Good day, and welcome to the Magnolia Oil and Gas First Quarter 2021 Earnings Release and Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Brian Corales of Investor Relations. Please go ahead.
Thank you, Tom, and good morning, everyone. Welcome to Magnolia Oil and Gas' Q1 2021 earnings conference call. Participating on the call today are Steve Chazen, Magnolia's Chairman, President and Chief Executive Officer and Chris Stavros, Executive Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward looking statements within the meaning of the federal security laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.
Additional information on the risk factors that could cause results to differ is available in the company's annual report on Form 10 ks filed with the SEC. A full Safe Harbor can be found on Slide 2 of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's Q1 2021 earnings press release as well as the conference call slides from the Investors section of the company website atwww.magnoliaoilgas.com. I will now turn the call over to Mr. Steve Chazen.
Thank you, Brian. Good morning and thank you for joining us today. My comments this morning will focus on our business model and provide an update on our Giddings asset. I will also provide some more details for our plans for the remainder of the year. Chris will review our Q1 results and will provide some additional guidance before we take your questions.
Our business model centers around disciplined capital spending and generating significant free cash flows. We limit our capital spending to approximately 60% of EBITDAX, which is intended to generate mid single digit production growth. As we shift the balance between Karnes and Giddings, we're going to generate higher production growth with lower levels of capital as a result of the improved efficiencies at Giddings. We plan to spend somewhat less than $300,000,000 to generate year over year production growth of 6% to 9%, that is in the high single digits. The reduced amount of capital is needed for this level of production growth provides greater free cash flow for Magnolia to improve its per share value.
The optionality the free cash flow provides allows Magnolia to improve its business while also enhancing shareholder returns. In contrast, some of our more leveraged peers have to allocate their free cash flow to reducing their debt. We clearly don't need to do that. Q1 was one of the best quarters in our company's short history. We had record earnings, EBIT margins of 48%, just shy of our goal of 50% and free cash flow of $100,000,000 Further with no oil hedges, Magnolia can benefit fully from the improved oil prices.
During the Q1, we spent just $39,000,000 on drilling completing wells or 26% of our adjusted EBITDAX to deliver 3% sequential production growth. Record production at Giddings would drive our better than expected production volumes. Giddings production grew 22% sequentially and was up 45% in the same quarter last year. Oil production at Giddings increased 32% sequentially and was up 73% from the prior year quarter. Our significant production growth at Giddings was accomplished by spending only $91,000,000 of D and C capital over the previous 4 quarters, demonstrating the quality of the acreage.
Well costs at Giddings are averaging about $6,000,000 per well and one rig can drill about 2 wells per month. In our initial quarter at Giddings, we now have a total of 28 horizontal wells online. The 8 wells added in the Q1 are in line with average production rate reported last quarter. The current operated rig at Giddings continues to focus on the initial core area we expect to bring online 20 to 24 wells this year. We plan to add a second operated rig this summer to drill wells in both of our asset areas.
Production impact to add activity is not likely to be realized till later in the year, the biggest impact reflected in 2022. Even with the additional rig, our drilling completion costs will be somewhat less than $300,000,000 for the year. Over the last couple of years, a large portion of our free cash flow has gone into adding small bolt on acquisitions. Now that we have a better understanding returns generated in our Giddings development, we do not have any need for any large scale M and A. This allows more of our free cash flow to be used for reducing our share count.
We reduced our diluted share count by 4% from 4th quarter levels and expect the 2nd quarter share count to average about 245,000,000 shares. We were able to accomplish our annual share reduction goal in the Q1 alone, but we still plan to buy back about 1% of our shares each quarter. Despite spending $88,000,000 during the quarter on share repurchases, we still exited the quarter with $178,000,000 in cash. In summary, we had a great start to our business in 2021. With the efficiencies and better productivity at Giddings, we were able to do more with less, all while maintaining our low cost structure and strong balance sheet.
Less capital is needed to grow production, resulting in more free cash flow to improve the value of our business. With no need for any large scale M and A activity, our free cash flow is focused on share repurchases combined with small bolt on acquisitions. Finally, we plan to pay our 1st semiannual dividend in the Q3. I'll now turn the call over to Chris.
Thanks, Steve, and good morning, everyone. As Steve mentioned, I plan to review some items from the Q1 results and provide some guidance for the Q2 and full year 2021 before turning it over for questions. Starting on Slide 4 of the presentation on our website, Magnolia delivered very strong Q1 2021 financial and operating results. The company generated total reported net income of $91,000,000 or $0.37 per diluted share and adjusted net income of $94,000,000 or $0.38 per diluted share, both well ahead of consensus estimates. Our adjusted EBITDAX was $151,000,000 in the Q1 with total drilling and completion capital of approximately $39,000,000 D and C capital spending represented just 26% of our adjusted EBITDAX during the quarter.
As a percentage, this was better than our earlier guidance mainly due to higher product prices, higher production and lower non operated capital. Total first quarter production grew percent sequentially to 62,300 barrels of oil equivalent per day, also higher than our earlier guidance. Our production in Giddings grew 45% from the prior year quarter, with oil production at Giddings growing 73% from the year ago period. Total production exceeded our guidance due to continued strong performance from some of our newer wells in Giddings. Looking at the quarterly cash flow waterfall chart on Slide 5, we began 2021 with $193,000,000 of cash.
Cash flow from operating activities during the quarter was $118,000,000 and cash flow from operations before changes in working capital was $142,000,000 Our D and C capital outlays, including leasehold costs, was $40,000,000 during the quarter. We allocated $88,000,000 during the Q1 toward our share repurchase efforts reducing our fully diluted share count by approximately 9,000,000 shares. Since we began our share repurchase authorization in the Q3 of 2019, we have reduced our diluted share count by 20,500,000 shares or by about 8%. We currently have 12,600,000 shares remaining under the purchase authorization. We generated $100,000,000 of free cash flow in the Q1 and ended the period with $178,000,000 of cash on the balance sheet.
$400,000,000 of gross debt is reflected in our senior notes, which do not mature until 2026, and we do not expect to issue any new debt. Magnolia has an undrawn $450,000,000 revolving credit facility, and our total liquidity of roughly $630,000,000 is more than ample to execute our strategy and business plan. Our strong balance sheet and consistent free cash flow generation is a relative advantage for Magnolia, allowing us to improve our per share metrics, whereas cash flow for many of the more heavily indebted companies is consumed by interest costs or the need to allocate free cash flow to reduce leverage. Our condensed balance sheet and liquidity as of year end 2020 are shown on Slides 67. Turning to Slide 8 and looking at our unit costs and operating income margins.
Our total adjusted operating costs including G and A were $10.47 per BOE for the Q1. Including our DD and A rate of $7.66 per BOE, which is generally in line with our F and D costs, our operating income margins for the first quarter of 2021 were $17.83 per BOE or 48% of our total revenue compared to 29% in the Q4 of 2020. Turning to some additional guidance for 2021, we expect our full year capital to be below our normal range of 50% to 60% of adjusted EBITDAX, mainly due to higher than expected product prices and the improved efficiency of our capital program. While we plan to add a second operated rig during the summer, our total drilling and completion capital is still expected to be somewhat less than $300,000,000 for the full year. The cadence of our activity in capital spending is expected to see a modest increase in the second quarter and further increase during the second half of the year coinciding with the additional rig and activity.
Overall, we expect to run 1 rig for the full year at Giddings with the 2nd rig drilling in both Giddings and Karnes with a mix of development and some appraisal drilling at Giddings. Only a small portion of the production impact from the 2nd rig will be seen late this year with most of the benefit not reflected until 2022. 2021 capital spending and activity is expected to deliver full year production growth of 6% to 9% compared to 2020 production levels of 61 point 8,000 BOE per day. Looking at the Q2 of 2021, we expect production to average 66,000 barrels per day, a sequential increase of 6% compared to the Q1. As we completed several DUCs in the Karnes area late in the first quarter, most of the company's 2nd quarter sequential volume growth will come from Karnes.
This is somewhat a function of running one rig during the first half of the year and a matter of timing of drilling and completions between Karnes and Giddings. Oil price differentials are anticipated to be approximately $3 per barrel discount to MEH during the Q2. The fully diluted share count for the Q2 of 2021 is expected to be approximately 245,000,000 shares, which is 4% lower than the Q4 2020 levels. We expect our shares outstanding to decline further through the year as part of our ongoing share reduction efforts and as we expect to repurchase about 1% of our outstanding shares per quarter. I wanted to provide some additional information that should be helpful for those modeling our earnings for this year.
Following GAAP rules, we do not expect to have any material federal tax expense for the remainder of the year as a result of a valuation allowance associated with the oil and gas property impairments taken during the Q1 of last year. Had the valuation allowance not been created last year, our non cash tax expense for the Q1 would have been approximately $20,000,000 on our total net income. Simply put, our pretax should approximate our total net income for the remainder of the year. Further to this point, we do not expect to pay any material federal cash taxes during 2021. As we have announced previously, last summer, we provided notice to EnerVest that we are ending our operating services agreement with the company.
That process is now nearly complete as Magnolia has built out its organization, filled out most open roles with Magnolia employees and taken over the EnerVest provided services that were part of the original agreement. The transition from EnerVest contract workers to Magnolia employees provides us with better operational control and should reduce our cost structure once the process is complete and into the second half of this year. We expect to take a one time charge to be reflected in our second quarter results for costs associated with the anticipated termination of the services contract with EnerVest, including costs related to modernizing some of our IT systems and software. We expect to see a meaningful decline in our cash G and A starting in the second half of the year as a result of the end of the EnerVest contract and plan to provide more details around this with our Q2 results. In summary, Magnolia's high quality assets and continued capital efficiency should continue to generate strong operating margins and sizable free cash flow allowing us to execute our strategy and improve per share value of the business.
We're now ready to take your questions.
And the first question comes from Zack Parham with JPMorgan. Please go ahead.
Hey, guys. Thanks for taking my question. You're now guiding the capital spending of somewhat less than $300,000,000 in 'twenty one, which you talked about being less than 50 percent of EBITDA. Given that the 'twenty two strip is currently around $60 how should we think about spending in 'twenty two? Is that 2 rig program for the full year a reasonable expectation at this point?
And I guess just more generally, how do you think about the balance between production
growth and free cash flow generation?
I think you should view the amount of growth you have in your view and the capital spending is not uncorrelated. And so if you think we're going to grow in the low end of the single digits of the upper single digits, you should have significantly less capital than $300,000,000 And if you think we're going to grow at the high end of it, it'll be closer to the $300,000,000 So and then the same thing will be true next year. So I think the run rate of the second half of the year in capital, which would be roughly twice what we spent in the Q1 annualized. Because we're running 1 rig in the Q1, we're running mostly 1 rig in the 2nd quarter. And then as we go into 3rd Q4, we're running 2.
So that rate, whatever it turns out to be, will approximate what you should see next year. That would generate more all things being equal, more growth than we're showing for this year because we're basically running more and more rigs. So the range, the 6% to 9% range actually reflects differences in our guess as to what non operated activities would generate since we don't really know that. It's picked up some recently, but it's still not a lot. And how many exploration style wells we drill in Giddings versus development wells and how the exploration style wells turn out.
So that's really the variance. And because of the variance we've built into this, the variance around the high end is probably somewhat greater.
Got it. Thanks for that. And just one follow-up. You talked about paying no cash taxes for the remainder of 'twenty one. Just given that Magnolia is consistently profitable and generates free cash flow, when do you anticipate becoming a cash taxpayer?
It's actually a more complicated question than you probably could guess. The B shares that we have, which are about 27% of the total shares, Those are physical they're actually partnership units with a voting right attached to them. And so they pay their own taxes. And when they're sold, they have to be converted to the A shares. It's the only way to sell more bought by us, doesn't matter which.
We get a step up in tax basis in that and that provides shelter going forward. So our ability to predict this depends on the number of B shares outstanding. So it is true for sure and that given our level of spending and given the profitability of the business eventually we'll pay taxes. And while I don't enjoy paying taxes, it's I dream as a person, I've always dreamed of being the nation's largest taxpayer. So it's sort of a good thing.
No, absolutely. That makes a
lot of sense. That's all for me. Thanks, guys.
Thanks.
The next question comes from Leo Mariani with KeyBanc. Please go ahead.
Hey, guys. You alluded to
the fact that in your prepared remarks here that you saw some strong recent getting to well performance. I was hoping maybe you could give us a little bit color around that. And then additionally, just also wanted to ask about maybe some of the wells that came on in 2020 at Giddings, particularly some of the ones early in the year before you shut things down. Really the question around that is just how is the longer term well performance also looking at Giddings? I think as you folks know historically Austin Chalk Wells sometimes haven't held up great over the long term.
I think obviously you guys are targeting kind of a better section here of better permeability. So maybe you could just kind of speak to those two things.
Well, so we said we put on basically 8 wells during the quarter, which it ties to the drilling rate. So that's what that is. Virtually none of them have been on for 90 days. And so we don't reporting 30 day production really isn't very useful for this because the wells tend to start out a little noisy and build up over time, although it's been a little better lately. You can actually see what the older wells are doing because we're this is how many wells we're putting on and the production clearly is not declining sharply.
So the answer to your question is the decline rate is much less say than Karnes wells. And so the and the better wells are really quite strong in that period. So it's but you can actually see it in the production because we're not drilling enough wells to make the production grow if we were faced with 50% declines in the other wells. So it's been pretty remarkable. Again, I think physically, if you think about it, the historical fracking done in Austin Chalk, basically just frac the chalk formation against existing fractures.
Here what we're doing is we're creating some from the frac process, but we're also opening old existing fracture zones. And so you get more, call it, non frac type production going into the mix. So I think the answer to your question is that to some extent, it's in the finding cost. I mean, our finding cost is less than $5 Less than $5 of BOE for the wells. And that continues to go down as we get more data.
So that will give you and putting a royalty in there because the royalty is taken out of that, give you an idea what the wells are producing. So I don't think it's I don't think it's a great mystery that it's significantly lower than a Karnes and produced a lot more oil over its life. But the reason we didn't talk about the 8 wells is none of them have been on for the 90 days. But the ones that have are probably a little above average, above the average we showed you. So no reason really to put in hype numbers like that.
Okay. And that's helpful color for sure. And just in terms of returning capital to shareholders, you guys have obviously been very aggressive with the buyback. Clearly, you've indicated that you're going to start to bring a variable dividend into play here as we get later in the year in 'twenty one. So maybe you can just talk about philosophically how you allocate some of that free cash flow to the variable dividend versus the buyback?
You also mentioned M and A opportunities with free cash flow. If I heard you guys right, it sounds like you mostly think it's pretty small bolt on type stuff and not really anything chunky available.
It's not anything chunky available that would compete. That's the issue. I mean, there's stuff to buy for sure, but it wouldn't it would be dilutive to our results. And you might stumble into diluting yourself, but you shouldn't go out deliberately to do that. So that's really the principle of this.
That's why the large deals there are other people who have a different set of alternatives. As far as buying the shares are concerned, as long as we look at the earnings as sort of actually valuable information. Our finding costs and our DD and A rate are approximately the same as Chris pointed out. So the earnings we have is available for improving things. And so that's reducing the shares or whatever.
And so if we're going to earn, I don't know what, let's say, we just annualize the Q1. So if we're going to earn $1.40 $1.50 buying stock in the $10 $11 does not strike us as expensive. So as long as we can do that, that will be the principal focus. Over time, as we reduce the share count, the amount of dividends will go up because I view the share the dividend is sort of a lump sum and it's just divided by the number of shares outstanding. So while we might pay a little less than we might otherwise pay in this year, maybe next year, the share count declines are just more money to pay more dividends per share.
And that's really the goal. As long as the stock is clearly inexpensive, the priority will be there. And there are people who don't want to own oil stocks or don't want to own us. Anybody who's got a 1,000,000 shares can call up Mr. Stavros, and we'll be glad to arrange or to take those shares off their hands.
Okay. Thanks, guys.
The next question comes from Neal Dingmann with Truist Securities. Please go ahead.
Good morning all. Steve, just following up on that comment you just had. I mean, I agree the shares do look cheap. But again, my comment or the question, I guess, would be is your Giddings returns are so phenomenal. So I'm just wondering how do you when you and Chris sort of debate the ops versus the finances behind that, when you think about stock buybacks versus the incremental Giddings delineation using that money for?
The Giddings is there forever. Locations don't go away. So to some extent, since we don't sell shares as a company and no plans to do some buy something for the bunch of watered stock, our objective is to keep the stock in a reasonable range. Yes, we could spend more money and grow more. There's no argument about that.
But the locations will still be there and the opportunity to buy the shares
is sort of
now, it's not the most popular segment in the world. And as long as people have that view and we can buy the shares cheaply now, we'll do that because we can always accelerate the drilling. My objective is to spend the money as wisely as I can over time. And so the business will grow nicely without pushing it and our finding costs will stay low. If you start accelerating just to generate free cash flow, for what end, I don't know.
You will get sloppy, just the nature of oil price. So this is the way to control our costs, and we can make the growth anything we want it to be. And so if high growth became more involved, we could probably do that. But right now, a growth of 6% to 9% and buying in 4% of the stock every year strikes us as a rational approach to generating pretty safe 10% per share metrics, 10%, 11%, 12%, 13% metrics on a per share basis and we think that should be attractive to a generalist investor.
No, I would agree with your comment, Stephen. And I think you just kind of hit on my follow-up, and it was around your Giddings growth. I mean, my thought was really these days, obviously, as you mentioned, any type of growth and it's so taboo. But for you all, as you mentioned, it takes so little capital to boost Giddings. Just anything else you would think about, I mean, you guys had great growth with just one rig.
So again, given what I know how investors feel about growth, just but how cheap it is to grow in Giddings, Maybe anything else you could say around that? Thank you, Steve.
Yes. We're putting a second rig on and most of that will be in Giddings, some in Karnes. In a $65 environment, while Karnes still isn't as good as Giddings, by North American standards, it's probably still some of the best money you could spend. And so that's sort of the balance we're doing. And we'll look into next year to see what needs to be done.
But I don't like ratcheting up the rigs and then bringing them down and that sort of thing. So I try to be sure that we're able to continue whatever we're doing because we just manage better that way. In an emergency, of course, we can do whatever, but we just manage better if we build slowly and thoughtfully. And again, locations aren't going away. And I don't have any I don't really care what the banks think because the only reason we don't reduce our line of credit is people would misinterpret it.
So we just don't have that kind of debt needs. So I think this is the right strategy for a multiyear program. And what would ruin the strategy or what would change the strategy would be if the stock were to go to some would double or triple in the same price environment and then the share repurchase strategy wouldn't work anymore and we have to endure more dividends.
Sure, sure. Well said as always, Steve. Thanks so much.
Sure.
The next question comes from Umang Chaudhary with Goldman Sachs. Please go ahead.
Hi, good morning and thank you for taking my questions.
Sure. Good to talk to you.
My first question most of my questions have been already asked. So I have two quick ones for you. The first question was around Geddings appraisal program and your expectations from that program as you add the 2nd rig this summer?
Yes. So some of it, the 2nd rig will be used for pad drilling and some will be to look at 4 new areas. And with the spacing of that, I don't know. We're still putting together the petrophysical work. So there'll be 4 wells, I think that'll be and there might be 3 by the way or some other number, but but 4 is currently where we are now and there'll be space over the year to look for areas where basically it's look for areas where we can economically lease more land to build the footprint in the areas and see if we can find some areas where we can add to our footprint.
It's less about the production because we've probably got enough in the core area for a number of years. But I don't want to since we've got this on our way to being figured out, I don't want to lose the 1st mover advantage.
Got it. And any color around the expectations in terms of like whether it's been as oily as your focus area? Do you expect the appraisal program to be more cashier or in the cashier part of your acreage footprint? Just trying to understand what
you're thinking about the I think we're looking for basically for Giddings well about 50% oil. And there might be some that are 40% oil, There might be some that are 60%, but when we get through, we're looking for a balance. The gassier parts, obviously, while we had a good day for gas this last quarter, it's not a it's still a pretty weak commodity. And until we get gas prices that are regularly over $3 or so, I'd rather focus on the oilier parts.
Got it. And my second question, follow-up question was really around the infrastructure build out in Giddings. I think last you mentioned was that if the program is successful, this is in early 2020, you would consider building a pipeline infrastructure, but the trucking cost itself is lower because your assets in giddings are located pretty close to the refining demand centers. I just wanted to get your latest thoughts around potential for to develop the pipeline of infrastructure to reduce cost down the road?
That's something we're actively working on. So generally the idea is that we'll be able to reduce the number of amount of production facilities we had, use centralized production facilities and carry the oil to a trunk line and take that down. It's not very far, not very expensive. And then we probably put in a water disposal line to go with it through this for the same area. And it's not a lot of money to do it, but it would generate significant efficiencies for us.
And as the business and as the what it looks like over the next 2 or 3 years, it's clear we can probably do that. We may have some people come in and ship on our line too. But generally speaking, we see opportunities to do that because you want to make sure you had enough locations and you could figure out where they were before you put the line in. But right now, we have enough line of sight to probably do that. The principal issue is getting it right away.
It's not whether the line makes sense. So you have a bunch of rich people live in River Oaks who have ranchettes there. And so nobody wants a pipeline in their ranchettes. So that's the fundamental issue.
Got it. That's really helpful color. Thank you so much.
Sure.
The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.
Hey, good morning. Good morning. I just wanted to ask, I'm sorry, you touched on this already. The second rig that you're going to be bringing on, I was just curious about the rate you got for that and what the market looks like and whether you're picking it on spot pricing or whether you locked it in for some period?
The rig rates have not changed very much. And so and it's the same people we have who run the 1st rig for them And we were there for them during the downturn. And so they're here for us now. So I don't think we I don't think it's a lot different. If you're talking about inflation in the field, inflation is caused by transportation costs and steel and things like that, which everybody knows.
You can see it as they talk about it on television every day, so it must be right. So that's where the inflation is. But I would also add that there is a modest amount of inflation in oil price. And so the margins in this are you toss in a few pennies back to steel producer or a guy running and driving a truck. And so you see the price of sand doesn't change, for example, but the hauling of the sand costs more.
So I mean that's the sort of thing you're seeing. That's true in American industry in general. We're not having UPS deliver our sand. Right.
And could you just walk through the components of your cycle time now, just on average your drill days, completion days and if there's a rig mold or demold in there. Just what's that like now typically?
We average 2 rigs. 2 wells, yes. 2 wells a month. The actual drilling time is less than that, but that counts moving the rig and that sort of thing every so often. And I don't think that changes very much.
In some quarters, it might be a little more or a little less depending on how many moves of it. When we do the so called exploration wells, those are single wells and that take a little you don't have the pad efficiency. So you'll see some degradation there as we drill the 3 or 4 of those. But in the development, that's really all. And then the completion just depends.
We use one completion rig and we reuse in Karnes and Giddings, just a math depends on the schedule. So if we drill a well in January or March or whatever we want to say, we could get to it right away or it might take a couple of months. And again, 3 months, a quarter, well, it's a big deal to somebody studying the stock from our perspective. It doesn't really make a lot of difference whether the well starts producing in June or July. So I just it just depends.
Again, with a small program like ours, small changes turn into big deals, but they're really
not. Great. Fair enough. Thanks a lot.
Thank you.
The next question comes from Nicholas Pope with Seaport Global. Please go ahead.
Good morning, guys.
Good morning.
Hey, I was trying to reconcile a little bit the kind of the capital CapEx guidance for the year. I think coming into the year, you were talking about expecting an average of $6,000,000 on Giddings wells to drill and complete. Just kind of the back of the envelope math, that's struggling to get to a $300,000,000 with a 30 type well count in Giddings during the year. And I'm trying to understand if there's maybe some more non op activity that might be expected in Eagle Ford, in the Karnes area. Just could you help me out a little
bit with that, Matt?
Yes. So, yes, your issue is sort of right. So, you don't have to do it even more than that. You could look at the Q1, we spent about $40,000,000 included a little non op activity and some completion of some docks. But you'd expect that in any quarter.
And there were 8 Giddings wells sort of 2, 4, 6 probably drilled in the quarter. So that's what a 1 rig program costs. And if that's all we did, you spend $40,000,000 in a quarter. And it would fluctuate with completing DUCs or whatever we did in Karnes or whatever. But that's sort of the answer.
If when we put the second rig on, it will cost another $40,000,000 a quarter for a full quarter. And so you do that. And then the rest would be in the non op area. And because some of the second rig will be used in Karnes and some of it will be done to drill these exploration Giddings well. So you get a little mismatch on the wells drilled.
But that's right. And
are you all on track again?
Yes. It's a struggle to get to $300,000,000
It's a good problem. It's a good problem. And you all are on pace on that. I think you all talked about kind of entering the year around 6.2% or at least that's what you average for 'twenty, an expectation of $6,000,000 for D and C and for Gideon. Is that kind of
Yes, that's right.
Got
it. And then the car involved are less expensive.
Okay.
I think we are done.
This concludes our question and answer session, which also concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.