Please stand by. We are about to begin. Good day, everyone, and welcome to the EOG Resources Yates Announcement Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Chief Financial Officer of EOG Resources, Mr. Tim Driggers. Please go ahead, sir.
Good morning. Thanks for joining us. Early this morning, we issued a joint press release announcing the combination of EOG Resources and Yates Petroleum and other Yates companies. Slides containing additional details have been posted on both websites, yatespetroleum.com and the investors section of eogresources.com. First, I will remind that this conference call includes forward-looking statements and oil and gas reserve estimates. The risk associated with forward-looking statements and the cautionary notes to investors regarding reserve estimates are in the press release and on page two of the slides. We incorporate those by reference for this call. Participating with me on the call this morning are Bill Thomas, Chairman and CEO; Gary Thomas, President and Chief Operating Officer; Billy Helms, EVP Exploration and Production; David Trice, EVP Exploration and Production; Lance Terveen, VP Marketing Operations, and Cedric Burgher, Senior VP Investor and Public Relations.
Under the terms of this private negotiated transaction, EOG will issue 26.06 million shares of common stock valued at $2.3 billion based on Friday's closing stock price and pay $37 million in cash, subject to certain closing adjustments and lock-up provisions. EOG will assume and repay at closing $245 million of Yates debt, offset by $131 million in anticipated cash from Yates, subject also to certain closing adjustments. Yates has net production of 29,600 barrels of oil equivalent per day, 48% of which is crude oil. Net proved developed reserves are estimated to be 44 million barrels of oil equivalent. Closing is anticipated to occur in early October. Let me turn the call over to Bill Thomas, Chairman and CEO.
Thanks, Tim, good morning, everyone. Let me start by expressing my sincere gratitude to the Yates family and companies. We have a tremendous respect and admiration for what they have done to build their companies and for their many contributions to the industry since they began operations 93 years ago. It is an honor to combine our high-quality assets to bring continued success for all of us. This transaction clearly illustrates Yates' confidence in their acreage and in EOG's technical and operational expertise to bring forth the most value from that acreage. This combination substantially increases EOG's position in the Delaware Basin and establishes a large position and a new potential resource play on the Northwest Shelf in New Mexico. In addition, EOG's position in the Wyoming Powder River Basin will double in size.
Yates demonstrated great foresight in assembling large acreage positions in these stack pay multi-zone plays, and we are excited to join forces with them. We expect Yates and EOG's combined acreage in concert with EOG's technical edge and operational scale will be transformational to the development of these plays. For EOG to undertake an acquisition, it must meet a strict set of criteria. The acreage must be high quality, as good as or better than EOG's existing acreage. The acquisition must come at a fair price, and it must be funded in a prudent manner, allowing EOG to maintain a strong balance sheet. The Yates transaction checks all of these boxes. Most importantly, the Yates acreage substantially increases EOG's ability to increase returns and capital efficiency. This really isn't about getting bigger. It's about getting better.
Yates improves the quality and depth of our acreage position in some of the most important resource plays in the U.S. It immediately competes for capital within the existing EOG portfolio and raises the overall quality of the portfolio. By enabling EOG to concentrate more of its capital in the most premium parts of oil resource plays, it will drive even higher growth and returns in the future. This combination is truly a rare gem that meets EOG's high rate of return hurdle. It's no secret anymore that the Delaware Basin is one of the best resource plays in the country. EOG's acreage position will increase by 78% through this transaction to a whopping 424,000 net acres. EOG has drilled some of the most prolific wells in the basin, and this expanded acreage position provides more inventory in the highest return parts of the play.
EOG will be able to accelerate its growth in the basin and leverage technology and prior learnings over a bigger and better asset base. We plan to get right to work and commence drilling on this new acreage shortly after closing, with additional rigs to follow next year. Yates also brings opportunities to boost our long-term growth and returns through expanded exploration opportunities in two emerging resource plays. In the Northwest Shelf, the industry has been drilling productive wells in several shallow oil-prone formations. We are excited to leverage EOG's technical acumen with our low-cost structure in these plays. Although the wells do not generally produce eye-popping IP rates, the low cost offer the potential to generate rates of return that could be very competitive with our traditional Delaware Basin program. EOG also plans to begin development activities in 2017 in the new Powder River Basin acreage.
The new acreage in the sweet spot of the play blocks up nicely with EOG's existing acreage, where we have an ongoing premium development program. We also see opportunities to generate high returns in several emerging plays in an expanded Powder River Basin exploration area. Our newly combined 400,000 net acreage position offers significant exploration opportunities in areas with stacked pay columns 4,000-5,000 feet tall. In conclusion, the combination with Yates allows us to bring together our companies with superb core acreage in some of the best emerging plays in the U.S. As we move forward, I want to reemphasize EOG's commitment to building shareholder value through returns-based decision making, financial discipline, exploration, technical leadership, and low-cost operations.
EOG's goals are to continue to be the U.S. leader in returns and in absolute oil growth, and to be competitive with the low-cost producers in the world oil market. This transaction is another significant step in accomplishing our goals. Thanks for listening. Now we'll go to Q&A.
Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key, followed by the digit 1 on your touchtone telephone. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Questions are limited to 1 question and 1 follow-up question. We will take as many questions as time permits. Once again, please press star 1 on your touchtone telephone to ask a question. If you find that your question has been answered, you may remove yourself by pressing the pound star 2 key. We'll pause for just a moment to give everyone an opportunity to signal for questions. We will take our first question from Evan Calio of Morgan Stanley.
Hey. Good morning. Good morning, everybody, and congratulations on today's transaction.
Thanks, Evan.
I think my first question is, that was an important part of the last call, the earnings call, but how does the acquisition impact your 10%-20% oil production CAGR guidance out to 2020, and any color on associated CapEx here for Yates, and rig or well counts in 2016 or 2017?
Evan, the first thing is that the guidance we gave in our second quarter call, which was 10% growth with a $50 flat oil price, compounded annual growth rate, from 2017 to 2020, a 20% compounded annual growth rate with a $60 oil price, did not include any of this Yates acreage position.
It was clearly independent of that and was relied solely upon what EOG owned at that time. This transaction will certainly increase our growth potential. The acreage is very, very high quality, as we said in the opening remarks. It sits and joins our position very strongly. We can take extreme amounts of benefits from the combined infrastructure, and just the operational synergies going on in the area. This is a big addition for the company. It truly is. The inventory that we said, the 1,700 premium inventory that we've given to the Yates acreage position is really just a first pass.
We believe that, as time goes on, we'll convert more at the premium going forward, and it certainly is potential from a rate return perspective and growth potential that will be right at the top of our list to begin drilling.
I guess it was a follow-up on the CapEx, if you had any guidance there, but also a follow-up, something that would relate to capital efficiency. Is any color on how you think about asset disposal or monetization targets now that you've materially added to your premium inventory, likely increased your outspend? Any color there would be helpful.
Yeah. The CapEx impact, of course, for 2016 is fairly low. We're going to keep our CapEx guidance that we have in place, and we'll update that as we go forward, maybe in the third quarter call. As we go forward into 2017 forward, we'll be adding capital to the Delaware Basin. I'm going to ask Gary Thomas if he can give a little bit of color on the rig count.
Yes. As with any strategic acquisition, we'll just get right to work on that so we can begin our development. Right now, we're just watching current oil prices, and we'll increase activity with price improvement. We do plan to add one rig here in the fourth quarter. We'll add more in 2017 as we continue to support our budget for next year. Yes, with more capital being spent in the Delaware Basin.
Great. On the sales? Potential sales?
Oh, sure. The potential for asset sales, this gives the company a lot more potential. As we have done, if some of the assets won't be in the Delaware Basin, but some of the other assets that come with this merger don't turn into premium drilling potential down the road, certainly they would be candidates for asset sales. They would go in the mix with the existing EOG asset sales, and it just really firms our position to continue to monetize properties as we go forward.
Great. I'll leave it there, guys. Thank you.
We will move to Scott Hanold of RBC Capital Markets.
Thanks. Good morning, again, my congrats to you all. If I could maybe dig in a little bit more on the rationale for the acquisition. Obviously, you guys had some pretty strong confidence in your ability to grow through 2020. When you step back and look at this transaction, it certainly has got some significant size to it. Considering what you all had in your inventory previously, what was the key driver of looking at this? Was it an opportunity at this commodity within the commodity price cycle, or was it the eventual maturation of the Eagle Ford and Bakken, and this providing a little bit more growth beyond that?
Yeah, Scott, it really all boils down to, we just see a unique opportunity to add very high quality acreage. This is a bit bigger deal than we've done in the past. Most of them have been bolt-on, a little bit smaller, but this is a bolt-on in a lot of sense of the word. It's just a really large bolt-on, especially for the Delaware and the Powder River Basin. It really boils down to this acreage quality is so high, that we just see as a very unique responsibility. In the same light, we have continued confidence in our exploration efforts. We have a number of exploration ideas, plays that we're testing currently, and some we're just buying acreage on.
We've got a lot of confidence that we'll be able to add additional potential, and we have really raised the bar in the company when we switched to the premium drilling only mode back at the beginning of the year. We've got a lot of confidence that we can find rocks and plays that will be accretive, that'll be better than the existing inventory we might have now. We've got a lot of potential to continue to grow the company and improve the inventory going forward.
Okay, as a follow-up, in the shelf, obviously, it seems to be an area that you highlighted a little bit in terms of building a position there that's fairly scalable. What does it take, in your view, for that to become more of a premium play and competitive with some of your other premium locations?
I'm going to ask David Trice to comment on the shelf.
Yeah. One thing to be clear on is, the 1,700 premium locations that we announced, those are all in the basin. None of those are shelf locations. On the shelf, the industry has been active up in that area for a number of years and using new technology, better completions, and that sort of thing. It does lend itself to EOG's abilities to go in there with our cost structure and our technology to be able to move locations into the premium status. That's what we're looking at there. Really, like I said, we haven't been active there, but just based on the industry activity we've seen, we do see the potential to add some value.
Okay. If I could summarize it's something where obviously you guys haven't been quite active, but it seems like it's both a cost and a well productivity side that you'll work to continue to enhance returns. Is that correct?
Yes. That's correct.
Okay. Thanks.
We will take a question from Irene Haas of Wunderlich.
Yes. Firstly, congratulations on this really nicely negotiated deal. On the Northwest Shelf , to continue the whole line of reasoning, I was curious as to the Wolfcamp formation, is that prospective? From what we understand, it's more of a basin type play. Additionally, what is prospective in terms of north of the shelf area in Chaves County and in north in Lea County? What kind of play? Are those acreage that can be converted into premium status as well?
Yeah, Irene. I think all that acreage is prospective longer term. We're going to need some time to just work through it and see if it will, over time, fit into the premium status. Of course, that's what we're mainly focused on. As far as the Wolfcamp, if you're thinking Wolfcamp shales and clastics, of course, that is in a basinal setting. In this setting, these are platform carbonates, and some of that has been productive over the years.
Great. Thank you. We will move to Doug Leggate of Bank of America Merrill Lynch.
Thanks. Good morning, and congratulations, everybody. Bill, you already had a pretty strong and deepening inventory in premier locations. I guess I'm trying to understand where does this fit in terms of changing what you would've been able to do anyway in terms of your growth rate? I guess what I'm thinking is living within cash flow has been your mantra. Adding more inventory, how does that change the growth rate on what you could already do with your existing inventory?
Doug, what it does is there's two, three things. The Delaware Basin, our current returns there and well productivity equal the best things that we have in the company, the Eagle Ford and the Bakken. The thing that's unique about the Delaware is it's really in the very early innings of development. We see tremendous improvement as we go forward. At some point down the road, as we continue to learn, the returns on the Delaware will just continue to go up and up and up. This truly enhances, we feel like is truly going to enhance our capital efficiency going forward. We'll be able to grow oil with less capital more efficiently than we currently do now. It's really just a very significant addition for, to allow EOG to continually improve capital efficiency going forward.
That's directionally why we wanted to make this move, but we thought it's a very unique opportunity to add some very high quality acreage.
A bit wider set of options, I guess, is the way I should think about it.
Yes, that's right.
Great. Thank you. My follow-up is really, it's related to Evan's question. 1.1 million acres that you haven't really ascribed any description to. Can you give us some idea as to what that is and whether I mean, even if you put a very low acreage number on it, one could very quickly get to a value that means you got the rest of it for a fairly low cost. I'm just trying to understand, what is that and any idea what kind of value ascribed to that in the transaction? And I'll leave it there. Thanks.
David Trice, would you address that?
As far as the acreage most of the additional acreage is really throughout the Rockies Basins. Obviously we highlighted the Delaware Basin and the Powder River Basin. Those are the two key positions there. In the Powder, we picked up in exploration core, Yates had about 200,000 net acres there. Really across all Wyoming including the Powder River and the Green River Basin, Yates has about 600,000 acres there. Across New Mexico, including the San Juan, that's about another 600,000 acres. The rest of it is in the Piceance Basin, Paradox, and some in the Williston. It's really across our the Rockies Basin. Some of it may be adjacent to our current positions there. Really again the main value is in the Delaware and in the Powder.
We'll be working to see how well the rest of it fits with our current position.
Great. Thanks again, guys, congratulations.
We will take a question from Charles Meade of Johnson Rice.
Good morning, Bill. I'll join the chorus and offer my congratulations to you and your team for bringing this one of a kind opportunity into the tent. To help put the whole setting together, can you give us a narrative of how this deal originated and matured and how your views on the assets evolved during the process for you?
Yeah, just to start off, Charles, I think we've had just tremendous respect for the Yates family and a great working relationship with them in New Mexico for years and years and years. We have a lot of admiration for each other as operations and people and culture, and certainly asset base culture, the acreage. I'm gonna ask Billy Helms, he was very involved in the negotiation part of the deal. I'm gonna ask Billy to share some color on that.
Thanks, Bill. Bill's right. Through the years, we've just maintained a great relationship with the Yates employees and have really admired the company, the employees, and the acreage position that they've been able to establish. Earlier this year, we initiated contact with Yates. We were able to continue to work through several issues and ultimately agreed to this combination of the two different entities to the benefit of all the shareholders.
I would add that it is truly a once in a lifetime opportunity for EOG to join forces with a company such as Yates, and we are excited about the value that not only we see in the acreage but also in the people. We're excited about the combination. It really has been a longstanding working relationship that led us to have this opportunity to start with. It was something that culminated over many months of negotiations to reach a mutually agreeable deal.
That's helpful color. Thank you, Billy. Bill, if I could just go back, you touched briefly on this point. I want to drill down a bit on the location count that you have, you've identified. If I just do a simple math of dividing the 186,000 acres in the Delaware Basin by the 600 premium locations you've identified with the Bone Spring, it works out to about one location for every 300 acres. I'm wondering if you could maybe give a little bit more insight or granularity on how you came up with that location count. Is a lot of the acreage not suitable to long laterals at this point, or are there some parts of the Delaware Basin position that you are excluding from that or are excluded from that premium location count right now?
Charles, the 1,700 are premium only. Just like in each one of our acreage positions, whether it's in Eagle Ford or whether it's in our existing Delaware position, we have a lot of additional locations. The 1,700, it's a very first pass, I would say a conservative location count of what we would consider premium only. There is quite a few additional location potential as we work the geology in more detail, get more data on the targeting, the different targeting and different pay zones in each one of these sections as we work on spacing, et cetera. As we work on well costs going forward, we believe that there will be a lot more premium location potential come forth from both our acreage position and the Yates acreage position.
This is really a tremendous acreage position that will be highly beneficial to the company for many years.
Thank you, Bill. That's helpful.
Moving on, we will take a question from Subash Chandra of Guggenheim.
Yeah. Good morning. I was curious where the Leonard Shale potential was, the 67,000.
Subash. The Leonard is equivalent to the Avalon. It's the upper part of the Bone Spring section. It's what many in the industry call the Avalon, and it's a very significant shale play for EOG over the years. It's historically been our oldest play in the Delaware Basin, but it's a very strong producer.
Do you think of that as being a sort of a Lea County potential, or do you see it throughout your acreage?
I'm going to let David Trice comment on that.
I think as far as the Leonard, Lea County is the main area. Southern Lea, that's where we've been active mostly in the Leonard. It is prospective as you move west into Eddy, it becomes a little more gassy in that direction. Really throughout the area, throughout the southern Lea area and southern Eddy County, it is prospective.
Okay, thanks. My follow-up is PRB. I seem to recall, and this might be stale, but there were some glitches in permitting and activity in how anyone can be an operator of record out there and sort of sorting that out. Could you just perhaps update me on what's happening in PRB and if those limitations do exist anymore?
Yeah. The Powder River is an area where you have to do your homework, and you have to do your homework upfront by sometimes several years. We've been active in that basin for many years, and we've got a very experienced staff there, land people, operational people. You have to start the permitting process, the surface access agreements, et cetera, well in advance of the drilling. We're experienced with that, and we don't see that as a significant hindrance to us fully developing the property. We've taken all that into consideration.
Great. Thank you.
We will move to Brian Singer of Goldman Sachs.
Thank you. Good morning.
Good morning.
Wanted to follow up on the Leonard question, as it seems that the premium locations on a per acre basis is actually more attractive for the Yates acreage than your legacy acreage. Can you talk about what's driving that? When you look at the economics, obviously you have a threshold to Call it a premium location, but are the economics, and the oiliness for that matter, more attractive, less attractive, or the same as your legacy Leonard acreage?
David Trice?
Yeah, I think on the Leonard, we've always been very high on the Leonard for the last several years. It's a very economic play for us. It tends to be a low-cost play for us. We haven't been as active lately in the Leonard, and really, the main reason why we haven't done that is we've been focused on the Wolfcamp, the deeper objectives. What that's allowed us to do is to collect a lot of data on the shallower objectives, such as the Second Bone Spring and the Leonard. In the future, when we get back to drilling those formations on more of a routine basis, we'll have a lot more data on them to be able to target better and get our completions better and such. We're still very, very high on the Leonard, and really, I think the acreage fits well together.
You can't really say that the Yates acreage or EOG acreage is better. They're both continuous. I think, going forward, we're going to, like I said, continue to collect the data and add premium accounts.
Great, thanks. As we think about the synergies and scale of the transaction, wondering if you could provide more specifics on a couple items. First, do you see the impact that this could have on drilling longer lateral wells on your legacy acreage, and if you have any numbers for how many additional locations, either already classified as premium or not, where you could, as a result of having this acreage, drill longer laterals? Second, what are the specifics that we should look for as indicative or as an indication that you're applying your technology on the Yates well? Should we expect improvement in well performance versus Yates' historical drilling record?
Brian, I think you hit on one of the important points, is that much of our acreage, it adjoins each other. It's bolt-on acreage. Increasing the lateral length has been, recent, but a very big driver in converting wells to premium category. We've considered that, the 1,700 has a very significant amount of longer laterals in that. Again, it's the first pass, I think we'll make improvements on that going forward, both in the per well productivity and the numbers of wells too. The second part of your question again?
I guess, what should we look for specifically on how you apply your technology? Should we expect well performance versus the historical well performance to improve? What specifically is driving that?
Yes, performance will definitely improve. As I said earlier, we think one of the great things about this acreage position is that we're really in the second, third innings. Cost reduction is an ongoing thing, and that will continue to drive returns improvement. You'll see the typical curves that we have. We're decreasing well cost per year. We'll just continue to go down, and we're really in the early stages in the Delaware on that. Targeting each one of these zones, whether it be the Wolfcamp, the Bone Spring, the Leonard, et cetera, has multiple pay targets and different kinds of quality of pay. As we get more information, as David described earlier, we'll be able to improve the targeting.
The frack technology, we believe that EOG brings a quite advanced frack technology to apply to this acreage, that will be a big driver in well performance going forward. Again, we see just a lot of upside at current cost and current operations, and we see a lot of upside as we continue to learn, improve in all these different areas.
Thanks.
We will take a question from Paul Sankey of Wolfe Research.
Hi, everyone. I was wondering in terms of closing the deal, are there any complexities or other concerns, and are there any existing contractual commitments or other issues as regards to what you're taking over? Thanks.
Yeah. Thanks, Paul. I'll let Billy Helms address that.
Yeah, Paul. We anticipate closing in early October. Really just waiting on some regulatory approvals that we have to get, the HSR approval that's going to be filed. Outside of that, there's really no other hurdles that we have to overcome. There's really no other commitments or anything like that to worry about.
Understood. It's fairly straightforward. Could you just comment further on the relatively high resource that you're talking about here relative to the lower production number? Is that a function of under-investment, do you think, in these acres? I assume it is. Thank you.
Billy?
Yes. As Bill alluded earlier, that's really the attractiveness of this opportunity is they have assembled just a premier acreage position across many basins that
Fit really well with our exploration focus of the company. We really didn't buy it for the existing production. It certainly has a good deal of value. Really what attracted us to this opportunity was their acreage position that they've been able to accumulate and maintain for so long, and thus the opportunity we see on that.
Great. Just the final from me is that there's obviously, I assume, a relatively low cash flow associated with the relatively low production. Are you guys going to remain committed to the idea of basically having CapEx within cash flow? Are you going to start outspending in order to develop these acres? I'll leave it there. Thank you.
Paul, we're going to continue to operate within cash flow. When we run the metrics on the deal, it's accretive 2017 forward in cash flow. It's very positive, very accretive, obviously, in production. It really helps the company produce more, find more, grow more within cash flow going forward.
Thanks.
We will take a question from Marshall Carver of Heikkinen Energy Advisors.
Yes. A question on, is there any need for any meaningful infrastructure spending in the next few years? Or can you really add a bunch of rigs if you chose to, if commodity prices allow? Or do you need to put some infrastructure in first before you can really accelerate?
I'm going to ask Gary Thomas to comment on that.
Marshall, there's sufficient infrastructure in place here in the Delaware Basin and PRB there, especially with all the additional midstream that's being constructed currently. These link up with our existing properties very well. Yes, we've been positioning so that we can go ahead and put wells to sales as we develop.
Thank you. One follow-up. I see most of the acreage is held by production, but not totally. Will you need to put rigs to hold acreage by production, or will the initial drilling be really development drilling right off the bat?
I think, Marshall, predominantly, it'll be development drilling. I think the remainder of the acreage that needs to be drilled to hold will just fit normally into the development process. Otherwise, we don't have a lot of immediate commitments, like we have to go out there and drill something we don't want to drill. We've got time to earn all the acreage and hold it by production over time, just through normal development process.
Okay. Thank you. That's helpful, congratulations on the announcement.
Thank you.
We will move to Kyle Bickel of Stifel.
Hey, good morning, guys. This is Kyle. I am filling in for Mike Fiala. I guess my first question is, with the increased allocation of CapEx toward the Delaware Basin, will this have any effect on further EOR projects or Austin Chalk tests?
Kyle, no. At this moment, we don't have any EOR plans for either the Delaware or the Powder River. It doesn't mean that sometime down the road, we may come up with some ideas that we want to test, but it certainly doesn't affect anything at the moment. Then the second part, the Austin Chalk. No, that's a South Texas-only play, so it doesn't come into bearing on this acquisition or this merger.
Okay. In terms of the 2017 plans, we won't see any change to what you might be doing there in terms of shifting CapEx towards the Permian and the Delaware?
I see. Yes. That's a good question. I don't think it's going to change our EOR or Austin Chalk emphasis. Those are something that don't have a lot of CapEx at the moment, but we'll make those decisions as we get a little bit more firm outlook on our 2017 plan. We don't think that this merger will deter from that.
Okay. I guess on a go-forward basis, can we expect any changes to your hedging program, whether or not it's hedging this acquired production or what you're looking at on an overall basis going forward?
This won't have any effect upon our hedging.
Okay. That's all for me.
As a reminder, it is star one to ask a question and star two to remove yourself from the queue. We will move to John Herrlin of Societe Generale.
Yeah. Hi, just one quick one from me. Everything's been asked. Is there any sort of a lockup for Yates with the shares?
Billy Helms?
Yes. It's a typical graduated lockup provision where I think in the first 60 days, there is no right to exercise shares. After 60 days, they can exercise up to 50%, and following 120 days, they can exercise up to all the shares. It's a typical graduated program that is in this transaction.
Thanks.
We will take a question from Pier Simon of Simmons Piper Jaffray.
Congratulations on the transaction. Just two quick ones from me. For the Delaware Basin acreage that you're acquiring, curious what the average working interest and NRI is on it. On the royalty, is the seller keeping any sort of override here?
Billy, you want to address that?
Yes. For the Delaware Basin, we have an average of about 66% working interest in the properties that we're focused on. In the Powder River Basin, it's about 60%. Yes, there is no ongoing override associated with all the properties.
Should we assume a roughly 20% royalty just on average?
It's a typical royalty for all the different areas, whether it's state or federal leases. It's typical with anything we would have in the basin as well.
All right. Thank you, Billy.
With no further questions in the queue, I would like to turn the call back over to Mr. Thomas.
Well, thank you very much for your questions, and certainly, thank you very much for your support. We believe this merger is a very historic moment in the company. It's one of those times where something has happened very significant for the future of the company. This is certainly very positive for EOG and for Yates, and we're very excited about the future and the benefits that this transaction holds for the company. Thank you for listening, and certainly thank you for your support.
Ladies and gentlemen, this does conclude today's conference call. Thank you everyone for your participation. You may now disconnect.