Crescent Energy - Q4 2025

Transcript

Operator (participant)

Welcome to the Crescent Energy Q4 2025 results call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Reid Gallagher, Investor Relations. Thank you. You may begin.

Reid Gallagher (Investor Relations)

Good morning, and thank you for joining Crescent's 4th quarter and full year 2025 conference call. Today's prepared remarks will come from our CEO, David Rockecharlie, and our CFO, Brandi Kendall. Our Chief Operating Officer and Executive Vice President of Investments will also be available during Q&A. Today's call may contain projections and other forward-looking statements within the meaning of the Federal Securities laws. These statements are subject to risks and uncertainties, including commodity price volatility, global geopolitical conflict, our business strategies, and other factors that may cause actual results to differ from those expressed or implied in these statements and our other disclosures. We have no obligation to update any forward-looking statements after today's call. In addition, today's discussion may include disclosure regarding non-GAAP financial measures.

For reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measure, please reference our 10-K and earnings press release available under the Investor section on our website. With that, I'll hand it over to David.

David Rockecharlie (CEO)

Good morning, and thank you for joining us. 2025 was a transformational year for Crescent. Our team delivered strong performance by executing on our consistent strategy and capitalizing on our leading combination of investing and operating skills. As a result, we entered 2026 better positioned than ever, with more scale, more focus, and more opportunity. As always, I'd like to begin with three key takeaways. First, our base business continues to deliver impressive results. In 2025, we generated significant free cash flow, exceeded expectations on both production and capital, and demonstrated the durability of our investing and operating model. We are bringing that significant momentum into our 2026 plan. Second, we are now a focused and scaled operator in three premier basins: the Eagle Ford, the Permian, and the Uinta. We see tremendous upside potential across our portfolio.

Our investing and divesting activity materially upgraded the quality and scale of our portfolio. In total, we executed nearly $5 billion of transactions in 2025, closing over $4 billion of acquisitions at less than 3x EBITDA and divesting nearly $1 billion of non-core assets at over 5x EBITDA. This is how we compound value, recycling capital out of non-core positions and into higher return, scalable assets, where we can apply our operational playbook to drive value for years to come. You have seen us successfully execute our strategy in the Eagle Ford. Over multiple years, we have built a top three position while generating strong returns and hundreds of millions of annual synergies. It is just the beginning for us in the Permian, but we are off to a strong start, and we are doubling our original synergy target.

Third, our equity value proposition is even more compelling. We will continue to build long-term value through strong free cash flow and returns from our base business. We also have significant upside catalysts embedded in our business. We are excited to introduce one of those key catalysts today, our world-class minerals platform, Crescent Royalties. Let me now discuss our strong fourth quarter in more detail. We produced 268,000 barrels of oil equivalent per day for the quarter, including 106,000 barrels of oil per day, and generated approximately $239 million of Levered Free Cash Flow. In the fourth quarter, our activity was focused predominantly in the Eagle Ford gas and condensate windows to capitalize on strength in the natural gas curve.

Early performance has been strong, and our ability to allocate capital across both oil and gas-weighted inventory enhances the durability of our returns in a volatile commodity environment. Operationally, we continue to raise the bar across our asset base. Over the past year, we have increased drilling and completion efficiencies, extended lateral lengths, and expanded the use of simulfrac operations across our footprint. These initiatives drove a 15% reduction in drilling and completion cost per foot YoY and contributed to full-year CapEx outperformance. Our operational expertise is foundational to our strategy of buying assets and making them better, and we intend to apply the same proven playbook to our newly acquired Permian assets, which gives us confidence in our increased synergy target. Our entry into the Permian was a defining step in Crescent's evolution.

Today, we operate scaled positions across three premier basins: the Eagle Ford, the Permian, and the Uinta, which is complemented by a substantial and world-class minerals portfolio. This combination provides inventory depth, commodity flexibility, and a durable free cash flow profile that positions us to outperform through cycles. Turning to our new Permian assets, integration has progressed seamlessly. As we have spent more time with the assets, our conviction in the value creation opportunity has increased. This acquisition remains one of the most compelling we've evaluated, with immediate accretion across key metrics and highly attractive cash-on-cash returns. Importantly, our synergy targets are now 100% higher than what we underwrote, which meaningfully enhances expected investment returns. That increase reflects clearer visibility into incremental operational efficiencies, overhead optimization, marketing improvements, and additional balance sheet opportunities as we implement the Crescent playbook.

Looking ahead to 2026, our plan reflects the consistent execution of our long-term free cash flow strategy. Our focus is on maximizing free cash flow while maintaining operational and capital allocation flexibility. We expect to run a six-seven rig program across our asset footprint. Four rigs in the Eagle Ford will span multiple phase windows, providing flexibility to pursue the highest returns across commodity cycles. One rig in the Uinta will target our core Uteland Butte formation and continue prudent delineation of the upside across our significant resource base, following the success of our Eastern JV. In the Permian, consistent with our acquisition announcement, we are right-sizing capital and operational intensity with a disciplined one-two rig program.

Our upgraded portfolio, enhanced capital efficiency, and commodity flexibility position us to generate some of the strongest development returns we have seen in recent years, despite the current commodity price volatility. In addition to upgrading our operated portfolio, we're excited to announce the formation of Crescent Royalties. This is a major milestone in our strategy to build a leading royalties business. We have been active buyers of minerals and royalties assets for nearly 15 years, and have built one of the largest and most established minerals and royalties platforms in the sector, anchored by a core position in the Eagle Ford under world-class operators. Today, our minerals portfolio contributes approximately $160 million of annual cash flow. By placing these assets within a dedicated capital structure, we enhance strategic flexibility and create additional pathways for long-term value recognition.

With Crescent's differentiated knowledge, experience, and sourcing pipeline, we see meaningful opportunity to continue scaling this platform in a value-accretive manner. Our transformation in 2025 was significant and a testament to the power of our consistent strategy. We are relentlessly focused on building a great business with a great team that talented people feel proud to be a part of. With our success in 2025, we are well positioned to continue on our trajectory with more scale, more focus, and more opportunity than ever before. With that, I'll turn the call over to Brandi.

Brandi Kendall (CFO)

Thanks, David. Crescent delivered another quarter of strong financial performance, generating approximately $536 million of Adjusted EBITDA, with $226 million of capital expenditures and approximately $239 million of Levered Free Cash Flow. These results underscore the significant free cash flow generation capacity of our portfolio and the strength of our lower capital intensity operating model. Our free cash flow enables what we view as an all-of-the-above return of capital framework. First, it provides substantial coverage of our fixed dividend. We declared a $0.12 per share dividend for the quarter, equating to an approximate 5% annualized yield, and our cash flow profile provides significant cushion to support and sustain that return. Second, it allows us to meaningfully strengthen the balance sheet.

During the quarter, we repaid more than $700 million of debt. We retained the capacity to continue deleveraging throughout the course of 2026. Third, it gives us flexibility to repurchase shares when market dislocation occurs. We increased our buyback authorization to $400 million, providing the ability to repurchase a meaningful amount of shares when we believe doing so represents an attractive use of capital. Our balance sheet remains strong, our liquidity is significant, and our capital allocation framework is disciplined, flexible, and focused on long-term per share value creation. With that, I'll turn the call back to David.

David Rockecharlie (CEO)

Thanks, Brandi. Let me close by reiterating our three key messages. First, our base business is strong, improving, and generating meaningful cash flow, and we are bringing significant momentum into our 2026 plan. Second, our 2025 investing and divesting activity materially upgraded our portfolio. We entered the Permian at compelling value with significant synergy potential and exited non-core assets at attractive multiples. Third, Crescent's value proposition has never been more compelling. We combine investing discipline with operational expertise, we generate substantial and durable free cash flow, and we have multiple pathways to drive long-term per share value creation. We are larger, more focused, and better positioned than we have ever been, and we believe we are just getting started. Thank you for your time this morning, and I will now open it up for Q&A.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question is from Bert Donnes from William Blair. Please go ahead.

Bert Donnes (Financial Analyst)

Morning, team. On Crescent Royalties, could you maybe help us understand where we are in the value creation process? It seems evident to us that the value is not really showing up in the shares, you know, if you use peer multiples. You noted scaling the business is probably maybe the next step. What options are you know, open to, or what options are you not open to eventually monetize the assets?

David Rockecharlie (CEO)

Hey, it's David. Great question. I think the most important place to start is that this has been a core business of ours. We've built a scale portfolio over the last 15 years. It's world-class assets, and there's significant embedded value in the company, and we wanna make sure that investors in Crescent understand what they own. The other couple key messages I would give, these assets that we've put together are among the lowest cost in the lower 48. We think they've got tremendous upside potential in just what we already own, but we see significant future growth potential just like we do in the rest of the business. I'll let Clay give you a little bit more color on that.

Clay Rynd (EVP of Investments)

Hey, the only thing I'd note is, you know, we view this as really step one in terms of value creation, in terms of allowing our shareholders to kind of recognize the value that we see embedded in the business. As David mentioned, we kind of see clear, pathway for growth. We've been able to compound this business at 20%, annual growth over the last five years. We continue to see pathway for kind of accretive growth for the business. you know, we're committed, in 2026 to continuing to unlock value for our shareholders, with this business.

Bert Donnes (Financial Analyst)

Sounds great. Maybe this one's for Brandi Kendall. On the, maybe the vanilla upstream M&A, we've kind of heard both sides of the story, that this is a, you know, a seller's market. Prices are reaching high water mark, but also that inventory is drying up, and you should probably be grabbing inventory while you can. Just wondering if, you know, Crescent thinks this is a time where maybe you do whatever it takes to win a bid, like maybe the Canadian curling team, or is it smarter to just take a step back and catch a few low-price silvers like the hockey team?

David Rockecharlie (CEO)

Hey, Bert, it's David. I'll take that one, thanks for an amazing setup. What I would say, a couple things. Your comment just makes me wanna communicate how many significant catalysts that we think we have in the company. To run through them on the M&A side, we've just completed a transformational year. We think we made a great entry into the Permian at fantastic value. That integration is going great. As you know, our number one thing when we make an acquisition is to get that right. What you should hear from us today is that it's going really well. We think it's gonna be a tremendous long-term opportunity for us. From a preparedness perspective, we're active in the market all the time, we're ready to be opportunistic.

From an actionability perspective, which is very different, what we're telling you is we see a huge amount of opportunity even within the company. We're focused on driving value with what we already own. We're focused on making sure investors understand all the levers we have the, in the business, including as we've talked about, the royalties assets, which again, are world-class and scaled. The market, from our perspective, we'll be ready when it's, when it's there. It's an interesting time right now, but we're kind of always in the market. The number one thing is, are we prepared to be opportunistic? Yes, we are.

Bert Donnes (Financial Analyst)

That's great. Thank you, David.

Operator (participant)

The next question is from Charles Meade from Johnson Rice. Please go ahead.

Charles Meade (Research Analyst)

Yes, good morning, David, to you and your whole team there. On the desire to grow the mineral royalty position, can you talk about what advantage Crescent has in that process? My impression is it's generally a pretty competitive market, but it's less competitive. There's fewer players as you get to the size you guys are playing in. What do you view are your advantages that let you compound this value 20% YoY? And perhaps, you know, is there one geography over another where you think there's the most opportunity?

David Rockecharlie (CEO)

I'd say a couple of things, and it goes back to just the core of kind of who we are as a company, which is, we're investors and operators. We've got the core skill set and activity on the technical and operational side, that we're looking at assets that we operate every day and paying attention to what others are doing. Then on the investing side, not only are we disciplined, we're very active. It's a core competency, we see and we try to see everything. When you put that together, at the end of the day, we're just opportunistic. There's no difference in how we go about look at growing or investing in minerals than we do the operating business.

It's about patience, it's about sticking to the returns and asset profiles we want. What we found is, we've been able to compound in both of these asset classes over time, as long as we're patient, disciplined, and prepared, and acquiring the assets that we want to own. I do think the track record speaks for itself, but the inherent advantages we have are really who we are as a company, and just really what we've built, how integrated a team we are, and how well we combine investing and operating expertise.

Charles Meade (Research Analyst)

Got it. Thank you for that. Then, if I could ask a question that drills down on your Midland Basin position. I know it's relatively new for you guys, but. There's another operator that made a big, really a big reveal about the Barnett, the prospective of the Barnett in the Midland Basin. I know there's been operators. It's not new that companies have been targeting the Barnett, but there was some new information with some frankly impressive rates. I'm curious, I know you guys have only had your hands on those assets since December, but have you, do you have any kind of estimate on Barnett potential that you'd be able to share?

David Rockecharlie (CEO)

Hey, David again, and then I'll let Joey and Clay also give you some more context on your broader Midland question. Very specifically, I'd say two things. We think we've made a phenomenal entry into the basin. We feel really good about it. It's going well, and we think we got it at great value. We don't feel any what I'll call pressure to do anything other than make sure we get that integration and then.

Clay Rynd (EVP of Investments)

Synergy captured right.

David Rockecharlie (CEO)

The second thing I would say, kind of before I hand it off, is if you look at really our strategy in action and what we've been able to do in the Eagle Ford, we put together a very significant position really over a decade. We're now a top three producer in that basin, and a lot of the resource that we're developing today was not thought to be there or thought to be economic at the time we acquired it, which is fantastic. I would just say we have high hopes for our entire business in terms of the long-term inventory potential without trying to comment specifically on the Barnett. I'll let Joey and Clay also give you some more perspective just on how the Midland and Permian is going.

Clay Rynd (EVP of Investments)

Yeah, the only thing I'd add, Charles, is clearly, you know, we've mentioned a lot when we talk about M&A, how active we are in the market. I think the same thing would apply to resource expansion. You'd expect us to be kind of very actively following where the market's going there and what opportunity we have. As David mentioned, I think one of the fit reasons you're hearing so much excitement for us on the Permian entry is that we think there's a ton of opportunity around that asset base. Really excited about where we sit today.

Joey Hall (COO)

Charles, in regard, we've seen the same announcements on the Barnett, and we just consider that potentially more upside to what we've already, highlighted, and so looking forward to exploring that with everybody else and seeing what we can do with it.

Charles Meade (Research Analyst)

Great. Thanks for the detail.

Operator (participant)

The next question is from Michael Furrow, from Pickering Energy Partners. Please go ahead.

Michael Furrow (VP on the Research Team)

Hi, good morning. I'd like to stick on Crescent Royalties quickly. We appreciate your comments, and the strategy sounds quite clear towards adding scale. You know, given that this is a different business model, are the acquisition hurdle rates going to be consistent with legacy Crescent, five-year payback periods and a 2x multiple on invested capital?

Clay Rynd (EVP of Investments)

Yeah, that's right. It's the same, it's the same lens we bring, right? The, as you know, right, this is cash flow orientation on the royalty side, clear focus on two times multiple of money, and very clear focus on NAV per share and free cash flow per share accretion. What we are excited about on the business is we've been able to build it the way we built it with those as kind of our core focus, and that is the opportunities that we see going forward.

Michael Furrow (VP on the Research Team)

All right. That's great. Appreciate the color there. As a follow-up, I was hoping for some clarification on one of your slides in the deck, slide 11 here. By our math, it looks like the implied oil rate for the 4th quarter in the Permian was nearly 70,000 barrels a day. Represent a pretty meaningful step up from the 3Q level of, like, 61,000. Even more impressive is that you're disclosing zero turning lines for the 4th quarter. Are there moving pieces here in terms of what was disclosed, or maybe some M&A or other transactions that occurred? Just trying to square that circle. Thanks.

Brandi Kendall (CFO)

Hey, Michael. No additional transactions. I would say that, right, our base business outperformed production expectations in the fourth quarter. I think we're carrying forward good momentum into 2026. I will also flag, though, that Vital did not bring on any new wells since early October. That business was in decline, and that ultimately is what's translating into a pretty flat oil production cadence for 2026.

Michael Furrow (VP on the Research Team)

All right. Thank you. That's helpful. I'll turn it back.

Operator (participant)

The next question is from Phillip Jungwirth, from BMO. Please go ahead.

Phillip Jungwirth (U.S. Energy Analyst)

Yeah, thanks. Congrats on the successful Vital integration and increase in synergies. On the well costs, I know these numbers aren't always apples to apples across companies, I think you're at 700 per foot in the Midland, 875 in the Delaware. I know there's a lot of tough competitors in these basins, it does feel like there's a nice gap you could reduce. I know we're just getting started, just wondering how much runway do you see to lowering Permian well cost beyond what's being underwritten currently in the asset intel?

Joey Hall (COO)

Good morning, Philip. Thanks for the question. Yeah, we're going to be working the DMC piece of it diligently. We do see some great opportunity for improvement. We've already seen some, even in the short time that we've had things moving forward. The other part of it that I always like to encourage people, or point out to people, is just the value of slowing down. The fact that we've slowed down, get the opportunity to catch our breath, understand from the past learnings from Vital and apply the things that we're going to do going forward. You know, just a slower pace gives us a better opportunity for higher capital efficiency and reducing costs. We're very bullish on our opportunity to reduce well costs in the Permian.

Phillip Jungwirth (U.S. Energy Analyst)

Okay. slowing down is actually gonna be my follow-up here. Just on the base decline, Vital used to give us a year-end figure for oil and BOEs. last year, it was 42% for oil and 36% for BOEs. I'm guessing this is a lot lower today, but any sense on where the Permian base decline is now or by year-end 2026? Just to confirm an earlier comment, can we imply that Permian oil production is also gonna trend flat through the year, similar to total company?

Brandi Kendall (CFO)

Hey, Philip, this is Brandi. I think similar to my prior comment, I would expect relatively flat oil volumes, both in the Eagle Ford and in the Permian throughout the course of 2026.

Phillip Jungwirth (U.S. Energy Analyst)

Okay, great. Anything on the base decline or?

Brandi Kendall (CFO)

Yeah, on a corporate level, we did pick up, post the merger, pro forma for divestitures. We're in the high twenties across the base, the broader business. expect to kinda get back to our corporate target of 25% or below over the next 12 to 18 months.

Phillip Jungwirth (U.S. Energy Analyst)

Great. Thank you.

Operator (participant)

The next question is from Jarrod Giroue from Stephens. Please go ahead.

Jarrod Giroue (Senior Research Associate)

Hey, good morning, guys. Congrats on a strong quarter. Thanks for taking my questions. My first question is around synergies from the Vital acquisition. In your release, you stated that Crescent had already hit $40 million+ in synergies from the deal, and it's causing you to double your annual targets at about $190 million. I was just hoping you could give a little color on what savings you've already seen and what you expect to get to the $190 million. Thanks.

Brandi Kendall (CFO)

Hey, Jarrod, it's Brandi. I'll start, and then I'll turn it over to Joey. With respect to the $40 million that has been captured to date, I would say largely overhead, duplicative public company expenses, as well as cost of capital synergies. Of the 100% increase on synergies, I would say 50% of that is ops related, and then the remaining 50% is additional overhead, incremental marketing synergies, and then additional opportunities to further drive down cost of capital.

Joey Hall (COO)

Jared, I'll You know, one of the things since I've been here at Crescent that's been incredibly impressive, you know, this is going back in history, their 16th asset that they've acquired since going public and have a very good tried-and-true playbook on integration. I've been incredibly impressed at how efficiently we've been able to integrate these assets. The team integrations and operational performance are exceeding our expectations. Just some color on some things specifically. You know, going forward, we'll be increasing the number of wells per pad, which will allow us to implement simulfrac. We're also increasing lateral lengths by doing land trades, so we'll be able to increase our capital efficiency there. The supply chain opportunities are starting to come to us now that we're a company of scale, you know, combining services and contracts.

You know, some specific examples, you know, combining contracts on generators, compression, chemicals, tubulars. As I was explaining to Charles, you know, just don't underestimate the value of slowing down. Slowing down gives us better operational planning, which drives better execution. Also, on the LOE side, huge opportunity on the artificial lift side, with our cash flow focus, free cash flow focus. We're focusing on long-term value versus short time rates, so that affects ESP sizing and how we do, you know, the timing of artificial lift swaps. You know, the list is pretty long. All of these opportunities will be feathering in over 2026, but we're pretty excited and looking forward to getting through 2026 and capturing all these synergies.

Jarrod Giroue (Senior Research Associate)

That's great. Thank you for the, for the color on that. Just my second question, with the earnings release, you announced an upsize and extended share repurchase authorization to $400 million. Just kinda curious how Crescent prioritizes shareholder return between the base dividend, shareholder returns, and debt reduction in 2026. Thank you.

Brandi Kendall (CFO)

Hey, Jarrod, it's Brandi. I would say no change to kinda key cap allocation priorities. The balance sheet and the base dividend are top. We're prioritizing deleveraging while also retaining the flexibility. Where we kinda talked about of all the above return of capital program. Again, I think in the immediate term, it's all about balance sheet. The increase in the buyback, so does allow us to be opportunistic. It allows us to move the needle with the authorization program if the stock is significantly dislocated.

Jarrod Giroue (Senior Research Associate)

Thanks for taking my questions.

Operator (participant)

The next question is from Jonathan Mardini from KeyBanc Capital Markets. Please go ahead.

Jonathan Mardini (Equity Research Senior Associate)

Good morning. Thank you for taking our questions. Just given the capacity or the ability for minerals companies to run at higher leverage ratios, does the latest spotlighting of Crescent Royalties change the way you think about leverage over time, or would you target that 1.5x ratio at the minerals level? Also, just how we should think about leverage on a consolidated basis trending through this year?

Brandi Kendall (CFO)

Good question. I would say no fundamental change to how we think about leverage across the broader business. Long-term target continues to be one time. We do believe that we were pretty conservative financing these latest minerals acquisitions. Right, we expect to be below 1.5 times by year-end. There's clearly just significant asset coverage, just given where this asset class trades relative to that leverage target.

Jonathan Mardini (Equity Research Senior Associate)

Okay. Appreciate the details. Just moving to upstream, on your Eagle Ford asset slide, you show laterals in your central and southern regions increasing by about 2,000 feet compared to 2025. Can you just talk about what's driving this expected step up and maybe how we should expect this to impact D&C cost per foot in 2026?

Clay Rynd (EVP of Investments)

Jonathan, this is Clay. I'm happy to start, and then I'll turn it to Joey. You know, I think part of that is, as we've talked about, our ability to kind of build scale in the Eagle Ford has given us a huge opportunity to continue to drive capital efficiency by extending laterals, asset swap, joint ventures, you know, just blocking and tackling in terms of putting the position together and giving ourselves the best shot at capital efficiency. Turn to Joey to also opine.

Joey Hall (COO)

Yeah. Yeah, Jonathan, obviously, one of the simplest ways to become more efficient is to drill longer laterals. It's really as simple as that. You know, I also point to the fact that we're increasing the pad sizes as well, which allows us to increase the percentage of simulfrac. You know, we'll be up to 70% of our pads in South Texas region will be on simulfrac. Those two things combined really push our capital efficiency higher and higher. It's all good things happening.

Jonathan Mardini (Equity Research Senior Associate)

Okay. I appreciate the context. I'll leave it there.

Operator (participant)

The next question is from John Abbott, from Wolfe Research. Please go ahead.

John Abbott (VP of E&P Research)

Hey, good morning, thank you for taking our questions. Yeah, I'll just jump to the Uinta permit for a moment here. I mean, part of your program this year is sort of delineating the other zones in that area. When you think about that asset, how do you think about the optionality of the Uinta at this point in time, that is not as a significant part of your portfolio as in the past?

David Rockecharlie (CEO)

Yeah. Hey, John, it's David. Great question. I'd say a couple of things, just to hit optionality, you know, immediately and succinctly, entirely HVP, entirely in our control, how we want to handle it. That's just a fantastic, you know, asset to have. It's obviously intentional, on our part as well as part of our strategy. We feel really good about two things in that area. We can deliver really strong returns, in a, what I'll call, in a normalized oil market. We're making great returns there in base Butte now, just the resource potential there is incredible. You know, we've seen our offset operators continue to expand that opportunity.

We entered there at below PDP value, we feel great about what I'll call just, methodically, going through, the opportunity and expanding that over time. As Joey said, the ability, operationally to just go at the pace you want to go just provides tremendous optionality. We think of it as more or less a one rig, area for us, and just slow and steady, continued expansion of the opportunity is what we expect.

John Abbott (VP of E&P Research)

Appreciate it. My follow-up question is really on maintenance, CapEx, and long-term oil. You know, based off your current plans, I guess you exit the year with one rig, maybe in the Permian. You know, let's say maintenance, CapEx, long term, I was talking to Brandi Kendall about last night, is $1.3-$1.4 billion long term. Well, maybe about 130,000 barrels per day. I guess my question is if we do see a more constructive environment on the second half of this year, as we sort of look out to 2027, 2028, could you decide to plateau at a higher level?

Is one rig in the Permian really where you want to be, or could you decide, hey, if we have a more constructive environment, let's just be a little bit higher than 130 long-term?

David Rockecharlie (CEO)

Yeah. Hey, John, it's David again. I'm happy to take that. Long story short, is we feel really good about what I'll call running the business at a target reinvestment rate, and we've done that all the time. Our key goal is returns and free cash flow. Yes, back to your topic of optionality. We've got the ability to do more everywhere, which means- Not that we're gonna do more everywhere, but we can allocate our development activity to the best return. If oil development is higher returning, you will see us allocating more capital towards oil and vice versa. As you've seen, the gas market strengthen, we've had more allocation there. I think it'll be purely a function of rate of return.

We actually have oil opportunity in the Eagle Ford and the Uinta and the Permian. I think we could do it anywhere. But yes, you're correctly pointing out that we've got good optionality in the Permian.

John Abbott (VP of E&P Research)

Appreciate it. Thank you very much for taking our questions.

David Rockecharlie (CEO)

Yeah, thanks, John.

Operator (participant)

The next question is from Lloyd Byrne from Jefferies. Please go ahead.

Lloyd Byrne (Managing Director of Equity Research)

Hey, good morning, David, Brandi, team. Congrats on all the progress. Can I just go back and get a couple clarification? I don't know if it was Joey that was talking about cost, but another way to kind of ask it, is there an optimal scale for you guys going forward? I'm just thinking about in the Permian or the Uinta. You've done such a good job in the Eagle Ford with scale.

David Rockecharlie (CEO)

This is David. I'll give you a sort of simple response and then give you maybe a little more context strategically. What we're seeing is that we've got the scale we need to continue to drive value within the current business around operations. We see tremendous upside in continuing to drive efficiencies across these assets. In particular, as you know, the newest assets in the company are some recent, you know, call it 12 to 18 months ago, Eagle Ford acquisitions, and then the entry into the Permian. We feel like we've got plenty of scale there to continue to drive value. We think this industry, through cycle, presents significant opportunity for our business strategy to grow through acquisition opportunistically.

We also see significant scale potential beyond what we already have, in particular in the Eagle Ford and the Permian. I think that's what we're looking for. Those acquisitions are all gonna stand on their own, and they're gonna be because we think the value is right, because we think we're ready to do them, and we see an ability to do what we do, which is buy assets and make them better. I think we would tell you, we've got the scale we need today, to drive significant value on our existing footprint.

Lloyd Byrne (Managing Director of Equity Research)

Okay, that makes sense. Then let me come back to you in a little bit, and I know it's a nice, steady growth going forward, but are there any bottlenecks at this point: takeaway, rail, permitting? Could you grow it faster if you wanted to? I guess is my question.

Brandi Kendall (CFO)

Hey, Lloyd, I'll start. We could grow it faster if we wanted. I think we've always thought about this asset as kind of a one-rig asset. The basin has really transformed over the last couple of years, given rail, given kinda de-bottlenecking on the gas side of things. I would say no constraints from an oil or gas midstream perspective.

Lloyd Byrne (Managing Director of Equity Research)

Okay. That makes sense. Thank you.

David Rockecharlie (CEO)

Thanks a lot.

Operator (participant)

There are no further questions at this time. I would like to turn the floor back over to David Rockecharlie for closing comments.

David Rockecharlie (CEO)

Perfect. Thank you all again. We really appreciate again, the opportunity every quarter to share how we're doing, and hopefully, the key takeaways all came through, which is base business, high performing with a lot of momentum. We completely transformed the portfolio last year into a much more focused and scaled business. Again, we think the company has a tremendous amount of catalysts, both on the existing assets, but also one of the things we really are highlighting this quarter is the opportunity in our minerals business in that segment. We'll continue to keep you updated as we move forward. Again, thank you for the support.

Operator (participant)

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.