Permian Resources (PR) Q2 2026 earnings call transcript

At this time, I will now turn the call over to Hayes Mayberry, Permian Resources Vice President of Investor Relations for some opening remarks. Please go ahead. Thanks, Aldi, and thank you all for joining us. On the call today are Will Hickey and James Walter, our Chief Executive Officers and Guy Elephant, our Chief Financial Officer.

Many of the comments during this call are forward-looking statements that involve risk and uncertainties that could affect our actual results and are discussed in more detail in our filings with the SEC. We may also refer to non-GAP financial measures. For any non-GAP measure we use, a reconciliation to the nearest corresponding GAP measure can be found in our earnings release or presentation.

With that, I will turn the call over to Will Hickey, Co-CEO. Thanks, Hayes. Q2 is a standout quarter for Permian Resources. We delivered record free cash flow of $751 million, an increase of almost 50 percent quarter over quarter, and record free cash flow per share of $0.88. These results reflect our team's ability to respond quickly and decisively to a our reminder of the uniqueness of PR's business model. We can respond quickly to market conditions, we have a differentiated approach to sourcing and executing acquisitions, and we are relentlessly improving the capital efficiency of our business on a go-forward basis. All of these characteristics support the goal we are all aligned on, increasing free cash flow per share over the long term to create shareholder value.

Turning to the quarter, oil production came in at approximately $198,000 per day, up 3 percent quarter over quarter. Slide four shows the key drivers that drove that oil production growth. When oil prices moved higher, our team and the field responded immediately. We increased the number of work over rigs by 50 percent, which improved run times and quickly accelerated incremental barrels. At the same time, our successful ground game drove working interest and completed wells to approximately 82 percent for the quarter, up materially from our original expectations of 75 percent. Combined with strong well performance, these actions generated 6,000 barrels per day of oil growth quarter over quarter for cash capital expenditures of $521 million. One thing I'd highlight is our continued success increasing work interest to head of development.

This has always been part of the PR playbook, but our BD and land team have executed at an exceptionally high level this year. We view these acquisitions as some of the highest rate of return deals that we do, given that their near-term impact, as evidence from our higher working interest not only in Q2, but also for the remainder of the year. Incremental workovers and ground game transactions are exactly the types of investments we want to make in a volatile market. Both generate incremental oil production and cash flow almost immediately, allowing us to recycle capital quickly and de-risk returns through shorter payback periods.

Turning to natural gas, our team demonstrated their relentless focus on maximizing free cash flow as they navigated a severely depressed Waja market during the quarter. As many of you are aware, Waja Natural Gas Prices averaged negative $3.14 per MCF during Q2 and traded as low as negative $9.52 per MCF. So, rather than selling natural gas at negative prices, we proactively curtailed production on high GR wells with Waja exposure, reducing natural gas production by approximately 20 percent quarter over a quarter. The curtailments, combined with our firm transportation and hedging, allowed us to realize a natural gas price of 38 cents per MCF for the quarter and an uplift of over 75 million of revenue on our natural gas sales.

When Waja pricing improved in late June, we returned all previously curtailed wells to production without any operational issues. I want to give a big shout-out to the field team at putting in the hard work to make this possible during the quarter. On the DNC side, we offset inflationary pressures from rising to useful prices with continued operational efficiency gains through longer laterals, increased water recycling, deployment of water-based mud, and new weather designs. We've also begun surfactant trials on completion and production operations. We're still early in evaluating surfactants, but we're encouraged by the initial results. Between continued operational efficiency gains and the potential to improve recoveries, there are a lot of ways for us to continue our path of increasing capital efficiency.

As you can see from today's results, the quality of our assets combined with our base and leading cost structure has driven a step change improvement to our business over the last several years. As a result, we achieved record-free cash flow in Q2 of $751 million. This is more than we generated in all of 2023, and we expect full-year 26 free cash flow to be nearly double what we generated in 2024.

And with that, I'll turn it over to James. Thanks, Will. Before we start talking about what's been a great start to our 2026 BD effort, we wanted to discuss how Permian resources approaches acquisitions and how that fits with our value creation story. When we founded Colgate in 2015, we moved to Midland with exactly zero acres, zero production, and Will and I sharing a single 200 square foot office. Our goal to be getting was to buy high quality assets, operate them efficiently, and under I think conservatively so they're invested capital to generate real cash on cash on leopard equity returns.

And from those humble beginnings, we do Colgate for an idea to the businesses today, with over 500,000 ed acres and over 200,000 barrels of oil per day. But our focus was never to build the large-scale business that Permian resources now, but rather to maximize the return of every dollar we invested in the business. So how do we get here? Because we've honored the same strategy and philosophy and how we underwrite and how we operate. We're working relentlessly to find deals that meet our very high underwriting standards and targeted full cycle returns. And we use it time and time again, small deals out up, you create value for shareholders and the business naturally gets bigger.

With that, I'm excited to talk about what we've done in 2026 today. Starting at the largest deal on Flight 8, we closed on an acquisition of approximately 2,000 ed acres and 5,000 BOE a day in War County for 520 million. This acreage directly offsets our existing asset base is 100% held by production and provides an extended runway of high return inventory.

Shortly after we closed on the War County, yes, in July, we signed a trade agreement with an offset operator, utilizing a combination of the recently acquired Bolton acreage, the legacy PR acreage, and some other acres that we had. This acreage helps address some of the challenges with the standalone War County acquisition, namely being majority non-operated, low working interest and somewhat scattered. The trade also increases the number of operated net locations from 50 to 120, while increasing the average lateral rank by 20%. We use this trade as a true win-win for PR counterparty, who is a value industry partner, as it helps them to further core up their acreage position and increase their working interest in their own operated units.

We expect the trade to close during Q3. Finally, the Parkway Bolt on Project at Eddy County is a great example of how proprietary data and middling relationships create opportunities others simply do not see. Following the success of the delineation while we drilled in late 2025, we quietly assembled a contiguous position of approximately 15,000 net acres with two model auto links and an 82 and a half percent eight-eighths in our eye. Our partner in this deal, Tuscos Energy Partners, actually brought this deal to us over drinks in Midland. We've been fortunate to know this team for a long time and bought a big deal from them a couple years back. But I think more importantly, this deal is a scaled example of the Midland-born deal that we do with our friends and partners on a regular basis, and that we think provides a real competitive advantage to Permian resources.

In total, year to date, we've acquired approximately 55,000 net acres in the core of the Delaware Basin for total consideration of approximately 1.05 billion, executed through roughly 190 separate transactions. These acquisitions added approximately 330 high-components high in our locations that immediately compete for capital in our portfolio. Ultimately, we think the valuation metrics for the deals we have done so far this year speak to the strength of our approach. 13,000 per net acre, 8,000 per net royalty acre, and 2.5 million per net location. Slide 11 summarizes why we believe our acquisition strategy is truly differentiated. Our focus is on buying high-quality assets, pursuing a creative transactions where PR has a commercial, technical, or operational advantage.

We continuously hunt for off-market deals and look for areas where we have distinct advantages or can create an edge that allows for our to underwrite higher feel cycle returns. The edge to come from our leading cost structure, proprietary service information, or simply access to a deal that isn't widely marketed. Well, this is not easy and requires a ton of work. We pride ourselves on being creative and not afraid of doing it a harder, less obvious deals. We are confident we will be able to continue this successful track record for years to come.

Our financial discipline allows us to execute meaningful transactions like we have announced today, while retaining a fortune of spall and cheat, with Q2 leveraged approximately 0.5 times, all the solutions to our updated and improved plan for 2026. As we'll mention is prepared remarks, the success of our ground game has allowed us to significantly increase our working interest for 4-year 2026. This will allow us to meaningfully grow production while maintaining the same completion cruise, rear count, and operating efficiencies we have achieved this year. Our updated production guidance of 199,000 barrels of oil a day for the 4-year 2026 is 10% higher than 2025, while our capex midpoint of 1.95 billion is approximately 1% lower than the capital we spent last year.

This highlights the strides that our team is making to continue to improve the capital efficiency of our business in a growth recasto per share every year. Concluding with slide 14, our focus on full cycle returns has allowed the company to generate outside value creation for our investors. A dollar invested in Colgate in 2015 would be worth nearly $50 today, representing a greater than 50% compounded annual return.

And we've continued that same philosophy and performance at scale with Permian resources, nearly tripling our total total return since formation in 2022. Most importantly, our business model has not changed. We are confident the combination of our high-quality asset-based peer leading cost structure and differentiated approach to acquisitions will continue our track record of long term value creation. We live in an industry that in some ways has been defined by consolidation and scale, but we'd like to be defined by prudent investment of capital, free cash so per share growth, and ultimately leading total shareholder returns for our investors.

Yeah, thanks, Scott. I think on the ground consistent for the whole 11 years we've been running this business, we've got pretty much the same team, the same people that are operating extremely high level.

That may even flow a little bit once we're in quarter to quarter, but I think over years, we are really confident we can continue to kind of execute and grow that part of our business. I think the opportunity set in front of us looks as good as it ever has, and we're kind of excited and confident that we can continue that. It may not be the same every single quarter, but we really do believe in the long-term viability of that part of our business.

In terms of larger packages, we've always looked at everything in the Delaware. I think you should assume we are kind of in the mix and evaluating any package of quality that is out there on the publicly marketed side. I think when we've seen in some of these deals and some of these federal lease sales or state lease sales, they're good assets. There's been some really good stuff that transacted this year, but I think our focus on full cycle returns and generating outside equity returns for investors, I think, has us being really disciplined on purchase price. I think some of the assets that transacted assets we'd like to own absolutely, but were we able to get to those purchase prices and still achieve our targeted returns?

The answer was no. I think for us, it's all about focusing on full cycle and long-term value creation. If there's bigger packages that meet those returns thresholds and standards, then we'll be excited to do them and not we'll continue to be patient.

I think in the last report, we feel really good about oil takeaway capacity for the next few years. I think we're also hopeful that we've all learned a good lesson on the gas situation we've been in the past 12 months that you've got to get out there years ahead. We're fortunate on the oil side. We've got a lot of capacity today and expect that to be the case. We continue to grow for years to come in the Permian, which I think is not guaranteed, but certainly possible. I said at this point, we're confident our midstream partners will be working with people like us to get further ahead of that. On the gas side, we haven't seen any meaningful reaction from an activity level.

I think if these are the pipelines that are coming online, this quarter able to handle the new gas that we brought back online, any incremental growth today. I think we're hoping that we're entering a new era in Waja gas where you get past this period of dislocations. We have a pipeline capacity that's now going to be able to keep up with Permian growth. I'd certainly say that the environment and the attitude has changed. I think there's a new eagerness and desire to build pipelines coming out of the basics. We do believe this patient is going downstream demand thing. I think we feel a lot better about both crude and gas. Then we have gas for a few months.

Yeah, I mean, I think that kind of Eddy County area where this Parkway bolt on has been that's been a tremendous asset for Permian resources since we bought our first bill there back in summer of 2016. I think we've seen it continue to work as you push modestly west and modestly north. I'd say we've been surprised by how strong the well performance is, for example, in the kind of area that you're referencing today. I think we see a lot of white space. I also think the whitespace may be moving north or maybe moving west, but there's also still a lot to do kind of in and in a month to our existing position. There's a lot of white space on the map between our existing assets.

I think I found in most of the bolt on activity that's active now is more kind of in between the yellow on the map, if you will, but we still see a lot to do in what we call the Parkway area of Eddy County and are certainly excited about the well results we've seen and excited about what we think could be coming.

Look, we don't like to forecast our plan for next year or anything like that. I'd say with regards to 2026 and what oil prices did at the beginning of this year, I think we were strong believers that this is an environment where it made sense to invest a little more capital and growth production more than the kind of flattish expectations we had coming into the year. We'll talk about it prepared and marks we're proud of our team, how quickly we could respond and how quickly we could bring those barrels.

As far as growth from here or growth next year, I think that's just really going to depend on the returns environment. We've always talked about growth in the returns. Driven framework, we have high oil prices, low service costs. You'll probably see us in growth mode. And inversely, if we have low oil prices and higher service costs, I think we'll see us back to the doctor made in this mode. So I think it's just going to depend on how the macro settles out. I think today, it's probably true to tell what next year looks like, but we'll keep watching it and we can react really quickly when the time comes.

Yeah, I mentioned a few in the prepared remarks. I'd say one that I feel like I hit on every quarter, which is really, really important to the kind of both the production and the completion cost of businesses is water recycling. And so we had another tick up on percent water recycling in Q2. I think it's the highest quarter we've had in PR history. So we are continuing to make progress on incremental water recycling. We've got a great relationship with a big water company in New Mexico. And as they continue to build out an integrated system, I'd say we are a big beneficiary of that.

And then on the drilling side, which is I think if you think back to my Q1 comments where I thought there was some low hanging fruit or maybe not low anymore, but kind of the next level of step up would be on the drilling side. And we're making a few changes there. I'd say one, we started to introduce water-based mud in areas where we take losses typically and with oil at high prices, I'd say the payback on taking a little bit of loss of water-based is pretty meaningful, kind of call it five, six, seven bucks a foot of savings on those wells. And in the last one to be, we've kind of transitioned to a slimmer hole design in New Mexico.

Same long strain, still run five and a half inch all day back to surface, but running it inside eight and five eighths instead of nine and five eighths. And that savings in steel, especially as casing prices are projected to run up in the back half of the year, savings in time, just smaller holes drill faster and then savings in cement. So I think that kind of if you think about looking forward, obviously we are willing to take the increased diesel prices with the increased oil revenue, but we do have some inflationary pressures with respect to diesel and casing. And to date, I've been able to offset that through through gains like what I just talked through.

Yeah, I mean, lateral lengths is the most effective way to reduce D&C per foot. I think we've slightly ticked up every year for the last two or three years, kind of moving from just under two miles to now, kind of right at 11,000 feet.

We mentioned on the deck that we drilled our first four-mile lateral in Q2, and that was a big success. So I think what it really means is the combination of our willingness to drill longer, our ability to drill U-turns when needed, and the blockiness of the position that you'll continue to see lateral length tick up over time. I don't think that we are in a place where you're going to see some step change where we go from 11,000 to 15 year-over-year, but I do think the kind of 500 plus or minus feet longer each year is probably typical of what you should expect going forward.

Yeah, but I think growing the base dividend consistently over time is a priority and always has been a priority. So I think it's something you'll continue to see for us kind of in the future. I'd say, other than that, we don't have any plans to change our capital allocation program. I think we have is working really well today. Obviously, the business is generating a lot of cash. We've been able to both pay down considerable amounts of debt over the past two years and do a lot of acquisition activity all while delivering the business for the point five times it is today. So I think now, for the foreseeable future, I think our capital allocation strategy is working and you'll kind of see us hold the course.

No, I mean, nothing outside of it's already fake in our plan and our budget for the year. I think these areas that we're kind of more active than are still right next to existing PR Offset Operations today. So I think it probably is pretty easy. We've got the right partners where we need on the midterm side. And frankly, got all the stuff we're doing really is a mile or two away from existing PR off. So kind of nothing out of the ordinary there. I think the only exception that means the Ward County bolt on, there'll be a minimal call at like $25 million of incremental CAPEX associated with just taking over a new asset.

It's Guy. On production side, we were at 192.5,000 barrels a day at Q1. Our guidance after Q1 are at 199 today. The only production we acquired with this billion dollars of acquisitions was 2,500 barrels a day of production at the time we closed the Ward County bolt on a week ago. When you take that over a year, that's 1,000 barrels of the 6.5,000 barrels a day increase. The significant majority of the remainders is higher working interest in our 2026 projects as we talked about with a little bit of contribution from accelerated workovers.

On the capital side, we're up $100 million. $25 million of that is just kind of some of the takeover costs associated with the Ward County bolt on just putting in equipment that's our standards and things like that. And the remainder is also just higher working interest than the 26 tills. We took our guidance from 75 to 80 percent to over 80 percent working interest in 2026 tills. So I think when you put all that together, it's really capital efficient.

And you can see that in the kind of increase in capital relative to the increase in production.

All the laws are back online. We brought them online kind of at the very end of June, right when Wauha rebounded. And we've had all the wells online since. So Q3 and Q4 will be much more normal looking with respect to gas. Hey, Kevin, on cash flow uplift, I think we're probably hesitant to forecast gas prices in the back half. But, you know, we produced over 750 million a day net. So regardless of where we end up, given where Wauha is today, about $50, $2.00 and HSC and Texo higher, it'll contribute in the back half of 26. And that's why we put the commentary in there about 27 is we think about growing free cash flow over time.

We've done that with the real headwind of realizing almost nothing from our dry gas stream. And I think both the curves and our transportation in 27 set us up for a much better answer year over year.

I mean, I think one thing just to correct is the majority of that 100 million increase happened in Q two. And so I don't think you can double it to analyze it. I think that is the annualized increase. If you want to think about this year, we came into we're going to spend 1.85 and grow production minimal. And now we're going to spend 1.95 and grow production by 10,000 barrels a day. So it is a very, very meaningful kind of increased production that 100 is is annualized. I think if you look go forward, I guess if the question is where is maintenance catbacks? I think if we continue to spend it called the 1.95 to 2 billion dollar range, we would continue to grow production.

So maintenance is south of their and that's a growth to case. And I think where we stand in 27 between do we want to grow or do we want to be in a maintenance case is obviously very much subject to what the markets look like when we get there. But I mean, like that 1.95 billion grew production 10%. I think that's a pretty substantial growth rate. And like, I'd say that's we think about the well, that's highly capital efficient. So I'd say if you think about our business today, that's 17,000 barrels per day, year over year growth in 10%. So I think that's a pretty cool capital efficiency story.

It'll be it'll normalize. We the step up in Q2 basically to through our entire backlog, the work over. So we are back at normal course, just kind of fixing wells as they come as they come offline. And that'll be with a rate cadence that's more like what we've done in Q1 in the past.

Yeah, sure. I know that was a really cool deal. I think kind of a lot of things came together kind of our team, great collaboration with, as you mentioned, multiple counterparties on the kind of the trades in the Ward County bolt on. And yeah, I think we love it when you can find the opportunities like that that are when, when, then it makes your position better. I think actually it's an interesting question. I'd say honestly this year we haven't talked a lot about it and maybe we should in our next release. But this has been a really busy year for us on the trade front. I think we're finding more opportunities to kind of net up our own working interests, trade out of non-off and into operated positions like you see here.

So yeah, I don't know if we'll see any that are kind of as big as this in the back half of the year. We've certainly done some big ones to start the year and it's something that we're always working on.

Sure. On the completion side, we've pumped two surfactant trials on two different paths with kind of tests or control wells and test wells. One of those is online. One is we've pumped the fracks, but the wells are not yet online. That's probably where we'll stop for this year. We'll look at that data kind of see what we see early time with water oil ratios and see what we see kind of over the 60, 90, and 180 day period as we kind of head into next year should be a good place to have a feel for how big of the program that could be. I'd say on that side, it's just too early to tell. And then on the production side, there's two or three paths across both basins that we have pumped surfactant more in late life, typically around an ESP failure.

And I've seen, I'd say uplifts up to north of 100 barrels a day and some that are kind of de minimis. On the average, that program has been very economic, kind of called sub one-year payouts on the aggregate inclusive of the wells that we saw basically no uplifts. So that's where we're very encouraged is that even with the dispersion of results from really, really effective to less effective that the program on average has been very economic. And so I'd say what the team's working on now is how do we, you know, do more of the 100 barrel day uplifts and less of the zero or what could we do differently on the wealth that we didn't see in uplift.

But I think that's going to be something that probably is a real part of the program to go for is just kind of, we got to figure out exactly how much and exactly where we're going to do it before we can kind of roll it out as part of the big go forward plan.

Yeah, that's a good question. You know, I think we're really comfortable in the primary zones. Like I actually think that's a great kind of nuance question that we didn't address in our script. Like I say, our base case underwriting kind of reveals the locations that we actually paid for. We are highly confident in. I do think as you get to some upside zones potential, I think whether that's, you know, two or three productive zones or four or five productive zones is still TBD. So I do think we'll continue to learn about the parkway area and that kind of test goes to acquisition specifically over time. But have a really high degree of confidence in what we're calling kind of proven locations that kind of go into that 330 locations that we're underwritten.

And, you know, I think over time, hopeful and would expect to see some of those upside locations, you know, kind of proven up and coming into the money.

Well, I think that there's a decent amount flowing through the financials today. I mean, we've run at this point, seven or eight microgrids across New Mexico and areas where we historically have, you know, been on generator power. If you want to think about run room of that going forward, like, there's definitely more to do, but it's really going to be New Mexico-centric as we are on line power in the Texas Delaware. Same thing on the compression side, like, as we're optimizing that, it's going to be in areas where, you know, what we've seen is where we have, we end up with better run times across the board if we're on microgrid, as opposed to kind of one-off generators.

Just, you know, think about flipping the light switch, like cycling it on and off is not good for run time of, you know, equipment like ESPs and things like that. But really, all this just kind of comes together to, I think, we've seen a tremendous ability for us to kind of hold L. O. E. flat or even reduce it over time, which is not, I think, not normal and not what you'd expect. I mean, we kind of, I feel like we've always been at 550 at B. O. E. L. O. E. company. And if you look at where we were in Q1 and even where we were in Q2 and, you know, a meaningful amount of our B. O. E. shut in due to gas curtailment, we're still kind of pushing closer to five bucks per B. O. E. and I think that's, that's a testament to what we've done in the short term.

And there is still stuff to do. You know, I feel like at that beating of that, the water recycling side is a big needle mover on, water disposals are largest L. O. E. cost and the more we can recycle, the more we defer and ultimately save on the L. O. E. side. So those are the initiatives we're working on real time. I think all of them matter, but if you can do them all together, that's when you really move the needle.

Yeah, I mean, I think kind of, I'd say the royalties historically, and in this first half of the year, come as a mix of kind of straight minerals and royalties acquisitions versus kind of high in our, I think for us, tended to be more weighted towards kind of higher in our eye leasehold. I think the minerals and royalties on a standalone basis can get really expensive and frankly, we struggled to always, you know, to be able to buy very much at kind of our return threshold. But yeah, I think going forward, I think we will continue to target both. I think it's probably safe to expect more of our royalty acquisitions to come vertically sold, because I think we can bring kind of the full suite of PR competitive advantages to bear on the cost bearing interest combined with the royalty.

In terms of prices, look, I think what you're seeing on low dollar per net royalty acre values, it's just to kind of the output of us acquiring these deals and attractive prices. Like I think we talk a lot about the creative things that we've done and those creative things allow us to buy both, I'd say the leasehold and the royalty interest at what we view as really attractive and you may view as lower prices. But I think that's a really good thing and you're something more helpful to continue to be able to do.

I think it's about it's going to be basically the exact same as it's always been. It'll be, you know, call it 70% of the development, maybe a little north of that and on the New Mexico assets and the rest in Texas and that that's consistent with where we've been the last two or three years.

I think the answer is no, we don't. We kind of, we were always looking, we're always on the hunt and we're going to continue to buy things and we can find high-quality assets that prices that make sense for generating attractive full-cycle returns. But no, I think we've got good momentum. You know, I think we're kind of the ground game continues to chug along and we're having a lot of success there, but I think trying to predict exactly what it looks like over the kind of next 12 months, I think that's hard to do.

I see, like, look, there's a long list of things you're doing. The hot topic today is surfactant and if you want to think back, you know, six months ago, it was on lightweight prop and in the middle, there's been a bunch of tweaks of, you know, cluster spacing, depletion design strategies, etc. I think the right kind of approach that you also think about PR is that we are testing, trialing and studying all of it and we'll probably, I think we're better suited to speak to exactly which ones are the big winners kind of once we get there. But really what's it mean for well productivity, I'd say, not driven by step changes in oil recovery percentages, but really just by the duration and depth of the inventory.

I think your expectation is that 27, or the rest of 26 and 27 productivity will be the same as it's been in 24, 25, 26. We are still kind of marching across our position in both New Mexico and Texas, drilling the same benches in the same way and expect the same productivity as we see in the past.

Obviously, the run-up and crude and kind of demand on steel, et cetera, so sure the war has put some pressure on where we were targeting for the year. But we've done a really, really good job offsetting that. I mentioned some of the efficiencies we've picked up on the drilling side, on the water recycling side. We've had some small winds on the sand side, so it's not all inflationary pressures. We've had some kind of big winds on the efficiency side to get here to date. I think a lot of that shares up just with the incremental year. Now we're just north of 80% working interest in the back half of the year, and we're still able to keep CapEx sub 1 billion.

Are we going to achieve $675? I'd say that feels like a longer put than it was when we came into the year, but we're still very much on target as far as where we came into the year at, and at least holding the line flat, or maybe slightly improving. It's really a hard answer to give Leo just given. I like fuel is such a big component of our spending. I just have no idea where fuel and crude prices are going to be between now and year-end. But I think that if oil prices dip and fuel resets back to where we came into the year, I think $675 is absolutely in our site. If oil runs, I think it's probably less likely, but we'll take it on the revenue side.

Yeah, I mean, I'd say just kind of we've spent a billion dollars in the last two years, kind of 24 full year and 25 full year. We've kind of already achieved that same pace halfway through or a little over halfway through. 2026, he's probably safe to say we will exceed the last two years at average this year. But yeah, the ground game, we're seeing a lot of stuff, you know, I think that like we said in the past, that's pretty consistent kind of every month in, every month out where we're finding opportunities on the ground game side and the bigger stuff can be lumpier. But I'd say we're getting a lot of looks. I think we'll reference it.

I feel like there are a ton of deals kind of coming to market at the beginning of the year. You know, I think we've seen maybe half of those kind of run their course and there's still some out there that could be interesting. But you know, I think for us, definitely nothing big, imminent, to kind of do some ground game stuff that's always getting done day in day out. But you know, for us, it's just taking those accounts and making sure we do the right opportunities at the right price and, you know, pass on the deals that don't make sense for us. And we've done a really good job of that. So we've got a ton of confidence.

It'll keep working going forward.

Last time we spoke about this, I'd say I mentioned kind of the success of the Avalon and kind of some of the deeper wolf camps in moving North and Lee County. And I'd say that is happening and happening extremely well and very quickly, so to speak, I mean, our we had drilled a few Avalon's up that far North as of the call last quarter. But I'd say since then like, you know, full development stacking Avalon, it's been some of the most productive wells we've drilled. So those type of emerging benches, think of it as, you know, benches that have been developed historically on the state line area, moving up North into our Lee County and our Eddie County position is very much happening.

We're seeing the same thing on the on our Eddie County position with some of like the deeper wolf camp. You're typically we've drilled first, sand, second, sand, third, sand, and X, Y on the North Eddie and we're starting to see deeper wolf can't move that direction. As far as like the total new benches, which are where I think you were eluding, you know, woodford, brushy, things like that, it's a we own it on some of our assets and other assets. We don't, but I'd say it's something that we're keeping our eye on, but it's not a it's not a core bench. It's not something that's going to be a big part of our development plan or really any part of our development plan in 27.

I think that it is we've seen some of the most prolific wells in the basin drilled in the in the woodford and some of the biggest dogs. And so we're just kind of going to watch and see and hopefully let serendipity kind of come our way to the extent it does.

Hey Paul it's Guy. I think we feel great about the deals we did. You know we identified this as an issue a couple of years ago and I think the not just the long haul that we are kicking in kind of late this year and early next year, but the interim agreements we had with some of those partners this year have served us really well. And I think the capacity we have going into 27 covers roughly all of our net volume. So we're always thinking about what else should we do to optimize the portfolio, how do we handle growth and gas volumes that could occur as we continue to grow old production and grow through acquisition.

And I think on the hedging front we're just going to be opportunistic like we have. I think that we spend a lot of time thinking about appropriate basis and where we want to sell gas, but I view that more as optimization rather than something we have to do.

No. I don't think water-based would be a time savings versus oil-based. It's more just, well, we've got some areas where you'll take some losses and if you can run water-based that oil-based in areas you take losses, you save money really, really quick.

Yeah, that's right. I mean, our drill time when to have been in this slim old design, I mean, obviously when you go to eight and five-eighths intermediate as opposed to nine to five-eighths, you can drill a smaller hole and kind of everything goes faster. So that's, if you want to think about the savings associated with slim hole, it's been like 50% of the savings is on drill times. We save almost a day a while.

Thanks, Sean.

I think we can, I think we can hand it back.

Thank you. As you can tell in this morning's results, the business is performing at the highest level in PR history. We delivered record free cash on this quarter, responded quickly and decisively to a volatile commodity environment and had high quality inventory to track evaluations, all while maintaining an investment grade balance sheet in the lowest cost structure to Delaware Basin. We believe we are exceptionally well positioned to continue compounding pre-cash soper share and delivering outside returns for investors going forward. Thanks to everyone who joined the call today and for following the Permian resources story. This concludes today's call.