Magnolia Oil & Gas Corporation Class A

Good morning and welcome to the Magnolia Oil and Gas fourth quarter and full year 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Jim Johnson. Please go ahead.

Thank you, Gary. Good morning, everyone. Welcome to Magnolia Oil & Gas' fourth quarter earnings conference call. Participating on the call today are Chris Stavros, Magnolia's President and Chief Executive Officer, and Brian Corrales, Senior Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. Additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10-K filed with the SEC. A full safe harbor can be found on slide two of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's fourth quarter 2022 earnings press release, as well as the conference call slides from the investor section of the company's website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Chris Stavros.

Thanks, Jim, and good morning, everyone. Thanks for joining us today. I'll provide some comments on our results and accomplishments during 2022, and we'll then give an update on our outlook for 2023 and how we plan to allocate our free cash flow during the year. Brian will then review our fourth quarter and full year 2022 results and provide some additional guidance before we take your questions. As we enter our sixth year as a public company, the core principles of Magnolia's business model established at the beginning are expected to continue. I've said previously that my plan is not to make significant changes or put my personal stamp on Magnolia. Throughout the halls here in the office and out in the field, every one of our employees is a Magnolia shareholder and it's aligned with our investors. We run Magnolia for our shareholders, and my objective will always be to do what is in the best interest of our investors. We plan to maintain our discipline around capital spending while keeping low levels of debt, and we expect to continue our track record of achieving moderate annual production growth while generating significant amounts of free cash flow with strong operating margins. 2022 was a record year for Magnolia, and I want to recognize our team's strong contributions, which helped support Magnolia's exceptional financial and operational results. We achieved goals that further solidified the strength of Magnolia's business model and strategy while also marking some important milestones. Record production in 2022 combined with higher product prices and our team's continued focus on managing costs all contributed to expand our full-year pre-tax operating margins to 63%, leading to record net income for the company. Last year, we successfully executed our development program at Giddings, and the positive performance of this asset is reflected in our financial results. Giddings now represents more than half of Magnolia's overall production and approved reserves, and is a significant contributor to our strong financial performance. Our Giddings development was responsible for driving overall productivity during 2022, while spending only 34% of our total EBITDAX on DMC and associated facilities capital. We generated a record $823 million of free cash flow last year and returned 54% of this amount to our shareholders in the form of share purchases and a regular-based dividend, which is paid quarterly. We repurchased more than 15 million Magnolia shares during 2022, reducing our diluted share count by 8% compared to 2021 levels. Our ability to deliver moderate annual production growth in our production volumes and reducing our outstanding shares builds greater dividend per share payout capacity over time and is demonstrated by the recent announcement of a 15% increase to our quarterly base dividend. The increase to our dividend reflects our strong operating and financial performance achieved during 2022 and demonstrates our ongoing confidence in the outlook of the business. Inclusive of the cash returned to shareholders and after spending approximately $90 million on some small bolt-on oil and gas property acquisitions during the year, our cash balance nearly doubled during 2022, ending the year at $675 million. While Magnolia's unhedged business captured the benefit of much higher product prices last year, this year's plan will focus on improving our execution and generating further operating and cost efficiencies in order to partially offset the impact of higher oilfield service costs. Operationally, we expect our 2023 plan to be quite similar to last year. We expect to continue to operate a two-rig drilling program, which we estimate should generate full-year production growth of approximately 10%. year and starting in the first quarter. As I noted earlier, we will stay disciplined around our DNC capital and limit our spending approximately 55% of EBITDAX, which would provide us with significant free cash flow. We estimate the current year's capital expenditures to be approximately $500 million, with the year's heaviest capital outlays occurring in the earlier part of 2023. Our supply chain and operations team did a superb job of strengthening the valued partnerships with our key vendors well as managing through the inflationary environment of rising oil field service costs that occurred throughout 2022. These efforts have helped to mitigate some of the increased costs and with recent signs indicating that some of the service cost inflation starting to flatten or even decline modestly in certain products and services. We plan to continue to allocate a sizable portion of our free cash flow toward enhancing the value of the existing business and improving our per share metrics. This includes our ongoing share repurchase program, where we expect to repurchase at least 1% of our outstanding shares each quarter. We also expect to pursue small accretive bolt-on oil and gas property acquisitions in and around our current operating areas. These acquisition opportunities would have characteristics comparable to our existing assets and match some of the skills and learnings from our experience in Giddings. As an example, in late 2022, we were able to acquire some acreage, minerals, and additional working interests in Giddings, and primarily outside of our core development area. This further builds on our strong position in the play and is in line with our strategy of incrementally improving our opportunity set as well as our drilling economics. Allocating our free cash flow through these actions is intended to enhance the underlying value of the business, expand our dividend per share payout capacity, and strengthen our investment proposition dividend growth over time. I'll now turn the call to Brian who will review our fourth quarter and full year financial results.

Thanks Chris and good morning everyone. I will review some items from our fourth quarter and full year results and refer to the presentation slides found on our website. I'll also provide some additional guidance for the first quarter of 2023 and remainder of the year before turning it over for questions. Beginning with slide three, Magnolia continued to execute on our business model as demonstrated by a fourth quarter and full year 2022 financial and operating results. We established records for many of our key operating and financial metrics during the year, including production, free cash flow, net income, and most notably operating income margins of 63% during the year. The overall results for 2022 were supported by very strong product price realizations. Our efforts around cost containment and supply chain management and stronger overall production growth. During the fourth quarter, we generated total net income of $255 million, which included a non-cash tax benefit to earnings of $66 million. Excluding this non-cash tax item, we generated total adjusted net income for the quarter of $189 million, or $0.88 per diluted share. Our adjusted EBITDAX for the quarter was $268 million, and for the year was $1.3 billion. Total capital associated with drilling, completions, and associated facilities for the fourth quarter was $140 million, or 52% of our EBITDAX. DNC capital for the year was $460 million, or just 34% of our EBITDAX. Fourth quarter production volumes grew 6% year-on-year to 73.8 thousand barrels of oil equivalent per day. For the year, company production volumes grew 14% to 75.4 thousand barrels of oil equivalent per day. As Chris noted earlier, we repurchased 15.5 million shares during 2022, reducing our diluted share count by 8% year over year. Looking at the 2022 cash flow waterfall chart on slide four, we started the year with $367 million of cash. Cash flow from operations before changes in working capital was $1.25 billion, with working capital changes partially offset by other items benefiting cash by $54 million. Our DNC capital incurred, including land acquisitions, was $465 million and spent $90 million on several small bolt-on oil and gas property acquisitions. During the year, we allocated $352 million towards share repurchases and paid dividends of $90 million. We ended 2022 with $675 million of cash in our balance sheet, an increase of more than $300 million during the year, and after returning, approximately 54% of our free cash flow to shareholders in the form of share repurchases and dividends. Looking at slide five, this chart illustrates the progress of the reduction in our total outstanding shares since we began our repurchase program in the second half of 2019. Since that time, we have reduced our total diluted share count by 52.3 million shares, or approximately 20%. Magnolia's weighted average fully diluted share count declined by 2.4 million shares sequentially, averaging 215.4 million during the fourth quarter. We currently have 8.9 million shares remaining in our current repurchase authorization, which is specifically directed toward repurchasing Class A shares in the open market. Turning to slide six, and as Chris discussed earlier, we recently announced a 15% increase in our quarterly dividend to 11.5 cents per share, which is payable on March 1st and providing an annualized dividend payout rate of 46 cents per share. The increase in our dividend is supported by the 24% year-over-year increase in our production per share that we achieved during 2022. Our plan for annualized dividend growth of at least 10% is part of Magnolia's investment proposition and supported by our overall strategy of achieving moderate annual production growth and reducing our outstanding shares by at least 1% per quarter. We plan to examine our dividend payout rate at least annually and after assessing our full-year results, recast in a $55 oil price environment. Magnolia has the benefit of a very strong balance sheet, and we ended the quarter with a net cash position of $275 million. Our $400 million of gross debt is reflected in our senior notes, which do not mature until 2026. Including our fourth quarter ending cash balance of $675 million in our undrawn $450 million revolving credit facility, our total liquidity is more than $1.1 billion. Our condensed balance sheet and liquidity as of December 31st are shown on slide 7 and 8. Turning to slide 9 and looking at our per-unit cash costs and operating income margins, our total adjusted cash operating costs, including G&A, was $12.15 per BOE in the fourth quarter of 2022. That's an increase of $0.83 per BOE compared to year-ago levels. The year-over-year increase was primarily due to higher production taxes due to higher product prices and higher LOE as a result of increased oil field service costs and higher workover-related activity. Including our GD&A rate of about $9.40 per BOE, our operating income margin for the fourth quarter was $29.16 per BOE, or 57% of our total revenue. Magnolia had a very successful organic drilling program during last year. Our 2022 approved reserves increased 16% to 157 million barrels of oil equivalent, and we replaced 179% of our 2022 production. Magnolia books only one year of approved undeveloped reserves, and as a result, 80% of our 2022 approved reserves were developed. The approved undeveloped reserve represent what we plan to convert to approved developed during 2023. Turning to guidance for the first quarter and for the remainder of 2023, we are currently operating two drilling rigs and plan to continue this level of activity through the end of the year. One rig will continue to drill multi-well development pads in our Giddings asset. The second rig will drill a mix of wells in both Carnes and Giddings areas, including some appraisal wells in Giddings. We continue to improve our operating efficiencies in the Giddings field and are seeing signs that cost inflation is flattening for some of our drilling, and completion materials compared to last year's steep increases. We estimate our DNC capital to be between $490 and $520 million for the full year 2023, which includes some non-operated capital that is expected to be similar to 2022 levels. At this level of spending and activity, we expect to deliver full-year production growth of approximately 10%, with most of the growth expected to come from our development program beginnings. For the full year 2023, we expect our effective tax rate to be approximately 21%, with most of this being deferred. Our cash tax rate is expected to be 6% to 9% for 2023. Looking at the first quarter of 2023, we expect total production volumes to be between 80,000 and 82,000 BOE per day, and our DNC capital is estimated to be in the range of 140 and 150 million. We expect our first quarter capital expenditures to be at the highest quarterly level for the year, with modest reductions in spending in subsequent quarters. Our price differentials are anticipated to be a $3 per barrel discount to MEH. Our fully diluted share count for the first quarter is estimated to be approximately 214 million shares, which is 6% below year-ago levels. We're now ready to take your questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Leo Mariani with Roth MKM. Please go ahead.

Hi, I was hoping you could talk a little bit more about some of the acquisitions in the fourth quarter. You said that it sounds like the preponderance of this stuff was outside the core at Giddings. I guess that certainly implies some confidence in the appraisal program. So maybe you could just talk a little bit more about how the appraisal program went in 2022 and Are you seeing more of these bolt-on opportunities of late than maybe you had, say, a year ago?

Sure. Yeah, good morning, Leo. Thanks for the question. You know, we did have a pretty active appraisal program last year, and things went fairly well. We expect that to continue somewhat into this year, too. Remember, there's sort of a large... swath of acreage in Giddings that we have our hands on, more than 600,000 gross acres, so there's a lot to go through. And we've been doing that gradually. This has really led to us identifying several new and, frankly, promising areas in Giddings. We plan to continue with some of that appraisal work in and around our acreage over time and clearly to improve our understanding. Frankly, it's some of that appraisal work and activity that provided us with a lot more confidence and which led to one of our larger recent acreage acquisitions. So yeah, we'll continue to be doing more of that. It may lead to some infill acreage acquisitions over time. It may add to other learnings that could sort of, um, you know, uh, steer us in a, in a little bit of a, uh, an adjacent direction, maybe as the best way to say it, but I think it'll, it'll supplement, it's going to continue to supplement some of what we do around, um, propping up, um, our, our extending, um, and sustaining Giddings even further and, and, you know, utilizing some of the learnings that we've, um, we've had over the last several years. So it continues to go well. We'll see what sort of actual amount of money, amount of money we allocate to this. It'll depend, but I think it's, you know, frankly on the, on the mineral side, you know, so if you know where you're going to drill that, that's obviously a, a huge help there, and we have a good feeling around that. So appraisal helps, and that's a boost to our economics. Better than sitting on the money, you know, earning, you know, 3%, 4%, even though that's not so bad these days, but it's better than that, clearly.

Okay, very thorough answer. Appreciate that. Could you provide a little bit more details around the performance of the 8-well gettings, Pat? I know you guys said it was sort of better than expected. Can we get maybe a little more color around that? Are there any other plans maybe for large pads of that nature here in 23?

Yeah. We tried to be as upfront about it as possible back early in the year when we had, frankly, experienced a couple of things that offset the expectations around our volumes for the fourth quarter, which were weather-related items. and certainly the large eight-well pad that was delayed a little bit, and I mean a little bit. You know, you're talking about a number of days that you can count on one hand. But when you're banking on one eight-well pad for the bulk or by and large, large proportion or most of your activity in a particular period, and especially late in that period, you know, if things slip a little bit, and namely because you hadn't done it before, not because of any other particular reason, it stands out. And that was really the issue. So we had greater reliance on this one pad, and that really made the difference. The pad's been online now since December and is actually performing better than our expectations. So no issues around that. You know, will we be doing any more 8-well pads here anytime soon? We're not planning on it. You know, I was joking the other day, and I said if we had a chainsaw and it had an 8-well pad, we'd just cut it in half maybe. But I just – I don't think so. You know, this is sort of a more unique circumstance. Nothing beyond that.

Okay. Thanks, guys. The next question is from Jeff Jay with Daniel Energy Partners. Please go ahead. Good morning, guys.

Hi, Jeff. So just simply for me, looking at Q4 DNC, annualizing that, it looks like a 10% reduction in your guide for 2023. Just wondering kind of, you know, what the sort of components of that are and really trying to get to sort of see where you see sort of the greatest, I guess, either sort of flattening or actually deflation in your service costs. Where are you seeing pricing and where's it getting looser?

Yeah, what you're seeing for fourth quarter, and you'll see it in the first quarter as well, which we talked about and we talked about just in terms of the guidance, the capital that we're forecasting or viewing right now is going to be more heavily weighted in the back end of last year and the front end of this year. And that's really just the plan of our scheduling. And so it's really somewhat front end loaded this year. And you'll see that develop and evolve in some of the volumes and production in the first half of the year. So you'll see some growth clearly stem from that. And then the capital will start to decline as we move into 2Q, 3Q, 4Q. So it'll come down a bit. So annualizing either, frankly, either one of those numbers is probably not the best way to sort of view the overall outcome for 2023. As far as you know, where the cost inflation is showing up or maybe not showing up or seeing some, you know, flattening out. You know, you're seeing some decline maybe or softening. Softening is probably a better way to put it. Flattening in steel, maybe some, you know, OCTG items, you know, clearly fuel, maybe drilling fluids. That's sort of what you're seeing. I think... You know, rigs are still well supported. But, you know, frankly, given where we've come in terms of product prices here in the last, you know, three to six months, and especially around natural gas, I would think that there's a bit of a disconnect in current costs for some services and materials. relative to where we are in the cycle. This is, you know, as well as I do, this is sort of a lag event. And, you know, folks are going to try to take it out of our hides as best they can. And they'll do that for a bit. And then things will soften up, I think.

Yeah, that's super helpful. And then, you know, thinking about the current pricing environment, and, you know, it's obviously a little soft. Will that have any impact on your ability to kind of get some of the bolt-on deals you guys may be looking at now or interested in going forward?

I don't think so. I don't see that at all. I'm not sure why it would. Nothing that I can say, frankly.

All right. Well, thanks for that, guys. I appreciate it.

Yeah, sure. See you soon.

The next question is from Nicholas Pope with Seaport Research. Please go ahead.

Morning, guys. Hi, Nick. Hey, Nick. I was hoping you guys could talk a little bit about the Carnes asset. You know, it's obviously a little further along in development. Maybe if you could provide a little context on kind of inventory there and how you're thinking about kind of what you have available on the operated side versus the non-operated side and the Carnes side of things.

Yeah, sure. I mean, look, at the pace that we're going – And, you know, like we said, we're utilizing one sort of devoted rig in Giddings and the second rig, you know, floats around Giddings and a little bit of Carnes. And, you know, so, I mean, proportionally on that basis, I mean, there's more for us to do. It's a simple, you know, sort of decision on our part frankly, around, you know, some of the returns and some of the, you know, ultimate performance that we're seeing out of the Giddings wells that is, you know, clearly led us or steered us more to allocating capital a little bit away from Carnes as opposed to sort of, you know, just, yeah, if we wanted to drill a little bit more in Carnes, I suppose we could, but, you know, it's It tends to be a little bit, a lot of flush IPs and sharp production initially, and then it declines more rapidly, typically, than Giddings. Typically, you're just seeing longer productivity and some more efficiency out of the Giddings program, and that's really why we're doing it.

Got it. That's helpful. And then just as a follow-up on the cost discussion, I'm kind of curious, how do you all think about, I guess, the timing of kind of rigged contracts and some of these consumables that you mentioned kind of moderate a little bit in cost? Like, what is the timing? How long out do you kind of set up some of those contracts and some of that planning?

Yeah, I mean, without getting into too many specifics, I mean, you're looking at, you know, chunky periods of time of three to six months, let's call it. So, you know, there's not much more that we can do in this environment around that. You know, so I think it's just fine for the service providers. It's okay with us. We, you know, what we plan to do as always, and we've done this as part of our just trying to be efficient in supply chain and making sure we don't run into any problems or issues as far as getting things. We talk to the vendors and we keep in touch with them all the time. We're very much in their face as far as scheduling, planning, organizing, you know, working with them. We provide them with schedules. They also, they're confident in knowing that we're going to be there next week, next month, three months from now. We're not going to sort of pull the rug out from under them. And so that's very useful in developing a relationship, and it really cuts both ways.

That's helpful. That's all I got. I appreciate the time. Thanks, Chris. Sure.

The next question is from Tim Resvan with KeyBank. Please go ahead.

Good morning, guys. Thanks for taking my question. I want to start on the repurchase front. You know, you've been very steady on that. You know, Brian had mentioned 8.9 million shares left on that authorization. So, Chris, you know, if you could put your director hat on, you know, should we just assume that that would probably be kind of extended or increase the authorization program since you could run through that, you know, 3Q or 4Q this year?

Yeah, you know, as Brian said, you know, the share or purchase authorization that's approved by the board really is related only to the Class A shares that trade on the market. Remember, a private equity owner owns some small amount of A shares and some larger amount of Class B shares, and so the share repurchase program, the 8.9 million shares of the authorization is not related to the Bs. Putting my director hat on, I mean, look, you know, it's not, from my point of view, this is not an issue. If we want to authorize or try to get the board to authorize additional shares for a purchase, we'll go to the board and they'll do that. I fully anticipate that. I don't see why they wouldn't. I mean, this has been part of the investment proposition for Magnolia from the beginning. And, you know, as I said, and I really try to double down on this, we're trying to create this dividend per share payout capacity enhancement. And so by continually repurchasing our shares that we think are at a good value, We just enhance that capability over time.

Okay, thanks. I just wanted to make sure that that would be part of the medium long-term plan. It sounds like it is. Absolutely. Okay, great, great. And then, you know, on the acquisitions front, you know, big number in 4Q, $78 million. So kind of two questions related to that. First, was there production that came with those acquisitions, And then secondly, as you look forward to kind of what, you know, you're sitting on a lot of cash here. How big could that be opportunistically? Would you go to $300 million, $400 million for the right opportunities this year? Just trying to understand kind of what, you know, what your appetite is or how big you can get on that front. Thanks.

Yeah, sure. I mean, you know, the $78 million in the quarter or the $90 million for a year, I mean, frankly, I don't view that as a large opportunity. you know, number. It's just larger than maybe some things that we've done fairly recently. And so anything, anything of any size is probably going to stand out. We did all this and we sort of walked you through and we ended with, you know, 700 million or thereabouts of cash. And so, you know, having a little bit more cash right now, probably not such a terrible thing, you know, especially given some of the uncertainty around the economy. At least we're getting a little bit more interest and offsetting almost all the cash interest expense. Having said that, we're not Bank of America. The goal of the money is to find a better use for it. It generates stronger returns and helps the business over time. So we'll continue to execute on the model with the moderate growth that we talk about. Frankly, we've overshot that. And we'll continue to repurchase shares and continue to pay a safe and growing dividend. As you know, we have this sizable private equity owner. We'll continue to accommodate their sales process over time. I can't say if, but I can't say when that will happen, but we'll be very supportive through our own purchases around that to help them. The M&A... As I said, this included a mix of acreage and working interests and minerals. Could we go larger if we found the right opportunity? Yeah, sure. We could do that. The business doesn't need a lot of money to sort of continue to run well and do what we need to do execution-wise. We found that out the hard way. you know, during COVID, but, you know, where we really didn't burn much cash at all. And so, you know, if we only spend 55% of our gross cash flow, you sort of generate free cash flow, you know, year in, year out. So we're pretty, you know, pretty focused around that and compensated around that. So, you know, if we find the right deal, we'll find the right opportunity that improves the business and enhances sustainability of the business and provides us more running room. Yeah, you know, but we're not, I would tell you we're not looking to do a deal where we would require any additional outside financing. So it's sort of limited to our capabilities around what we have on hand in terms of cash and also around our skill set.

Okay, thanks for that detail. And just It closed the loop. Can you disclose any production that came with the acquisitions in the fourth quarter?

Sorry, yeah. No, so it was very small. I mean, not a consequential amount, immaterial amount of production volumes. Okay.

All right. Thanks so much.

Again, if you have a question, please press star, then 1. The next question is from Noel Parks with TUI. Please go ahead.

Hi, good morning. Good morning. Good morning. Just a couple of things. You talked about expecting to see some efficiencies this year that could help offset some of the service cost inflation. I wonder if you could just talk a little bit about it. Most operations are working on different efficiency projects. all the time. I was wondering, are there any particular resource shifts, I mean, more staff or shifting staff around various functions to tackle any particular types of projects in the field that you haven't before?

No, I wouldn't say we're shifting any staff or generating new staff to work on this, especially. I would tell you with Giddings, Remember I said we're entering our sixth year as a public company now. And so if you skip over the COVID gap, we really just got at this maybe in late 2020, more so 2021. And so we're in the earlier middle innings of what is the evolution of trying to get at Giddings and understand it better. And so there's more to, I think, be squeezed out of it So, you know, the usual operational efficiencies that, you know, most talk to or speak to in terms of improving our drilling feet per day and, you know, reducing our drilling days and frack stages per day improving. We recently set a new record on a pad in terms of the completion time. So, you know, there's still some of that to be done. And I think we'll see some benefit of that.

Great. I noticed it looked like there was a sequential decline in cash G&A between first quarter and from third quarter to fourth quarter. Certainly not complaining. Always good to see that direction on cost. Was there anything particular one time involved in in that that made for the difference?

Yeah, the cash G&A is a pretty small number for us. And so there's always or commonly can be some one-off items that pop up period to period. It could be an insurance item that comes up, payment, or it could be Bonuses for the executives or what I get whatever it is. I mean, it's it's hard to sort of predict evenly You know or with with a lot of precision quarter-to-quarter so, you know, I Wouldn't make anything of it. It's nothing that jumps out in my mind. I mean, there's some things even associated with some You know enter enter the share sales some costs associated with that so a very small items generally and

Gotcha. And just wondering one thing about reserves. Did you see any tight curve improvements or upward revisions in reserves this year with the engineers?

We did. We did. And, you know, you'll be able to see that, you know, more specifically once we put out the 10K, which will be here soon, very shortly. So we did speak to you directly there in terms of some performance, positive performance revisions.

Terrific. That's all for me.

Thanks. The next question is from Neil Dingman with Truist. Please go ahead.

Morning, Chris. I think I always know the answer to this for you or Brian, but could you just talk about just on capital allocation, when you guys think about buybacks versus divs these days, anything that caused you to change that plan?

Yeah, you know, I mean, the share of purchases, I mean, we talk about doing this 1% at least regularly every quarter, and there's nothing changing around that. But if you look at the last two years, we've probably done double that rate. And that's largely been to, you know, help out Entervest as they've sold down. So we've purchased a lot of shares from them. As that peels off or, you know, starts to go away here, you could see, you know, we're committing to the 1%, but you could see some of that, you know, excess cash that's been allocated to share repurchases move a little bit more towards dividends, and that's sort of my thought. But, you know, on the dividend, again, I've said this repeatedly, you know, you want to prudently grow into it. You don't want to rush to grow out of it. And so you just want to be steady and maintain the safety and security of that dividend. And so I wouldn't see us, you know, sort of leaning in on some sort of variable dividend process. We just want to grow that dividend steadily. And that's what good dividend growth companies actually do.

I was wondering if you were going to bring up that your wife liked dividends like your great leader once said. She does.

I always consult with her before.

And then with that, can I just have a follow-up on that?

More shoes, more shoes.

The immense amount of cash you all have, is that out there just in case with the intervest or could you talk about that cash that you have on the books? Very significant.

Yeah, it is. I mean, we'll see how things go with Enervest, and we'll see how things go with some M&A opportunities or bolt-ons that we can look at. I don't have anything in mind that's imminent right now, and so, like I said, it's okay to have a little bit of extra money in this sloppy environment. It's a Obviously not a great day to report results here with the sea of red out there today. We'll see where the day ends. But, you know, it's always not a bad thing to have a little bit more cash on hand given some of the general macro uncertainty and variability, volatility of the market these days. So feel very safe, secure. But, again, the point is that, you know, it just – It's not doing a lot for us just to sit there and look at it. It may make you feel better or someone feel better, but you'd actually want to put it to work to improve the business.

Great point. And then one last one, if I could, just on the development program over in Gideons, will that remain largely on that 70,000 or are you adding more acres to that piece?

Well, we did. That's what we did in the fourth quarter. And so... you know, where we can maybe through some appraisal work or activities around that or just things that may come up in terms of bolt-ons, we will look at expanding that footprint within Giddings, not just on our existing acreage, but over time it'll, you know, some of the things that we already have may be filled in that allow us to be active outside of that core development area. Quarter development area is great, but, you know, just sort of want to continue on that path of looking at other options.

Great point. Thanks, guys. Great quarter.

All right. Thanks, Neil.

This concludes our question and answer session, and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.