ESTE - Earnings call transcript Q1 2022

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Operator

Good morning and welcome to Earthstone Energy’s Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

Joining us today from Earthstone are Robert Anderson, President and Chief Executive Officer; Mark Lumpkin, Executive Vice President and Chief Financial Officer; Steve Collins, Executive Vice President and Chief Operating Officer; and Scott Thelander, Vice President of Finance. Mr. Thelander, you may begin.

Scott Thelander

to quarter welcome conference and you our XXXX first call. Thank

of like get forward-looking you meaning started, we to statements securities I the contain Before will would remind laws. call that within federal today’s

and year our to believes Robert. XX-K reading. now risks, transcript Mark CEO; closing with on as the also the give and Reconciliations begin assurance documents under and December X, we I correct. uncertainties information prove from of XXXX incorrect, will listening announcement as we or measure includes CFO, comments can in ended to Anderson, call the website, Therefore, These most please measures call our quarter call the replay these over yesterday. our remarks and may management by expectations, turn earnings to no found more results be actual subject information financial may one have followed and for only for then May are be in any will released Form non-GAAP Today’s from our Investors no our comparable Also, will note recorded these measures. These the some materialize on assumptions longer in call speaks time that based issued Robert any President are or directly announcement of earnings contained Steve materially. first GAAP of Although yesterday. Should underlying comments at of today, financial This our risks Robert. time-sensitive the of reasonable Lumpkin, annual this conference are XXXX. non-GAAP accurate XXXX, our XX-Q will COO; to from references www.earthstoneenergy.com. should Collins, Form filed they first statements prove assumptions the in vary they report on be certain section statements that XX, certain to described material can or quarter these

Robert Anderson

joining us ongoing and significant busy Thanks, Scott momentum. really our good quarter first our in four morning reflect It’s and strong pleased a we to our for call. today which quarter, but transformation the are months, positive appreciate you We talk about results everyone. been

the Big acquisition have realized further quarter With end, scale after closing change the and of Horn in we a step efficiency.

$XXX a quick worth equity. $X.X on $XXX of new closed a XXXX, acquisitions. we in raised completed in have We for we billion As million, reminder, million asset high-yield notes about and offering

has a sustainable a strength. All sheet of transformation last just base and this acquisitions created with inventory much XXXX how we’ve months. significant the and amazing business It’s more with high-quality resilient larger activity, production XX and balance a along continued over the with flow deeper drilling undergone of cash

we to future on focused are are driving asset value from our numerous continue and the opportunities we However, significant there believe base.

We the are asset debt. focused of while our absolute development and base costs on reducing high-quality optimizing managing

confidence efficiencies. through is quarters, able next and over operational we value be high drive to several will improving Our the that capital

costs on reducing As recently inflationary we even the on of can, these will with done we all assets acquisitions, with we acquired our have focus where pressures.

operating asset and wells With personnel help systems assets, with that BigHorn operating some on the synergies improve us next maximize margins. our we and door to see literally our will reduce existing procedures, downtime

acquired newly and smooth. going The expanded operations exceeding meeting strong. is flow our cash initial results or Delaware are Basin free expectations assets well Our on our are

high more plans The assets that feel execute cash given I commodity are substantial particularly generate free cash, large our Bighorn flow. forward, free on even to generating and positioned Looking amounts well these we’re prices. operational of

the purchase X the significant between preliminary reduced assets consideration price April free cash that by of generated date period $XXX and for effective on January flow million. interim such Bighorn after about was the closing XX, acquisition adjustments, during fact, the In the

have parts We execution. far. most integration believe very one that efforts is of pleased integral the so integration of We been our with

have Basin way the consistency doing BigHorn. We land and integrated Chisholm well key the Delaware already are the accounting, for the of operational along are the we same and for Continuity efficiency. acquisition in financial and to reporting

Steve areas we Delaware have discuss identified assets. days As on Basin will potentially a further, drilling reduce of couple to the

field, of right sure people are we the transition joined the because personnel We we’ve been making that have and smooth the in with pleased have the us.

hiring operational to from that been from of disciplines, to all added experienced by us we’ve industry. also office able the to will We the attract allow including both technical have assets, continuity, we which across and staff employees our companies keep staff acquired talented

February Spring approaching are pleased drilling Delaware has strong well per the XX wells, completed and to X,XXX Bone These sand of pad months Harkey of share highlight early and about XX% Basin the results, County, minus side. about since on some shown averaging about located now cut Mexico X-well third two the we’re New production on days our day successes. first some laterals you the over with April. are oil Lea Steve the acquisition, targeting production. on per closing We the of in first since with early in which foot in will BOE X,XXX three completion Delaware in brought our we Basin closing the side, But pad

view Delaware strong production Basin estimate further initial we Spring, as X-well flowing now supports results, pad, Third are second we with acquisition. pursued approximately commodity Lea our payout the wells on brought these bringing prices, which Bone County we the that And while After we reach current high-quality date. back. With minus this pad expected in will from early, a the months on targeting are inventory very four we of the which first pleased the

our $XXX from was spending $XXX that. million forward, capital do impacts guidance, about between year below Our of million, to we our and but going more XX% for we hear maintaining for significant guidance the and about the full expect are the midpoint inflation see and quarter you’ll

be on these and executing integrating continues assets new near-term drilling to on Our plans. our focus

expect, of it debt, to do to to to And of initiate As could generated, and you scale returns plan additional us but to our but Steve. balance shareholder year as and of us, better our larger sheet. any And position the expect we in strength finally, open after plans expect provide the a that with business we in a down XXXX, consider over flow I’ll turn high-quality with to giving free operating cash in still we not few potential that, get XXXX. the us the is quarters behind inventory we’ll be ability opportunities would to production remainder for remain acquisition pay maintain while the is

Steve Collins

Robert. Thanks, morning, everyone. Good

continue two to Basin in We the in operate Delaware Basin. the rigs and X Northern rigs drilling Midland drilling

was daily just per average XX,XXX from over quarter which of up first day, XX% BOE is the fourth Our production XXXX. quarter

the the Chisholm We online February. two from and in closing have seen the results completed production wells Basin acquisition in first initial brought Delaware since strong

on Basin We are over optimistic that we time. capital will the be improve Delaware able assets efficiency to

we us in an drilling surface casing area mentioned, on side allow the to days identified many are that reduce have Robert or that will circumstances. drilling related incorporate working to two As we to presetting

feet that six – a in completed our a and of have We and X,XXX cost for wells Upton length were pad also foot. of completed an Benedum drilled on approximately average lateral recently County $XXX

well type XX% early daily line with day, per XXX per curve cleaning with still are are wells these in initial average production results our BOE oil. of up, While approximately

the acquired Let assets field February, on which most update in to is provide plans. in me With assets the closed operational previously Delaware the and due new bringing the their of that assets, integration of respect operation the an on the smoothly. this to is running executing were operating This assets personnel year. part, for existing Basin part

nearby the also can say having are production, of production focused these improvements over about hired the engineering, a assets. maximize drilling to field are implement and this Basin able staff majority approach X Earthstone’s be as been do as that staff that operation we additional to asset. operating the to time we to Delaware have expected, costs. we technical closed on assets of exclusively completions with existing only we these areas to program ago, changes and wells areas, working things both of in land any find some assets, going BigHorn and ourselves large not weeks foresee assets Combining active operating fracs Despite we the integration have after material an With retained with expect in shedding completion in that minimize and production. mentioned, drilling Robert and I for and the geology on over and wells As before

long-term operating is work these workover and driving should we workover with downtime this potentially production for respect increased production see which decisions. reduce Although to accounted increases review and This our additional With activity prep to in is enable under us efficiency reduce it operating expense, economics production. opportunities, frac the assets, Bighorn guidance. some downtime expense, and

calls Our the rigs two X-rig for Reagan Delaware in County. Basin the the and continuation Midland in operating Currently, and our in capital program Basin X we and rigs with County, Basin. program the two are Delaware Eddy County of a County Midland have Irion while rigs in Basin Lee

and Reagan well. completing are We County as Irion in wells

by in pressure inflation the not first expenditures first was can you see quarter. capital impactful As the below quarter guidance, that the being

However, costs the year, the rise. to course we of expect service over that continue fully will

for and our Robert completed sand And at just X,XXX-foot couple is completed deliveries areas as two pad with volume. casing price we in on per a at a December we locked year a lateral a also $XXX of committed contract have We XX,XXX-foot out, the next the $XXX costs, Recapping for foot. Midland lateral pointed in pad fixed throughout foot. quarters, the

can to hard influences less normalize efficient, the length are pressures. to we you shorter to and lateral cost are the that see beginning laterals due the of Although see differences,

focused both completion days We to order on efficiencies on in activities. location, drive drilling down are and

purchasing that, some over compression. we Now expenses obtain will allow and a much with vehicles greater larger operation I’ll as it from well. everything operating turn and production base, Mark. to expect to to for larger much power Having on With chemicals savings a lease cost

Mark Lumpkin

Thank good you, Steve and morning everyone.

on to to key usual, additional As going and highlights. time some details take metrics I’m meaningful several this some provide

you and XX you information debt earnings a of you on I our our our additional financings release can the recent say release. XX-Q. our results breakdown also press As find equity can in know, April would our and in find and detailed

year lot a the going since sheet. our the of had beginning on to we’ve related While balance

start an give will I well. as I current end and update more you update with a quarter as then will of So

Also we pay revolving In mid-April, consideration Chisholm increased of of our million quarter of undrawn closed million XX, borrowings closing at on the As with on million had to from Horn from acquisition, revolver. based a in facility end, the of used also bar we the close cash the Bighorn capacity $XXX on the which our of completed in and million was the level $XXX in year. a credit the With pipe Big offering, our in deferred we million end XXXX, commitments to conjunction proceeds to approximately billion we $XXX down XXX-mile in borrowing of we $XXX $XXX in had and Bighorn million. revolver $XX $X.XXX million. the on these quarter the at $XXX March the closing a with conjunction from to at end, base reduce $XXX credit mid-April, on facility to April, quarter the and acquisition notes million earlier elected offering part and

$XXX We looked quarter-end like beginning of which $XXX been April, $X.XXX outstanding cash leaving and all our $XXX credit $XXX and in have total balance, million comprised billion, on this have under but here’s our of availability have outstanding basis. million commitments of would activity the So adjusting for it on of what million notes had facility, total on that debt undrawn the unsecured facility. credit debt approximately with would would senior of of debt million

down also break all the outstanding count. share our think activity, it’s recent Given I important to

the you shares equity million million. was This the and we April. into the by our Upon not shares. of that in XX.X of conversion our outstanding does of the $XXX.X XXX.X common see million total A XX, common of includes of common count expected common in common our conversion share total count shares convertible impact will April total Class approximately outstanding will our to Class the stock, issued expected grant include shares preferred As Class pipe B $XXX share which A in common these increase as had XX-Q, million both

prices. first incremental and Now Basin quarter results going million back commodity the assets higher the our which to increase was XX% quarter, Delaware $XXX quarter-over-quarter, the half also from for was production attributable about the largely of to EBITDAX from of quarter a the

million free $XX quarter flow. generated of first also which quarter, our marks free cash cash positive We consecutive flow the in of eighth

including quarter including second quarter Delaware Delaware saw and assets first of higher and and first much will quarter for we the at Bighorn cash the Basin the about about are than half production Bitcoin in the not all, for for the the realizing quarter, Basin in asset the which assets assets quarter. excited only With flow we include what XX% about quarter full the the

the We then and in cash in outlook. early generally flow which acquisition. standpoint, purchase a forward, improved today and Bighorn than of of quarter price January expected significant the amounts the a XXXX, Bighorn we going under expected of EBITDAX repayment announced is position in for credit we when higher where free really combination balance have expect be very as downward larger From earmarked better our levels first significantly to debt our have mentioned, for adjustment the in leverage facility. acquisition, and the The just of we’re really Robert position of a to

the might to the part the right targeting did side, you the recall, to Chisholm Bighorn And look own we As we first X.Xx balances take X.Xx if around of what for of Earthstone’s for first from and debt-to-EBITDAX the on before this quarter EBITDAX assets. has in period quarter to debt end we quarter, of by and When plus year fourth EBITDAX the on of course, you the originally annualized the the basis. getting an down the Shisai, first before the actually quarter quarter. EBITDAX our are at result end we add quarter and closed is just Chisholm the in you debt were

puts basis, lower to quarter much the basis. continue a that better in first the to debt tick at X.Xx we the position on down really the we below And are year that leverage us annualized on this So EBITDAX to year well we than that a anticipated. on quarter adjusted finish X.Xx throughout expect and fourth from

XX% quarter, our a an Looking which XX,XXX except mentioned at all X% mentioned, we produced the last expect average our was metrics, gas BOE we natural standpoint, for relative a be about being for the of in largely guidance Delaware includes BOE with for and midpoint somewhere we of below with the contribution guidance, second to and of around again, quarter Delaware assets of Further, CapEx, year, first XX,XXX were assets, we the as about the factors our this, about of From quarter the component from production of per which component assets. quarter, from course, what Bighorn middle BOE already and half expect in we the approximately and the guided to both was the XX% natural a XX,XXX again assets between the XX% XX% oil production day produce and XX%. per gas To in that first February acquired And liquids. full in per in XX,XXX we of to Basin day, of about XX full mid-April. to the reiterate day we the comprised acquired oil, days XX,XXX oil quarter, the Bighorn second guidance. which Basin

million XX% first to gas fourth quarter. in in per we BOE on and somewhere about natural production, up compared was year changes G&A build production basis, comprises about between and and XX,XXX for our but XX% it $X.X in natural million cash day, XX,XXX expected to the So at the to oil, no results XX% where on a Total came right quarter gas guidance full liquids. and $X.X

quarter in year. the quarter first last volumes Of more fourth course, in to the of the second we – compared added

And earlier $XXX our that be put of guidance. million on and $X.XX cash this in first $XX midpoints we on BOE $X.XX So out the XXXX G&A both about quarter our the went year quarter-over-quarter down G&A per to and year. fourth by per the a BOE basis, production to about G&A BOE quarter. in between $XX expect full we still per million range based would be from the cash And $X.XX

In $X.XX. quarter, Moving over to BOE LOE LOE. we per of recorded the first

As Earthstone $X.XX elevated maintaining LOE And expect LOE be guidance year acquisitions. per last compared full LOE these we’re BOE BOE to quarter, $X.XX. we two the of we per prior to closing guided to for our on to

We some synergies operational are of achieve for a now that days, monitoring on potential both can inflationary need XX our pressures we’re workover that XX the the past respectively. think offset as the on hands we both sets and that assets. here we’re hopeful bit. some recently activity acquired just we higher to time, at excited assets And same will the of in gotten about we’ve But

side. quarter. from basis, see to quarter do more absolutely impacts time, in how expect And to but for of towards the that $XXX of the year. more of inflation $XX expecting us the none over pressure the the of high driven year, I there about of quarter perfectly and first to million. end we the to say would that. largely to Turning going can end first throughout baked We the And hindsight, in would say million year. was predict certainly of million inflation was did what much out inflation less $XX midpoint the lean we’re same the cushion that million – we’d in was I capital $XXX are in full see is we million below the significant which – expenditure Obviously, really by than the quarter, probably XX% plays going probably the our we And we first realized too happened our we of maintaining what timing guidance the second impact in spend forward. expect guidance the for At $XXX inflationary forward. this On of

the reported it not On With XX% collars. XX% the that, we I back that different really front, to hedged Robert turn we where which mix year from right March, is of when our remainder and over XXXX were hedging comments. will swaps all about are of for the in results with we the for to closing

Robert Anderson

Mark. flow Today’s cash production well-located commodity acquisition of combined significantly accretive free assets generate with our prices, has meaningfully cash higher that high our Thanks, profile. and strengthened margin

executing to As which the pay flow, expect cash we generating and on of debt. continuing rest us, heard free remain levels you to assets, we XXXX high we have use look operating focused ahead of these to plans as integrate from and down our to

track to As on Mark facility below believe the target. end reduce of credit our onetime stay support asset our for will focus Strong and Earthstone. base. mentioned, to helps optimize our past we’re balances a demonstrating ability strong we to a robust debt-to-EBITDAX debt cash are to flow and compared significantly year And well the program drilling we sheet optimistic more on our our that balance the by larger very as this record-setting year be we

that last provided a X.X Over production current opportunities. increased as of years, we’ve complementary dramatically well have new drilling assets exciting as the acquired mix

legacy team consistent high-quality recently, acreage cash to track asset that and optimize our record generation. enhanced really adjacent have in we future our flow the we allow free as expanded both our our successful to excellence have us as into Basin. assets feel demonstrated will drilling and position exceptional positioned of program operational We execute We base, believe operations as a to Midland well Delaware the Basin well

to be a will few take we glad questions. operator, that, with Now

Operator

you. Instructions] [Operator Please with Charles your question. Rice. from question with Your Thank proceed Johnson comes first Meade

Austin Aucoin

in This Robert Austin and morning, team. Charles. good filling Hi, for is

Robert Anderson

Austin. morning, good Hey,

Austin Aucoin

debt a is the of still and there market? XXXX execution the complete, that reduction? And so as a of Or the more how Bighorn market? of year follow-up, state A&D is Now acquisitions current is Chisholm and are in A&D

Robert Anderson

mutually are they think don’t I exclusive.

same as we, And make can you’ve our we’re that as year. team, on on perhaps. staff look a this can on are, management sense. plans for, for a think picky heard, We continue and time, looking be we bit I at to executing more both very focused opportunities for the little what

price a at lots It’s there continue of So full just $XXX we at. opportunities of bid-ask want – oil. what spread to opportunities to There where deck you is pipeline will sell. versus to the up as is could There get is of sellers use a people buyers they in guess and to be at paid market. to what look going the want kind between the lining

impact the or this think year A&D in near-term. I going to the at what’s So that’s market least

Austin Aucoin

two-rig you after you Delaware. Thank additional program? understand see the for plan rig the an color. we in of execution, the XXXX I a that in the And program of a near-term, quarters in run to couple could But

Robert Anderson

Yes.

But our economics out side. see activity jump walk decide we’re there. being like there. federal do time on Steve exercise before it doing preplanning a another And are have out increase into we take we’re And now. of we’d have for guys We’re the you as have going to before try more well New activities and can strong, executing you sure a out run need what to right to we’re in love going as to of going you’re right it to the if we make where our that and Delaware through as lot But we planning long lot aware, we makes and that now rig so we the and to now, permitting. figure could more Mexico does lead acreage sense

Austin Aucoin

for it. appreciate I me. all That’s

Operator

Your your with comes next Please White Capital. ROTH from question. with question John proceed

John White

months. Good and over many XX morning, guys past done congratulations gotten that the all you’ve on

Robert Anderson

Thanks, John.

John White

it’s your Mexico, and on you the before good, with it? anticipate didn’t property new basin anything closed anything of on it’s maybe Delaware, but the your or again, So couple wells some payback, New you on provided color now not Are is look it really that that you you first Texas. us seeing and experiencing additional a

Robert Anderson

production I tough at time, think an good a team that in inflationary positive I environment, efficiencies some just prior but of around what I really. is is same like the arms the the think fruit can new on and we and to cost that. local dealing situation, and matter do mean things negative. different which both always the and doing federal permitting your surprises, And improve drilling and change and side. Not and both with was operations landowners then is the few need low-hanging a getting is operator mean and it’s there There things create we be it’s to some some purchasers what structure. I will there the able the

So nothing ways – surprised execute continue It’s just to and got cost us there is that just negatively. down we’ve the to drive find can. to structure if we

John White

I guys am you execute well. very well, Okay, did. sure what That’s you

So, and for detail additional on. that I will thanks it pass

Operator

from comes proceed question with next with Chandra Please Your Benchmark. Subash your question.

Subash Chandra

thanks. Hi,

about So like flow in it to your more there opportunities and probably netbacks layering How ‘XX protect then think do Waha and there looks assurance hedges like your out you’re and you progresses. moment? how so might at what and the market basis about in hedges the ‘XX thinking additional look

Mark Lumpkin

actually very that we before standpoint upward of we hedges because hedged January. weeks loved moving gas sort buy you X looks bunch Mark standpoint From of announced able half our did the protection. piece ‘XX the have of that. the of what and been in roughly That’s on really That to on and have to of year Yes, one. Waha to X focused some coming. address try sort never, gives of we’re would financial one us I’ll I go late the know, swap announced like. and have really put those From and in of on this they seen all of assurance, of Bighorn of mid the to on prior kind the been a futures based hedges, in weeks terms financial we I of two to after rates start the sort Bighorn. We’ve that’s or it’s that contracts transport. Subash, think And put hedges on firm flow financial as ‘XX it, week Waha here. kind of those

is and that reason continue we’re we can that. also we explore solutions do And ways sort think multiple in are that. we have mentioned to to that we’re of that. to working that. to have we this to do At different sure don’t us, good going the the right flow feel of our with we assurance. that. I we’re And the on day, about But For I on within assure make everything processors. March And the main we there And focused exploring all moment, gas coordinating and you, end but ability are tackle

Subash Chandra

Yes. Also, guess, put did and I – are or further Mark, opportunities way, there? opportunities to there basis take another the hedge you

Mark Lumpkin

the Waha in mean, put were that January, place have and ‘XX ‘XX in in and hedges maybe not All I added No. we definitely then. in to even February, we’ve some in late since

Subash Chandra

Yes.

feel have of comfortable sort become you unfavorable? curious So do point? at they Or why not pretty this

Mark Lumpkin

there and the case adding was build we a as markets about function add risk we that working out the two, done. we put in because Yes. or a And potentially there. Hub the more the speaking, we Sort a hedges might of felt in I’m money pipe. for get trying look ‘XX basis risk more ‘XX, would to underlying Waha hedges. we’ve it – pipes, hedge get we’re I completely take Henry there we chuck than completely more I And of mean, WTI it covered, it of guess or in saying not plans say, just maybe not and compression our to philosophy place a new on in generally or on good I’d responded obviously did of the a different heard pretty hedging that’s money it how on little be on to great out not

be we’re relatively we go We’re to that monitoring of it’s if daily, that XXX% want also hedge not to protected, not weekly. something And going but well it.

Subash Chandra

particular prior could And be put that that in it. Delaware have context on what interval? sort then Got of the in may results Okay. you of results, been

Robert Anderson

Subash, Chisholm is This time first or either Robert. Harken is that this completed the us wells.

something So two our ahead it’s with identified the in we But tackle they operators go are them, results we should a the not with are we’re probably it’s really interval. these pleased a and type of and team completing little wells along Chisholm Other the and zone. that new curve.

Subash Chandra

it. Got Okay.

then of if is of lockups kind sort And expire? Okay. there? there just of finally, could And any out the you lockup of review imminent status lockups that sort

Robert Anderson

shares management off The except some shareholders And the XXX locked days I and generally folks small The June. I still memory. shares. are who Chisholm in going then locked XX that expire is management days, got group of acquisitions am think will for up, Bighorn like – up,

couple after remaining of couple So, we lockup. got more out shares months and the that then come months a before the have in first the a round other of

Mark Lumpkin

But to aren’t yet. Subash, to those shares that, registered add

out So, of not even up, aren’t sell are and the they them. and that on gets the Chisholm in locked lockup statement are yet they registration practically gets until can’t filed effective trading shares

Subash Chandra

Got it.

guys. Thanks Okay.

Operator

Your question. with your from Jeffrey Partners. Global Alliance Please next proceed question Campbell comes with

Jeffrey Campbell

Thank you.

believe years. X First, I your debt callable for high-yield is not

just So, ask would talked the I I and about you debt. thought revolver reducing

plan your balancing secured in what’s coupon term, credit regarding higher versus facility? the longer debt debt Just unsecured lower coupon

Mark Lumpkin

point a get case you cash is pay next maybe of over this mean closed of with And flow, your would at four capacity to the XXth is so a on for time. of or yield chunk year-end really, of over of year. high-end year risk of of of of the what the add are and versus We acquisitions and it Bighorn the over debt from first rate go-forward we term. longer floating being by a of what’s point, might nothing like to are we we doing the to callable we away point to four bonds we a that cash And static rate the in large bank be fixed static One, drivers balance start place Robert really look more building when We like able at if else going basis, the was in cash. one today spot aside five looking like and just a running Maybe I we can because the at of think let probably do big if And looks of free we change setting acquisitions. are this that having that years. to of revolving the hit do place, easily the a bunch think of are kind good out we we where a finance in termed a revolver cash on some bond high sort the did there that, the me in the least the on capacity. pipe April course honestly, takes the should are we sort first debt bond. of couple the part majority have as and obviously, year. time was down in mix And building reduced rigs do

uses And positive maybe don’t for of more we pick much that just Robert, a the the us. the fact up us strategic to of cash? have gives ability to part what drawn that or even on are. the commitments that’s you on relative So, what that want is electric borrowing revolver do base

Robert Anderson

Yes.

kind next program to some our then be capital year, business. do quarter and mean more significant we opportunities down of and I free think towards find our the be through to with grow debt spend this return bit see paid we to our little happens revolvers focus is And we Maybe I opportunities to cash cash But right. definitely year be try off, it’s going and will and Mark increase it for end what acquisitions. would in do of hit that plan going flow. more what other the consider opportunities look XXXX. a then shareholder and after cash first the but still that paying to

Jeffrey Campbell

I Okay. Eddy interesting drilling Great. it see but maybe to occurred have County. it mistaken, it. That I was was occurred expected. in color. appreciate This I I thought good than was earlier would

So, perhaps activities there I the and and your assets that other could and some assets add with select like portfolio? on just or are your how competing color wondered, places parts you there County Reagan of Tracker the

Robert Anderson

observation. good and question Good Yes.

couple Eddy wells now We drilling bigger on a of our block County. in are

year. you with. to We track deal because stay will the your have midstream plans Federal probably for of later changing couple in you timelines a the have have permit on when wells And of got got other got planned just difficulty we of

on go we good execute economics, and go our to test to So, ability they those are out wanted areas.

under-completed, had it, Some historical intensity wells fracs. been we lower will call

got the have there. infrastructure We

embedded sort in is So, of that it. already cost

So, fulsome get. a to more come we of in out, more areas in knows. we County. bit going what back Eddy this gas a results certain are test we It see who year, go with kind little Maybe program next does make

that like little gas little Irion in their $X Irion are are drilling to and both to or economics cheaper. compared places County, two the there. Eddy. while prices basins where other a favorable. we some in They it $X. So, are drives a And It’s are economics that’s they respective cheaper similar Similar bit good,

our whether prices of on Irion get expand we get we gas on of are those those they five-well will are going quickly, before in can in where with results pad and we with to we kind either we Hopefully, what County. track So, are, we our decide places. program see two

Jeffrey Campbell

more additional then be question, that and Delaware seeing? Okay. personnel improving that hired last are additional have a to to operations priority you Basin And the would the you exposure regarding my due acquisitions,

Robert Anderson

We are focused the looking Basin. But in Basin. Midland at Delaware deals we are at definitely in stuff still the at also looking

done. to going opportunities you either it is and not driven seller/buyer or of a price to So, are and agreeing a get on disagreement far deck too some by are a apart, use deal and you

to that’s team. definitely places. And So, it’s our want we increase the both have side. footprint And we Mexico New why increased driven opportunity our on in

going So, not I out to am either them, rule of one though.

Jeffrey Campbell

it. fair. That’s Thanks much. very appreciate Okay. I

Operator

question. with question Please Truist. comes Neal your proceed next Dingmann with from Your

Neal Dingmann

details. is for Robert, Hi. return. my Good you shareholder question the Thanks for or guys. on morning Mark,

unique and you notable little at a of shares, got you kind coming. is have look to cash your Yours a discount look be Two, on forward flow a one, estimates, free given least our based most the with larger unique that obviously when was lockup and three, we to out especially float then situation some a though, of of comes there, ones. have it a bit your peers to And mentioning.

those are deals. think because it don’t to there think where that things given is, at guess a need purely am So, I about do you is is coming, with do – I how just point that, going that all all this I

think that. want investors don’t I So,

very I be just to – is So, a am debt wondering soon. your going level fantastic and at

So, is with or makes versus where truly you seeing looking off, return take sense those and it if if and it if deals, – those where you then two at things shareholder the of are are because, value or so, unique wondering investors, about you are bit how larger guys just on just return, you work a a you there? that think I that in again, would situation shareholder am those of

Robert Anderson

Neal, again, I don’t And are there exclusive Yes. think decisions.

to look flexible things long well plan I are shareholder think continuing opportunities. have as ways as you there could ways to your both. we future and quarters end a until of the sit like. kind the looks what behind us do and see at And there as return program, is as that have M&A of is And year down of towards a return get in couple you the

We are be in going it. not about way we the to flexible think are – we

were either some or weren’t continue hope the was selling of year, to tremendously we and mean our and and last create some as future deals that. sold where for several float buying additional we well. that I past locked years, it, increased selling by our over have helped the helped up we love some locked it’s hit That You the and they up the in to shares flow, or goal and parties

on decisions So, is we nothing have and on table that yet. there any the is just there a made lot

Neal Dingmann

Okay. sense your PV-XX And shares mean they looking to returns market at, make than shares I looking are don’t at are, PV-X are your guess what at if that, knowing I trading is are deals strictly in to certainly share deals pick if number, obviously, there cheaper a not that focus I I are? your whatever, see further deals exclusive, out you value, PV-XX, versus am share up on just but and what the PV-XX, wouldn’t it

Robert Anderson

building Yes. from the bigger, maybe that. I different expands, look the the as mean multiple that, and we get we continue process, to at aspect a multiple trying but if And to you gain get are expands scale also we it continue right. I and

to backwards step to we a take forward. steps have maybe to take be able two So,

could you We have deal done at stock first XX months. was argue the think dilutive quite did in that today. $X in $XX to selling along group the all about the We past we when

worry that. I about So, really don’t

us what the Let opportunity see is.

growth and makes our Let’s whether into we see development it will out then how it fits not. that or figure sense

Neal Dingmann

how are that are the do size? And largely than am kind wondering, you not is of wondering, inflation anybody just the you logistics, tubulars, am are that get the continue scale now, is certainly. multiple, comfort increased that running new go casing of that And you on adequate to and I with on are should or and seeing assume much more I helping crews to have point. then that Is we issues amount you lastly that forward? you just due running, I going OFS then a etcetera. does you great any are frac rigs do having else. that forward that No, the

Robert Anderson

And together, a work to morning. their we And like long or problems. in work. ordered Steve I vendors of it’s I for got with been when and And want we of And a this to have with our great just the vendors six growth last been us. this pre-bought, for supportive been next navigate for have slew we relationships But really vendors of has have some the needs. months a process time. these years. supportive from create will mean call lot trying that And a to pipe difference around come we are been developed thereabouts. them it, building very have of vendors, years, it’s Well, we there the have and able growth, relationship over – our and of whole not have that make X are worked we we heard Steve does those

Neal Dingmann

job. Thank Nice Great. you.

Operator

with question Robertson next Tower Water with comes question. Please from your proceed Your Research. Jeff

Jeff Robertson

it assets the a far right of can you of to take Chisholm. where owned program have two-rig Thanks. the had you for years And the when Delaware Robert you talk Good the to Steve, about acquired that now as couple situation If you wondering how couple you permit long as months, morning. correctly, recall inventory or of worth now? Basin? permit I are just out? that support a permits in am get stretching does I a

Robert Anderson

to Do you want answer it?

Steve Collins

a Well, to year get I to XX still in think are permit. a months we the

a positioned completing well keep to of lot operating are challenge. somebody we moving think it drilling about operating. our comes But with along. but side a program a in two-rig And I planning the haven’t permits to is we the and earlier well, question seen surprises surprises in really when the asked

we ramp next it’s we have got us from not we want are schedule a bit. if we little our for at plan, and But going to up that keep to permitting that year, change do. So, looking what to doing

Jeff Robertson

of bring Robert, lot assets on in strategy, a high Basin. lot a Delaware a flow. of assets level Bighorn around inventory bring free cash the Chisholm the corporate

generate Do need Bighorn, maybe to you cash do more inventory develop flow? free you your a of So, asset to for talk you all having like your I of program deleveraging far the acquisitions or think outlook expand you cash with lot as able can pace. that current the and you be XXXX, a assets how rig and to said flow inventory with about drilling ones Chisholm flow as do can at amount base But roughly think do the one XX-year and the like about cash you provide?

Robert Anderson

Yes.

– continue I Bighorn, good it, both for call of opportunities. think two that’s to whatever inventory. same look did with run. to of want we find close we kind opportunities that like home but that, it different or And win strong to about and or like in And you double Chisholm the time can provide a them and a flow cash we or some you things that deals you do if them

right do door, existing focused operator the a of be And and we right. We size it, we the the can aided of on upside a as pickier it are pure on sitting know our deal we there some But to see time next half some is It’s to what has bit spend our business we ability to bolt-on operate it is unless can large little there. be for on what for. not by today. we have reason going PDP

your hopefully, answer. So, gets you that

Jeff Robertson

That’s helpful. Thank you.

Operator

closing gentlemen, would for Ladies and the to to And have the question-and-answer like Robert reached turn Mr. the remarks. end Anderson back I we session. of call

Robert Anderson

have I We lot. to time. it’s next know a know hold Thanks interim, talk you questions, your to you you get everybody. busy day, quarter. but Thanks you how will appreciate And – if us. if a we the of a in

Operator

today’s This conference. concludes

Thank may all you this for You your time. disconnect participation. lines at your

Earthstone Energy (ESTE) 9 May 222022 Q1 Earnings call transcript