Brigham Minerals, Inc. Class A

Good day and welcome to the Brigham Minerals First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please see your conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask your question, you may press star, then one on your touch-tone phone. 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 Jacob Sexton. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the Brigham Minerals first quarter 2021 earnings conference call. Joining us today are Bud Brigham, founder and executive chairman, Rob Rosa, founder and chief executive officer, and Blake Williams, chief financial officer. Before we begin, I would like to remind you that our remarks, including the answers to your questions, contain forward-looking statements, and we refer you to our earnings release for a detailed discussion of these forward-looking statements and the associated risks. In addition, during this call, we make references to certain non-GAAP financial measures. Reconciliations to applicable GAAP measures can be found in our earnings release and our investor presentation. Our investor presentation is titled First Quarter 2021 Investor Presentation and is available for download on our website, www.brighamminerals.com. We recommend downloading the presentation in the event we refer to it during the conference call. Lastly, as a reminder, today's call is being webcast and is accessible through the audio link on our IR website. I would now like to turn the call over to Bud Brigham, founder and executive chairman.

Thank you, Jacob. We appreciate everyone joining us this morning for our first quarter 2021 earnings conference call. Our business continued to deliver outstanding results this quarter, including record total revenues in adjusted EBITDA, which I attribute to our team's disciplined and thoughtful management of our diversified mineral portfolio. Despite a 5% reduction in production volumes due to the impact of winter storm Uri, our total revenues were up 42%. Adjusted EBITDA was up 57%, and we increased our dividend 23% sequentially from the fourth quarter. I will note that the 23% increase in our dividend comes on the heels of further increasing our dividend retention from 10% to 20%. Said differently, we are distributing 80% of our cash this quarter as compared to 90% in the fourth quarter of 2020. It's readily apparent that the minerals business model benefited tremendously from improved pricing, and Brigham Minerals was, in particular, able to pass along the improved macro directly to our shareholders. Our sound balance sheet, which we intend to maintain, benefited us in two important ways. First, we did not need to panic at any point during the rollercoaster year of 2020 and execute hedges, which today are currently serving as strong headwinds to numerous companies in the energy space. Here at Brigham, we are managers of a premier mineral portfolio, not commodity traders, and we prefer to give our investors full exposure to the commodity. Second, since the third quarter of last year, we've continued deploying capital to mineral acquisitions and believe the assets we've acquired over the past three quarters will generate differentiated performance over the next several years. We will continue to employ our disciplined underwriting of deals to enhance shareholder value and at the same time see more of our acquisitions internally funded via retained cash. A related key point that I want to make is that our retained cash and lease bonus funded approximately 30 percent of our first quarter mineral acquisitions. In a similar vein, we have and will continue to monitor the risk of increased federal regulation with respect to our ongoing acquisition efforts. While it appears permits are being issued, there's no doubt that the process has slowed and the increased rhetoric is of concern. As a reminder, however, our current portfolio has less than 5% exposure to federal lands across New Mexico, Oklahoma, the DJ, and North Dakota. And in particular, only 2.5% of our assets on a net royalty acre basis are located in New Mexico in federal units. We therefore currently have minimal exposure to potential federal regulatory changes. Further, when we look at deals in these areas, we're only giving credit to visible and near-term development in federal units. Finally, I'd also like to highlight the continued value of our diversified portfolio, another critical element of our differentiated approach. Our multi-basin asset both reduces the risk to any specific operator or operating basin, while also allowing us to play in a bigger sandbox in terms of mineral acquisitions. We continue to find incredible value in deals in the DJ, Anadarko, and Williston basins, and will opportunistically add to our portfolio in these areas when the economics point towards achieving favorable risk-adjusted returns. Looking ahead, I'm particularly encouraged by our ground game deal flow, and I like the fact that we are internally funding a portion of our deals. The macro setup is extremely positive, and I believe our experienced management team and differentiated strategy will continue to produce outstanding results. With that, I will turn the call over to Rob.

Thanks, Bud. As Bud noted, our team was able to achieve record results in the first quarter driven by a combination of factors, including the significant rebound in commodity prices, but more importantly, the team's disciplined management of a premier diversified asset. We need to keep leverage levels low. This allowed us to maintain a 100% distribution in the second quarter of 2020 and, importantly, enter 2021 unhedged with our investors fully exposed to the run-up to commodity prices as the economic reopening took hold towards the end of last year and more fully during the first quarter of this year associated with the vaccine rollout. As we sit here today, I think research analysts and investors are beginning to understand that mineral companies, and in particular Brigham Minerals, offers a more efficient vehicle to return capital to investors, especially when times are challenging as we saw at the onset of COVID and the shutting down of the economy during early 2020. If you assume the second quarter of 2020 was the ultimate trough for the energy space, I sincerely hope that that is the case. Remember that we distributed 14 cents per share via our dividend for that quarter, which when analyzed and assuming a $17 stock price equates to roughly a 3.3% yield based on the All of those assumptions, with Brigham Minerals, you theoretically have a downside floor yield of 3.3%, which is higher than the yields of many EMPs today without exposure to the continuing need to deploy CapEx. Looking at the first quarter of 2021, we're able to pay out a dividend at roughly a 7.5% yield, which represents an incremental yield of 4.2% above the trough level we saw in Q2 2020. Importantly, we're able to deliver that 7.5% yield with over 13,000 gross undeveloped locations and inventory that will be organically developed for shareholders over time, again, free of capex. We've included slides in our presentation deck on pages 3 and 4 depicting our yield relative to our peer group of EMPs and the S&P 500 Index. As you will note, Brigham Minerals' Q1 yield exceeds both of these comparison points. Further, during the first quarter of 2021, we were able to retain 20% of our cash and utilize that retained cash plus our lease bonus to internally fund approximately 30% of our Q1 mineral acquisition capital. We deployed 90% of our mineral acquisition capital to the Permian and in particular to the Midland Basin. Our net locations associated with these acquisitions were comprised of approximately 75% PDP, duck, and permitted locations, which represents a record percentage of net PDP, duck, and permit locations acquired during any one quarter. I believe when you digest all the aforementioned positives, you can clearly see Brigham Minerals offers an extremely compelling differentiated positioning relative to the remainder of the energy space. Turning to our operating results, our first quarter production volumes were roughly 8,900 barrels of oil equivalent per day, down roughly 5% from our fourth quarter production volumes. Excluding the impact of winter storm Yuri, we estimate our production volumes would have been approximately 9,300 barrels of oil equivalent per day, or in line with our fourth quarter of 2020. Our net activity wells at the end of the first quarter 2021 were 9.1 net locations, up 17% from year end, and were comprised of 4.4 net ducts and 4.7 net permits. Again, the importance of these locations is that our ducts will contribute to production volumes over the next 12 months, and our permits likely will contribute to production volumes over the next 12 to 24 months. Our net ducts grew over 20% from year-end 2020, again, to 4.4 net locations, largely attributable to the strong rebound and drilling activity that we saw in our minerals. During the quarter, we saw 132 gross or one net well spud on our minerals. This represents a 67% increase in gross wells drilled and a 150% increase in net well spud from the fourth quarter of 2020. It's readily apparent we are now seeing the recent increase in rig activity directly impact our minerals portfolio. In particular, we saw strong drilling activity on our position in both the Permian and DJ basins. In the Permian Basin, we saw additional well spud in Chevron's RevBX pad in the southern Delaware Basin, which I mentioned in our last conference call. We also saw continued drilling by ExxonMobil in our St. John's unit in Loving County, where they appear to be testing the Bone Springs in an area where EOG has had substantial success. In the DJ Basin, we saw Chevron spud approximately 12 gross wells in a Reveille pad in Wells County in what historically has been proposed to be the Nobles' Wells Ranch area. Drilling down in additional detail into our duct bound position in the Permian Basin. Further, the majority of Barnett ducks are anticipated to be converted by Chevron, ExxonMobil, PDC, Continental Resources, and Devon. Based on our analysis of state and satellite data, we estimate that roughly 1.2 of our net ducts have either, one, been turned in line to production and we are awaiting additional production data from the operator or state to begin the accrual process, or two, have been fracked and the operator is waiting to turn the wells in line to production. We can't control the ultimate timing of when these wells will get turned in line to production, but it is extremely encouraging to see approximately 25% of our net ducts on the verge of being contributory to our production volumes. Our permit inventory also saw a strong growth of 12% from the fourth quarter to 4.7 net permits. Growth was driven by both strong organic permit generation and first quarter acquisitions. We saw strong growth in our Permian permits, which grew by over 90% to 2.5 net locations, and therefore the Permian now represents over 50% of our net permits and inventory. We saw Muirburn, who is currently running 11 rigs in the Delaware Basin, permit locations in March in western Loving County in a tract that we acquired in early January of this year. In the Midland Basin, we acquired interest under Pioneer Resources with 11 gross permits in Martin County, where Pioneer moved a sputter rig onto location in April to set surface casing, and we anticipate the big rig to show up shortly. So to summarize our activity wells, sitting here at the start of the second quarter, we currently have over five net Permian activity wells comprised of our ducts and permits in inventory, which represents a record total since our IPO in April 2019. And importantly, as I previously mentioned, those ducts are under high-quality operators with strong balance sheets who are able to consistently execute upon their capital plans. These ducts and permits are newer in terms of vintageing, and it could take time for operators to turn our wells in line to production. We anticipate that at some point during the second half of 2021, our production volumes will approach 10,000 barrels of oil equivalent per day, dependent, of course, again, on the pace at which our operators turn in line to production our wells. The key takeaway is our ducts and permit quantity and quality are extremely strong, and with time will contribute to our production growth. Moving to our ground-gain mineral acquisitions, during the first quarter, we closed roughly $22 million of acquisitions, deploying approximately 90% of that capital to the Permian Basin, and in particular, deploying a record 56% of our capital to the Midland Basin. Again, it's worth highlighting that these acquisitions were comprised of a record percentage of net PDP, duck, and permit locations. Roughly 75% of our net Q1 acquisition locations were comprised of these inventory buckets, which I outlined earlier as being highly likely to contribute to production growth over the next 12 to 24 months. Finally, I want to reiterate BuzzPoint that we're able to increase our dividend 23% to $0.32 per share versus the $0.26 per share in the fourth quarter. As a result of capturing the full benefit of higher prices in the first quarter, we're able to modify our payout ratio to 80% from 90% in the fourth quarter and still increase the dividend by 23%. Using that retained cash and $1.6 million of lease bonus that we generated during the quarter, we were able to internally fund approximately 30% of our $22 million in mineral acquisitions. Lastly, as a reminder, and as we discussed in late February, we'll update guidance for the second half of 2021 in early August of 2021 associated with our second quarter 2021 conference call. I'll now turn the call over to Blake so he can summarize for you our financial performance. Blake.

Thank you, Rob. Our daily production for the quarter was roughly 8,900 barrels of oil equivalent per day, down 5% sequentially due to the winter storm. It is important to note that we believe we have fully captured the production impact of the storm, but will true up differences in the second quarter once we receive the revenue checks from our operators. Our portfolio generated royalty revenue of $32.2 million for the quarter, up 35% sequentially due mostly to a 45% improvement in realized pricing. Realized pricing for the quarter came in at $40.03 per BOE. Importantly, realized pricing per barrel of oil was $55.55, up 38% sequentially. Realized gas and NGL pricing were also impressive, with $3.75 per MCF and $25.97 per barrel of NGL. Also, with respect to the financial impact of the storm, we believe there could be additional upside to gas pricing realized in the first quarter that will be trued up in the second quarter. We also were able to capitalize further on the improving macro environment through lease bonus revenue of $1.6 million out of the Delaware Basin. Net income for the quarter was roughly $12 million. Adjusted EBITDA for the quarter came in at a record $27.1 million, and adjusted EBITDA excluding lease bonus was $25.5 million, which is up 48% sequentially from Q4 2020. Moving to costs, gathering, transportation, and marketing expenses were $1.7 million, or $2.16 per BOE. Severance and ad valorem taxes were $1.8 million, or 5.4% of mineral and royalty revenue, and in line with historical levels. G&A expense before share-based compensation was $3.1 million. While we are pleased to come in at the low end of our guidance range, thanks to our continued cost-saving initiatives, we need to get past the second quarter before we are ready to look at tightening our full-year G&A range. Our team continues to originate and prudently deploy capital in targeted highly accretive acquisition opportunities. As for the balance sheet, we exited the quarter with 5.6 million of cash and 32 million drawn on our revolving credit facility for net debt of 26.4 million, leaving us with total liquidity of $109 million. We have 103 million undrawn on our current $135 million borrowing base. Further, as a result of our spring redetermination, which is expected to be finalized at the end of May, our administrative agent has given us an indication of an increase in the borrowing base to $165 million, which adds another $30 million of liquidity, bringing the new total to $139 million. With the anticipated increase in debt availability and our retained cash, we should have ample liquidity to execute on our strategic objectives and anticipate a that we will not need to access equity capital markets in 2021. There is no change to our thoughts on capital structure as we continue to reiterate our comfort level at an upper bound on net debt to adjust to the EBITDA ratio of less than one and a half or two times. Lastly, as Rob already stated, we declare a dividend of 32 cents per share of Class A common stock. This dividend is payable on May 28th to shareholders of record as of May 21st. We continue to believe that through our superior business model, coupled with our active and prudent management, Brigham Minerals offers investors a unique opportunity to own premium assets in a yield vehicle that is highly attractive when compared to any other investments, energy or otherwise. I will now turn the call back over to Rob to wrap things up.

Thanks, Blake. We appreciate you joining our first quarter 2021 call. We believe Brigham offers a tremendous value to investors. We have our heads down, solely focused on executing our business plan and demonstrating the value of our portfolio and our team. Operator, I'll now turn the call back over to you to begin the question and answer portion of our conference call.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone button. If you're using a speakerphone, please pick up your handset before pressing the keys. We'll draw your question. Please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question today will come from Chris Baker with Credit Suisse. Please go ahead.

Hey, good morning, guys. Just wanted to ask on the dividend yield slide, You know, definitely a solid comparison there. Hoping you might be able to just frame up how you think about the relative risk profile of the company and specifically just thinking about, you know, the absence of operational control versus, you know, obviously the benefit of diversification and not having to, you know, maybe reinvest half your cash flow like we see on the E&P side to be helpful. Thanks.

Yeah, just initially, Chris, thanks for joining us. And I'll start and then hand it off to Blake. But I think in terms of the overall risk profile of our dividend yield, it's much less risky than an E&P or other companies involved in the energy space. When I think about it, many of the points that you mentioned is our higher margin business, our low debt levels that we've consistently maintained and will continue to maintain, which may have enabled us to experience full flow through of crude oil pricing. As you also mentioned, we have over 13,000 gross undeveloped locations that we think will continue to you know, move our production volumes up into the right without capex. And so when I think about it, you know, when you think back to the second quarter of last year and really the tough environment that we're in then because of the shutdown of the economy and COVID, and I think about that 14 cents that we distributed when many had to peel back to a much stronger, much larger degree, A lot of our commentary regarding that 3.3% yield in that second quarter of last year being kind of a theoretical floor. So there's tremendous upside as we think about crude oil pricing and the stabilization and the tailwinds that we're currently seeing out there in the market. you know, we think that that 3.3% theoretical floor yield is really much less risky than other companies, you know, not just in the energy space, but probably elsewhere, just given our high operating margins, our low debt levels, which we've indicated we'll maintain. And so I'll hand it off to Blake for additional comments.

Yeah, I think also, you know, obviously our assets underwritten by all these large, well-capitalized operators. So as they work through This year, you know, they continue to repair their balance sheets, pay down debts, and stick to a return of capital model. I think that just is going to play well for us, especially as they get past hedges that they've got in 21. So, you know, as you think forward to 22, I think, as Rob already said, we're going to be exposed to quite a bit of upside, and as these guys continue to stick to their business models and drill out our assets, I think that shareholders will be a beneficiary of that. The other thing I would note as well, as Rob kind of already touched on, is that 3.3% yield that we're showing there on page three, of our slide deck has been battle tested in the second quarter. So, you know, I think we're very comfortable with our ability to return capital shareholders in a big way.

Great. That's helpful. And then just as a follow-up, definitely a strong update on the ground game, but just curious, can you kind of update us on your thoughts around larger scale, sort of more transformative opportunities? and the potential to see something, you know, later on this year or next year?

Yeah, Chris, I appreciate that question. You know, I think first and foremost just want to reiterate what a tremendous job the deal team, the acquisition teams are doing in terms of getting out there, processing a large amount of deals, and ultimately, you know, in what we saw in the first quarter, you know, closing on $22 million in acquisitions, adding about 2% to the portfolio in terms of net royalty acres, But probably most importantly, when you think about the net locations associated with those acquisitions at a $6 million per net location cost, we added 75% to our PDP duck and permit inventory buckets. So really a tremendous job by them. They're doing tremendous work out there each and every day. The deal flow levels that we're seeing are really strong, probably stronger than we've ever seen. And so it's really tremendous that they've been able to ramp up and execute and process that many deals. And so I feel really good about that. In fact, a couple weeks back, we're at the Mineral and Royalty Acquisition Conference in Houston, and one of our competitors that's actually still out there buying alongside us, that number has been greatly reduced. But it came up to me, indicated that we're probably two to three weeks ahead of them in terms of getting to sellers and being out there in front of people. So I think it's a big compliment to our team. But I think, you know, as you mentioned, Chris, one of the things that we've seen in particular of late is And we're really working on now, more so than we've seen probably in the past nine to 12 months, a lot of marketed transactions out there. So there's been a big ramp in those, probably five or so marketed deals that are out there. So it's been interesting to see those evolve and come to market in the past several weeks. some of which are interesting, extremely interesting. And so, you know, we'll continue to evaluate those. And so we've structured the team such that we can handle the round game plus incremental opportunities. And so we'll look at those, but, you know, rest assured, you know, key to us is being disciplined in our underwriting process. And so when we do so and looking at deals and making sure that those deals are accretive near term, as well as longer term on an NAV basis. And so it's really the goal of the team is to, a large number of deals, both the ground game as well as these larger opportunities, but to do so in a disciplined manner, making sure it's highly accretive for our shareholders. And one of the things that obviously came about as a result of board discussions as related to distributable cash flow and what was ultimately distributed is the opportunities that we saw are tremendous out there. And as such, The board was comfortable reducing the percentage that we distributed to our shareholders from 90% to 80% because of the tremendous opportunities that we saw out there in terms of our mineral acquisitions.

Great. Appreciate the update.

Our next question will come from Leo P. Mariani with KeyBank. Please go ahead.

Hey, guys, I wanted to follow up a little bit on the commentary around MNRL getting close to 10,000 view per day in the second half of the year. Just wanted to get your sense on what gives you confidence in that. Is that just your own analysis of operator activity? And would you expect to kind of be maybe at 10,000 as we exit this year into next year?

Leo, I'll start and then hand it off to Blake. But to me, what gets me comfortable about reaching that range that we talked about in the press release and what you discussed is really the key building block are our activity wells. That we have an inventory. So that's really the ducks and permits that we have that are going to be developed for us over the next 12 to 24 months. And so, you know, really, I really want to emphasize what I talked about in the conference call opening comments that those act that activity. Well, inventory is extremely strong from both a quantity and quality perspective. When you think about the activity wells, we're able to increase those 17% this quarter from year end. So taking that up from 7.8 to 9.1 net locations. And importantly, you know, we're at record levels in terms of activity wells that we have that are going to be developed for us or turned in line to production in the Permian Basin. So that's roughly about 57% of those total activity well net locations. You know, in particular, when you look at the near-term contributors to the production volume, it's going to be our ducks. So, very importantly, you know, we saw our duct balance increase by 22% to 4.4 net locations, you know, over 50% of that balance, again, being in the Permian Basin. And, you know, some of the key operators are going to turn in lines as well as just for production are Chevron, ExxonMobil, Continental, Devon, PDC. And so, you know, we really were able to strengthen and bolster that duct balance by the drilling activity that occurred on an organic basis for us. And so, you know, you saw that really play out this quarter with the gross wealth spot up 67%, the net wealth spot up about 150%. And then kind of the next key building block are our permits. We increased those about 12% to 4.7 net locations. And so really importantly there, our Permian permits were up 90%. And so now the permit bucket is over 50% on a net basis in the Permian. And so when you look at all those differences, those different building blocks in terms of ducts and permits, it really gives me comfort, confidence that we're going to be able to hit those levels. And then, you know, we've also spoken about, you know, our acquisition program because that will also be additive this year. And so, you know, again, reiterating what a tremendous job the team did in the first quarter, still seeing good deal flow here into the second quarter and would expect to see good deal flow through the remainder of the year. So really when I think about that, those key building blocks as we, develop and think about our model and our production and cash flows going towards the end of the year. So now break, hand it off to Blake for additional commentary.

Yeah, I think, Leo, the thing to keep in mind as well is that that duct bucket is a fresher duct bucket as far as the vintaging is concerned. Obviously, it's the As the recovery sort of started back in the third quarter, fourth quarter, as operators started to put equipment back to work, you know, we've seen that translate through to our inventory of all the buckets that Rob just mentioned. So it was always our expectation that, you know, this would be sort of more back half-weighted, that we'd be ramping into the end of the year. And so, you know, as he also said in his prepared statement, We will touch guidance again in August, but no changes right now.

Okay. I just wanted to follow up on some of your comments here. You guys talked about roughly five marketed deals out there and deal flow being up. I just want to hear your thoughts on those five deals. Are those kind of much chunkier, just larger deals, or is that sort of a mix of stuff you would consider ground game and big deal?

No, I would say that those deals are more kind of doubles, triples type of opportunities. So, you know, where I consider the ground game more of the singles that kind of 50 to 60-acre deal, the 1,700-odd transactions that we've done over the life of Brigham Minerals to build up to this 88,000-acre position, that's really the lifeblood of the company. And so these kind of marketed deals that are out there that, again, really interestingly have kind of surfaced over the past month or so, they're more in that double or triple bucket. And so we'll evaluate those. Some are more interesting than others. But, you know, again, the key there is to be very disciplined in our underwriting. So, you know, to the extent we – if we are to announce any, you know, closing or, you know, any of those deals over the next couple of quarters, you know, rest assured, you know, from an accretion standpoint, both near-term as well as longer-term, that those deals will be highly accretive to our shareholders.

All right. And I think you guys also just made a comment that you didn't see a need for equity here in 21. Just clarify that. Is that basically just referring to the fact that if you guys are able to successfully execute, you know, on the ground game, call it 20 or 25 million a quarter between which we're really comfortable with that. But on the flip side, if it was a larger deal, then possibly that might have an equity component.

Yeah, I think equity to the seller. We typically look at all deals, ground game and larger ones, on an all-equity basis anyway to ensure that we're able to add value for shareholders from the beginning, as Rob was already talking about. So it's certainly a possibility if we get to the right valuation that we're comfortable with that equity to the seller could be a component, yes. Okay, thank you.

Thanks, Leo. Appreciate it.

Our next question will come from Pierce Hammond with Simmons Energy. Please go ahead.

Yeah, good morning, and thanks for taking my questions, and thanks as well for all the helpful information and commentary. My first question pertains to the acquisition of some minerals in the DJ. I know it wasn't a huge amount, but just curious what you see there. Is it more of a value play? And just overall thoughts, especially in light of the political risk in that state.

Yeah, no, Pierce, appreciate you joining. You know, when you think about the acquisitions that we undertook here in the first quarter, you know, again, 90% of them were weighted towards the Permian. But as Bud mentioned in his comments, we are still active and looking at deals in both the D.J. Basin, North Dakota, and Oklahoma areas. You know, the key thing there is that we look at these deals on a risk-adjusted basis. And so pretty typically when you think about those deals in those other areas, we're looking for higher rates of return on those deals. And so we're very cautious when we underwrite those deals. Obviously, you know, political risk in the D.J. Basin is first and foremost in our minds as we think about deals. And so when we look at deals, you know, obviously PDP, ducks, and permits are you know, much beyond that, really not going to give credit for. And so we were very excited about this deal. We were able to close it in the first quarter in Wells County. And kind of right after closing that deal, I think within a couple of weeks or so, the frack crew showed up and obviously waiting on incremental data, but extremely pleased to see kind of right after that deal being acquired, that frack crew showing up and starting to frack that location. And so we still think that there's really nice opportunities out there in these other basins, and it's just really the key thing. We built this diversified portfolio. The acquisition team has the experience, the knowledge, the expertise to acquire in these other basins, and so we can very efficiently and from a returns perspective really high-grade each and every quarter's acquisitions by supplementing the Permian activity with acquisitions in these other areas.

Thanks, Rob, and very helpful. And then my follow-up. One of the attributes of Brigham Minerals has been working with the high-quality operators, some of the major integrated oils, et cetera, that give you more consistency and, again, well-capitalized operators. But here recently there's been a dichotomy whereby it's really the private operators pushing the drill bit and the public companies having more capital discipline. So I guess the question is, is, Are you seeing more private activity on your minerals, or are you at a disadvantage in any way with your focus on more of the high-quality companies? And then secondarily, are you seeing any fraying of the capital discipline from some of those public ENPs, especially as prices hang out at these levels?

You know, I'll probably start with the last question first, you know, in terms of, you know, obviously a lot of what's investors' minds right now is capital discipline and, you know, maintenance mode capex, you know, not wanting to see significant production growth such that, you know, we are able to achieve that, what some people have written of late, the golden age of oil and gas. And so, you know, we are seeing public operators be very disciplined, you know, as I scour all the different transcripts and press releases, you know, all the public seemed to be very disciplined in terms of maintaining CapEx, you know, pointing to, you know, low to no growth as we think about going forward. You know, probably importantly today, you know, a key indicator, one of the very large EMPs had a big special dividend that was announced, kind of pointing towards capital discipline. So, you know, to me, across the board, we're seeing the public operators, you know, either pay down debt or or enhance their dividends or special distributions to their shareholders. So I think, you know, that should be very comforting to the investment community as you think about, you know, being able to maintain that mid $60 plus pricing that we are currently seeing, you know, and eventually maybe getting to the $80 level that Goldman referenced. When I think about the first part of your question, you know, I don't think that we're at all at a disadvantage because of our focus on public operators because there have been some several key private operators that we've focused on in the past and continue to focus on. And so when I think about, you know, some of the important folks that we've targeted or tried to binder, that includes Muburn with 11 rigs. We did a really nice transaction with them. that are referenced in the conference call transcript there in January that they then came and issued a significant number of permits in March of this year. We've consistently targeted Endeavor, who's run a decent amount of rigs. I think currently running about nine rigs. We like BTA. They've done a good job. We like what the DoublePoint guys have done. And obviously now that portfolio has transitioned to the Pioneer guys. But, you know, our focus on public operators has always been supplemented with focus on high-quality private operators, those that are doing a good job when we look at their wells on their fracks and generating high-level, high EURs relative to others. I would say the key there is just to, again, stay under quality operators, but that can be both public and private operators. Okay, thank you very much.

The only thing that I would add to that is just that, you know, staying under these well-capitalized operators gives us sustainability. So, you know, going forward, as you think about some of these private operators selling their assets to the public, like we saw with Devil Point going to Pioneer and then Pioneer kind of ramping down from where they're double point was, you know, that's going to end up being more sustainable for us going forward, which, you know, I think will play out well for investors as far as our ability to continually return capital.

Appreciate it, Blake. Thank you.

Thanks, Chris.

Again, if you'd like to ask a question, it is star then one, star then one to ask a question. Our next question today will come from Janine Y. with Parkways. Please go ahead.

Hi. Good morning, everyone. Thanks for taking our questions.

Good morning.

Thanks for joining. Good morning. Our first question, it's really back to the A&D conversation. That market is recovering very well. I think you said previously that it was stronger than you've ever seen. But importantly, you'll remain disciplined in acquisitions, and you also expect some strong deal flow in the second half of the year. So given all of that, would you consider, again, lowering your payout ratio to in, you know, 2Q, 3Q, 4Q, given the opportunity set that you see that's currently available?

Thanks, Jeanne. Appreciate the question. You know, I think one of the things that we've consistently messaged is where the goal is to have a dividend that's consistently moving upward. And so, you know, that's the ultimate goal of the board. As we think about implementing that, we've talked long-term about that ultimate payout ratio being in the 75% to 80% range. And so, You know, I think as a company and a management team have been very consistent in terms of, you know, doing what we said we were going to do. And so, you know, I would expect the range really at some point to hover in that 75% to 80% band. And so, you know, I think, you know, when I think about, you know, the dividend, as I've mentioned on probably several different conference calls, is more of an art than a science. And so we'll continue to monitor and evaluate dividends. you know, cash flow deal opportunity as moving forward as a board. And so, you know, I think, you know, one of the things that happened is obviously, you know, prices were very supportive with a 45% increase in realized prices in the first quarter that allowed us to step down. the payout ratio from 90 to 80%, which was obviously very constructive and allowed us to fund about 30% of our mineral acquisition capital. And so we'll continue to monitor that, have board discussions. But, you know, I think, you know, in terms of where we ultimately land, we'll be in that 75 to 80% distribution ratio that we've consistently talked to folks about, our institutional investors.

Okay, good to hear. My follow-up question is maybe just dovetailing off of Pierce's question. Is there on the privates versus publics, is there a difference between what you see is available in the minerals market between private and public operators? And is there an opportunity to expand on the subset of high quality private operators that you consider? I thought your commentary was interesting and we've seen the M&A market kind of pick up. And if some of the smaller players versus what you're talking about do eventually get picked up by the larger publics, then they automatically get a boost in being high quality and well capitalized. So I thought maybe there could be an interesting opportunity to expand what your subset is that you're looking at, but just wanted to get some color. Thank you.

Yeah, no, I appreciate the question. So I think, you know, in terms of the privates, there are, you know, a handful of privates that we think are high quality, and that's in terms of, you know, the number of rigs running, which, you know, if they don't ultimately get, you know, taken over in some type of M&A activity, they still will have consistent activity on our minerals, as well as high quality in terms of the EURs, because we want to make sure that we're under the very best operators that are employing the blessed completion and drilling techniques. And so, you know, I would say probably my interpretation of the first quarter and thus far in terms of the second quarter, we are seeing really nice deal flow under privates. And so we are actively targeting that. We're not going to shy away from that because, Janine, as you did mention, we've had multiple instances, you know, throughout our life cycle as a company where our a smaller operator gets acquired by a much larger one which then translates into probably more consistent development a much larger balance sheet uh you know and that really becomes critical when i think about really the multi-zone coordinated development that you're seeing out there so when i think about you know in particular in the midland basin on a half-section drilling 11 or 12 wells really to efficiently develop that. You want these well-capitalized operators that are going to be able to drill 11, 12 wells in a half-section, you know, 22 to 24 wells. You know, when you think about $7 million well costs, you know, that you're talking about, you know, you know, $100 million to $200 million a section, half section to full section to get developed. So, you know, we are seeing a really nice opportunity under privates and are actively engaged in processing those deals. And so we'll continue to do so going forward.

Great. Thank you very much for the detail. Appreciate it.

Yep. Appreciate you joining.

Ladies and gentlemen, this will conclude our question and answer session. I'd like to turn the conference back over to Rob Russo for any closing remarks.

Again, we really appreciate you joining us on our first quarter conference call, and we look forward to reporting back to you on our second quarter in early August. Thanks for joining.

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