Evolution Petroleum (NYSE: NYSE:EPM) has announced a substantial increase in oil production and strategic financial moves in its third quarter fiscal year 2024 earnings call. The company reported a 19% rise in oil output, credited to acquisitions and operational participation, notably in the SCOOP/STACK area and Chaveroo field.
Alongside production growth, Evolution Petroleum has actively returned value to shareholders through dividends and share repurchases, while maintaining a focus on growing cash flow-producing assets. The company's financial strategy aims to sustain dividends and capital expenditures, even amid a challenging natural gas market.
Key Takeaways
- Evolution Petroleum's oil production surged by 19% year-over-year.
- The company completed three wells at Chaveroo and engaged in strategic acquisitions.
- A $0.12 dividend was paid in March, with another $0.12 dividend announced for June.
- Share repurchases amounted to roughly $800,000 during the quarter.
- Evolution Petroleum ended the quarter with $3.1 million in cash and $42.5 million in borrowings.
- The company expects additional cash from the final settlement of the SCOOP/STACK acquisition price adjustment.
- Hedging strategies are in place for oil production in 2024 and natural gas for 2025 and beyond.
Company Outlook
- Evolution Petroleum aims to cover dividends and capital spending throughout market fluctuations.
- The company is focused on maximizing shareholder returns through dividends, share repurchases, and asset growth.
- They plan to maintain leverage at or below 1x pro forma EBITDA.
Bearish Highlights
- The natural gas market presents challenges, influencing the company's hedging decisions.
Bullish Highlights
- SCOOP/STACK acquisitions and Chaveroo wells are expected to increase oil production.
- The company's diverse asset set is aimed at facilitating consistent cash returns.
- Excitement surrounds the drilling activity near their area in the Williston Basin.
Misses
- No immediate plans for new wells, focusing instead on workovers and efficiency improvements.
Q&A Highlights
- The company can pay down asset-based lending but may opt to reinvest in capital expenditures.
- Open to further organic growth or M&A opportunities if they benefit shareholders.
- Dividend coverage and potential increases depend on cash flow and business reinvestment.
- Capital allocation is evaluated for reinvesting, stock buybacks, or dividend increases.
- The company practices less hedging compared to peers, but may adjust based on commodity prices.
Evolution Petroleum has demonstrated a strong commitment to shareholder returns, with a history of dividends outperforming the S&P 500 and its peers. The company's strategic acquisitions and operational involvement have paved the way for increased oil production, which is expected to continue with systematic participation in future development blocks. While there are no immediate plans for new wells, the company is optimistic about its organic growth potential and remains open to opportunistic mergers and acquisitions.
The discussion on capital allocation highlighted the company's prudent approach, balancing the reinvestment in the business with shareholder value through stock buybacks or dividend raises. The earnings call concluded with a note of appreciation for participants and an open invitation for further inquiries directed to the Investor Relations Manager. With a clear strategy for hedging against commodity price fluctuations and a focus on sustainable growth, Evolution Petroleum is positioning itself to navigate the volatile energy market while striving to deliver consistent shareholder value.
InvestingPro Insights
Evolution Petroleum's recent earnings call highlighted a robust strategy for production growth and shareholder returns, which is underpinned by a solid financial structure. According to InvestingPro data, the company holds a P/E ratio (adjusted) of 11.92 as of the last twelve months ending Q3 2024, suggesting a reasonable valuation relative to earnings. Additionally, the dividend yield stands at an attractive 8.51% as of the same period, reflecting the company's commitment to returning value to its shareholders.
An InvestingPro Tip notes that Evolution Petroleum has successfully raised its dividend for 3 consecutive years, reinforcing the company's strategy to sustain dividends as mentioned in the article. Moreover, the company has maintained dividend payments for 12 consecutive years, which aligns with the emphasis on consistent cash returns to shareholders.
For readers looking to delve deeper into Evolution Petroleum's financial health and future prospects, InvestingPro offers additional tips. There are 5 more InvestingPro Tips available that can provide further insights into the company's performance and analysts' expectations. Interested readers can explore these tips by visiting https://www.investing.com/pro/EPM and can benefit from an additional 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24.
Full transcript - Evolution Petroleum Corp Inc (EPM) Q3 2024:
Operator: Good morning, everyone, and welcome to the Evolution Petroleum Third Quarter Fiscal Year 2024 Earnings Release Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. At this time, I'd like to turn the floor over to Brandi Hudson (NYSE:HUD), Investor Relations Manager. Ma'am, please go ahead.
Brandi Hudson: Thank you. Welcome to Evolution Petroleum's fiscal q3 2024 earnings call. I'm joined by Kelly Loyd, President and Chief Executive Officer; Mark Bunch, Chief Operating Officer; and Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer. We released our fiscal 2024 third quarter financial results after the market closed yesterday. Please refer to our earnings press release for additional information containing these results. You can access our earnings release in the Investors section of our website. Please note that any statements and information provided in today's call speak only as of today's date, May 8, 2024, and any time-sensitive information may not be accurate at a later date. Our discussion today will contain forward-looking statements of management's beliefs and assumptions based on currently available information. These forward-looking statements are subject to the risks, assumptions and uncertainties as described in our SEC filings. Actual results may differ materially from those expected. We undertake no obligation to update any forward-looking statement. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. Reconciliations of these measures to the closest comparable GAAP measures can be found in our earnings release. Kelly will begin today's call with some opening comments. Mark will provide an update on our properties and plans as they relate to our ongoing strategy of maximizing shareholder returns. And Ryan will provide a brief overview of our fiscal quarter highlights. After our prepared remarks, the management team will be available to answer any questions. As a reminder, this conference call is being recorded. If you wish to listen to a webcast replay of today's call, it will be available on the Investors section of our website. With that, I will turn the call over to Kelly.
Kelly Loyd: Thanks, Brandi. During our last quarterly call, we told you that we were working to increase our scale and economic efficiency. We told you that expanding regionally and further diversifying our production base are important goals for us. Most importantly, we also told you that the point of all this is to increase our cash flow and, therefore, either extend our dividend fairway, allow us to increase our dividend, or do both. With our current asset base and the additions of our recent SCOOP/STACK acquisitions and participation in the operations at Chaveroo, we've come a long way towards achieving what we set out to accomplish. And we have done so while keeping our balance sheet in our comfort zone and adding no incremental dilution. In fact, we repurchased shares during the quarter. We added to our producing asset base and our portfolio of drilling locations. We entered into two prolific areas, the Permian Basin and the Anadarko Basin. We increased our oil production as a percent of sales. In fact, this quarter represented a record amount of oil production net to the Company. And by the end of the quarter, we had participated in 35 newly drilled wells or wells in progress, 32 in the SCOOP/STACK and three in Chaveroo, which represent some of the most economic returns the Company has seen to date. Evolution today versus Evolution a year ago looks very promising. Our oil production for the fiscal third quarter this year versus last year is up by approximately 19%. Our NGL production is the same, and our natural gas production is down by roughly 4%. These numbers only include about half of the quarter for the SCOOP/STACK acquisitions as the transaction closed on 2/12, and less than 2/3 of the quarter for the new Chaveroo wells as all three wells were only finished being placed on production in early February and ramped up in production as frac fluid was recovered. Today, we have a much deeper and higher-quality inventory of drilling locations versus a year ago, with economics that are very compelling. We believe that with our current inventory of assets, we have the firepower to fund our dividend for many years to come with the potential for growth, particularly as natural gas prices recover as expected. And we certainly don't intend to rest now. We're always on the lookout for the next highly accretive transaction that will benefit our shareholders. From October of 2019 through February of 2024, Evolution has participated in six major transactions, putting over $119 million to work for our shareholders. During that time, we've paid down over $41 million of borrowings, while our share count has remained virtually unchanged. Since we began paying dividends 10 years ago, we have returned over $3.45 per share to shareholders in cash and another $0.26 per share in share repurchases. These six major transactions have added substantial volumes of proved oil, natural gas and NGLs, all of which gain us exposure into different largely uncorrelated markets both by product and locations, many of which have recently experienced outsized favorable pricing versus other sales points. These six major transactions also provide Evolution with hundreds of undrilled upside locations operated by proven and experienced teams. We can either choose to participate, non-consent or even sell many of these undeveloped locations, depending on which will bring the most value to our shareholders at the time. Throughout the years and across many diverse transactions, our goal remains the same as it has been since 2013, the year we paid our first of 42, and counting, consecutive dividends. That goal is to maximize total shareholder returns by carefully evaluating every dollar we use to drive dividend payments, share repurchases and replenishing and/or growing our cash flow producing asset base, all while avoiding significant dilution or over-leveraging our balance sheet. I'll hand it over to Mark now, who will give you an update from an operational standpoint on some of our recent actions supporting our strategy.
Mark Bunch: Thanks, Kelly. I will focus on some of our notable items since our listeners can refer to our press release and 10-Q filings for additional details. Our latest acquisition, SCOOP/STACK, is a very exciting add to the Company's portfolio. We closed on this acquisition on February 12. On a pro forma basis for the third quarter, the net production rate was approximately 1,550 BOE per day, which was essentially flat with the production rate at the effective date of the acquisition November 1, 2023. Also, on the effective date of the acquisition, we acquired over 300 gross drilling locations, 21 of which were DUCs. At the close of the third quarter, 19 of the 21 DUCs have been placed on production, and we have agreed to participate in additional 15 gross or 0.2 net new horizontal wells across the acreage, of which 13 are currently in progress. Based on limited information, the completed wells have so far, on average, exceeded expectations. Based on current performance, we are confident that SCOOP/STACK will be a real value add for the long term. At Chaveroo, we brought our first three wells on production around February 1. All three wells' gross production peaked at between 300 and 375 BOE per day, which is significantly better than our predrill estimates. On a pro forma basis for the third quarter, Chaveroo has produced approximately 290 BOE per day net to our interest. In conjunction with the operator, we are planning to drill the next four wells beginning in September 2024, followed by another six wells beginning in April 2025. We're very pleased with the results of our drilling program at Chaveroo and believe will continue to support the dividend through a continual drilling program over the next decade. Again, we would like to highlight that the addition of Chaveroo and SCOOP/STACK are perfect fits for our evolving strategy of both adding a long-life production during commodity price downswings and adding undeveloped locations by making acquisitions through the drill bit. We view this as crucial to enhancing our ability to maintain or increase production at an attractive rate of return for years to come. As for our legacy properties, we have had a successful third quarter. Jonah Field still receives a premium over Henry Hub pricing since we sell into the West Coast market and continues to perform as expected at its historical decline rate. The Williston asset production increased slightly due to the ONEOK (NYSE:OKE) Grassland System downtime in the prior quarter, even though we did experience some downtime due to winter storm in January. The Barnett Shale asset experienced some downtime due to a winter storm in January as well. Subsequently, operations were resumed with production back on its historical decline rate. The operator continues to work on ways to reduce operating expenses there. Hamilton Dome continued to perform very well, even though experienced more downtime due to well workovers than usual at the beginning of the quarter. Net production was only slightly down from the previous quarter. At Delhi, production was affected during the quarter by winter storms that impacted oil production and repeated downtime from rental turbine failures impacting NGL production, both of which resolved by the end of the quarter. The CO2 purchase pipeline was taken offline for preventative maintenance at the end of February and the operator anticipates resuming CO2 purchases in June 2024. This will reduce Delhi Field LOE during this time period. The field continues to inject recycled CO2, which is the bulk of the normal CO2 injection. And we do not anticipate a significant production impact from the temporarily decreased CO2 injection volumes. The operators also indicated that Delhi is expected to be certified as a carbon capture utilization and storage site designated for enhanced oil recovery by this summer. All in all, fiscal quarter's rate production increased 14% from the prior quarter to 7,209 net BOE per day, with oil increasing 27% and natural gas and NGLs each increasing approximately 10%, with drilling results and the contribution of the acquisitions more than offsetting normal declines, maintenance and weather-related downtime. I'll turn it over to Ryan to discuss the highlights of the quarter.
Ryan Stash: Thanks, Mark. As Brandi mentioned earlier, we released our earnings yesterday, which contains more information on our results. My comments will focus mainly on the highlights of the current quarter. This quarter, we had total revenues of $23 million, adjusted net income of $1 million, and adjusted EBITDA of $8.5 million. Our financial results demonstrated the positive impact of our SCOOP/STACK acquisitions and Chaveroo drilling program as revenue and EBITDA were higher than last quarter despite receiving lower realized prices due to the continued weakness in natural gas. On the development side, we spent $2.6 million in CapEx, primarily related to the drilling and completion of the three initial wells at Chaveroo. We ended the quarter with $3.1 million in cash on hand and borrowings of $42.5 million on our credit facility. Our cash balance and borrowings do not yet include the impact of net cash we expect to receive for the final purchase price adjustment on the SCOOP/STACK acquisitions. As of March 31, we recorded an interim settlement receivable of $3.3 million and expect additional cash upon the final settlement set to occur during the fourth fiscal quarter. We continue to expect to remain at or below our leverage target of 1x pro forma EBITDA. We entered into oil and gas hedges during the quarter and after the quarter in order to comply with the terms of our credit facility. We also amended our credit facility to give us more flexibility regarding the mix of individual commodities we are required to hedge. We now have the option to hedge 40% of oil production or 25% of oil and gas production for each individual month. Given the extremely low prices of natural gas throughout calendar year 2024, we are currently only hedging oil production for that period. We also hedged natural gas beyond the required 12-month period to capitalize on the high prices available in calendar year 2025 and beyond. Our goal for our hedging program will continue to be to reduce downside commodity price risk while maintaining the maximum amount of upside available. As such, we will continue to monitor the market and may add additional opportunistic hedges. On the shareholder return front, we paid a $0.12 dividend in March and declared another $0.12 dividend to be paid in June, which will mark our 42nd and 43rd consecutive quarterly dividends and seventh and eighth consecutive dividends at the current level. We also repurchased approximately $800,000 worth of shares during the quarter. I'll hand it over to Kelly now for closing comments.
Kelly Loyd: Thanks, Ryan. At Evolution, we accomplish our strategy of maximizing total shareholder returns by carefully weighing the use of every dollar we put to work for all our stakeholders, always with an eye towards increasing or extending the runway of our dividend for many years to come. We have a proven track record of paying dividends with stronger yields than the S&P 500 and our peers, returning cash to shareholders of over $3.45 per share over the last 10 years. We are building our company into one designed to cover our dividend and our capital spending even in challenging times like we see today with natural gas pricing, while maintaining ample capacity to return cash to shareholders. We have built and continue to build a diverse, resilient set of assets strategically designed to facilitate and complement our consistent approach to returning cash to shareholders. In building this base, our balance sheet has remained rock solid and we've added no material dilution. With that, I'll turn it over to the moderator to begin the Q&A session. Thank you very much.
Operator: [Operator Instructions] [Technical Difficulty] from Northland Capital. Please go ahead with your question.
Unidentified Analyst: So, the first question I want to ask about is, so for the certification for Delhi and that expectation to happen in summer, that sounds more or less like reiterating a consistent statement that kind of we've heard before in terms of that time line. So, was there an incremental step, or just sort of it's more of a saying like it's on track, that is still the expectation? And then have you advanced any negotiations or conversations around that with the operator?
Kelly Loyd: Thanks, Donovan. So, to answer your question, it's really steady as she goes. The updates are no, they still expect it to be in the same time frame they did. So as far as advancing negotiations and where that's going to shake out, no, we're not there yet.
Donovan Schafer: Okay. And just kind of real-quick, I don't know if you'll have the answer or not. But do you know for Phase 5 for Delhi? Because I've had this thought or speculation or wondering that it could sort of nudge Exxon (NYSE:XOM) over into having more of a desire to do Phase 5 because that's more floor space conceivably to inject CO2 into. So, do you know, has that come up at all in conversations? And do you know if that requires additional certification or if that can just -- you can expand the project and it's kind of automatic?
Unidentified Company Representative: So, I'll answer it this way. We certainly think Phase 5 is a very strong economic project on its own merit, and we hope that Exxon will come to that conclusion with the additional benefit of having more floor space to inject CO2. As for additional -- I mean it's within the field, I don't expect it would be, but I'm actually not sure on that.
Donovan Schafer: Okay. And then turning to Chaveroo, some language jumped out at me in the release saying -- and I know you guys have secured these, a lot of different locations that you can participate in, so it's not new per se, that it's something you've been -- that you want to do this or like having it on the table. But in the release, the language you say, that your plans are to systematically participate in the remainder. So beyond, we've got four and going back two, and then another six, and then yes, the Company also expects to systematically participate in future development blocks, holding rights to over 69 additional horizontal locations in aggregate. Is that -- talking about systematic participation, does that signal or indicate any kind of a flipping of a switch or something where you kind of feel like you're -- of course, if things change and you start to get some bad well results, something you'll reassess, but does that kind of indicate you're at a point where you're kind of feeling like due is we're kind of ready to run with this, at an appropriate pace for dividend support and so forth, but just that you want to keep doing these over and over?
Kelly Loyd: Yes, honestly, is the answer to that. It's -- we've got more data, we're more comfortable than we were. Look, everything is subject to change. But as of now, we intend to systematically keep going with it. So yes, is the answer. Excited about it.
Donovan Schafer: Yes. Am I right in kind of picking up on that language, like systematic participation is kind of suggesting a feeling or a reaction to how things have been going that's a step forward or a step incremental, the initial kind of toe in the water?
Kelly Loyd: Yes, more confident than let's wait and see like what maybe we were before. Now it's -- yes, absolutely. Good catch.
Donovan Schafer: Got it. Okay.
Operator: [Operator Instructions] Our next question comes from John White from ROTH Capital. Please go ahead with your question.
John White: Congratulations on closing the SCOOP/STACK and getting your Chaveroo wells flowing back. Very nice additions to the portfolio. Wanted to see about additional detail on the SCOOP/STACK. Primarily, is the -- where is the acreage? What counties in the Anadarko Basin is the acreage concentrated in?
Kelly Loyd: So, I can answer that, or Mark. But I mean, it's in various places throughout the SCOOP/STACK. I would say it's got a large concentration over in Grady and Garvin. Those have kind of been the focus on where most of these wells in progress are.
John White: Okay.
Kelly Loyd: I mean, purely -- look, it has -- excuse me, Blaine, Canadian, Carter, Custer, Dewey, Garvin, Grady, Kingfisher (LON:KGF), McClain, Stephens. It's the whole SCOOP/STACK. But the biggest concentration and where the most activity is, over there, in sort of Grady and Garvin right now.
Mark Bunch: Basically, John, this is Mark, it's kind of near where Norman is.
John White: Yes. I know where Grady County is. I've driven around there a lot. So, it's pretty spread out across the Anadarko.
Kelly Loyd: Yes and no. Like I said, it's sort of more concentrated in that Grady -- Eastern Grady kind of area. But yes, we do have various species throughout.
John White: And is there a concentration of operators or is that pretty diversified too?
Mark Bunch: There's -- we have a big position with Ovintiv (NYSE:OVV) and Continental. There's some with EOG, Marathon, Gulfport. It's -- there's probably, in total, somewhere around like realistically around 20 operators that we'll end up dealing with. But those -- the ones I mentioned are the major ones.
John White: Those are good names.
Mark Bunch: Yes. Some Continental Resources (NYSE:CLR) too, sorry.
John White: It's a big one. No, you mentioned it. And what is the primary formation being targeted?
Mark Bunch: Mainly like the Woodford, but they also look for the Sycamore, anything in the Mississippi. The way they pool, there is a pool of a larger section. So, a lot of times, this section is pretty good size that they pool.
John White: All right. So, 640?
Mark Bunch: Well, actually, the -- a lot of them now are getting to be 10,000-foot laterals. So, they're actually going to be 1,280s.
John White: I know you don't give guidance, but with the initial results from SCOOP/STACK and obviously the Chaveroo results, is the feeling we should see your percentage of oil cut of total production increase over time?
Mark Bunch: Yes, John, yes, you should see that because both of them are, especially Chaveroo, is really oily. And SCOOP/STACK is oilier than our current mix.
Ryan Stash: Yes. The only caveat, John, would just be we obviously still have more insight into Chaveroo timing and drilling in the SCOOP/STACK, depending on what happens with gas prices, we could see some areas that have more gas content get drilled. Right now, they're focused more on the oil and liquids areas, which makes sense, but there is some gas there, too, right? So, there's a little bit of TBD. It depends on what the operators drill.
John White: Okay. Thanks for the additional detail. I really appreciate it and I'll pass it back to the operator.
Operator: [Operator Instructions] And ladies and gentlemen, I'm showing no additional questions -- actually, we do have an additional question. This comes from Bruce Brown from Brown Capital. Please go ahead with your question.
Bruce Brown: Thanks for the good work. I just had a -- I know you've given no real guidance, but I'm just wondering, if prices stay right around where they are today for like the next 12 months, which is probably not going to happen, but let's assume it does, would your asset-based lending line be paid down significantly?
Ryan Stash: Yes. So, thanks, Bruce. Obviously, we're not saying guidance. So really what we're looking at, and to answer your question is the balance of paying down our line versus capital, right? And one of the big unknowns obviously is how much capital we'll have in the SCOOP/STACK given pricing. I would say we're generating enough cash to significantly pay down, but we may choose to spend more and reinvest in CapEx and pay the line down a little bit slower. But we're certainly going to remain below our target of one-time EBITDA. And as I mentioned, from a cash flow perspective, yes, we're generating plenty of cash to be able to pay it down if we wanted to. We do have capital projects that we think are really attractive that we'll probably put some capital too as well.
Bruce Brown: Do you have any comment on additional capital projects in the Williston?
Kelly Loyd: Sure. So, we are working with the operator there is Foundation. What's interesting is that area is -- if you're talking about drilling new wells, we're actually getting kind of excited. It's starting to get drilled and the activity is moving towards us. So, we're going to kind of wait and see and look how things move towards us there. So, we're getting incrementally more excited about that area. As far as other projects within the field, I think it's just general workovers. Mark?
Mark Bunch: Yes, it's just general workover, it's general fix-up. We're also doing some electrification in some areas that will improve efficiency, reduce operating costs. But no wells planned to be drilled right now, at least like in the near term.
Operator: And our next question is a follow-up from Donovan Schafer from Northland Capital. Please go ahead with your follow-up.
Donovan Schafer: Sorry about that. Okay. So talking about organic growth kind of the levers that you guys have to pull, at this point, we've got the Williston, the SCOOP/STACK -- well, I guess, yes, you've got some PUDs there, I can't remember if you're in a position to accelerate on the gas there or not, that may not be -- but there's like PUDs there. And then you've got the Chaveroo. So, the question is, do you feel like there's a need to kind of add any more organic growth potential, a few M&A type stuff? Or do you feel like, given your size as a company and kind of what you see from flow of funds, CapEx and other things over the next, say, 12 months or so, do you feel like you're kind of pretty content and pretty good, you've got everything you sort of need, unless something just really opportunistic comes along? I think you said in the SCOOP/STACK, you've seen more things come [indiscernible] or more people kind of pitching things, so maybe if there's a great opportunity. But otherwise, in terms of what you need in your portfolio for any type of organic growth potential, do you think you need more or do you feel kind of like you're set there now?
Kelly Loyd: Thanks, Donovan. This is Kelly. So, the answer is we had a definite focus to make sure we added that arrow to our quiver, right? And we've -- like I said, we've come a long way to accomplishing that. But along with everything else, you're never done. So -- if the next deal that comes along is pure PDP and it fits wonderfully with our portfolio, then that's the deal we're going to do, if it's highly accretive for us. If the next one comes along and it does have an organic growth piece, we're certainly going to absolutely consider it. So again, it's like you said, if it's the right deal and it's really accretive for our shareholders, for sure. It is -- I would say it's not as much of a push as it might have been prior to these last two acquisitions or partnerships, but it's certainly never off the table. How about that?
Donovan Schafer: Okay. That's good. And kind of related to this, you -- I think Mark made the comment that, with Chaveroo, and maybe is also a reference to the SCOOP/STACK. But just with those -- with the combination of those, that's extended the dividend -- helps the dividend coverage for a decade or more or something like that. And so, I'm curious if there's any kind of quantification you could give. I mean I could ask it in the form of like, gee, could you do a dividend increase or something, but that's -- this is sort of the type of thing you can't really comment on. And I know you guys placed dividend protection first in any case. So, is there any kind of quantification or analysis or a sense, and maybe now of talking about Chaveroo from this kind of systematic participation standpoint, do you have an internal, a sense of how much -- how many extra years these have gotten you, or stress test case where you say, we think we have the dividend covered as it is for x number of years? Is there any color or anything you can give there? That would be helpful.
Ryan Stash: Yes. I mean -- hey, this is Ryan, Donovan. Look, I mean, I don't think we can't comment specifically on, as you mentioned, long-term sort of guidance here. But what I will tell you is, obviously, you can look at the assets themselves and how much cash flow they bring, and you can sort of model out how much we think Chaveroo remain in the future. So, from there, you can obviously see quite a bit of dividend coverage. I think as we're looking over at least the near term, we're going to generate a good amount of cash flow and we have potential uses, right? One of those is increasing the dividend. However, others are also reinvesting in the business, right? So now that we have this organic growth leg, we have more capital to put to work than we have in the past, right? Whereas in the past, we could have just returned it all to shareholders. Now, we'll probably take some of that capital and put it back into the business to keep sustaining our production level. So, I know I'm not exactly answering your question, but I just -- I'll let you know that, at the Board level, we certainly look at every single dollar we put to work and whether that makes sense to reinvest in the business, buy stock, raise the dividend. Obviously, our goal is to keep it for a sustainable business at our base dividend or better for a long period of time.
Donovan Schafer: And I suppose, because you guys don't -- you characteristically do significantly less hedging than a lot of other kind of oil and gas companies, in practice, that all -- that whole pathway just sort of becomes accelerated with upward commodity price cycles. Is that correct like you would -- it's in that situation where, if natural gas recoveries materially or oil climbs in some material way, that just puts you in a position to kind of double down where you think it makes sense? And then add in -- layer in more assets that give you the kind of -- the number of years of coverage you'd want, but then also at a higher dividend because like you've gotten this almost like a windfall of sorts with what commodity prices may do on the upside? Is it kind of the right way to think about it?
Ryan Stash: Yes. I mean, except that, I would say, obviously, we're looking out multiple years. So, let's take, for instance, when we saw gas not too long ago run up past $5, $8, $9, right? You saw us actually, we helped to pay down some of our debt repayment at that point, and we bought back quite a bit of share. So again, the dividend is just one tool. And so, if we were to see -- if we saw a price recovery that we feel is sustained for a long period of time, then that's one thing. But if it's -- with natural gas, all it takes, as we really well know, is a warm winter to -- and all bets are off, right? So, it's hard to really forecast gas at a $5 level for long term. But if we were to get a run again here, then we could look to again, accelerate debt pay down, we could buy back some additional shares, even look at acquisition opportunities, right? So again, it would be all of those things that we would examine.
Kelly Loyd: I mean just to follow on, and carrying on with where he's going, with our base sort of commodity price expectations, we've said many times where we think we can absolutely have great dividend coverage for many years to come. With something above that, it is cash flow with which we will make a prudent decision at that time what to do with it.
Donovan Schafer: Yes. Okay. That makes a lot of sense. All right. I appreciate it.
Kelly Loyd: Terrific. Yes. Thank you.
Operator: And ladies and gentlemen, once again, I'm showing no questions at this time. I'd like to turn the floor back over to management for any closing remarks.
Kelly Loyd: We just want to say thank you all for joining us today. And if you have any further questions, feel free to contact Brandi, who is our IR Manager. So, thank you all very much.
Operator: And ladies and gentlemen, with that, we'll conclude today's conference call. We thank you for joining. You may now disconnect your lines.
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