Magnolia Oil & Gas Corporation Class A

Good morning, everyone, and thank you for participating in Magnolia Oil and Gas Corporation's third quarter 2024 earnings conference call. My name is Cindy, 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.

Thank you, Cindy, and good morning, everyone. Welcome to Magnolia Oil and Gas's third quarter earnings conference call. Participating on the call today are Chris Domeros, 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 2 of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's third quarter 2024 earnings press release as well as the conference call slides from the investor section of the company's website at .magnolioilgas.com. I will now turn the call over to Mr. Chris Domeros.

Thank you, Tom, and good morning, everyone. We appreciate you joining us today for discussion of our third quarter 2024 financial and operating results. I will provide some comments on our quarterly results which demonstrate the continued execution of our full year 2024 plan and the consistency of our business model as well as highlighting some of our accomplishments and finally provide an early look into 2025. Brian will then review our third quarter financial results in greater detail and provide some additional guidance before we take your questions. As I continually remind the financial community that Magnolia's primary goals and objectives are to be the most efficient operator of -in-class oil and gas assets, generate the highest return on those assets while employing the least amount of capital for drilling and completing wells. We also strive to return a substantial portion of our free cash flow to our shareholders in the form of ongoing share of purchases and a secure and growing dividend. Finally we plan to utilize some of the excess cash generated by the business to pursue attractive bolt-on oil and gas property acquisitions where we have built a competitive advantage and leverage both our technical knowledge and experience in the bases where we operate. Acquisitions are targeted not to simply replace the oil and gas that has already been produced but importantly to improve the opportunity set of our overall business, enhance the ongoing sustainability of our high returns, and increase our dividend per share payout capacity. We look for acquisition opportunities to provide upside optionality with a lower cost of entry and that are both financially accretive and accretive to our stock. We firmly believe that our business model and strategy provide us with a durable competitive advantage to sustain our moderate growth over time and allowing us to act as serial compounders of value for our shareholders. Looking at slide three of the investor presentation, we delivered another consistent quarter of financial and operational performance which include our initiatives to lower our field level operating costs. I want to commend our operations team, field workers, and supply chain team for their continual efforts through this year to reduce our operating costs and improve the efficiency of our capital program. These actions have resulted in improved margins and additional free cash flow that can be used to enhance Magnolia's per share value. Total company production during the third quarter was approximately 91,000 barrels of oil equivalent per day and in line with our earlier guidance. Overall, our quarterly production was impacted by multiple unplanned third party midstream facility outages, some of which occurred late in the period. These outages primarily affected our natural gas and NGO production by approximately 1,000 POE per day during the quarter and were fully resolved by the end of the period. Total company oil production during the third quarter was nearly 39,000 barrels per day which represented growth of 18% from year ago levels and we expect this level to remain resilient into the fourth quarter. Production in the Giddings area was .7,000 barrels of oil equivalent per day during the quarter, growing 12% compared to the year ago quarter with Giddings oil production growing 24% on a year over year basis. We continue to see strong overall well performance throughout our assets which underpins the strength in our earnings of free cash flow. As we wind down the year, we continue to expect high single digit year over year total production growth for 2024 with this year's oil production now anticipated to exceed the total POE rate of growth. We spent $103 million drilling and completing wells during the third quarter which is well below our capital guidance of $120 million and represented just 42% of our adjusted EBIT DAX of $244 million. This lower than expected level of capital spending resulted from a mix of ongoing drilling and completion efficiencies, a decline in our overall well costs and a small amount of capital which is deferred into the fourth quarter. The improvements in well costs and ongoing overall spending efficiencies have provided us with spare capacity within our capital plan which will allow us to drill an additional four well pad in Giddings during the fourth quarter that was not part of our originally planned 2024 capital and activity. We expect this additional pad to be a duck at year end but anticipated completion sometime in the first half of 2025. This pad should provide us with some additional operational flexibility into next year. As I said, I'm very proud of the hard work shown by our operational operating personnel in the field. Their continual efforts have helped us further reduce our field level operating costs to $5.33 per POE in the third quarter, a decline of 11% compared to this year's first quarter and exceeding our earlier target to lower our lease operating costs by 5% to 10% during the second half of 2024. Realized savings over this period came from a mix of improved pricing and product substitutions for workovers, water hauling, chemicals, and replacement parts in the field. Additional savings are being seen from optimizing our contract labor needs for some of our field rental equipment through the implementation of field management software which has reduced our cost for water hauling and will be further utilized to lower costs from other field services over time and into next year. Low capital spending and further reductions in our lease operating costs led to improved free cash flow generation of $126 million during the third quarter. We returned $88 million of 70% of our free cash flow to shareholders through a combination of our quarterly-based dividend and ongoing share repurchase program. Our high quality assets and capital discipline inherent in our business model provides for a low reinvestment rate and consistent free cash flow generation. Our plan is to continue to return a significant portion of this free cash flow to our shareholders through our share repurchases and growing-based dividend. We also continue to look for attractive bolt-on acquisitions that utilize our knowledge and experience, have the ability to generate returns well above our cost of capital, and can work to sustain the durability of our business model. During the third quarter, we completed several small transactions in both our Giddings and Carnes operating areas, acquiring royalty, leasehold, and incremental working interest totaling $15 million. These deals increase the value of our future development locations in these areas. As we close out 2024 and look forward to next year, we plan to execute the same business model that has delivered both strong operating and financial results over the past six years. The recent initiatives we have taken this year focusing on reducing both our field LOE and our well costs allow us to endure product price volatility and position us for success into 2025. I'll now turn the call over to Brian for further details on our third quarter financial and operating results in addition to fourth quarter guidance.

Thanks Chris, and good morning everyone. I will review some items from our third quarter results and refer to the presentation slides found on our website. I'll also provide some additional guidance for the fourth quarter of 2024 before turning it over for questions. Again on slide four, and as Chris discussed, Magnolia had an excellent third quarter. During the quarter, we generated total net income of $106 million and total adjusted net income of $100 million or $0.51 per diluted share. Our adjusted EBITDAX for the quarter was $244 million with total capital associated with drilling completions and associated facilities of $103 million or just 42% of our adjusted EBITDAX. Third quarter total production volumes grew 10% year over year to 90.7 thousand barrels of oil equivalent per day and our diluted share count fell by 5% year over year to 198.4 million shares. Our annualized return on capital inflow during third quarter was 22% showing our continued capital efficiency. Looking at the quarterly cash flow waterfall chart on slide five, we started the quarter with $276 million of cash. Cash flow from operations before changes in working capital for the third quarter was $241 million. With working capital changes and other small items impacting cash by $33 million. Total drilling completions and associated facilities capital incurred including leasehold was $105 million. As Chris mentioned we closed multiple small royalty and working interest deals during the third quarter for $15 million. We paid dividends of $27 million and allocated $61 million toward share repurchases ending the quarter with $276 million of cash. Looking at slide six, this chart illustrates the progress in reducing our total outstanding shares since we began our share repurchase program in the second half of 2019. Since that time we have repurchased 70.7 million shares leading to a decrease in diluted shares outstanding of approximately 23%. Magnolia's weighted average fully diluted share count declined by more than 2 million shares sequentially averaging 198.4 million shares during the quarter. We have 3.9 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 seven, our dividend has grown substantially over the past few years including a 13% increase announced early this year to 13 cents per share on a quarterly basis. Our next quarterly dividend is payable on December 2nd 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 by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend payout capacity of the company. Magnolia has the benefit of a very strong balance sheet and we ended the quarter with 276 million of cash and 400 million of senior notes which matured in 2026. Including our third quarter ending cash balance and our undrawn 450 million revolving credit facility, our total liquidity is 726 million. Our condensed balance sheet as of September 30th is shown on slide eight. Turning to slide nine and looking at our per unit cash costs and operating income margins, total revenue per BOE decreased year over year due to the decline in oil prices when compared to the third quarter of 2023. Our total adjusted cash operating costs including G&A were $10.83 per BOE in the third quarter of 2024, an increase of 15 cents per BOE or 1% compared to year ago levels and a decrease of 27 cents per BOE or 2% sequentially from the second quarter of 2024. The sequential decrease was primarily a function of lower LOE and production taxes. Our operating income margin for the third quarter was $15.45 per BOE or 39% of our total revenue. Turning to guidance on slide 10, we expect our full year 2024 drilling completion associated facilities capital spending to be approximately 470 million around the midpoint of our original guidance from February of 450 to 480 million. This includes slightly more activity than originally planned with the addition of a 4-well pad being drilled and gettings during the fourth quarter. We expect fourth quarter drilling completion associated facilities capital of approximately 125 million. Total production for the fourth quarter is estimated to be approximately 93,000 BOE a day delivering high single digit total year over year production growth during 2024 with annual oil production growth slightly higher than BOE growth. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all of its oil and natural gas production. The fully diluted share count for the fourth quarter of 2024 is expected to be approximately 197 million shares which is 5% lower than fourth quarter 2023 levels. We expect our effective tax rate to be approximately 21% and our cash rate to be approximately 5% to 7% for both the fourth quarter and the total year. This is lower than our prior guidance due to a refund we received during the third quarter this year. We are 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 speaker phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like 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 Neil Dingman of Truist Securities. Go ahead please.

Good morning guys. Nice quarter and happy Halloween. My first question is on your remarkable continued gettings growth. Specifically I realize much of the last quarter growth was a result of that prior acquisition but I was just wondering could you all discuss the continued drivers around the success of these assets that enabled you to keep the reinvestment rate so low around this?

Yeah

trick or treat Neil thanks. Thanks for the comments and questions. You know look I will tell you this takes a village. It's never easy and we have been working at this for a pretty good long time now. More than 6 years call it 7 years. We have some fantastic talented people, geologists, geophysicists, reservoir engineers, drilling and completion folks. All of them have been integral in getting us to where we are now. So I thank them for that. On day one we didn't necessarily understand it but we knew that we had a field with a lot of oil and hydrocarbons in place and that through some time and work and practice sort of like riding a bike that we could figure it out and I think we have as shown by the progress that we have made. So the point of the acquisitions that you mentioned is to expand off of our knowledge. Our knowledge is sort of the springboard and a base but the acquisitions are sort of designed to take us beyond what we may already know and have figured out and act as sort of little tentacles or tributaries to get us even further beyond what we already know. So the benefit of, a little bit to your question, the benefit of the low reinvestment rate, Giddings does have generally what we have seen anyway is a subtler decline rate than typical shale area, certainly a lower decline rate than what we see in Carns. The performance of the wells has typically exceeded our expectations over time. We drilled more than 100 Gentry wells in Giddings and we are often surprised typically over time in a positive way. So we continue to do what we are doing. We learn more every day, every time we put down a well and I think we will continue to benefit from that knowledge and experience and it will take us further not just through the field but provide us with other opportunities where we can

utilize some of that understanding subsurface. So I hope that gives you a little color.

It does, well said Chris. And then my second question, just around your announced multiple unplanned third party midstream facility outages, well the recent outages I know you talked about have been completely rectified. Are you concerned about more of these reoccurring outages and further would you consider spending any of your capital towards future infrastructure maybe to address some of this?

Yeah, well you know all of this is around having control and you know in a perfect scenario you would love to have all of the control around your destiny in terms of being able to produce what you want to produce and take it to where you want it to take it and you know from a pipeline and facility standpoint. So unfortunately Magnolia is of a size where you know we need to work with some larger midstream organizations that have the specific knowledge and capability and capitalization to do this. But I wouldn't exactly, you know if I was trying to set my watch to these guys I wouldn't exactly feel overly confident around doing that. So you know it is what it is and if I had some concern around predictability and you know reliability going forward it might be more around power than anything else because you just never know and some of the issues that they faced without calling out anything specifically some of the issues that were faced were around power and that could be an ongoing issue going forward. I continue to be concerned about reliability related to power and we'll sort of see how that goes. But would we consider doing something in terms of our own capital going forward? I think in a big way, unlikely right now, maybe over time but I don't see it in a big broad fashion that would allow us to have ultimate control of what we would like to do. You sort of have to take it for what it is and you know we work with them best we can and I know they try but you know there's weather issues, there's power issues, there's breakdowns and what not and

you know which over time seems to become more of a common practice so I would ask that they try to go above and beyond what's been their recent history.

Makes sense. Thank you so much Chris.

Sure. The next question comes from Phillips Johnston of Capital One. Go ahead please.

Thanks for the question. It's pretty clear the LOE optimization program is paying off. I realize you guys don't have any guidance out there for next year but just from a directional standpoint, where do you think both unit LOE costs and unit GP&T costs will trend in 25 relative to your second half exit rate and I guess with the natural gas trip looking higher for next year, how might that impact either cost item?

Yeah, thanks for the question. You know, we've done I think what's been a pretty decent job in terms of you know reducing costs as I said double digit reductions from where we had been early in the year second half. You know we're always looking to improve and I will never say that we're done. I would say that maintaining these levels is probably fair going forward and we'll continue to push beyond that and we may see some additional small to modest gains before the year is done and into next year. I certainly would press for that but you're constantly pushing back on you know underlying field inflation as well as increasing environmental and regulatory requirements. So like I said we'll always look for more to improve our margins but I think it would be great if we could at least hold these levels into 2025 and maybe see some modest improvement. But I think it puts us in a good place for you know should product prices you know weaken even further into next year so I think this is all been a good exercise for us.

Okay, sounds good and then on the $15 million worth of small deals that closed in the quarter was there any significant production that came in the door and so when in the quarter would that have closed?

No, there was not. These were really incremental working interests, mineral interests and some things of that nature but there was really nothing around

production

that was any consequence.

Yeah, okay. Sounds good. Thank you.

Our next question comes from Oliver Wang of Tudor Pickering Hole. Go ahead please.

Good morning Chris and Brian and thanks for taking the questions. I wanted to start out on services. I was hoping that you all might be able to speak to how you all feel about where service costs sit today relative to the oil and gas commodities from an alignment perspective. It looks like it's continuing to trend in the right direction based off what you all saw this past quarter but really just trying to get a better sense of how you all think costs might trend moving into 2025.

Yeah, thanks Oliver. You know it really it worked partly into you know the capital savings that we or the lower capital that we had in the third quarter and to some extent provides us with a little bit of that flexibility for the fourth quarter to drill that extra pad. I would tell you that you know things have been softer than I would have anticipated or expected from say you know a month to two months ago and you know the timing was such for us as well where we were kind of falling within a period where we had some you know recent renegotiations of some of our key services and materials contracts that I think you know have allowed for some additional small incremental savings going into next year. And I'm talking you know mid single digit type savings into next year and again across the board this OCTG, steel casing, you know pressure pumping, rigs and the other categories as well really all of those are sort of averaging in the mid single digits you know plus or minus depending on which one. So you know we're still seeing some of that and you know just on the capital going into next year you know we will you know we'll as I said we'll be able to grow moderately into next year. I fully anticipate certainly in current commodity levels, pricing levels and sticking within our you know 55% cap on cash flow in terms of capital spend we'll be able to grow sort of mid single digits but tough for me to see our capital being higher than or certainly not much higher if at all than 2024 going into next year. I think you know we have a good amount of flexibility built in but the way things stand right now it's

looking at you know sort of similar at worst for best.

Perfect. That's super helpful color and maybe just for a second question on your land position. I know the legacy position had been in the high 90s percent from HBP perspective. When considering some of the bigger packages over the last year both in April in that core gettings area and even the one up north that closed late last year, is there anything that we should be aware of in terms of just required drilling or lease obligations and how that might impact near term capital allocation decisions?

No, it's very similar to what it had been. There's nothing you know meaningful that would have changed in terms of creating additional obligations necessarily at all really

not from those deals.

Okay perfect. Thanks for the time. You're welcome.

The next question comes from Carlos Escolante of Wolfe Research. Go ahead please.

Carlos are

you on mute? Yes, I'm here now. I'm asking on behalf of Carlos. Thank you for taking my call. So the question is even though you pulled early the four well pad it looks like the capital uptake is minimal, not a material deviation from your rateable quarterly DNC spend. So in that sense how much of the DNC costs are accounted for? Is it only drilling? Is it both? Otherwise is the incremental capital just a proxy for your continued capital efficiency improvements? Thank you.

I don't know about it being a proxy for anything on a continual basis. It can fluctuate from quarter to quarter just depending on the timing of activity. But we did include in our forecast for the fourth quarter we did include the drilling costs for that pad that we will drill which I would tell you would be approximately $10 million roughly.

So that's all incorporated into that.

Okay, perfect. And my next question was regarding the LOE target reduction. On top of what's the right go forward number and if you can add color how you got there because in our view depending on what it is it can be a move and go post instead of a fixed number.

Well, as I said I expect that there may be some modest fluctuation. The direct LOE is a lot of what we're working on but there's a lot of components within there. So you've got work over costs and work overs that depending on work over activity and what you're doing that may create some small modest fluctuation quarter to quarter. There's not a ton of control over that. Sometimes you just need to do what you need to do. But I would tell you that in almost every respect in every bucket of costs we've made positive inroads in terms of reducing those things particularly around direct LOE and field management software implementation. So I think there's more to be had, more to be picked up. But again there's always things that you're pushing back on as I mentioned some regulatory matters, environmental items, things of that nature and some general field inflation. But I do believe that where we were in the third quarter is at least as good a proxy for going forward and I do believe we can do better than that. So going into next year, you know, 525 to 535 is sort of feels pretty

good to me.

Perfect. Thank you very much. Appreciate your answers.

You're welcome. The next question comes from Noah Hungness of Bank of America. Go ahead please.

Morning guys. I wanted to ask first just on the general M&A market and kind of how you see the opportunity set both at Giddings and in the broader Eagle Ford trend. Is it currently more of the small $5 to $15 million both on acquisitions or are there larger opportunities in the hundreds of million dollars as well?

I

would

tell you it's all of the above and I certainly hope so because we look at a lot of things and a lot of this or certainly some of it and the smaller items oftentimes are driven by our land group that has what I would call more of like a ground game and looks at opportunities driven by sometimes our existing areas or things that are adjacent to where we operate or where we're drilling. So some of that is just small pickups to improve the value of things that we'll be drilling going forward. There are other larger asset packages that are certainly out there. Some that are being run through a process, some that we may look to drive ourselves if possible. But no, there are certainly a number of opportunities that we continue to look at of varying quality and what I would tell you is that we've got a very good quality hand and so I'm looking at it from a sense of I've got the deck in front of me and I want to pick up cards that positively add to my hand if that's the way that I can kind of describe it. So you always want to try to improve the business, not make it more difficult or complex for yourself. So it's a high bar. But we kick a lot of tires and I think there's quite a few opportunities out there.

That makes a ton of sense. And then I guess the next one is just on your thought process around choosing to pull your activity forward with the continued DNC efficiency gains you all have seen. Why are you choosing to pull activity forward versus maybe take the capex savings and then also if we move into 25 and we run into a similar issue in the fourth quarter of 25, would you also think about pulling activity forward then as well?

Well, I

think

a

little bit is around maybe our view in terms of how things are evolving with product prices as you go into next year. It still feels somewhat soft. And my view around pulling it forward, providing ourselves with a little bit more operational flexibility, optionality seems like a good idea given maybe a little bit more uncertainty on product prices. So my view is why not? We're not short of money. And, you know, this is, we're talking about $10, $15 million. So I mean banking it as opposed to creating more optionality flexibility in our program seems to me to be the better course

of action decision. So I'll take it.

Great to hear you guys. Thank you so much.

Thanks.

The next question comes from Neil Mehta of Goldman Sachs. Go ahead, please.

Yeah, good morning, Chris. Good morning, team. Just one tactical question, one strategic. The tactical one, it looked like there were some midstream interruptions in the quarter that you called out. It sounds like those have largely been resolved, but do you feel good about those challenges going forward and you have confidence that you kind of worked through it?

Yeah, I feel good. I mean, I responded a little bit earlier to it. I feel good about where we are. I mean, everything's been resolved and, you know, we're all good to go and these things do happen from time to time. And it's, you know, you work with your third party midstream providers as best you can. And, you know, they've I think done a reasonable job around responding to, you know, issues. But as I said, there's certainly sometimes, you know, things that occur on the power side or unplanned, unforeseen circumstances that where these facilities can be exposed to issues. And anyway, you know, they're fine. Everything's fine now. And so I think we're good to go.

Good. Good. All right. Very good. And then the second one, just the philosophy around hedging, as you know, you're almost completely unhedged for your oil and gas production. And, you know, just step back and talk about why you think that is the right philosophy. And what would it take for you ever to be more aggressive in terms of managing the risk and hedging forward? So just thinking about your philosophy on hedging.

Yeah, the point or the way you mentioned it about being almost completely unhedged. No, we are unhedged, not almost unhedged. We are totally unhedged. Look, you know, my philosophy around it is it's sort of like, you know, fire insurance. And that's always how we've thought about it. And, you know, it's like trying to predict the fire and about your need for the insurance in the first place. And, you know, these are risks, inherent risks in the business. And, you know, we don't take a lot of financial risk. We don't have a lot of debt. And so there's a cost to the hedge. Just like you pay a premium for insurance, there's a cost to the hedge. And I think it complicates the business. I think it's something that we don't need.

And

my view is that when I think about how folks who own us in terms of the investors, shareholders who own us, they wanted that exposure to the commodity with the understanding that they could also sleep at night and that, you know, we won't have any issues on the financial side given our low leverage. So I think we have this allows for full exposure to commodity prices on the upside

with protection on the downside given our low levels of debt. So I think it's an optimal position or situation to be in. And that's sort of the philosophy.

Yeah. Yeah. Thanks, Chris. That's very helpful. Thanks.

Our next question comes from Tim Resvan of KeyBank Capital Markets. Go ahead, please.

Good morning, folks. Thank you for taking my question. I'd like to follow up on the prior question. Obviously, you don't need to have traditional hedges given the balance sheet strength. But I think the decision to hedge basis is really sort of independent of the balance sheet, giving a lot of the dynamics going on right now. We talked to Tim recently and we heard that you're not concerned by basis blown out at Houston Shift Channel. Some of your public peers have a different view. We've seen Shift Channel and KD basis out about 20 cents for the next couple of years. So if you could talk about, Chris, about why you're comfortable not doing basis swaps, do you feel like there's overblown fears about what Matterhorn is going to do to the Gulf Coast area? Love your comments on that. Thank you.

Yeah, I'll try on this one. But, you know, as you can imagine and understand, it's obviously complicated. You know, I think we're pretty confident around, you know, Shift Channel and that, look, it's the second best hub, I guess, to sell our gas after Henry Hub. And as you said, it's about 20 cents. You know, so the additional volume coming to the KD area on Matterhorn is probably at this point priced into the curve and it's best, you know, we think. And our understanding of this is not, you know, better than necessarily anyone else's by any means. You know, there's, I guess, Hermian is not two and a half million BCF or BCF a day long gas. And we don't see an immediate flood of gas, you know, coming onto Matterhorn from like, it's sort of like a dam breaking. You know, so the initial flows that happened in early October, I think it's about 250 million a day. You know, that's only one interconnect completed. There'll be some additional interconnects that get completed and more and more gas will be able to find a home into the other interconnected pipeline storage facilities. But as it ramps, this will likely take some time. And, you know, I think there's other factors that will probably, you know, will probably benefit from the Plaquemines LNG facility coming on in a commercial service. And that'll pull some gas that's coming south from the northeast away from our market, the Texas market, and maybe provide some offset to Matterhorn. So whether or not this is all one for one offset, I just don't know. So there's just a lot of moving parts around this that I think could potentially offset impacts from the Matterhorn line. But what I would say is trying to hedge basis here is challenging and probably would amount more to speculation on our part, which is something that just we're not going to do.

Okay, that's a good answer. I appreciate that context. And then just I want to circle back on your prepared comments on oil, Chris. Just want to make sure we understand what you're saying. You talked about oil exceeding BOE growth. That's pretty clear. You said you expect oil to remain resilient into the fourth quarter. Should we take that to mean like the current, you know, low 40s oil skew is something you think is sustainable? I'm just trying to understand what that means. Thank you.

Yeah, I think what it means for the fourth quarter is that, you know, the oil volumes we anticipate will be about flat going into the fourth quarter. Now, maybe it'll be a little bit better. I just don't know yet. But my guess is that it'll be about flattish from where we were third quarter on the volume side. And the overall BOEs obviously will be up a little bit. But, you know, generally that should hold us in and around a similar

percentage,

if you will.

Okay, I appreciate that. Thank you.

The next question comes from Sean Mitchell of Daniel Energy Partners. Go ahead, please.

Good morning, guys. Thanks for squeezing me in here. You talked a little bit about it earlier, Chris. You guys have been very consistent in kind of finding these bolt-on opportunities, and you kind of referred to – you like to, you know, make a good hand. Is it getting harder? I mean, you've been doing this for a while. I'm just thinking – or the bolt-on is going to get harder to make a hand in kind of 25 and beyond, or do you still feel pretty good about it?

No, I don't think it's harder. I just think you have to be – you know, you have to have some level of patience around it. And you can't just, you know, lunge at every opportunity. Like I said, we kick a lot of tires. And there's a lot of things, a lot of smaller private folks out there, or opportunities that sometimes you just have to think out of the box and try to create through your understanding of what you have and relationships that you have in and around areas that you operate. So I think it's – you may have to be more thoughtful about it. But I'd be – yeah, I think there's going to continue to be opportunities out there.

Okay. And then maybe one follow-up. You mentioned in the earlier comments on the midstream facilities and power potentially being a problem if you saw something in the future. Are you thinking more in terms of power generation or transmission when you think about potential problems for power?

You know, sometimes when I think about it, it's probably all of the above. And I wouldn't tell you it's necessarily just in our neck of the woods at all. It's a lower 48 issue. And, you know, there's increasing demands on, obviously, around pull-on power. And that will only grow. And so, you know, you just have to understand that, you know, the grid and power capabilities and generation are susceptible just like anything else. And, you know, we've seen it related to weather issues to some extent, partly that. But as demand and pull-on facilities grows, that makes things tighter over time and only potentially more problematic. And I'm not speaking for us specifically. I just think this is a growing issue that

folks need to consider.

Yeah, I agree with you. Thank you.

Sure.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.