too are focused on continuing to see us grow shareholder value further. Our focus on creating debt adjusted per share growth for all of our shareholders is clearly exhibited on page six of our earnings presentation. Since 2020, we have increased production and proved reserve value on a per share basis by 185% and 289% respectively. And finally, the strength of our balance sheet has been and will continue to remain a top priority at Earthstone. Despite using a considerable amount of debt to fund over $2 billion of acquisitions in 2022, our focus on a conservative balance sheet management and our utilization of free cash flow to pay down debt result in us ending the year with a lower leverage on a last quarter annualized debt to EBITDAX ratio than the level at which we entered the year. Growth and reduced leverage, how's that for a one-two punch? Looking ahead, our 2023 plans call for a five-rig program with three rigs active in the Delaware Basin, focusing on our state line area during the first part of the year, and two additional rigs in our Midland Basin properties. Previously reporting guidance, our plans call for an investment of approximately $750 million, and we expect to deliver production of approximately 100,000 BOE a day for 2023 projects. both at the midpoint of guidance. With all that, I'd like to now turn the call over to Steve to provide an update on operations.