Categories Earnings Call Transcripts, Energy

Northern Oil & Gas Inc (NOG) Q1 2023 Earnings Call Transcript

Northern Oil & Gas Inc Earnings Call - Final Transcript

Northern Oil & Gas Inc (NYSE:NOG) Q1 2023 Earnings Call dated May. 05, 2023.

Corporate Participants:

Evelyn Infurna — Vice President, Investor Relations

Nicholas O’Grady — Chief Executive Officer

Adam Dirlam — President

Chad Allen — Chief Financial Officer

Analysts:

Scott Hanold — RBC Capital Markets — Analyst

Neal Dingmann — Truist — Analyst

John Freeman — Raymond James — Analyst

Derrick Whitfield — Stifel — Analyst

Donovan Schafer — Northland Capital Markets — Analyst

John Abbott — Bank of America — Analyst

Charles Meade — Johnson Rice — Analyst

Paul Diamond — Citi — Analyst

Phillips Johnston — Capital One — Analyst

Presentation:

Operator

Greetings, and welcome to Northern Oil and Gas First Quarter 2023 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Evelyn Infurna, Vice President of Investor Relations. Thank you. You may begin.

Evelyn Infurna — Vice President, Investor Relations

Thank you, operator. Good morning, and welcome to our first quarter 2023 earnings conference call. Yesterday, after the market closed, we released our financial results for the first quarter. You can access our earnings release and presentation on our Investor Relations website. Our Form 10-Q will be filed with the SEC within the next few days.

I am joined this morning by NOG’s Chief Executive Officer, Nick O’Grady; our President, Adam Dirlam; our Chief Financial Officer, Chad Allen; and our Chief Technical Officer, Jim Evans.

Our agenda for today’s call is as follows. Nick will provide his remarks on the quarter and on our recent accomplishments; and Adam will discuss an overview of operations; and last, Chad will review our first quarter financials. After our prepared remarks, the executive team will be available to answer any questions.

Before we go any further, let me cover our Safe Harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward-looking statements. Those risks include, among others, matters that we have described in our earnings release as well as in our filings with the SEC, including our Annual Report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements.

During today’s call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release.

With that, let me turn the call over to Nick.

Nicholas O’Grady — Chief Executive Officer

Thank you, Evelyn. Welcome, and good morning, everyone, and thank you for your interest in our company. Given the strong consistent results and lack of big changes this quarter, I’ll be more brief than usual. I’ll get right down to it with only three key points.

Number one, Stellar execution. In our first quarter of the year, NOG’s national diversified model delivered once again with better than expected production and cash flows. We continued to fire on all cylinders. Our Mascot acquisition was closed on time and our assets are on track to deliver growth throughout 2023. Generated record adjusted EBITDA in the quarter and record oil and total volumes, despite significantly lower commodity prices.

Even with the closing of our Mascot acquisition this quarter, our LQA leverage ratio was down sequentially. Our capital spending is right on track at about 20% of the midpoint of our guidance and in line with our anticipated 60% first half weighting. In a year of notably weak gas pricing, our oil properties have picked up the slack with our oil cut rising materially in the past few quarters.

Number two, growth. In Midland here [Phonetic] for commodity pricing, we are seeing tremendous opportunities on all fronts, from our organic properties, from our ground game and from an ever-expanding variety of growth prospects. Given our size, scale and diversity, as the largest national non-op franchise, we are unique in having access to the best of the best properties across both commodities and multiple basins.

Additionally, we’ve expanded our bolt-on opportunities set beyond our traditional fractional non-op asset acquisitions. We are pursuing other growth avenues, including partnerships directly with the operating groups, as seen with MPDC, co-bidding in M&A as a partner operators with similar economic discipline and other unique structured solutions to deliver solid returns for our investors and drive the compounding of returns over time.

Adam will talk about it further, but we continue to make traction with our operating partners as a superior capital provider for the co-development of oil and gas assets. We have the scale and the capital to provide solutions for these operators in ways others can’t. We pride ourselves on being a straightforward and reliable counterparty with a track-record of execution.

Number three, capital allocation. Our goal is to provide our shareholders with the highest possible total return over the long-term. We have implemented a multi-pronged approach, including a share repurchase program, repurchasing debt securities at discounts and increasing the cash dividends for our common stockholders.

We recently announced a 9% increase to our common stock dividend for the second quarter of 2023, our ninth straight increase. Additionally, we tactically repurchased common shares during periods of volatility. Since we initiated our dividend program and share buyback in mid-2021, we’ve returned well north of $200 million to investors. And our view at NOG is that our scale should help us build a shareholder return program that can grow over time.

As always, we’ll be mindful of risk and leverage. But the power of what we’ve built should continue to deliver an attractive risk-adjusted total return as the company under our management has consistently done over the past 5.5 years. During our tenure, NOG’s total return outperformance versus the upstream sector has been significant. Driven by a capital allocation strategy rooted in dynamism. The flexibility inherent in our strategy, as well as our business model has allowed us to adjust our capital allocation to where the greatest opportunities exist at any point in time, all the while providing a solid and growing cash return via the dividend. We continue to see this as superior to more dogmatic return programs and the results in the marketplace speak for themselves.

In closing, 2023 is off to a strong start for the NOG team and we remain confident that we can continue to deliver growth opportunities in the coming years. I will remind you, as I always do, that we are a company run by investors for investors.

With that, I will turn it over to Adam.

Adam Dirlam — President

Thanks, Nick. The first quarter was seasonally strong as we kicked-off 2023’s operations. Turn-in-lines for the quarter are as expected, adding approximately 13.1 net wells to production organically, which was up over 20% versus Q1 of last year, despite multiple periods of inclement weather. Williston made up approximately three quarters of the organic activity, driven by larger working interests with several of our top operators. The closing of our Mascot joint development project in January added another 16.4 net wells of current production and we continue to be encouraged with the project’s overall productivity. So far on average, actual production results have outperformed our internal estimates by 10% in the Mascot project.

The productivity and outperformance across each basin are testaments to our capital allocation process, where we target areas and operators that we believe will deliver a superior return on capital. The drilling and completing list finished the first quarter with 59.3 net wells, up from 55.4 net wells where we started the year. During the quarter, we added 14.1 net wells across the Williston and the Permian via organic and ground game activity with an additional 9.2 net wells added from our Mascot project, as drilling continues. First wave of Mascot completions since we joined the project is slated to turn-in-line over the next couple of months with the second batch that to start completions in the fourth quarter. Our D&C list grew during the quarter and our near-term backlog of well proposals has also been consistent.

During the quarter, we received over 200 well proposals, our highest on record, albeit with varying working interest. Well cost inflation has been consistent with our recent AFEs. We are seeing leading indicators of deceleration and we expect to realize that towards the back half of the year as operators continue to reset terms of service providers. The quality of the proposed wells also remained high, as we had over a 95% consent rate during the quarter.

The M&A landscape continued to evolve during the first three months of the year. Large asset packages were a bit slow coming out of the gate, and the quality of what came to market was not particularly enticing. As such, we passed on a number of potential transactions, while continuing to search for opportunities that are better aligned with our strategic positioning and return profile. We’re being patient and are beginning to vet more compelling and higher quality opportunities.

NOG’s total addressable market has expanded, given our size and scale and we have been invited to COVID on a number of operated prospects as wells explore sell downs from operators looking to partially monetize and remain as operator. These opportunities are not necessarily available to smaller non-ops as size and scale are required to participate in these large asset packages. This puts NOG in a unique position, where we can have a seat at the table with our operating partners, determine a long dated development schedule and underwrite accordingly. Looking at the entire landscape, there are currently 14 opportunities we are reviewing across our basins of interest, totaling over $6 billion across large asset packages and joint development structures.

Volatility and commodity pricing was also a headwind during the quarter, and there were several M&A processes that were put on hold. While the bid-ask spread was alive and well, we pivoted to our ground game to target drill-ready opportunities in situations where most sellers needed to transact to manage budgets and capital outlay.

Taking advantage of that backdrop, we reviewed over 140 opportunities and closed on 10 transactions during the quarter, picking up 2.6 net wells and 369 net acres. We’ve maintained that momentum moving into the second quarter with a backlog of attractive deals under negotiation. Our Midland Petro transaction last year has shown the art of the possible. And while we’re exploring large joint development agreements, we’ve also been able to bring this concept to our ground game, putting together one-off operated units and bringing in operators to develop. While our total addressable market for non-operated properties is as large as ever, we remain steadfast in our discipline. We will never be focused on growth just for growth’s sake. Our strict underwriting remains focused on returns.

With that, I’ll turn it over to Chad.

Chad Allen — Chief Financial Officer

Thanks, Adam. I’ll start by reviewing key first quarter results, which outperformed our expectations, despite the volatile commodity pricing backdrop.

Our Q1 average daily production top the high end of our expectations, 87,385 BOE per day and 11% increase over Q4 of 2022. Well volumes were up 12% sequentially over Q4, as we experienced better well performance across all basins and the addition of our MPDC acquisition, which closed in early January.

Our adjusted EBITDA was $325.5 million in Q1, a record for our company. Our first quarter free cash flow was robust at $84 million, despite growing activity and commodity price volatility. Oil realizations continue to be better than internally expected as Q1 differentials came in at $2.67 per barrel, due to continued strong in-basin pricing and having more barrels weighted towards the Permian, which are typically priced tighter. Natural gas realizations were 142% of benchmark prices for the first quarter, substantially higher than our stated guidance to the stabilization of NGL prices, and some of our Permian gas tied to West Coast deliveries versus Waha.

Balance sheet remained strong. Leverage is trending in the right direction and is down sequentially on a LQA basis versus year end, even with the closing of our MPDC acquisition, which added approximately $320 million to the balance sheet. Our net leverage ratio should return to our target level by the end of 2023, as our acquisitions contribute to our operations and we are able to organically delever. We still have over $1 billion of liquidity in the form of unused revolver and borrowing base capacity. And herein, we have retired $19.1 million of our 2028 notes at attractive prices and have reduced our outstanding revolver balance by approximately $50 million post closing of the MPDC acquisition.

Mindful of our net leverage target, we will continue to look for ways to efficiently reduce leverage if market opportunity arises. We are reaffirming our capex guidance and reiterating the amount and cadence of our capex spend. As a refresher, the range is $737 million to $778 million for 2023. Our Q1 capex investment was $212 million, represented approximately 28% of our capex guidance at the midpoint, keeping with our in — expectation of realizing 60% of our annual spend in the first half of the year.

With respect to cost inflation, year-to-date, we are within our internal expectations, but as Adam mentioned, we are beginning to see early indications of stabilization. And with the continuation of weak natural gas prices, we anticipate the potential for reduction in rig count and subsequent cost savings over the next six months to nine months, if current trends stay in place. We are not adjusting our 2023 production guidance and continue to expect a range of between 91,000 BOE and 96,000 BOE per day for the full year, barring unexpected disruptions.

With respect to our production cadence for the year, based on our current TIL schedules, we still expect fairly ratable increases each quarter with slightly more modest volume growth in Q2 and an acceleration in the Q3 as the next wave of Mascot wells come online. We have made minor adjustments to our guidance on gas realizations and LOE.

On differentials, we are upping our gas realizations to 80% to 90%, given stronger than expected NGLs thus far, but keeping our oil differentials the same for the time being as in-basin pricing in the Permian and Williston remains volatile. LOE was adjusted for higher NGL prices realized year-to-date. We’ll update you in the coming quarters if we anticipate material changes.

With that, I will turn the call back over to the operator for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Scott Hanold with RBC Capital Markets. Please proceed with your question.

Scott Hanold — RBC Capital Markets — Analyst

Yes, thanks. Hey, Nick and team. Just a question on the shareholder returns, obviously, you all were able to hit your dividend target much sooner than anticipated, and you’ve flexed several different aspects of shareholder returns. How do you see that progressing like through the — through 2024 — into and through 2024, is — are you looking to target maybe another dividend? Is that driven by rate? Or do you continue to look at buybacks as — is it an option that increasingly becomes more important?

Nicholas O’Grady — Chief Executive Officer

Good morning, Scott. We’re obviously proud of having grown our base dividend and achieved and exceeded our target plan well in advance. And as you know, we have active stock and debt repurchase authorizations that allow us to take advantage of market opportunities as they arise. I’d say it is virtually every quarter, but dynamic capital allocation is critical in our opinion to creating long-term value, and the ability and flexibility to act when things change. So, I think, you can trust us to be nimble as we evaluate where we deploy our free cash flow, but the obvious places for the future are dividends, share and debt repurchases and reinvestment in the business. So, I think, we’ll take it all in stride.

Scott Hanold — RBC Capital Markets — Analyst

Okay. Thanks for that. And, you know, I think, Adam, you had mentioned that a lot of opportunities coming in the door, you’ve turned down a number of these just because it sounds like maybe like a bid-ask kind of a spread or — do you guys have a higher bar now with the success you’ve seen from Mascot that fundamentally means that some of these opportunities that historically have come in need to really kind of do a little bit more to compete versus the JV opportunities or partnerships?

Adam Dirlam — President

Yes. I mean, we look at everything on a risk-adjusted basis. And so, the specifics of any particular transaction and the assets and maybe some of the other kind of qualitative details are going to go into that underwriting. I think, the fact that we have so many of these opportunities in front of us and I feel like a broken record every quarter staying as much, but it gives us the ability to be picky, right. And so that’s going to come out in our conservative underwriting, as well as the way that we approach any given particular transaction as we’re not going to fall in love with any deal because there’s plenty for us to choose from.

Scott Hanold — RBC Capital Markets — Analyst

Right. And maybe my underlying kind of question was do these JVs and partnerships, do they tend to be better return opportunities than say the historical buying of non-op working interest will say?

Nicholas O’Grady — Chief Executive Officer

I think, they’re just different. I would say, in general, the short answer would be yes. But it’s a combination. Adam used the term risk-adjusted. I mean, you have to think about you have concentration, both benefit and risk, you have line of sight and development timing risk. And when you combine all those things together, that’s really what — from an underwriting perspective what really will drive the decision-making. And so, what I mean by that is that, you could buy a non-operated fractional business with 2% working interest across those things, across the Board, and you can underwrite it to a very high discount rate. But ultimately, it takes a lot of activity to be impactful on those assets if you buy something with a 20% or 30% working interest, that has different sets of risks. But especially, when you’re working alongside the operator, the timing and confidence in that underwritten value is, it can be a lot higher. But I would tell you that generally speaking, when you’re talking about bigger ticket items, the discount rate is going to be wider. You were just simply going to be able to have a — I don’t know, Adam?

Adam Dirlam — President

Yes. And that’s a function of [Indecipherable] competition is, and as we see larger and larger non-op types of transactions that’s going to effectively filter out a lot of the competition that we would otherwise see maybe on some of the smaller ground game things, that will give us the opportunity to raise our discount rate and still get things across the finish line.

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, I think, not to be too tongue and cheek, but anyone who tells you that we’re picking up the small things that no one else is paying attention to, I think that’s not true. Because I think the smaller and the lower the barriers to entry, the more competitive any process is.

Scott Hanold — RBC Capital Markets — Analyst

Appreciate that. Thanks.

Operator

Our next question comes from the line of Neal Dingmann with Truist. Please proceed with your question.

Neal Dingmann — Truist — Analyst

Good morning, guys. Thanks for the time, Nick. My first question for you, Adam, just on the Mascot project. Specifically, could you discuss just since you did, I guess, you closed not terribly long ago, but since close, any update on the development plan or just maybe what returns are looking like there? I know, it’s a quite interesting project when you first announced, like it was mid last year and now just want to know how that’s progressed?

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, I would just give an overall. I’ll let Adam talk about the details. But I’d say, overall, we’re really pleased. We take everything day-to-day, month-to-month, but everything so far has been wonderful. I think the productivity, obviously, some of this is just conservatism on our end, but the productivity has been better than we had certainly underwritten so far. I’d say they’ve been hammering away in the field and doing a great job so far, and everything is moving according to plan. I don’t know, if you want to add to that.

Adam Dirlam — President

No, that’s great. I mean, I alluded to the fact that outperforming expectations were about 10% on current production. We’ve got about nine net wells in process. The drilling and spudding of the wells is humming along, and that will be ratable across the rest of the year. And then from a completion standpoint, in the next couple of months, they will be getting after that. And so, you’re talking about — excuse me, about half of those works give or take, tailing in late June, kind of early July and then kind of that next wave come in the ’24 give or take. So, down the fairway, no surprises, and pretty much everything that we underwrote.

Neal Dingmann — Truist — Analyst

No, that’s great to hear. I’m looking forward to that. And then, just on that, Nick, I think it was in the press release, you continue to talk about the record number of just proposals you’re seeing, maybe could you just speak to that. I mean, again, I guess my question around it is, are you seeing more today than you did even a year-ago? And if so, as sort of which are — restrictions are when you’re looking at these? Maybe talk about what the requirements are? How much tougher they’ve gotten since — since the company is now much larger?

Nicholas O’Grady — Chief Executive Officer

Sorry, I want to make sure I’m answering the right question here. Are you talking about like just well proposals or are you talking about like transactions and opportunities? I just want to make sure I…

Neal Dingmann — Truist — Analyst

No, I’m just wondering exactly just on well proposals, like how many you’re getting and when you and Adam are looking at it now is the bogey that hit, how much higher would you say it is these days versus a couple of years ago?

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, I think — I mean, I think, what was it — we had 200 gross proposals in the first quarter. Yes. I mean, we had a record number. And sometimes these could be a fraction of a percent of an interest to 40%, 50% in some cases. And what I’d tell you is it goes into the same meat grinder, it goes right through the engineering group, every single one goes through the same process, whether it’s a tiny bit of money or a large amount of money, net to us.

And I’d say, overall, the fact, as we were expanding — you’re talking about 1 million gross acres now plus or minus for our assets. So you’re seeing tremendous amounts of activity, even as commodity prices have weaken somewhat. But if we’re doing our job, just like any portfolio manager, if you’re buying lands in the right places, you’re going to see a consistent development. And I think we’ve certainly seen that. We’ve continued to high-grade and already high-graded set of acres over the last several years. And so, I think we’ve seen activity that’s been at or above our expectations. The net interest in those can vary wildly from quarter-to-quarter. But I don’t know, Adam, do you want to add anything else.

Adam Dirlam — President

No, I think you had nailed it. I think it’s just a function of the effective management of the portfolio. The working interests are going to vary and you’ve got your plan, and so you can hit the gas when you need to and you can pump the brakes on the ground game when you need to, and it’s all going to depend on what the organic asset is spooling and the opportunity set that we’re seeing and we just continue to manage it day in and day out.

Neal Dingmann — Truist — Analyst

Perfect. Thanks, guys. Great work.

Nicholas O’Grady — Chief Executive Officer

Thanks, Neal.

Adam Dirlam — President

Thanks, Neal.

Operator

Our next question comes from the line of John Freeman with Raymond James. Please proceed with your question.

John Freeman — Raymond James — Analyst

Thank you. First that I want to touch on was just on the cost inflation side. I know, you all had a — budgeted for kind of 7.5% cost inflation this year. And I know that last quarter, Nick, you mentioned that you’re really seeing more of the cost creep in the Bakken where you had some operators that were seeing some longer-term service contracts rolling-off relative to the Permian, which you had said was a lot steadier. And I guess, I’m just wondering, if in the first quarter when, as Adam mentioned, you all were like three quarters of your activity was in the Bakken. If that maybe skews a little bit of the cost inflation that you’re seeing relative to the rest of the year when it’s obviously a lot more balanced with Permian and Bakken, especially as Mascot continues to ramp?

Nicholas O’Grady — Chief Executive Officer

I mean, maybe a touch, John, I’d say that, we have to think about how fragile the overall — I don’t want to get on my macro horse here, but the overall market in general is quite fragile right now, right. And I’m not talking about the oil market per se, I’m talking about the entire capital markets. And so, — and you had material sell-offs in natural gas. You’ve had oil go through probably two hard sell-offs in the last five months. But like anything else, this takes time. And so, you’re correct, we definitely have seen costs rising year-over-year and certainly even since, let’s say, last fall.

As Adam pointed out, the biggest challenge last year was not necessarily cost, but actually logistics, like getting items. And I think, I remember on a prior call saying, hey, building a steel pipe or sand are not things that are going to be in long-term shortages. It’s just going to take time. And those things — those logistical things and shortages of materials have largely passed.

I think where it goes from here is really going to be determined by, as dumb as it may sound, it’s going to be determined by the price of crude. What you find is that, overall E&P margins stay relatively static overtime, whether oils are $100 or if it’s $65. And so, if oil prices are then materially weaken, I would expect overtime, you’re going to see material reductions to margins for service providers as overall activity falls. If prices hang in there and do their thing where they are today, I still think through drilling efficiencies, we continue to see operators drilling longer and longer laterals and larger amounts of wells at a PAT level, at any given time. And those will add up to material kind of — for lateral foot savings overtime.

And so, I would expect, you probably can see some relief as time goes on. And yes, I think as our program moves to be more balanced over the year, I think you’ve definitely seen a material slowdown in the Permian, specifically, in inflation of well costs. And so I think that will ease it overtime. I think to the extent that we’re going to see any relief is going to — we’re going to have to wait and see overtime. I think, everyone from a service provider to an operating group are going to have their chest puffed out when you see periods of volatility, and we’ll see how that plays out.

Adam Dirlam — President

John, I think the only other dynamic that I’d add to that is just kind of the operator kind of cadence in flow. And you mentioned the Williston, Continental and Conoco, we’ve seen the most activity within the quarter. And just looking at kind of their weighted-average AFEs, it’s certainly encouraging. Continental being one of our most active operators and being ratably lower than the overall base in average.

John Freeman — Raymond James — Analyst

Great. And then just my follow-up. Adam, you kind of gave us an idea of how the production cadence kind of looks over these next few quarters, and you’ve been clear on sort of the capex breakdown of that 60% in the first half of the year. But I was hoping to maybe get a little bit more color on the TIL cadence. Obviously, last year was sort of average 10 TILs in first half of the year, and had the big step up in the second half and then this year, it sounds like you kind of build as you go throughout the year. Can we get any more of a breakdown on how you kind of get to that 80% to 85% total guidance for the full year, kind of how the remaining quarters look, just rough numbers?

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, without going specifically into the numbers, John, just because I don’t have those sitting right in front of me. But I would expect, you’ll see consistent to slightly higher activity this quarter and that should generate some modest growth in the third quarter. Obviously, you really — in early in the third quarter, you should have the bulk of the first wave of Mascot wells on, so you’re going to have a material step-up in the third quarter.

And the capex doesn’t really track our TILs. Like the money we spent this quarter for 13 TILs isn’t really necessarily going to those wells. Those wells were largely — that money was spent last year. And so that’s why the weighting is upfront, because the way we accrue on a percentage of completion basis, right, the TIL is just sort of the icing on the cake at the end. So the capital we spent in the first quarter and second quarter will really go towards that weighting in the back half of the year. And so I would imagine even from a production and a TIL cadence, which will be more closely aligned, then the capex cadence would be there, you’re going to see a more material step-up in the third quarter and into the fourth quarter than you would necessarily in the second even as you’re drilling a lot of those wells.

And it also, to be candid, depends on what time they come on in the quarter. If we have a bunch of wells come online in June, that’s not going to have a huge impact on the second quarter necessarily. So we try to be very mindful of that, because those drill schedules move around all the time. So, really I think you would see probably — and Jim, correct me if I’m wrong, but I would say, the third quarter is probably going be the most active quarter from a TIL cadence this year with the fourth quarter and not far behind.

John Freeman — Raymond James — Analyst

That’s perfect. Thanks, Nick.

Nicholas O’Grady — Chief Executive Officer

Yes.

Operator

Our next question comes from the line of Derrick Whitfield with Stifel. Please proceed with your question.

Derrick Whitfield — Stifel — Analyst

Thanks, and good morning, all.

Nicholas O’Grady — Chief Executive Officer

Good morning.

Adam Dirlam — President

Good morning.

Derrick Whitfield — Stifel — Analyst

With respect to the larger operators, specific opportunities you may pursue. How important is line of sight activity and investment pacing in your evaluation process? And would you generally require a modestly greater return to offset operator concentration risk?

Adam Dirlam — President

Derrick, just to be clear, you’re talking about like TIL bidding, assets or partnering and some sort of partial sell-down. Is that kind of where the question is based?

Derrick Whitfield — Stifel — Analyst

Yes. And I am thinking more like the Mascot opportunity. I was directionally…

Nicholas O’Grady — Chief Executive Officer

Yes.

Derrick Whitfield — Stifel — Analyst

…that was 14 larger packages you’re referring to.

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, the answer is, all those risks way into it. What we really focus on is alignment with the operator, and that can be through governance, it can be through what share of what everyone owns, and it could be a combination of all those things, with concentration risk comes just that. But the line — we are an IRR, NPV and risk-adjusted return on capital weighted company. That’s how we evaluate these projects. And so line of sight is also incredibly important. With that line — just because you have line of sight, you need to make sure that you have governance that they can’t change their mind and not do that because that’s obviously an easy way to sort of value. So we try to weigh all those things contractually, and to ensure that the operators aligned to do the same thing that we would want to do with our money.

Adam Dirlam — President

Yes. And I think it’s understanding, the needs and the wants of the operating partner, right, with each individual operators solving for something different. We’ve had conversations with operators that say, hey, Northern, choose your own adventure. You tell us what you want to drill in order to come up with the best number that you can, and then you’ve got other operators that want more autonomy in terms of what that drill schedule looks like, and we’ll underwrite it accordingly and take those factors into consideration.

Derrick Whitfield — Stifel — Analyst

That’s great. And then building on John’s earlier question on service prices, are you guys seeing any improvement in well costs across any categories on a leading-edge basis? And then separately, regarding your Continental commentary, does that price advantage appear to be efficiency or market pricing base?

Nicholas O’Grady — Chief Executive Officer

On the latter part, what I could tell you is that, there is a huge difference between a one-rig or two-rig private company and a large several 100,000 barrel a day company, from both a technical perspective and from just a sourcing. I mean, you’re talking in some cases millions of dollars per well. And that means, it’s because the small guy is borrowing a frac crew in between times and sourcing their tubulars on the spot and all those sort of things. And so, that’s why the bulk of our operations, in general, were a smaller company by a public standards, but our operator group is mostly large companies. It doesn’t mean there aren’t private companies that are incredibly good drillers and can make up for. In other ways, there are exceptions in every rule, but buy and large scale is incredibly important from a sourcing perspective. There’s just a big difference between a company like a Mewbourne that operates a lot of our Permian assets with 20 rigs running versus someone with a stand-up rig and sourcing things on the spot, everything from midstream contracts to drilling costs to every ancillary costs along the chain. I don’t know if you have anything…

Adam Dirlam — President

No, that’s great. I think having conversations with our operators, they’re seeing some relief on the tangibles, not necessarily having to put down deposits in order to secure supplies, all that kind of comes through from a pricing standpoint as well from an inflationary standpoint…

Nicholas O’Grady — Chief Executive Officer

On the leading-edge, is there anything worth discussing?

Adam Dirlam — President

No, I mean, I think it’s the tangibles that really — we’ve seen really first and some drilling contracts and those sorts of things that we’ve seen, does that make up the largest percentage of the overall AFE? No. Does it help? Yes.

Derrick Whitfield — Stifel — Analyst

Makes sense. Very helpful, guys.

Adam Dirlam — President

Thanks, Derrick.

Operator

Our next question comes from the line of Donovan Schafer with Northland Capital Markets. Please proceed with your question.

Donovan Schafer — Northland Capital Markets — Analyst

Hey, guys. Thanks for taking the questions. I want to start-off talking about — it’s a little bit kind of further looking, I mean, talking about one, two, maybe even like three-year time horizon. I want to focus on infrastructure and pipelines and so forth. So, yes, obviously pretty big stakes in some of the major basins, the Permian, the Williston and then you’ve got a certain amount of involvement in Appalachia. And these are all areas that have potentially meaningful benefits from some — in addition of pipeline infrastructure, maybe LNG capacity in the Gulf, just other types of developments like that.

And then you’ve got the situation right now like also cover a lot of the kind of clean energy names [Phonetic]. And I was at a conference this week in California with, you know, commercial fleets are getting forced to like electrify or to do something, and they’re freaking out because of the infrastructure, like they are — I mean, it was like just shy of panic in terms of being able to hit targets that are being legislated and so forth.

Today, we have Democrats and Republicans, it was like what management tried to do. Try and get like a permitting reform something where it seems like they might be able to get Republicans on board or the key to it could be giving concessions on traditional sort of oil and gas type infrastructure, making it easier for all that to happen.

So I’m just curious if you guys have any kind of unique insights that this is something you follow. There’s kind of the bigger picture macro political stuff, but even anything worth pointing out, like even near-term at a regional level, I think some couple of pipelines are coming on in like South and parts of Texas. But like the Williston or Appalachia, anything either regional or national, but just kind of bigger picture, what you pay attention to and what you think could be beneficial from a pipeline infrastructure standpoint?

Nicholas O’Grady — Chief Executive Officer

Well, we do spend a decent amount of time and money on understanding the political landscape and as it pertains to infrastructure. Because as it pertains to traditional energy in oil and gas, the bulk of the impediments to the business have been attacking infrastructure projects in order to choke off supply. And generally to the detriment of American citizens, that’s a larger conversation.

But what I’d tell you is, as it pertains to the three basins that we’re active in today, the Williston is candidly oversupplied from a takeaway capacity. You’ve seen that in better pricing over time. And the basin as a whole — while our volumes are set to hit records, the basin as a whole is not growing tremendously. And so, I don’t think we have a ton of concerns in the Williston.

In terms of the Marcellus, well, there you have Mountain Valley Pipeline and other things that could potentially change the game there or even LNG expansions. Our base case assumption has been nothing gets better ever. And that’s how we generally underwrite there, that’s generally our view. It’s just been challenge, it’s both political, geographical, all of those things going into above, do I hold [Phonetic] some optimism that at some point, logic will prevail sure, but we’re not counting on it.

And in the case of the Permian, you do have a ton of LNG expansions coming on. The gas infrastructure in particular is quite tight right now, and we’ve had that view internally for some time. But those logistical issues are getting solved in real time and I have no doubt in my mind that we’ve even seen operators find ways around it, as Chad mentioned, rerouting gas, especially because the bulk of our Permian assets are in New Mexico, which has more options.

And so money is an amazing thing and motivates people to solve problems and where there is capital and so. I don’t think we have a ton of long-term worries within the Permian Basin. And I think given its proximity to the Gulf Coast relative to other places, where business is largely still open. I think LNG expansion overtime will both help ease the glut of natural gas over not necessarily this year or next year, but over a multi-year basis, as well as infrastructure projects getting ahead of it.

Donovan Schafer — Northland Capital Markets — Analyst

Okay. That’s helpful. The perspectives — it’s good to know that you’re not baking anything and that’s a good thing for me to know as I look at things.

Nicholas O’Grady — Chief Executive Officer

Yes. I mean…

Donovan Schafer — Northland Capital Markets — Analyst

Yes, it’s nice to have the conservatism there. I am optimistic. I mean like or I’m hopeful, let’s call it, hopeful. But okay, that’s helpful to know, at least you’re not baking anything in there, which is good. So, I want to ask for the record level of M&A opportunity. I mean, you guys talked a lot about this. You gave out a number, $6 billion kind of an opportunity. But I don’t remember getting like a dollar number, maybe you did, and I’m just blanking on it before like last quarter. So can you give us a sense like the magnitude of how that’s changed since the last update? Is it — was it $5 billion a quarter ago or like what’s been the magnitude of change over the kind of near-term or short-term timeframe?

And then with respect to magnitude, that mean like if the opportunities had doubled, should we think of it as like that kind of like doubles your appetite and you’re like, oh, we can scoop up 2x the amount of things we wanted to scoop up? Or does it translate more into or just skew more towards quality, where you’re like, well, no, we can just — it doesn’t change as much of our appetite per se, but like well now you can really beat guys up and bargain and negotiate and get some good economic terms?

Nicholas O’Grady — Chief Executive Officer

I think, like any business the more optionality you have, generally the more opportunity you have. So if you have access to more opportunities and you have scale to participate in more opportunities and those barriers to entry arise in those opportunities, you’re going to have better return prospects. And as we’ve scaled, we’ve seen nothing but a benefit.

But in terms of the — we have in the past talked about our pipeline and it is certainly probably a record level. But I use an analogy to this, which is like take the real estate market and take commercial real estate as an example. Whatever that total addressable market is in the United States, there’s only a smaller portion of minority interest owners across all of those — all those commercial buildings. There might be billions of people that own 20% of a building or something like that.

But if you’re a large enough and you have the skill enough to talk about working with the majority owners of those buildings to own at your addressable market is growing in kind, and I’d say that, that’s where we are in the lifecycle of our company. And so, frankly, I don’t think we could even really — tangibly you’ve got hundreds of billions of dollars worth of oil assets in the United States and we’re really just scratching the surface.

But as Adam and I tell our investors a lot, you can carve a working interest out of anything. You can carve a minority interest out of any [Indecipherable] asset in oil and gas. And so what we’re finding is that, that total addressable market has increased markedly from our sizing.

But if you want to go back to kind of how we select the stuff, M&A is one of those things, is about having a 1,000-yard stare. We don’t fall in love with anything. We don’t do something just because strategically we want to do it. We do it because we can earn as much money as we require ourselves to or more. And when you do that, you can make good decisions. And the thing is, you’re going to have to take a lot of swings at that. I mean, I think our success rate on the ground this past quarter was about 5%, but that still adds up to tens of millions of dollars.

And so no different for corporate M&A. It might seem like it’s easy because we’ve obviously done $1.7 billion in just the last two years, but it really masks a lot of failure, which is you’re probably looking at a three times or four times multiplier to that when you’re back into the success. But I will say, we’re moving to avenues in which we remain one of the few people that can participate in those and that allows us to target the returns that we want and also broaden that horizon. I don’t know if you want to add to that.

Adam Dirlam — President

No, you’ve covered it.

Donovan Schafer — Northland Capital Markets — Analyst

Okay. And then just one last question, and I’ll take the rest offline. Is — the NGL to gas ratio, I know it’s kind of above historical levels and that was — that showed up kind of nicely in this quarter. I also know, that’s a hard thing to predict and know exactly where that’s headed. I mean, the only one I know — I think, Rusty Braziel, the only one I know, who is like actually wrote a book on it and knows the stuff inside and out.

But kind of beyond my — beyond my skillset, can you tell us like what you look at? I know it’s like the next to possible if you guys are going to guide on anything like this. But just — and you don’t control over it, right, like when the operators are electing to go to ethane rejection or keep it or do the extraction and so forth. But it’s — what are you like watching and — how are the trends and what you’re watching that underlie this? If you can just elaborate all on that and if there’s anything like we could watch or monitor, that helps give us a sense of where it’s going?

Nicholas O’Grady — Chief Executive Officer

Well, I mean, the NGL basket trades every day. The mix of which we receive varies from day-to-day. You mentioned ethane, and ethane rejection is probably at a high. There are limits to how much you can do. And some operators extracted one way or the other because of contracts they might have entered and you’re going to get a worse realization in a market like that when that happens. But ultimately, you were talking about — probably about four variables. You’ve got the in-basin differential, you have the NGL basket as a ratio to gas, and then you have to fixed gathering and transportation costs, and then in some cases, you have the percentage of proceeds piece in which there is an added cost as those go up.

Chad, I don’t know, do you want to add to that?

Chad Allen — Chief Financial Officer

No, I think, you said it right. I think, we would expect our guidance as just to be more realistic going forward. Obviously, gas differentials are volatile. And then the recent weakening in oil prices will have an effect on kind of the go-forward price we believe. Ethane rejection obviously played a role this quarter, as well as kind of the take away to the West versus Waha and the Permian for us, so.

Donovan Schafer — Northland Capital Markets — Analyst

Okay. That’s helpful. Thanks, guys.

Operator

Our next question comes from the line of John Abbott with Bank of America. Please proceed with your question.

John Abbott — Bank of America — Analyst

Hey, thank you very much for taking our questions. First question is on capital allocation. I appreciate you’ve got a dynamic process here allocating towards growing the dividend, paying down debt, buybacks. But when you sort of see what investors can sort of earn as far as a return on cash, does that change the calculus at all? Does it make [Indecipherable] makes potentially buying back shares or reducing debt more attractive in the near-term? Just how do you think about that?

Nicholas O’Grady — Chief Executive Officer

I think, we think about it, as — you know, you mentioned the word dynamic. We think about it dynamically, because those inputs change every day, right. Our — the stock price versus our ability to reinvest capital versus taking risk off by paying off debt to ever increasing dividends, and that balance matters. And I also think that, like anything in life, too much of anything is not a good thing, right. And so we really tried to keep it balanced. I think, in the coming months, we’re going to spend a lot of time, you know, we’ve laid out what we viewed as a long-term plan a couple of years ago. And we really need to think about what’s next for us in the next couple of years. And I think it’s going to be a balanced approach to all of those things, right.

And I think we’ll spend a lot of time with our Board and our advisors to really go through, because ultimately, I think, certain things come in and out of book [Phonetic], from special dividends to dividends to buybacks, and they tend to oftentimes reach a fever pitch. And we really tried to issue that and think really long-term, because when oil was $100 last year, a special dividend sounded like an awesome plan, until prices pulled back and then those special dividends go down. And you may have foregone other opportunities that might have created more value for the long-term. And so we really tried to be very, very careful and methodical about this. This is why we’ve really stuck to a base dividend. We do believe we have a path to grow it overtime, as well as to leave enough meat on the bone and enough excess cash flow to allocate it to things that are going to drive that dividend growth in a solid fashion over that long-term period. Makes sense?

John Abbott — Bank of America — Analyst

Yeah, it does. And then as a broader question, more on production, you had — looks like you had a beat here on the Bakken. Also if we sort of look back earlier during the week, there was another operator that had relatively strong performance out of the Bakken. There was some prepared remarks on productivity in the Bakken. Could you provide any more color on how you see productivity trends sort of in the Bakken?

Nicholas O’Grady — Chief Executive Officer

Broadly speaking, what I would tell you is that, what I’ve been impressed at when I get shown the raw data, and I’d have rather Jim answered most of this question, is that stuff we would have viewed as Tier 2, three years or four years ago is performing about as well as Tier 1 stuff now. And so, the one thing about the Bakken is a higher-cost basin, let’s say, than the Permian. It has a higher breakeven. It’s also a lot more consistent. And because the activity has been relatively muted, there have been about 50 rigs consistently for the past couple of years.

You’ve seen a lot of discipline to that development. You don’t see the wild variations. You see the best of the best in the Permian and you see the worst to the worst. It’s a much more consistent, both [Indecipherable] rock that is more consistent, as well as consistent behavior from the operators. I don’t know you — and I would say, John, honestly, we saw better than expected productivity in all three of our basins, including the Marcellus. I mean, the declines in the Marcellus have been notably better than we would have expected. I don’t know if you want to add to that.

Chad Allen — Chief Financial Officer

Yes, that’s right. With the delayed [Phonetic] completions and operations, we have seen some improvement where you used to think Tier 2, Tier 3 [Indecipherable] now we view it as Tier 1 in some cases or is the operator trying longer laterals, so three long laterals, that’s helping on the productivity as well. And then part of it for us, again, it’s going back to the active management. We focused on areas that are highly productive within the core. So that’s kind of how we manage the business.

John Abbott — Bank of America — Analyst

Very helpful. Thank you for taking our questions.

Operator

Our next question comes from the line of Charles Meade with Johnson Rice. Please proceed with your question.

Charles Meade — Johnson Rice — Analyst

Good morning, Nick, and Chad, and Adam, and the whole NOG team there. Nick, you’ve made a couple of comments, I guess, in the Q&A section about the importance of operators. And I think you’ve made a comment or two about the importance of having operators that have scale. For the Mascot project, talking with that to investors, what is your — what’s the message — what’s the context you gave to people when they say Permian Deep Rock Oil, I’ve never heard of them?

Nicholas O’Grady — Chief Executive Officer

Well, as I said, there are exceptions to every rule. I think, there’s also — there is an operator piece, there’s a geology piece. But I would tell you that this is a company with a team and a history, a long history of excellent performance. You have multiple rigs operating, not just on our lands, but also on his other properties. We had a good look at a multi-year, he had built-out all the infrastructure directly on the properties, which is atypical for a company of their size. And that all went into the primordial soup of our decision-making. But I can tell you, they know how to drill wells.

Adam Dirlam — President

Yes. David’s been doing this for years. And when we went into underwrite, there is a number of wells obviously that they had already drilled and completed and brought online, and that gave us the conviction of what David’s team that they could put down highly productive wells and keep well costs under control. And so when we’re going into these types of things, we need to make sure that our analysis is bespoke.

Nicholas O’Grady — Chief Executive Officer

Yes. And I’d say, you’re talking about a company that has everything from redundant in excess water disposal to excess gathering for crude and gas takeaway and long-term contracts in place for the operations. And we’ve been thrilled how they do it. But, you’re right in the sense, that is — if you think we weren’t worried or thinking about that when we went into this, you’d be mistaken. We — definitely that was a big part of the analysis that we went into.

Charles Meade — Johnson Rice — Analyst

Got it. So reasonable question, but that’s helpful detail that you gave. Nick, if I could go back to your prepared comments, and you were talking about the — not just the size of the opportunity in front of you, but also the nature of the kind of opportunities, more of these, as you said, like bespoke carve-outs. I recognize that it’s — the role of all managements across companies is to allocate capital. So, everyone is doing it. But, hearing your comments, it seems to me like you’re — maybe there is a shift in how you guys are thinking about yourselves away from being in a oil and gas company has to be — happens to be focused on non-op and more towards a capital provider to the industry. Is that a shift that’s going on in your mind or in the minds of the management team and the Board? And if so, what — how should we change, what we expect from you guys?

Nicholas O’Grady — Chief Executive Officer

Maybe it’s a change in how we explain it. But I’d say, we’ve always been both. We’re both a capital provider or investment company and we are an oil and gas company. What I’d tell you is that, for operators that require capital to develop and these aren’t necessarily small, we hear from the biggest independents and quasi majors in the country about needs for capital for certain reasons or another.

But what I’d tell you is, at the end of the day, as non-op, you are a capital provider and it really — but the difference is, we are an oil and gas company. We do our own engineering, we do our own technical work. We have the infrastructure to manage those assets ourselves. And so what we found is, five years to 10 years ago, you had a lot of true financial, whether it’d be private equity groups or others that provided capital in non-operated ways to operators. And what we found is that, ultimately, the need to securitize or find some by and then exit path for those capital providers made it very untenable for the operators. And we find them seeking us out, not just we are still — like the concept that we’ve — we would ever abandon or that we’re leaving for others are traditional non-operated business as far from the truth. We are as active in just our normal course of business as we’ve ever been.

But what I would tell you is that, we have a lot of operators come to us who say, I did a deal with X, Y, Z financial firm, and I don’t want to do that ever again. I want to deal with someone who understands oil and gas, who is willing to take the risk and who is a permanent owner of these assets. And in that respect, cost of capital matters, but really what matters is alignment and risk-sharing and an understanding of what we’re actually doing [Indecipherable] just scrape a return and then move on.

Charles Meade — Johnson Rice — Analyst

Thank you for the comments — for those comments. Nick, appreciate it.

Nicholas O’Grady — Chief Executive Officer

Sure.

Operator

Our next question comes from the line of Paul Diamond with Citi. Please proceed with your question.

Paul Diamond — Citi — Analyst

Thank you. Good morning, all. Thanks for taking my call. Just wanted to touch quickly on, you guys talked about hitting kind of hit rate of like 10 of 140 [Indecipherable] opportunities, as of late just puts in kind of a low to mid single-digit or mid single-digit hit rate. Is that is the — could that be thought of as kind of your target for the longer-term, or is that just — is that going to shift quarter-to-quarter depending on what’s in front of you?

Nicholas O’Grady — Chief Executive Officer

Yes. It’s going to shift quarter-to-quarter. It’s all going to depend on the quality and other qualitative factors in terms of what the average size working interest is. Is it going to move the needle. So it’s all going to be rig and seller dependent. We’ve got our hurdle rates, that’s what we’re sticking to. And then from there, it’s a matter of just distilling down the quality opportunities. We mentioned 140 opportunities; 70 of those probably were in a garbage as soon as they hit the inbox. So it’s all dependent on overall activity flows, because this stuff all comes in a linear fashion.

Paul Diamond — Citi — Analyst

Got it. Understood. And then just one more kind of circling on M&A as well. You discussed 14 opportunities you’re currently looking at. Is there anything we should expect as the departure from scale from the ones we’ve seen over the past 18 months? Are they all relatively within that same range?

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, the range, generally at the kind of package levels, is kind of like a $100 million to $1 billion. I’d say the average size is still probably less than $200 million. I think there is a point at which a big deal and a small deal will take the same amount of time. And so, obviously, you want something that’s significant enough to be worthwhile of your time and to be impactful to the bottom line. You have a lot of costs associated with these evaluations, legal costs, all sorts of stuff. And so you want to make sure that it’s going to be meaningful to the investor. But we’re still the dust buster. We’re still picking up the tiny, tiny interest every single day.

And going back to your last question, just for a second. I think it’s worth noting that we’re pretty robotic in terms of how we look at this, right. When you have 10 times the amount of things coming out, either you’d ever want to underwrite your go through, you can afford to be right. And so it’s pretty robotic. And what we found is that there’s a lot of cyclicality within all of the different businesses that we — business lines that we have and we — that hit rate goes up and down, and oftentimes it really comes down to risk. We find when oil prices are $100 and convexity is weak, we’re highly uncompetitive in those things.

And when things get ugly and crude breaks $60, I promise you it will be the last game in town and there you can — you’re dealing with situations where we can extract some more value. So that convexity plays into that decision-making, and our own competitiveness.

Paul Diamond — Citi — Analyst

Got it. So makes more sense thinking it more — thinking of it more as countercyclical to the aggregate price of the commodities.

Nicholas O’Grady — Chief Executive Officer

I’d like to think of us as a countercyclical investor in general. I mean, I think the most active we ever were as a percentage of our size on the ground was in 2020, right, when things were pretty ugly.

Paul Diamond — Citi — Analyst

Understood. Makes perfect sense. Thanks for your time.

Nicholas O’Grady — Chief Executive Officer

Yes.

Operator

Our next question comes from the line of Phillips Johnston with Capital One. Please proceed with your question.

Phillips Johnston — Capital One — Analyst

Hi, guys. Thanks for squeezing me in, and I’ll keep it short, with just one more question on the 14 opportunities. Just wondering if any of those are located outside of your existing three regions?

Nicholas O’Grady — Chief Executive Officer

The majority of them are across the Delaware, Midland and Bakken as well as Appalachia. We’ve seen a number of properties in the Eagle Ford as well. And we’ve been looking at the Eagle Ford, we’ve alluded to in prior calls haven’t necessarily found the appropriate fit or assets for us, but it’s definitely one basin that we keep an eye on.

Phillips Johnston — Capital One — Analyst

Yes. Okay. And then, I realize you guys don’t typically do PDP only types of deals with no real upside. But do you guys ever look at conventional non-shale types of packages with low PDP decline rates that would be accretive, but it will also help keep your overall PDP decline rates down.

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, we have bought a handful of PDP assets that you may remember. We bought some assets from Comstock a few years ago that we owned about 90% of already and there were low decline PDP. And so, the decline rate for a PDP only asset is really important. I’d say on the conventional side, the one challenge there are that typically if you took like a CO2 flood asset or something like that, it might have low declines, but it also probably has $20, $25 LOE cost. So it’s going to be much more sensitive to oil prices. And so that’s another risk factor. It may have less operating risk or need for growth from an underwriting perspective, but it’s going to be more sensitive.

One of the things that we talk to our investors a lot about and particularly as it pertains to PDP assets are that you really have no upside to your returns besides pricing when you buy a PDP asset. And so you really need to think about where you are in the cycle. Ultimately, what we find is that undeveloped assets become — in a period of dramatic pricing, the NPV of those undeveloped assets becomes very low, and that’s when you can ultimately underwrite things based on PDPs and get that upside for relatively de-minimis amount, conversely, buying a PDP asset when the crude strip is $100, you really don’t have a ton of anything but downside.

Chad Allen — Chief Financial Officer

And in a lower price environment, it’s going to be seller dependent and what does their balance sheet and financial health look like, right, because you’re going to be looking at a pretty big bid-ask spread, the majority of the time to the extent that they are healthy.

Nicholas O’Grady — Chief Executive Officer

Yes. I mean, I think — we think in general, there are better buyers for PDP assets than us. But there are occasions where it makes a ton of sense, Phillips. And I’ll just tell you, in terms of what we see, we got sent everything. I mean, I’m talking, we’ve been sent to Alaska, Gulf of Mexico, Tuscaloosa — Tuscaloosa Marine Shale, Alabama Conventional production. We’ve been sent everything, but I wouldn’t say anything has made it past the email inbox as it pertains to those types of opportunities.

Phillips Johnston — Capital One — Analyst

All right. Sounds good. Thanks, guys.

Operator

There are no further questions in the queue. I’d like to hand the call back to management for closing remarks.

Nicholas O’Grady — Chief Executive Officer

Thank you, guys, for joining us today. We’ll continue to work to execute on our plan this year. We are dedicated to providing a superior return to the marketplace. And again, thank you for your interest.

Operator

[Operator Closing Remarks]

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