Oliver Huang

Oliver Huang then asked about Texas Pacific Land Corporation's position and prospects in the power and data center market in West Texas, specifically how their ability to capture market share has evolved over the past quarter or year, and which areas of their expansive footprint are most prospective for such deals.

Answer

Chris Steddum, CFO, affirmed TPL's strong positioning due to extensive available land and attributes attractive to power generators and data center developers. He noted West Texas's increasing popularity for multi-gig facilities and mentioned ongoing "really good conversations" with potential news to share soon.

Oliver Huang inquired about TPL's position in participating in the West Texas power and data center market, comparing it to previous quarters, and identifying prospective areas for executing such deals given TPL's expansive footprint.

Answer

Chris Steddum, CFO, affirmed TPL's strong position due to available land with necessary attributes, making them attractive to power generators and data center developers. He noted West Texas's growing popularity for multi-gig facilities and expressed optimism about ongoing conversations, anticipating news on interesting opportunities soon.

Oliver Huang asked for detailed takeaways from the Rysted four-mile well's performance and inquired about the potential for incremental inventory expansion from a broader shift to four-mile laterals.

Answer

EVP & COO Darrin Henke described the Rysted well's execution as nearly flawless, with drilling outperforming expectations and production exceeding its type curve by 30%. President, CEO & Director Daniel Brown explained that while it's too early to quantify inventory additions, the improved breakevens from four-mile wells will make peripheral acreage more competitive for capital, noting these laterals could comprise up to 50% of future development.

Oliver Huang of TPH&Co. sought detailed takeaways from the first four-mile Rysted well, including drilling, completion, and productivity, and asked if the company might tweak its approach for subsequent wells. He also questioned how a significant shift to four-mile laterals could expand the company's economic inventory.

Answer

COO Darrin Henke described the Rysted well's execution as nearly flawless, with drilling performance exceeding expectations and production outperforming its type curve by 30%. He noted the company will have seven four-mile wells online by year-end to gather more data. CEO Daniel Brown explained that the superior economics of four-mile wells will make peripheral acreage more competitive for capital and that these longer laterals could constitute up to 50% of future development.

Oliver Huang from TPH&Co. asked if faster operational cycle times could push capital spending and well completions toward the high end of guidance. He also inquired if there is a long-term absolute net debt target beyond the goal of reaching one-times leverage.

Answer

President & COO Clay Carrell acknowledged that faster cycle times pull activity forward and stated the company is actively balancing this to maintain a level-loaded program into 2026. CFO & Treasurer Marianella Foschi noted that while there isn't a specific absolute debt number, the company will continue to pay down debt materially post-2025, focusing on holistically de-risking the business through its capital structure, maturity profile, and hedging.

Oliver Huang asked about the primary levers for further productivity gains in the Midland Basin over the next year. He also inquired about the outlook for service costs in 2025 and the deflation assumptions baked into the maintenance capital forecast.

Answer

CEO M. Doyle explained that future gains will come from focusing on incremental well returns, which may mean drilling fewer wells per section, alongside continuous improvements in subsurface targeting and completion designs like simul-fracs. He noted it's too early to predict 2025 service costs given market volatility but stated recent deflation was mainly in consumables.

Oliver Huang of TPH&Co inquired if lower D&C costs were driven by service cost deflation or purely by efficiency gains. He also asked about the possibility of building DUCs if the company runs ahead of schedule, versus slowing down or pulling forward 2026 activity.

Answer

CFO Brandi Kendall clarified that the 3% reduction in the capital guide was entirely due to drilling and completion efficiencies, not service cost deflation. She noted that the resulting $100 million in incremental free cash flow would be retained for shareholder benefit rather than reinvested. CEO David Rockecharlie affirmed that the company's outlook for the year remains the same and they would not change their plan absent large commodity price moves.

Oliver Huang asked for specific drivers of the improved Uinta well performance, given the wells were from an inherited DUC backlog, and questioned the expected oil production trajectory into Q4 and 2026.

Answer

EVP & COO Beth McDonald pointed to a comprehensive development strategy, including landing zone optimization and lateral extensions, as drivers for performance. President & CEO Herbert Vogel acknowledged a likely Q4 production rolloff due to well timing and provided a preliminary 2026 outlook of flattish BOE production with a six-rig program, emphasizing a focus on maximizing free cash flow.

Oliver Huang of TPH&Co inquired about the economic criteria for adding new acreage to the core Giddings development program and asked for an outlook on oilfield service cost trends.

Answer

CEO Christopher Stavros explained that the recent bolt-on acquisitions were viewed as a low-cost entry point for high-upside acreage adjacent to their core position, offering opportunities for lengthening laterals and new wells. Regarding service costs, he noted some ongoing deflation due to reduced industry activity, estimating a several percent benefit in Q3. However, he cautioned this could flatten out in Q4 due to steel tariffs, with a potential for costs to rise again with activity in 2026.

Oliver Huang asked about the economic criteria and return thresholds used to add 40,000 net acres to the core Giddings development inventory. He also inquired about service cost trends and expectations heading into the next contracting season.

Answer

CEO Christopher Stavros explained that the acreage acquisitions were viewed as a low-cost entry point for upside potential, with the acreage being contiguous to their core position and offering opportunities for longer laterals and new wells. On service costs, Stavros acknowledged that things are harder for service companies, leading to some deflation. He expects a several-percent benefit in Q3 but noted that steel inflation and tariffs could flatten costs in Q4, with a potential for costs to trickle higher early next year as activity ramps up.

Oliver Huang inquired about the current state of service costs and how they might trend into 2025. He also asked if recent large acquisitions introduced any new required drilling or lease obligations that could impact near-term capital allocation.

Answer

President and CEO Christopher Stavros noted that service costs have been softer than anticipated, contributing to Q3 capital savings. He sees potential for additional mid-single-digit savings into next year across categories like OCTG, pressure pumping, and rigs. He anticipates 2025 capital will not be much higher than 2024. On the second point, Stavros confirmed that recent deals did not create any meaningful new drilling obligations.

Oliver Huang of Tudor, Pickering, Holt and Company asked for a walkthrough of the anticipated frac activity cadence for the remainder of the year, noting that spending guidance implies a slowdown in Q4, and its effect on early 2026.

Answer

EVP & CFO William Lambert confirmed that current plans imply lower capital spending in Q4. He explained this is a result of operational efficiencies pulling activity forward into Q3. Wells turned on late in Q3 will primarily contribute to Q4 production. Lambert highlighted that large-batch, multi-zone developments in the Delaware basin will inherently create lumpiness in production and capital cadence due to longer cycle times.

Oliver Huang of Tudor, Pickering, Holt and Company asked for a walkthrough of the anticipated frac activity cadence for the rest of the year and any potential flow-through effects on production at the start of 2026.

Answer

EVP and CFO William Lambert confirmed that operational efficiencies have pulled some activity forward into Q3, which could lead to lower spending in Q4. He explained that wells turned on late in Q3 will primarily benefit Q4 production. Lambert also noted that large-batch, multi-zone developments will naturally create some 'lumpiness' in production due to longer cycle times but result in prolific initial output.

Oliver Huang of Tudor, Pickering, Holt & Co. requested details on the cadence of frac activity for the remainder of the year and the potential flow-through effects on early 2026 production.

Answer

EVP and CFO William Lambert confirmed that operational efficiencies have pulled some activity forward into the third quarter. This will result in higher Q3 capital, with the associated wells being turned on late in the quarter and contributing more significantly to Q4 production. He noted that the nature of large-batch, multi-zone development in the Delaware Basin will inherently create some lumpiness in production profiles due to longer cycle times.

Oliver Huang from Tudor, Pickering, Holt & Co. asked for details on the cadence of frac activity for the rest of the year, noting that spending guidance implies a slowdown in Q4.

Answer

EVP and CFO William Lambert confirmed the spending trajectory, explaining that operational efficiencies allowed the team to pull activity from Q4 into Q3. He noted that wells completed late in Q3 will primarily benefit Q4 production. Lambert advised investors to expect some 'lumpiness' in production going forward due to the longer cycle times of large, multi-zone development pads in the Delaware Basin.

Oliver Huang from Tudor, Pickering, Holt & Co. asked about Lease Operating Expense (LOE) trends, considering the impact of Ameredev volumes, and inquired about specific plans to reduce operating costs on the newly acquired assets.

Answer

Glenn Stetson, EVP of Production, clarified that while Ameredev's assets have a higher initial operating cost, the company has already identified $1 million per month in potential savings. These efficiencies will come from increased use of recycled produced water, optimizing production chemical programs, and consolidating operations to be field-based in New Mexico. He noted the Pinyon sale does not affect these properties' opex.

Oliver Huang of TPH & Co. asked for APA's updated corporate breakeven oil price required to cover capital expenditures and the dividend, given the accelerated cost savings. He also requested quantification of the shift toward denser well spacing from 2024 to 2025.

Answer

CEO John Christmann stated that with the full $350 million annual run-rate savings, APA can fund its entire program, including exploration and the dividend, at a $50 WTI price. Regarding well spacing, he explained that a significant portion of the current program already utilizes the denser design, driven by operational changes like using slimmer casing, and that it is a dynamic optimization process rather than a fixed percentage shift.

Oliver Huang asked if Permian Resources is considering larger pads or developing more zones to lower costs, and inquired about power reliability and related capital needs.

Answer

Co-CEO William Hickey explained that while development is rock-dictated, the company's tolerance for larger pad sizes has increased with scale and pad sizes will likely be slightly higher next year. He clarified that power is reliable and not a production risk, but improving it by moving off generators presents a significant opportunity for future LOE savings, not a major capital concern.