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spk09: participating in Magnolia Oil and Gas Corporation's fourth quarter 2023 earnings conference call. My name is Andrea and I will be your moderator for today's call. At this time all participants will be placed in a listen-only mode as our call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks which will be followed by a brief question and answer session. Please go ahead.
spk01: Thank you Andrea and good morning everyone. Welcome to Magnolia Oil and Gas's 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 on the company's annual report on form 10k 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 2023 earnings press release as well as the conference call slides from the investor section of the company's website at .magnoliaoilgas.com. I will now turn the call over to Mr. Chris Stavros.
spk13: Thank you Tom and good morning everyone. We appreciate you joining us today for discussion of our fourth quarter in full year 2023 financial and operating results. I plan to briefly speak to our results which closed out a strong year for Magnolia and during which we took several actions to improve our overall business. I will also discuss our business model and our core principles in the context of some of last year's accomplishments and note how Magnolia stacks up compared to many other EMP companies on several key financial metrics. Lastly I will provide an update on Magnolia's 2024 capital and operating plan which follows the same principles on which the company was founded nearly six years ago. Brian will then review our fourth quarter and full year financial results in greater detail along with some additional first quarter guidance before we take your questions. Starting on slide three of the investor presentation and looking at some of the highlights Magnolia ended 2023 on a high note with fourth quarter production volumes at 85.4 thousand barrels of oil equivalent per day bringing full year 2023 production to 82.3 thousand BoE per day. This represented -over-year production growth of 16 percent for the fourth quarter and full year 2023 volume growth of more than nine percent. Production at our Giddings asset grew 55 percent compared to the prior year fourth quarter reaching 63,000 BoE per day which included oil production growth of 59 percent. Giddings production represented approximately 71 percent of overall Magnolia volumes last year and the Giddings area continues to see operating efficiency improvements in the field such as fewer drilling days per well and realizing significant gains in stimulation stages per day. DNC capital totaled 91 million dollars for the quarter and 422 million dollars for the year representing 47 percent of adjusted EBITDAX for the year and leading to free cash flow generation of 413 million dollars or roughly 10 percent of our current enterprise value. We returned 74 percent of this free cash flow to shareholders through our dividend and share repurchase programs with the remaining allocated to our balance sheet which helps support attractive bolt-on oil and gas property acquisitions geared toward improving the overall business. Turning to slide four, Magnolia's business model remains unique since it was devised in 2018 but the objective to create a highly investable attractive E&P business that is enduring and focused on generating absolute per share value over the long term. As we have often expressed, Magnolia's primary objectives are to be the most efficient operator of -in-class oil and gas assets generating the highest returns on those assets while employing the least amount of capital for drilling and completing wells. Our high quality asset base allows for a low reinvestment rate while still providing moderate growth for the business over time. This results in significant free cash flow generation and we strive to return a significant portion of this to our shareholders in the form of share repurchases and a safe, sustainable, and growing dividend. Some of the excess cash may accrue to the balance sheet helping us to opportunistically pursue attractive bolt-on oil and gas property acquisitions that improve the business which help to sustain our returns and enhance the dividend per share payout capacity. We continue to adhere to our core principles and this is a sound formula for creating long-term value for our shareholders. I'd like to spend a moment reviewing how this model has helped us achieve our goals over the past several years and as our operating program has shifted more to our gettings asset. Slide five shows that Magnolia has had one of the lowest capital reinvestment rates compared to most other E&P companies while achieving a superior compound annual rate of growth in terms of production per over the past three years. This is a powerful combination allowing us to maximize our free cash flow generation. Turning to slide six, our corporate level returns or return on capital employed continue to be some of the best in the upstream energy sector highlighting our strategy of disciplined capital spending including last year's success in reducing our well costs and the beneficial impact of our ongoing share repurchases. Our cost reduction efforts in 2023 helped further support these returns as we were able to meaningfully grow our production per share with capital that was 17 percent less than what we had expected at the beginning of the year and eight percent below full year 2022 levels. Two key elements of our business model are maintaining our low leverage and generating high operating margins. Slide seven and eight demonstrate that Magnolia is best in class when coupling one of the lowest leverage profiles in industry with some of the highest operating margins. This is compared to E&P companies of similar size to Magnolia as well as much larger companies and is a testament to our underlying asset quality and the characteristics of our overall strategy and philosophy. Turning to our 2024 guidance shown on slide nine, we expect this year's plan to deliver similarly strong results in current product prices. Magnolia's capital and operating plan is expected to deliver high single digit percentage growth this year or approximately seven to nine percent on both an oil and on a BOE basis with a capital budget estimated in the range of 450 to 480 million dollars. This would result in a spending level below 55 percent of our EBITDAX for 2024 assuming current strict pricing for products. Total production for the first quarter is estimated to be approximately 84 to 85,000 BOE per day which includes production of facilities downtime caused by severe winter weather conditions during abortion in mid-January. Despite the transitory weather impact last month, our production is fully recovered and is running normally and we are confident in our full year plan and guidance of high single digit production growth for the year. We expect this we expect first quarter DNC capital expenditures to be approximately 130 million dollars and anticipate this to be the highest quarterly rate spending for the year. Most of the full year 2024 production growth is expected to come from our development program in our Giddings area and as the main driver will receive approximately 80 percent of our overall capital and include some activity on our recently acquired assets. We plan to operate two drilling rigs and one completion crew during 2024 and expect to maintain this level of activity throughout the year. While this activity level is pretty much last year's operating plan, lower well costs combined with improved operating efficiencies allow for more net wells to be drilled completed and turned in line helping us support Magnolia's overall high margin growth. Most of the development activity will consist of multi-well development pads and giddings with a smaller amount of development planned in the Carnes area in addition to some appraisal wells. For this year's development activity in Giddings, we currently expect to drill multi-well pads with somewhat longer lateral lengths of approximately 8500 feet. We continue to run a focused business and in an industry where operational execution and financial discipline are essential. The actions we took last year to reduce our well costs help to significantly reduce our capital, improve our operating margins, and generate additional free cash flow. Together with the acquisitions completed last year, these accomplishments have strengthened our position into 2024 when we expect high single-digit growth, high margin and high margin total company production growth with our oil volumes growing at similar rates. We have a strong five-year history of demonstrated operating financial results and expect our business model to enhance per share value over time. I'll now turn the call over to Brian to provide more details on our fourth quarter 2023 financial and operating results.
spk11: Thanks Chris and good morning everyone. I'll review some items from our fourth quarter and four-year results and refer to the presentation found on our website. I'll also provide some additional guidance for the first quarter of 2024 in the remainder of the year before turning it over for questions. I know you'll close out 2023 on a high note as we continue to execute on our business model. During the fourth quarter, we generated total net income attributable to class A common stock of 98 million with total adjusted net income of 108 million or 52 cents per diluted share. Our adjusted EBITDAX for the quarter was 240 million with total capital associated with drilling completions and associated facilities of 91 million or just 38 percent of our adjusted EBITDAX and below our guidance. For the full year, adjusted EBITDAX was 899 million with DNC capital representing 47 percent of EBITDAX. Fourth quarter production volumes grew 16 percent year over year to 85.4 thousand barrels of oil equivalent per day. For the full year, production volumes grew 9 percent to 82.3 thousand barrels of oil equivalent per day. During the year, we repurchased a total of 9.6 million shares and our diluted share count fell by 5 percent year over year. Looking at the annual cash flow waterfall chart on slide 11, we started the year with 675 million of cash. Cash flow from operations before changes in working capital was 872 million with working capital changes and other small items impacting cash by 59 million. During the year, we paid dividends of 102 million and allocated 205 million toward share repurchases. We added 355 million of bolt-on acquisitions primarily in buildings and spent 425 million on DNC and facilities capital. And we ended the year with 401 million of cash. Looking at slide 12, this chart illustrates the progress in reducing our total shares since we began our repurchase program in the second half of 2019. Since that time, we have repurchased 61.9 million shares leading to a change in diluted shares outstanding of over 20 percent net of issuances. This is one of the largest decreases in the upstream energy space, with the majority of the companies increasing their diluted shares outstanding over the past five years. Magnolia's weighted average fully diluted share count declined by more than 2 million shares sequentially, averaging 206.5 million shares during the fourth quarter. We have 9.2 million shares remaining under our current share repurchase authorization, which are specifically directed toward repurchasing Class A shares in the open market. Turning to slide 13, our dividend has grown substantially over the past few years, including a 13 percent increase announced earlier this year to 13 cents per share on a quarterly basis. Our next quarterly dividend is payable on March 1st and provides an annualized dividend payout rate of 52 cents per share. Our plan for annualized dividend growth is an important part of Magnolia's investment proposition and supported our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend per share payout capacity of the company. Magnolia has the benefit of a very strong balance sheet and we ended the quarter with zero net debt and 401 million of cash on the balance sheet. Our 400 million of principal debt is reflected in our senior notes which do not mature until 2026, including our fourth quarter ending cash balance of 401 million and our $450 million revolving credit facility, our total liquidity is approximately $850 million. Our condensed balance sheet as of December 31st is shown on slide 14. Turning to slide 15 and looking at our per unit cash costs and operating income margins, total revenue per BOE declined due to the substantial decrease in product prices and especially natural gas prices when compared to fourth quarter of 2022. Our total adjusted cash operating costs including G&A were $10.55 per BOE in the fourth quarter of 2023, a decrease of $1.60 per BOE or 13% compared to year-ago levels. The -over-year decrease was primarily due to lower production taxes and GP&T. Our operating income margin for the fourth quarter was $17.56 per BOE or 43% of our total revenue. The -over-year decrease in pre-tax operating margins was driven by the significant decrease in commodity prices. On slide 16, Magnolia had a very successful organic drilling program during last year. The total approved developed reserves at year-end 2023 were 135 million barrels of oil equivalent. Excluding acquisitions, sales, and price-related revisions, the company added 44 million barrels of oil equivalent approved developed reserves during the year. Total drilling completion capital was $422 million in 2023, resulting in organic approved developed F&D costs of $9.60 per BOE and reflective of our drilling program. Our organic approved developed F&D costs declined by approximately 40% compared to last year as a result of our well cost reduction efforts and strong loan results. Turning to guidance, we expect our 2024 DNC capital spending to be in the range of $450 to $480 million, which includes an estimate of non-operated capital that is about the same as 2023 levels. We expect first quarter DNC capital expenditures to be approximately $130 million and expect this to be the highest quarterly rate of spending for the year. Total production for the first quarter is approximately $840 million. We expect the next quarter to be estimated to be approximately 84 to 85,000 barrels equivalent a day, which incorporates the impact of production and facilities downtime caused by severe winter weather conditions in January. Despite this impact, our production has fully recovered and we are maintaining our guidance for high single-digit production growth in 2024. Most of this growth is expected to come from our development program in our Giddings area. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston, Remy H., and Magnolia remains completely unhedged for all of its oil and natural gas production. The fully diluted share count for the first quarter of 2024 is expected to be approximately 205 million shares, which is 4% lower than first quarter 2023 levels. We expect our effective tax rate to be approximately 21%, with most of this being deferred. Our cash tax is expected to be between 6 and 9% for 2024. We are now ready to take your questions.
spk09: We will now begin the question and answer session. To ask a question, you may press star then one 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 two. At this time, we will pause momentarily to assemble the roster. Our first question comes from Neil Dingman of Truist. Please go ahead.
spk04: Morning, Kristen, team and guys, another nice print and guide. My first question is on Giddings specifically. Can you all talk about the recent Giddings acquisitions and all these assets are looking, definitely realizing it's early days and then maybe, Chris, anything we should be thinking about on the development plan specifically there?
spk13: Yeah, thanks, Neil. Good morning. Giddings is one of those fields, old fields, that it sort of just keeps getting better. And my level of confidence now versus say five, six years ago is quite a bit better. And a lot of that is born out of the results, obviously, and certainly what we've learned and what we've been able to do with the field. So the subsurface and as I said, it's one of those fields that, you know, where you, it's gone through different phases of its life over the last several decades. And, you know, we happened to get involved really prior to it going through this latest phase in utilizing modern FRAC techniques and design. So, you know, where this headed is, you know, we've got a sizable position, more than half a million acres. And we've done some recent acquisitions and I think that's improved our position and will help us learn some more. There's some gassier areas of Giddings, there's some oilier areas of Giddings, but I think the proof is in the pudding in terms of the results having been born out. When we picked it up with the original acquisition, the field and the asset was producing maybe 10,000 a day equivalent or so, you know, as I said, it's producing more than 60,000 a day now and that will continue to grow. And this is really what the, you know, the returns, the quality returns that we've seen in the business are really, you know, in many cases, function of the outcome of Giddings. So, where does it go? You know, frankly, I think there's more for us to go after here and there. I mean, some of them will be a little bit smaller, some things might be a little bit larger, like, you know, in similar terms of what we did or size what we did back in the fourth quarter of last year. We'll just have to see. I can't tell that we'll go after everything or anything and everything, but, you know, we'll go after some things and, you know, we're starting to integrate the assets that we recently acquired. Early days look good. It's this particular asset happens to be a bit oilier. The wells that we plan to drill are shallower, several thousand feet shallower, as I said, a little bit oilier with the economics broadly, you know, quite similar to Giddings as a whole overall. So, I remain real optimistic about, you know, our prospects going forward for the fields and what it's going to mean to Magnolia going forward.
spk04: Yeah, definitely love the footprint there and maybe following up a little bit with Giddings, you know, as you pointed out, the operating margins are certainly notable and I'm just wondering, you know, when you look at the expanded Giddings results, I mean, is that potentially and, you know, will that even lead to, do you think, even lower reinvestment rates? It's certainly notable how, you know, how good your reinvestment rate and as you highlighted the operating margin. I'm just wondering, baked on maybe a higher Giddings plan, could we see even potential increases in this?
spk13: Yes, it's a, that's a tough one. I mean, I think the results are pretty good over, you know, three year, five year type period and if you want to say it's almost through a cycle, if you will. I don't think it's going to be meaningfully different. I mean, there might be some things around the edges as we learn more, but I think the outcome, if I had to look out, I think the outcome is not going to be meaningfully different, which I will take that, you know, sort of any day of the week.
spk04: Absolutely. Thank you all. Nice work.
spk09: The next question comes from Leo Mariani of MKM Partners. Please go ahead.
spk12: Hi guys. I was hoping you could provide maybe a little bit more color on the increased activity in 2024. I think in the press release, you guys alluded to the fact that B, you know, more wells this year. You know, is there any way to quantify that? Is it, you know, kind of five or six wells and just kind of any detail around any of the splits here? Is it primarily more of a development drilling program? You did mention there would be some appraisals. Is it a fairly similar appraisal split versus last year? And I guess there's going to be some drilling on the newly acquired acquisition from the fourth quarter. Do you also consider that kind of appraisal drilling? And is it just a handful of wells? Any color around the kind of complexion of the program this year versus last would be helpful.
spk13: Yeah, thanks, Leo. I think you repeated some of what I said and answered your own question in some ways. But anyway, yeah, so we'll probably drill maybe a little more than a half dozen additional wells, you know, this year versus last year, and then we'll go into the next one. So, you know, the next one is the net wells. You know, most of that is, you know, or part of it anyway is some of the new assets that'll be brought or integrated into the plan. Some is just, you know, the ongoing development and innings. You know, keep in mind that the average lateral length is a little longer in this year's program compared to last year. I would tell you also that the working interest in the wells is also a little bit higher. As far as appraisal goes, no, I wouldn't consider the, you know, the drilling on the new assets as appraisal in gettings. But there may be, depending on product prices, there may be some appraisal drilling in gettings just to sort of see if we can learn a little bit more around other areas. So we'll see how that goes. So that's by and large, you know, some of the color, I would tell you. The current program will be fairly similar to what it had been, not really very different generally.
spk12: Okay, that's helpful. And then just, do you have any color you might provide on a few of the big picture expense items? I think that perhaps the new early asset had a little, you know, kind of higher cost, any kind of, you know, range at all you can kind of throw out there if LOE is going to continue to tick up a little bit and maybe DDNA and maybe GNA is not really changed. Anything you can have high level on some of those kind of key cost items?
spk13: Yeah, sure. Well, the new assets, especially the latter acquisition that we did in gettings, considering that it is oilier in nature, you know, yeah, there is a little bit more in the way of LOE as would be, you know, common or typical. And as we're also sort of bringing it up to magnolia standards, if you will, you know, where we're owners of the assets, where the prior folks might have been viewed as more renters of the assets. So, you know, there's some things that we need to do or probably will do to bring it up to our standards. However, I will tell you that, you know, my choice and my view is that we're going to pursue sort of a program to focus a little bit more on LOE broadly through the year to try to get that down a bit. So as we transition with the new asset into the first quarter, you might see a little bit more in terms of bump in LOE, not very meaningful, frankly, but a little bit. And then my hope and view is that, we're going to try to attack this and manage it to the point where we could see some decline later into the year.
spk12: Okay, now that's helpful. And I guess just anything on any of the other costs, is the G&A per barrel still pretty flat? I don't know if there's any impact on GP&T from the new asset either. Is that pretty rateably flat?
spk13: Not really. I mean, you know, GP&T, actually, I think we're doing a pretty good job there. And, you know, we'll see how that goes. I'll just say we're doing a good job around that. G&A, I, you know, not going to change very much, frankly, at all. Not meaningfully on a per barrel basis.
spk14: Yep. Okay. Thanks,
spk13: guys. Okay. Thanks.
spk09: The next question comes from Charles Mead of Johnson Rice. Please go ahead.
spk08: Good morning, Chris and Brian and the rest of Magnolia's team there. Chris, I, at risk of frustrating you, I'm going to ask one more question about the, about your activity on those recently acquired assets. That's all right. That's all right. You wouldn't be the first one. Well, maybe I'll be the best. I want to, presumably, I think you indicated actually that you guys had a slightly different view of that asset or maybe you thought you had a differential insight on that asset. And so I'm curious if you could tell us what, for the activity you have, maybe you just kind of characterize the number of wells that you're going to, that you're going to drill, the number of the pads you're going to drill on that new, on that newly acquired asset. And if there's any, you know, any aspect of your well design that's going to test perhaps some of those differentiated ideas that you have, in which case, what's kind of a timeline for any kind of results or update there?
spk13: Yeah, thanks, Charles. You know, it's a little early days to be too granular specific around the, you know, how we're going to drill the well or wells. There will be a handful of wells that will be drilled later this year where we'll have some results that you probably, you know, through some of this data, these data sets, you will be able to see over time. I just don't know, you know, we're still sort of studying it and looking at, you know, prior results to see how this, how it's gone. We may make some smallish, modest changes going forward, but we're not at the point, frankly, where these are going to be probably more single wells, frankly, at this stage. So we're just not quite there yet. You know, frankly, we closed on the deal, you know, about three months ago, so we're still integrating it and devising it, developing it, folding it into the plan. So it's still somewhat early days.
spk08: Okay. Well, thanks for that detail. And then a second question. This is about, excuse me, A&D and the EagleFord more broadly. How do you, how would you characterize the opportunity set for Magnolia? And how much of your attention are you spending on looking at opportunities right around Gittings and how much of it is directed to, you know, the larger EagleFord and also TalkTrend across Texas?
spk13: Yeah, that's a fair question. You know, percentage of my time, you know, it's pretty, you know, pretty meaningful. I mean, because it's, there's a lot of things out there. And again, as I said earlier, much of this is born out of our own experiences and knowledge. And as we gain further understanding of, you know, the wells that we drill and directionally where we want to go, and what, you know, what excites us, what is more attractive for us. And I've said this to folks before, you know, at the end of the day, we're trying to, and maybe this is why we're not, you know, overly open about what our plans are, but we're trying to build a little bit of a mosaic around the asset and, you know, fill in some of the blanks and improve the business based on some of the quality areas that we see. So we won't go after everything. It's not like I say, well, you know, I'd like to own all the acreage everywhere. You know, it's not that. But there are, you know, some areas that look, you know, interesting and will help us and will help the business. Where I can see this, you know, enhancing the runway, if you will, and provide more sustainability for the business over time. So I think the opportunity set is reasonably good. All right. Thanks for that.
spk06: Sure.
spk09: The next question comes from Oliver Hong of TPH and Co. Please go ahead.
spk05: Good morning, Chris and Brian, and thanks for taking my questions. Just wanted to hit on the 2024 outlook really quick. I think you all did a great job last year in being able to exceed initial expectations. CAPEX 17% lower for nearly inline production volumes. And I know last year is probably a unique year, just kind of given the misalignment to start the year on service costs. But as we kind of look forward into 2024, what are some of the key levers or upside catalysts that you all foresee or are most excited about that could drive better than expected capital efficiency? And also any sort of color on what drives the lower and higher ends of the CAPEX guidance range would be helpful as well.
spk13: Thanks, Oliver. You know, I don't know how much of a disconnect there was. But, you know, we got after this early, you know, and I credit our teams both on the supply chain side and on the operations side, drilling completions and working with everyone to make it happen. But it didn't just happen. It took a lot of work, you know, talking with the vendors and, you know, creating some linkage between us and them as venture partners. And we did benefit from some of the weakness in large, you know, gassier fields to the north east of us that were, you know, activity was slowing up and we saw some benefit from that, you know, proximity to us. So it did take a lot of work, you know, in terms of what's going on in the first half. You know, we've locked in our costs for the, certainly for the first half of the year. So I'm very comfortable with where things are headed in the first half of the year in terms of our outlook. You know, for the second half of the year, it doesn't seem to me as if activity is just going to soar away higher. In fact, you know, maybe you sort of see things, you know, flat to a little bit lower or softer considering where gas prices are. It's not all that pleasant. And so, you know, we'll just have to see. It may provide us with a little bit of wiggle room, you know, for the back half of the year. But generally, you know, things feel pretty good. On the specific areas or items, you know, we did a terrific job around efficiencies last year, especially on the completion side and completion stages per day. I'd like to think that we could see some improvements on the drilling side and we'll work towards that with some, hopefully some efficiencies and maybe some something on the cost side as well, but we'll see. So I hope that that makes you a little bit of color.
spk05: Yeah, that's definitely helpful. And just a quick follow-up on a comment you made earlier about potentially higher working interest in wells this year. Just wondering if there's any way to kind of quantify the magnitude of that shift, really just trying to get a sense of how the net lateral footage might have increased on a -over-year basis.
spk03: We can
spk05: get back to you and answer that more specifically. Sounds good. Thanks for the time, guys. Okay, thank you.
spk09: The next question comes from Atty. Modak of Goldman Sachs. Please go ahead.
spk07: Hi, good morning, team. Thank you for taking the questions. I guess you mentioned there's still a lot of opportunity and acquisitions in the Gettings area. I'm just wondering if these are largely smaller acreages or are there entities that are relatively large as well and what is the level of interest maybe that those players have to try and replicate what you are doing versus hand the asset over to you? And does that mean that you would be more active in M&A this year versus last?
spk13: Well, I don't know what the other operators are looking to do or willing to do or able to do, frankly, if they're looking to replicate our plan or whatever. I wouldn't think that this is necessarily going to be a more active year than what we just had in 2023. Our plan is to digest and integrate some of what we've done last year, which was overall a bit of a heavier year in deal-related activity for us acquisitions. So there is some digestion and integration that needs to occur. So I think if there are some things, they'll tend to be a bit smaller, but may hopefully pack a punch and really, again, as I said, fill in that mosaic of what we've been trying to accomplish in recent history and going forward. So I don't think it's going to be larger. At least that's not
spk07: my sense right now. Got it. And then anything around the expectations for well productivity in 2024 versus the prior years? If you can talk about oil per foot basis, how should we think about the trends this year?
spk13: Yeah, I mean, that's been talked about, to be honest, and it's sort of an evolution of the program and gettings over time. I mean, early days, the population set of wells was smaller, obviously, and much more focused and concentrated within a very, very limited area. And as that's broadened out, there may have been some movement around the productivity, but frankly, not in a major way or terrible way. I think that this year's program and results should yield similar results to what you saw in 2023. I don't see any major change, frankly.
spk07: Got it. Thank you for taking the questions. I'll return it over. Okay, thanks.
spk09: The next question comes from Nicholas Pope of Seaport Research. Please go ahead.
spk10: Morning, everyone. Hi, Nick. Quick question on the reserves details that you provided in the presentation. The price-related revisions, just wanted to make sure, is there anything specific there, or is that kind of balanced across the two assets? Is it just tail, the tail of some of those PDP reserves coming off, just trying to make sure I understand that 15 million kind of hit the Yelp tick there?
spk11: Yeah, and when you roll forward from last year, which had significantly higher pricing, you do lose reserves. So the -over-year change in the SEC-required pricing was relatively significant, both oil and gas.
spk10: So it's across both assets. It's
spk11: both assets. It's both assets, but just remember, I think we're at 75% of our production is Giddings, so it's probably proportionate.
spk10: And on the Giddings acquisition, can you be a little more specific? What was the timing of the close of that acquisition?
spk04: It was right around mid
spk10: -November. Got it. Okay, that's all I had. Thanks. Great, thanks.
spk09: The next question comes from Jeff J. of Daniel Energy Partners. Please go ahead.
spk06: Hey, guys. I was just kind of curious. You talk about the efficiency gains, particularly on the completion side. Can you help me understand how significant that increase is? And if you sort of looked around and benchmarked that against your peers, and if you think there's further efficiencies to come this year?
spk13: We're looking into that now. We're going through that process right now. As we look to the latter portion, or we're trying to think ahead into the back half of the year on our equipment and crews, I don't know how much I can really add on that specific item for you, Jeff. I just don't know.
spk11: And Jeff, I'll just maybe add one thing. And Chris talked about it a little bit earlier. We did a really, really good job on stages per day on the completion side. One of the focuses on more for this year is on the drilling side to improve more of those efficiencies.
spk06: Right, got it. I guess you know what I saw in the press release that the cost of getting as well cost was down about 20%. My curiosity was piqued about how that might break down. Between efficiency gains and sort of pricing, and I don't know if you could, if there was a way to kind of help me understand the interplay there.
spk13: Well, a lot of it was, as you know, a lot of it was steel, OCTG. But there were meaningful steps in STEM and FRAC, so there were meaningful benefits there as well.
spk06: Excellent. Thank you.
spk09: The next question comes from Zach Farnham of JPMorgan. Please go ahead.
spk03: Yes, thanks for taking my question. I guess, first, just could you quantify where your leading edge DNC cost are in gettings and maybe give us some color on how much cheaper you expect the wells to be on the newly acquired shallower acreage? Yeah, the wells now
spk13: are running about $1,100 a foot, I would say, and that's about 20% lower than a year ago. And so that, you know, for the longer, some of the longer laterals we'll drill this year, that's maybe, you know, nine million roughly per well. The well costs for the newer stuff, you know, as I said, they're shallower, quite a bit shallower, 3,000, 4,000 feet shallower. But you don't get the exact efficiencies of pad development too. So that's sort of what I know right now.
spk11: In fact, let's, we need to drill one first. Yeah. Can give you a better answer, but it is shallower. So on a per foot, it should be a little cheaper.
spk03: Got it. Thanks for that color. I guess also wanted to ask on natural gas, gas differentials have widened out a bit versus both Henry Hub and Ship Channel over the last couple quarters. We've also heard some concerns on Ship Channel widening out further, given increasing Permian volumes flowing into the Gulf. Can you just give us your thoughts on how you expect gas differentials to trend in 2024 and going forward?
spk11: Yeah, well, to be honest, I mean, all our gas goes to Ship Channel. We are a price taker. You know, I still think it's the second probably best hub outside of Henry Hub to deliver your gas. You know, we're closer to market than the Permian. We have all the infrastructure we need. You know, is gas in general challenged?
spk13: Yes. You know, Zach, it's going to be interesting to really see what, how this evolves in the market. You know, you've probably seen already some of the comments from some of the independent producers, the gas here, producers here, maybe reducing their activity a bit. And so, you know, this is a market and the operators will respond to the economics. So, it will be interesting to see that response and to the extent that things are pulled in that may over time bring things into better balance. So we'll see.
spk02: Got it. Thanks, Chris. Thanks, Ron.
spk09: The next question comes from Kim Resven of Key Bank Capital Markets. Please go ahead.
spk14: Good morning, guys. Thanks for squeezing me in. I'd like to start on repurchases first, just trying to understand if we sort of back into like a repurchase amount based on your, you know, one, two shares outstanding, you know, kind of information, it suggests maybe a little lower than that 50 million-ish, you know, range that you've run. Do you think about it as like wanting to have a free cash flow deficit in the quarter? Just understand kind of, you've been pretty methodical with the repurchases. Is anything changing or is it just because of the heavy first quarter capex that maybe you're pulling back a bit?
spk13: Well, we didn't, we're not forecasting the share repurchases really. I mean, I think, you know, if I recall, I think we bought in two and a half million shares exactly in the fourth quarter, and I think that was about the same, if not exactly the same as the third quarter. So sequentially, the amount of shares per repurchase was the same. The dollar amount might have been a little different because the, you know, the shares might have been bought in a little bit less expensively, which is fine. I look at the share repurchase, I mean, just a comment. I look at the share repurchase program as sort of ongoing and opportunistic, and, you know, there might be some shares that come available in the market. And, you know, I'm not, not that I know anything, but if that were to happen, we could certainly lean in. If I feel as if, you know, there's a disconnect in terms of perceived value, we could lean in. You know, the share repurchase and the dividend are sort of symbiotic in a way. There's an integral relationship for us with that. The more shares I buy in, the more it supports our dividend payout per share capacity. So, you know, that's sort of how I think about it.
spk14: Okay, okay. We're just, if you do the math on that 205 million for the first quarter, it seems a little light. That's why I was just trying to understand if there's something there, and I guess there's not. So thanks, Chris. I appreciate that. And as my follow-up, you, I thought it was interesting, you said you should have a similar oil cut going through 2024. If we look at the Giddings asset in general, you've seen oil cuts call it kind of mid-30s. Is your confidence that, you know, you have enough well-control in Giddings that you're confident the oil views you're going to be getting from the 2024 program? Is that what sort of gives you confidence in sort of that oil cut staying where it is? You're trying to understand that a little bit.
spk13: Yeah, no, Tim, thanks. I'm pretty confident with this year's program on the oil volumes, if you will. You know, I think we ran in a -42% mix of oil for the fourth quarter right in that range. If I had to take a view, I think it'll be somewhat similar through the year, maybe a little movement, but not all that much. The oil volumes, they'll grow, as I said, they'll grow year on year for each quarter, and they'll grow on a similar basis to the overall BOE volume. So I'm pretty confident with that. That's what the program is designed to deliver, and it's just in terms of the well-control and the confidence in Giddings. Yes, that's how I feel.
spk14: Okay, thank you.
spk09: The next question comes from Paul Diamond of Citi. Please go ahead.
spk02: Thank you, good morning. Thanks for taking my call. Just one quick one for you. As you guys think about Giddings going forward as far as just the addressable, I guess the total addressable acreage, and you know, the right size of the level you want to be at, I guess is that something we should think about as like a single-year effort, or is that more, you know, kind of multi-year goal?
spk13: I see this evolving over years. I don't see it necessarily all occurring at once or in a shorter term. The amount of learning that we picked up and experience has been, you know, over this five, six-year period, it's not all going to come at once here for us as a result. So we're still, you know, we have a large position that we'll continue to learn through our own activity, and as an extension of that, you know, we could and likely will pursue some other small opportunities that make sense.
spk02: Understood. And do you think those smaller opportunities are more kind of blocking out existing acreage, or are there more kind of further flung areas that you guys are really interested in exploring up there?
spk13: Mainly the former, you know, filling in.
spk02: Understood. I'll leave it there. Thanks for your time.
spk14: Okay. Thank you.
spk09: This concludes our question and answer session. The conference has now also concluded. Thank you for attending today's presentation, and you may now disconnect.
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